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So people near me just put their house on the market... in October... with 8% mortgage rates.... I have no idea what they are thinking. I know they aren't putti

So people near me just put their house on the market... in October... with 8% mortgage rates.... I have no idea what they are thinking. I know they aren't putting it on the market because of financial or health or family reasons. I just boggles my mind.

ChatGTP 3y ago
Well it could be 10% on 2 years or less?
- jrumbut 3y ago
  This is very true! 8% is not that high historically: https://money.usnews.com/loans/mortgages/articles/historical-mortgage-rates https://money.usnews.com/loans/mortgages/articles/historical... It's the past several years that were the anomaly. There's a legitimate chance we don't see rates like we did in 2021 again for decades.
jjtheblunt 3y ago
People buy houses with cash is what they’re thinking.
- spondylosaurus 3y ago
  My parental units literally just sold their house to a cash buyer... so yep, exactly this. Final sale was over a million dollars by the way. Where people come up with that kind of cash is beyond me, but they're coming up with it one way or another.
  - EB66 3y ago
    > Where people come up with that kind of cash is beyond me, but they're coming up with it one way or another. A "cash buyer" just means that the buyer didn't open a new mortgage to close the sale. Cash buyers often bring in cash from other interest-accruing loans -- such as HELOCs or portfolio loans. Foreigners or irregular income earners are a couple examples of people who might not qualify for a conventional mortgage and would need to tap into alternative loans to buy a house and thereby become a "cash buyer". Cash offers are also considered more competitive (they close faster), so someone might make a cash offer (via other loans) just to make their offer have a higher chance of succeeding.
    - spondylosaurus 3y ago
      Ah, that's interesting! And makes sense.
latchkey 3y ago
https://www.bankrate.com/real-estate/capital-gains-tax-on-real-estate/ https://www.bankrate.com/real-estate/capital-gains-tax-on-re... "For the 2023 tax year, you are not subject to capital gains taxes if your taxable income is $44,625 or less ($89,250 if married and filing jointly). If it’s $44,626–$492,300 as a single filer, or $89,251–$553,850 if married and filing jointly, you would pay 15 percent on the $250,000 profit. Above those top amounts, the capital gains rate would be 20 percent."
- Thorrez 3y ago
  How is that relevant?
  - latchkey 3y ago
    People selling their house can take advantage of the tax break. OP was curious about why they'd sell and that could be a reason. Now give me back my downvote please. ;-)
    - Thorrez 3y ago
      What tax break? I think you just quoted the capital gains tax rates[1]. That's a tax, not a tax break. Those rates apply to all capital gains, not just houses. They're basically the same every year. The numbers increase each year for inflation. There actually is a tax break, the paragraph after what you quoted. But I don't think that's new or ending soon. So that's also not something that would trigger people to sell now rather than in a year from now. [1] https://www.bankrate.com/investing/long-term-capital-gains-tax/#rates https://www.bankrate.com/investing/long-term-capital-gains-t...
mr_toad 3y ago
People change jobs, have kids, get separated, retire, die. There’s always people who need to sell for one reason or another.
- thinkerswell 3y ago
  As rates go higher I suspect a high percentage of homes that will only move due to people dying off. Much stagnation
  - gg82 3y ago
    It will start with the new houses... The builders have to sell, so new house prices will drop first. Then when existing home owners see the prices of new houses dropping, they will rush onto the market and try and get out before everyone else does. People need to consider however, if they sell, they also need to take into account the mortgage rate they will be able to obtain. They may be on a significantly lower interest rate than they can obtain now, so even if houses prices drop, they may not end up in a better financial position.
onion2k 3y ago
If you look at a graph of interest rates that goes back more than 50 years you'll see that the recent period of very low rates is an abhoration. It was weird. It hasn't happened before. 8% is a return to normal (still a little low if anything). Refusing to sell because you believe rates will drop is just making your life more difficult because it almost certainly won't happen.
- qeternity 3y ago
  > because it almost certainly won't happen. A return to zirp in the short-term most likely won't happen. But the world simply cannot afford higher rates. The Fed is pausing, in will likely cut next year.
  - throwaway2037 3y ago
    The Fed is pausing They are likely to raise rates (25bps) at the next meeting. Economic indicators continue to be very strong, and inflation has not meaningfully reduced.
- imtringued 3y ago
  If you look at a graph of interest rates there is a centuries long trend of declining interest rates. The current interest rate hike is the "abhoration".
- sunbum 3y ago
  Yeah but prices are still at very low interest rate levels and not at 8% interest rate level
- username332211 3y ago
  There's a much bigger aberration in a graph out there though. The M2 money supply. During covid it expanded at an unprecedented rate. It's currently declining. The latter hasn't happened since the Fed started publishing records of it. Worse still, the last historical precedent for such a decline I could find is the 1929 depression.
hipadev23 3y ago
Home prices haven't fallen much yet, despite the massive surge in interest rates, so if they can cash-out now why not? Sell now, rent for a while, watch the market crash, jump back in when prices and/or rates fall?
- instagib 3y ago
  Take the cash from sale and do a modest home increase or even a decrease. Less to finance.
- fasthands9 3y ago
  Also about 40-percent of homes in America have no mortgage on them. If you own one of these homes (and never took out a second mortgage) selling it and moving to a house of similar value is not really effected by interest rates. This is way more the case for older people, but still possible.
  - madaxe_again 3y ago
    You tend to achieve less value if interest rates are high, as the buyer will typically need a mortgage, and the pool of prospective buyers decreases as borrowing costs rise, and supply and demand does the rest.
    - peter422 3y ago
      But in that example a person is selling one house to buy another (presumably a cheaper/smaller one). Market conditions will even out.
    - riku_iki 3y ago
      > to achieve less value if interest rates are high it could be more value compared to the future when interest rates may be even higher
- syndicatedjelly 3y ago
  > Sell now, rent for a while, watch the market crash, jump back in when prices and/or rates fall? A 1031 exchange is a good reason to not do that. https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx https://www.investopedia.com/financial-edge/0110/10-things-t...

