4 ms·

I'm fighting the urge to time the market and put an offer for a house I like in the next few days. The high mortgage rates are putting my monthly payment estima

by ra7 4y ago

I'm fighting the urge to time the market and put an offer for a house I like in the next few days. The high mortgage rates are putting my monthly payment estimates in uncomfortable territory, but I also know rates are unlikely to go down for a year at least, especially not to historical lows of 2-3% we've seen recently. Only saving grace is home prices are falling in my local market (Austin, TX) and builders are willing to negotiate more for inventory homes. But it's not falling fast enough proportional to the rate hikes. I guess this is working exactly as designed for the Fed, but it sucks.

bombcar 4y ago
If you get what you want at current rates and they go up - got it just in time! And if rates go down enough, refinance!
linguae 4y ago
Same here. I've been on the housing market for the past year, though my local market is the Monterey Bay Area, with parts of the Bay Area and the Central Valley as backup options. Interest rates were considerably lower last year, but the market was an absolute frenzy, with homes receiving multiple offers at prices considerably above asking. At a budget of only $550,000, it was highly discouraging; there were few listings that met my price range to begin with, and all of them ended up selling well above asking. Once the 2022 interest rate hikes began, it's been less frentic; not only are there fewer above-asking bids, but homes are sitting on the market longer, and many sellers have made modest 5-10% cuts in their asking prices. However, a mortgage on a $525,000 home at 6% interest is still larger than a mortgage on a $550,000 home at 3.5%. Even though 6% interest is still low by historical standards, today's home prices in my areas of interest are the highest they've ever been. However, I'm still interested in purchasing now because I don't believe prices are going to drop substantially in my area. There needs to be more housing in order to meet the demand, but Santa Cruz and Monterey counties (less so San Benito County due to the growth of Hollister) have historically not been keen on large-scale development. Thus, supply hasn't increased very much, while demand has been increasing, especially when the pandemic started when the prospect of working from home made commuting to Silicon Valley less of an issue.
alistairSH 4y ago
End of the season in a different market so YMMV, but the markets I follow (Reston, VA and some of the towns along the Blue Ridge Mountains) have flatlined in the last two months. Prices are steady or falling and I'm seeing houses that went under contract in early August return to the market. People definitely seem unsure. Funny, I remember the early 80s, when rates were around 18%. The house my parents bought back then was, in part, selected because the existing mortgage was transferable and at a lower rate (~9%). The last decade of rates below 5% are an anomaly. Average over the last 40 years is somewhere in the 5-6% range with many periods well above.
- exhilaration 4y ago
  because the existing mortgage was transferable I've never heard of transferable mortgages! I'm guessing they've been phased out due to changing regulations?
  - dwater 4y ago
    They mostly phased out in the 80's because banks wanted to make more money from fees and rising interest rates. The main reason a buyer would choose to assume a mortgage is because rates have risen, which means the bank would get more money if the buyer got a new loan instead.
  - awinder 4y ago
    Current FHA mortgages are assumable
smaddox 4y ago
You can always refinance when the fed inevitably reverses course.
whitej125 4y ago
Mortgage rates will change more quickly than housing prices. Mortgage rates are a function of the Fed, Treasury Rates and tons of banks/lenders across the nation. National scale influenced, sure, in part by national demand for mortgages. You local housing prices are more of a function of local supply/demand which is partially disconnected from the national scene. So yes, national mortgage rates going high will knock out some potential buyers. At the same time (at least in my area)... rates have gone up... local inventory of available homes has gone down (people just choosing to not sell) and thus housing prices are remaining mostly flat even as national mortgage rates rise.
- ra7 4y ago
  In my local market, prices are definitely dropping [1] and available inventory is up to pre-pandemic levels [2]. But even with price cuts, it's still only at Jan-Feb 2022 levels (I think prices peaked around April-May). It's the lag between rates rising and that being reflected in prices that makes the timing less ideal. [1] https://fred.stlouisfed.org/series/MEDLISPRI12420 https://fred.stlouisfed.org/series/MEDLISPRI12420 [2] https://fred.stlouisfed.org/series/ACTLISCOU12420 https://fred.stlouisfed.org/series/ACTLISCOU12420
deelowe 4y ago
At a macro level, mortgage rates impact the market. At a local level, things may be very different. In my area, 2008/09 impacted the price point I was in by about 5-10%. There was too much growth in the area for the downturn to affect prices that much. We did see volume go down, but prices overall stayed relatively the same.
AnimalMuppet 4y ago
> The high mortgage rates are putting my monthly payment estimates in uncomfortable territory... And they are doing the same for everyone else who needs a mortgage to be able to buy. So, what's going to happen is that in a month or so, house sellers are going to realize that they can't get the same price now that they could six months ago. Offer a price that makes your monthly payments comfortable, even if it's less than the seller is asking. If everybody else is in the same boat, and nobody else offers more, then the seller has a decision to make - your offer, or nothing. It can take a while for them to decide to bite that bullet, though. Note well: I'm not a realtor, nor a real estate investment guru. This is just the way I think this plays out.
- ra7 4y ago
  > Offer a price that makes your monthly payments comfortable, even if it's less than the seller is asking. Exactly what my plan is. At least it's encouraging that sellers are willing to negotiate now.
daniel-cussen 4y ago
Willing to negotiate more. Hah. You know I've seen both sides, was getting an introduction to a construction job from a Central American, guy was long-term very solid, told me yeah wages are $20 but they charge $75 dollars per hour to the buyer. Dude willing to negotiate. All about making things more expensive and charging cost-plus. Dude like hospitals $120 for a box of tissue paper. Negreation. Very negreated market. Everybody squeezing, everybody trying to corner, everybody seeking to conspire, everybody out to fuck you. Less so as you go inland, but to an extent still. Just considered easy money. You and me, anybody who hasn't bought in yet gets negreated. Anything but supply and demand. Dude that's why startups attempt to take on this kind of markets and always fail, that medicine and education, always nosedive, why? Highly negreated. Negreado, treated like a source of free labor, ie like negros especially bozales (direct from Africa) were exploited in Chile. It's supposed to be real estate agents just make shitloads of free money. Like three phone calls boom 60000 USD. No effort. Just sleazing. Connections. Access. So it can't be disrupted, really. The whole industry is set up as an economic army prepared for disruption with...with anything. Everything on the table. You think the entrepreneurs before 2006 couldn't see inefficiencies? Couldn't say hey I can do it better? Didn't have the internet? There were phone lines, there was fax, sneakernet, there was tons, and there was internet going back to the 80's. A professor told me of a spreadsheet business online in the 80's. Dude, the reason disruption can't happen is because everybody backstabs it right away. The industry is that. Also sometimes build houses, also sometimes prescribe some pills, also sometimes actually hand out sheepskins. But the intent is to deny, not supply. Deny and demand.

