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We were in a position to buy during the last crash, when there was a bit of a discount off the bubble. So in my experience, in the long run, paying less up fron

We were in a position to buy during the last crash, when there was a bit of a discount off the bubble. So in my experience, in the long run, paying less up front is better than paying more.

conductr 4y ago
I’d agree but don’t think it’s the right comparison for this discussion. It’s more about how much prices have to come down from their recent highs to offset the recent uptick in interest expense. I bought my first home at end of the last recession (price at floor for my market) and maximized my leverage (little down) AND got low rates. So I did great and assuming you did the same it probably worked out the same for you. But the high rates now make the math a bit more complicated. And, I don’t know if I’d assume the same level of appreciation I did back then. At that time, the recession was a few years in and it felt like that bulls were awakening so I was very confident in my purchase. Right now, it’s early in the recession, we don’t even know how long/far prices will decline, and rates are pretty high and most assets feel inflated. So, I wouldn’t feel very confident about it right now. I’d actually recommend most people just do lowish down, hope for a refi opportunity in a couple years, but make sure you have some cash for repairs/maintenance/rainy days as well. In any case, how much does a home price have to come down to offset interest rates climbing? It’s a lot. Probably something like 20% (I can’t do the math rn)
- harambae 4y ago
  > how much does a home price have to come down to offset interest rates climbing Generally speaking it's a rule of 10x in purchasing power (not price, clearly, because we haven't seen the corresponding price correction yet). So 1% increasing in mortgage rate should be 10% decreasing in purchasing power, just based on the math. And yes I believe there has been a 2% increase in average mortgage rate (3% -> 5%) so 20% sounds right.

We were in a position to buy during the last crash, when there was a bit of a discount off the bubble. So in my experience, in the long run, paying less up front is better than paying more.

conductr 4y ago

I’d agree but don’t think it’s the right comparison for this discussion. It’s more about how much prices have to come down from their recent highs to offset the recent uptick in interest expense. I bought my first home at end of the last recession (price at floor for my market) and maximized my leverage (little down) AND got low rates. So I did great and assuming you did the same it probably worked out the same for you. But the high rates now make the math a bit more complicated. And, I don’t know if I’d assume the same level of appreciation I did back then. At that time, the recession was a few years in and it felt like that bulls were awakening so I was very confident in my purchase. Right now, it’s early in the recession, we don’t even know how long/far prices will decline, and rates are pretty high and most assets feel inflated. So, I wouldn’t feel very confident about it right now. I’d actually recommend most people just do lowish down, hope for a refi opportunity in a couple years, but make sure you have some cash for repairs/maintenance/rainy days as well. In any case, how much does a home price have to come down to offset interest rates climbing? It’s a lot. Probably something like 20% (I can’t do the math rn)

harambae 4y ago
> how much does a home price have to come down to offset interest rates climbing Generally speaking it's a rule of 10x in purchasing power (not price, clearly, because we haven't seen the corresponding price correction yet). So 1% increasing in mortgage rate should be 10% decreasing in purchasing power, just based on the math. And yes I believe there has been a 2% increase in average mortgage rate (3% -> 5%) so 20% sounds right.