ChatGTP 3y ago

Well it could be 10% on 2 years or less?

jrumbut 3y ago
This is very true! 8% is not that high historically: https://money.usnews.com/loans/mortgages/articles/historical-mortgage-rates https://money.usnews.com/loans/mortgages/articles/historical... It's the past several years that were the anomaly. There's a legitimate chance we don't see rates like we did in 2021 again for decades.

jjtheblunt 3y ago

People buy houses with cash is what they’re thinking.

spondylosaurus 3y ago
My parental units literally just sold their house to a cash buyer... so yep, exactly this. Final sale was over a million dollars by the way. Where people come up with that kind of cash is beyond me, but they're coming up with it one way or another.
- EB66 3y ago
  > Where people come up with that kind of cash is beyond me, but they're coming up with it one way or another. A "cash buyer" just means that the buyer didn't open a new mortgage to close the sale. Cash buyers often bring in cash from other interest-accruing loans -- such as HELOCs or portfolio loans. Foreigners or irregular income earners are a couple examples of people who might not qualify for a conventional mortgage and would need to tap into alternative loans to buy a house and thereby become a "cash buyer". Cash offers are also considered more competitive (they close faster), so someone might make a cash offer (via other loans) just to make their offer have a higher chance of succeeding.
  - spondylosaurus 3y ago
    Ah, that's interesting! And makes sense.

latchkey 3y ago

https://www.bankrate.com/real-estate/capital-gains-tax-on-real-estate/ https://www.bankrate.com/real-estate/capital-gains-tax-on-re... "For the 2023 tax year, you are not subject to capital gains taxes if your taxable income is $44,625 or less ($89,250 if married and filing jointly). If it’s $44,626–$492,300 as a single filer, or $89,251–$553,850 if married and filing jointly, you would pay 15 percent on the $250,000 profit. Above those top amounts, the capital gains rate would be 20 percent."