by ra7 4y ago

bombcar 4y ago

If you get what you want at current rates and they go up - got it just in time! And if rates go down enough, refinance!

linguae 4y ago

Same here. I've been on the housing market for the past year, though my local market is the Monterey Bay Area, with parts of the Bay Area and the Central Valley as backup options. Interest rates were considerably lower last year, but the market was an absolute frenzy, with homes receiving multiple offers at prices considerably above asking. At a budget of only $550,000, it was highly discouraging; there were few listings that met my price range to begin with, and all of them ended up selling well above asking. Once the 2022 interest rate hikes began, it's been less frentic; not only are there fewer above-asking bids, but homes are sitting on the market longer, and many sellers have made modest 5-10% cuts in their asking prices. However, a mortgage on a $525,000 home at 6% interest is still larger than a mortgage on a $550,000 home at 3.5%. Even though 6% interest is still low by historical standards, today's home prices in my areas of interest are the highest they've ever been. However, I'm still interested in purchasing now because I don't believe prices are going to drop substantially in my area. There needs to be more housing in order to meet the demand, but Santa Cruz and Monterey counties (less so San Benito County due to the growth of Hollister) have historically not been keen on large-scale development. Thus, supply hasn't increased very much, while demand has been increasing, especially when the pandemic started when the prospect of working from home made commuting to Silicon Valley less of an issue.

alistairSH 4y ago

End of the season in a different market so YMMV, but the markets I follow (Reston, VA and some of the towns along the Blue Ridge Mountains) have flatlined in the last two months. Prices are steady or falling and I'm seeing houses that went under contract in early August return to the market. People definitely seem unsure. Funny, I remember the early 80s, when rates were around 18%. The house my parents bought back then was, in part, selected because the existing mortgage was transferable and at a lower rate (~9%). The last decade of rates below 5% are an anomaly. Average over the last 40 years is somewhere in the 5-6% range with many periods well above.

