OT: Housing market/Mortgage interest rates

[Maroonthirteen]

So...the Fed is going to raise rates a few times this summer. Some people predict 7-8% mortgage interest rates by summer's end. Do you guys agree interest rates will get that high by summer's end?

Also, as we know, housing purchase prices are way up. In just a few years, a 2500 sq ft house has gone from 100-110 per sq ft to selling for 160-175 per sq ft in my area. However, I am starting to see some listings lowering their initial asking price and coming back closer to 160-165 per sq ft. Some...not all. So, I listened to an expert this morning that says housing prices will decrease over the next year....decrease.

I can't remember, ever in my 24 years of home ownership that housing prices decreased from one year to the next. Ive seen the market slow and flip to buyers markets. However, the purchase prices (per sq ft) don't drastically decrease. Like, dropping back to 110-120 per sq ft. Im seeing new builds still at 175 per sq ft.

Do you guys think housing prices will decrease, assuming the mortgage rates go up and up?

 

[Smoked Toag]

You’ve never lived in a volatile market then.

 

[kired]

Were you in a coma for a few years starting ~2008?

 

[Maroonthirteen]

Were you in a coma for a few years starting ~2008?

I was in Arkansas. Does that count as a coma?**

Speaking of, I bought a house in a suburb of Little Rock in 2005. Sold it in 2011 and made a little money even after RE commission.

 

[dorndawg]

So...the Fed is going to raise rates a few times this summer. Some people predict 7-8% mortgage interest rates by summer's end. Do you guys agree interest rates will get that high by summer's end?

Also, as we know, housing purchase prices are way up. In just a few years, a 2500 sq ft house has gone from 100-110 per sq ft to selling for 160-175 per sq ft in my area. However, I am starting to see some listings lowering their initial asking price and coming back closer to 160-165 per sq ft. Some...not all. So, I listened to an expert this morning that says housing prices will decrease over the next year....decrease.

I can't remember, ever in my 24 years of home ownership that housing prices decreased from one year to the next. Ive seen the market slow and flip to buyers markets. However, the purchase prices (per sq ft) don't drastically decrease. Like, dropping back to 110-120 per sq ft. Im seeing new builds still at 175 per sq ft.

Do you guys think housing prices will decrease, assuming the mortgage rates go up and up?

No.

 

[Cooterpoot]

If we get to 7-8%, it's going to be a *****!!! But they've mishandled everything else, so won't surprise me.

 

[Smoked Toag]

I was in Arkansas. Does that count as a coma?**

Speaking of, I bought a house in a suburb of Little Rock in 2005. Sold it in 2011 and made a little money even after RE commission.

Most decent places in Anywhereville, America probably didn’t see much decline in 2008. But vacation areas and the popular areas (NY, CA, FL, etc.) saw big losses. I would imagine the same phenomena will be at play again, although some of these places have shifted some.

I highly doubt that real estate in Nashville or Austin will go down. People live there. But in super inflated or places that depend on vacation dollars - lights out during a recession.

 

[greenbean.sixpack]

Most decent places in Anywhereville, America probably didn’t see much decline in 2008. But vacation areas and the popular areas (NY, CA, FL, etc.) saw big losses. I would imagine the same phenomena will be at play again, although some of these places have shifted some.

I highly doubt that real estate in Nashville or Austin will go down. People live there. But in super inflated or places that depend on vacation dollars - lights out during a recession.

Was in Mexico Beach in late 2008, there were for sale signs errywhere. I still kick myself today for not buying everything I could.

 

[Cooterpoot]

At 7-8%, construction and purchase makets will start to dry up a little. Even though that wasn't a bad rate at one time. Hell, in my previous life I made loans at 10% for a bank. You'll start seeing all those different ways to get lower rates with crappy loan programs again and the whole cycle will start over.