Thorrez 3y ago
How is that relevant?
- latchkey 3y ago
  People selling their house can take advantage of the tax break. OP was curious about why they'd sell and that could be a reason. Now give me back my downvote please. ;-)
  - Thorrez 3y ago
    What tax break? I think you just quoted the capital gains tax rates[1]. That's a tax, not a tax break. Those rates apply to all capital gains, not just houses. They're basically the same every year. The numbers increase each year for inflation. There actually is a tax break, the paragraph after what you quoted. But I don't think that's new or ending soon. So that's also not something that would trigger people to sell now rather than in a year from now. [1] https://www.bankrate.com/investing/long-term-capital-gains-tax/#rates https://www.bankrate.com/investing/long-term-capital-gains-t...

mr_toad 3y ago

People change jobs, have kids, get separated, retire, die. There’s always people who need to sell for one reason or another.

thinkerswell 3y ago
As rates go higher I suspect a high percentage of homes that will only move due to people dying off. Much stagnation
- gg82 3y ago
  It will start with the new houses... The builders have to sell, so new house prices will drop first. Then when existing home owners see the prices of new houses dropping, they will rush onto the market and try and get out before everyone else does. People need to consider however, if they sell, they also need to take into account the mortgage rate they will be able to obtain. They may be on a significantly lower interest rate than they can obtain now, so even if houses prices drop, they may not end up in a better financial position.

onion2k 3y ago

If you look at a graph of interest rates that goes back more than 50 years you'll see that the recent period of very low rates is an abhoration. It was weird. It hasn't happened before. 8% is a return to normal (still a little low if anything). Refusing to sell because you believe rates will drop is just making your life more difficult because it almost certainly won't happen.

qeternity 3y ago
> because it almost certainly won't happen. A return to zirp in the short-term most likely won't happen. But the world simply cannot afford higher rates. The Fed is pausing, in will likely cut next year.
- throwaway2037 3y ago
  The Fed is pausing They are likely to raise rates (25bps) at the next meeting. Economic indicators continue to be very strong, and inflation has not meaningfully reduced.
imtringued 3y ago
If you look at a graph of interest rates there is a centuries long trend of declining interest rates. The current interest rate hike is the "abhoration".
sunbum 3y ago
Yeah but prices are still at very low interest rate levels and not at 8% interest rate level
username332211 3y ago
There's a much bigger aberration in a graph out there though. The M2 money supply. During covid it expanded at an unprecedented rate. It's currently declining. The latter hasn't happened since the Fed started publishing records of it. Worse still, the last historical precedent for such a decline I could find is the 1929 depression.

hipadev23 3y ago

Home prices haven't fallen much yet, despite the massive surge in interest rates, so if they can cash-out now why not? Sell now, rent for a while, watch the market crash, jump back in when prices and/or rates fall?

instagib 3y ago
Take the cash from sale and do a modest home increase or even a decrease. Less to finance.
fasthands9 3y ago
Also about 40-percent of homes in America have no mortgage on them. If you own one of these homes (and never took out a second mortgage) selling it and moving to a house of similar value is not really effected by interest rates. This is way more the case for older people, but still possible.
- madaxe_again 3y ago
  You tend to achieve less value if interest rates are high, as the buyer will typically need a mortgage, and the pool of prospective buyers decreases as borrowing costs rise, and supply and demand does the rest.
  - peter422 3y ago
    But in that example a person is selling one house to buy another (presumably a cheaper/smaller one). Market conditions will even out.
  - riku_iki 3y ago
    > to achieve less value if interest rates are high it could be more value compared to the future when interest rates may be even higher
syndicatedjelly 3y ago
> Sell now, rent for a while, watch the market crash, jump back in when prices and/or rates fall? A 1031 exchange is a good reason to not do that. https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx https://www.investopedia.com/financial-edge/0110/10-things-t...