exhilaration 4y ago
because the existing mortgage was transferable I've never heard of transferable mortgages! I'm guessing they've been phased out due to changing regulations?
- dwater 4y ago
  They mostly phased out in the 80's because banks wanted to make more money from fees and rising interest rates. The main reason a buyer would choose to assume a mortgage is because rates have risen, which means the bank would get more money if the buyer got a new loan instead.
- awinder 4y ago
  Current FHA mortgages are assumable

smaddox 4y ago

You can always refinance when the fed inevitably reverses course.

whitej125 4y ago

Mortgage rates will change more quickly than housing prices. Mortgage rates are a function of the Fed, Treasury Rates and tons of banks/lenders across the nation. National scale influenced, sure, in part by national demand for mortgages. You local housing prices are more of a function of local supply/demand which is partially disconnected from the national scene. So yes, national mortgage rates going high will knock out some potential buyers. At the same time (at least in my area)... rates have gone up... local inventory of available homes has gone down (people just choosing to not sell) and thus housing prices are remaining mostly flat even as national mortgage rates rise.

ra7 4y ago
In my local market, prices are definitely dropping [1] and available inventory is up to pre-pandemic levels [2]. But even with price cuts, it's still only at Jan-Feb 2022 levels (I think prices peaked around April-May). It's the lag between rates rising and that being reflected in prices that makes the timing less ideal. [1] https://fred.stlouisfed.org/series/MEDLISPRI12420 https://fred.stlouisfed.org/series/MEDLISPRI12420 [2] https://fred.stlouisfed.org/series/ACTLISCOU12420 https://fred.stlouisfed.org/series/ACTLISCOU12420

deelowe 4y ago

At a macro level, mortgage rates impact the market. At a local level, things may be very different. In my area, 2008/09 impacted the price point I was in by about 5-10%. There was too much growth in the area for the downturn to affect prices that much. We did see volume go down, but prices overall stayed relatively the same.

AnimalMuppet 4y ago

> The high mortgage rates are putting my monthly payment estimates in uncomfortable territory... And they are doing the same for everyone else who needs a mortgage to be able to buy. So, what's going to happen is that in a month or so, house sellers are going to realize that they can't get the same price now that they could six months ago. Offer a price that makes your monthly payments comfortable, even if it's less than the seller is asking. If everybody else is in the same boat, and nobody else offers more, then the seller has a decision to make - your offer, or nothing. It can take a while for them to decide to bite that bullet, though. Note well: I'm not a realtor, nor a real estate investment guru. This is just the way I think this plays out.

ra7 4y ago
> Offer a price that makes your monthly payments comfortable, even if it's less than the seller is asking. Exactly what my plan is. At least it's encouraging that sellers are willing to negotiate now.

daniel-cussen 4y ago

Willing to negotiate more. Hah. You know I've seen both sides, was getting an introduction to a construction job from a Central American, guy was long-term very solid, told me yeah wages are $20 but they charge $75 dollars per hour to the buyer. Dude willing to negotiate. All about making things more expensive and charging cost-plus. Dude like hospitals $120 for a box of tissue paper. Negreation. Very negreated market. Everybody squeezing, everybody trying to corner, everybody seeking to conspire, everybody out to fuck you. Less so as you go inland, but to an extent still. Just considered easy money. You and me, anybody who hasn't bought in yet gets negreated. Anything but supply and demand. Dude that's why startups attempt to take on this kind of markets and always fail, that medicine and education, always nosedive, why? Highly negreated. Negreado, treated like a source of free labor, ie like negros especially bozales (direct from Africa) were exploited in Chile. It's supposed to be real estate agents just make shitloads of free money. Like three phone calls boom 60000 USD. No effort. Just sleazing. Connections. Access. So it can't be disrupted, really. The whole industry is set up as an economic army prepared for disruption with...with anything. Everything on the table. You think the entrepreneurs before 2006 couldn't see inefficiencies? Couldn't say hey I can do it better? Didn't have the internet? There were phone lines, there was fax, sneakernet, there was tons, and there was internet going back to the 80's. A professor told me of a spreadsheet business online in the 80's. Dude, the reason disruption can't happen is because everybody backstabs it right away. The industry is that. Also sometimes build houses, also sometimes prescribe some pills, also sometimes actually hand out sheepskins. But the intent is to deny, not supply. Deny and demand.