 

[The Peeper]

I've been considering downsizing in Starkville and had lunch with a realtor in Starkville over the weekend and she said not to quote her but now is not the time to be buying in Starkville, for what that's worth. In other words she thinks the bubbles about to burst, at least here it is. Combine threat of interest rate hikes, lumber instability, shortage of appliances and other furnishings, poor MSU sports team performances and not a favorable outlook for sports in the future and I could see it happening easily and fairly quickly. I'd still like to sell mine but there's very little inventory to move into and I'm not building so.......

 

[TNT.sixpack]

I've been trying to understand where all this cash is coming from for people who are paying tens of thousands and in some cases, hundreds of thousands above asking price in a bidding war. I have a friend who moved from California to Montana and she sells real estate on the side and it's NUTS. So I finally read an article last week that made sense for the first time. COVID and an aging population have claimed a lot of lives. As a result, the kids (50's) of these aging people have come into sudden wealth. They're now liquid with money they never had and this is the money we're seeing people throw around like it's pocket change. They're using the money to pay cash for homes and for second homes. Honestly, it makes sense. After having read that article, I immediately could think of 3 people I know in this exact situation. All 3 purchased vacation homes for cash money and they all 3 paid well over asking price. I think this phenomena is happening in a lot of places. It's also happening for first time home buyers. Parents are passing on money to kids and it's really helping to drive this current real estate market. And to those folks, rising interest rates won't matter. But if that's part of what's driving the market, it will eventually slow down.

 

[kired]

Probably didn't decline much here (north MS) but definitely some. We bought our first house near the absolute peak in 2007 and it was a few years before prices in our subdivision got back up to that level. I'd guess they dropped at around 5% and stayed flat for a while. All the houses were in that 1600 - 1800 sqft size. It was probably 2012-2013 before one sold for more we bought ours for in 2007.

 

[57stratdawg]

Also the average American has done much less eating out, had fewer vacations, not needed as many new clothes, driven less, gone to fewer concerts, etc. over a roughly 2 year period.

The consumer cash levels in this economy are quite something.

 

[PBDog]

So...the Fed is going to raise rates a few times this summer. Some people predict 7-8% mortgage interest rates by summer's end. Do you guys agree interest rates will get that high by summer's end?

Also, as we know, housing purchase prices are way up. In just a few years, a 2500 sq ft house has gone from 100-110 per sq ft to selling for 160-175 per sq ft in my area. However, I am starting to see some listings lowering their initial asking price and coming back closer to 160-165 per sq ft. Some...not all. So, I listened to an expert this morning that says housing prices will decrease over the next year....decrease.

I can't remember, ever in my 24 years of home ownership that housing prices decreased from one year to the next. Ive seen the market slow and flip to buyers markets. However, the purchase prices (per sq ft) don't drastically decrease. Like, dropping back to 110-120 per sq ft. Im seeing new builds still at 175 per sq ft.

Do you guys think housing prices will decrease, assuming the mortgage rates go up and up?

yes housing prices and new construction will drop - that is the point of raising rates to 7-8% to slow the economy. there will be an overshoot and recession. expect to see the rates drop, restart QE, and a stimulus check prior to the presidential election

 

[Maroonthirteen]

I've been considering downsizing in Starkville and had lunch with a realtor in Starkville over the weekend and she said not to quote her but now is not the time to be buying so.......

This is where I am. I want to sell now to take advantage of the sellers market. However I don't want to buy. I'm thinking sell and rent. Then wait and see if this market really does correct itself and buy something cheaper next year.

However I have no idea if builders have to ask $175 per sq Ft to cover rising material, labor, fuel cost. Or is that price point just because of housing inventory taking advantage of a sellers market? I have a feeling with interest rates going up, the inventory shortage will be solved by next summer and it will be buyers market.

 

[dorndawg]

This is where I am. I want to sell now to take advantage of the sellers market. However I don't want to buy. I'm thinking sell and rent. Then wait and see if this market really does correct itself and buy something cheaper next year.

However I have no idea if builders have to ask $175 per sq Ft to cover rising material, labor, fuel cost. Or is that price point just because of housing inventory taking advantage of a sellers market? I have a feeling with interest rates going up, the inventory shortage will be solved by next summer and it will be buyers market.

Bulldog to Bulldog, I cannot encourage you strongly enough against doing this.

 

[dorndawg]

Also the average American has done much less eating out, had fewer vacations, not needed as many new clothes, driven less, gone to fewer concerts, etc. over a roughly 2 year period.

The consumer cash levels in this economy are quite something.

Also a vast cohort of college educated folks who are in peak homebuying years have had student loan payments frozen for 2+ years. Setting aside the political debate on the soundness ofthis policy, it's put a ton of cash into markets.

 

[horshack.sixpack]

My first time buyer special interest rate was 7% back in the day and I was happy to get it! Really crazy to think how this long period of low interest rates has our expectations reset.

 

[mstateglfr]

My first time buyer special interest rate was 7% back in the day and I was happy to get it! Really crazy to think how this long period of low interest rates has our expectations reset.

Exactly. The suppressed interest rates for the last handful of years really messed with what people expect and how people think lending and financing work.
Its almost as if there is a limit to how many cards you can stack atop others before it all breaks.

 

[mstateglfr]

I was in Arkansas. Does that count as a coma?**

Speaking of, I bought a house in a suburb of Little Rock in 2005. Sold it in 2011 and made a little money even after RE commission.

Be appreciative of how shielded you were then. We bought in spring of '05 and sold spring of '12 for the exact price we bought for. I had a hell of a tough time accepting that, given how much money we had put into improvement over that 7 year span.

Home values plummeted across the country during the '08 - '11 timeframe...the entire financial crisis was built on home loans and home values, so yeah they crashed all over.

 

[IBleedMaroonDawg]

Also the average American has done much less eating out, had fewer vacations, not needed as many new clothes, driven less, gone to fewer concerts, etc. over a roughly 2 year period.

The consumer cash levels in this economy are quite something.

This is my situation in a nutshell because of the pandemic and inflation. That money you speak off is going to gas and food. I will just add that we are trying to slowly eliminate what debt we have that is not necessary such as home, car, etc.

 

[Cooterpoot]

This is my situation in a nutshell because of the pandemic and inflation. That money you speak off is going to gas and food. I will just add that we are trying to slowly eliminate what debt we have that is not necessary such as home, car, etc.

Exactly! I consolidated and paid off everything I could. Reworked insurance policies etc. too. Killed off extra subscriptions I half-asses used as well. I did not refinance my low interest mortgage. I'm about $1000 to the plus side now, which is really only about $500 due to the insane *** cost to breathe these days.

 

[dorndawg]

Exactly! I consolidated and paid off everything I could. Reworked insurance policies etc. too. Killed off extra subscriptions I half-asses used as well. I did not refinance my low interest mortgage. I'm about $1000 to the plus side now, which is really only about $500 due to the insane *** cost to breathe these days.

It's always good to review your insurance policies, but I'd encourage you (and anyone else) to make sure you don't get exposed to being under-insured especially on houses and cars, which have a soaring replacement cost.

Also: talk to your agent about an umbrella policy if you don't have one. If you ever need it, best ~$225 a year you'll ever spend.

 

[PooPopsBaldHead]

Bulldog to Bulldog, I cannot encourage you strongly enough against doing this.

^^^ This all day. Housing (personal not investment) is a carousel that never stops. It spins faster and slower at times and 15 years ago even went backwards a little bit, but it never stops.

When you bought your first home, you had to jump on that sucker while it was moving. And you probably got some bruises (coming up with a down payment, pmi, etc.) I was lucky and bought my first in December of 2011 and it was moving real slow. First time home buyers today are jumping on at full speed.

I'm not sure how long you have been on the carousel, but you can safely make from horse to horse (house to house, nice pun eh.) Do not jump off this sucker right now.

We hope it will slow down soon. But we don't know. We hope rates will calm, but we don't know. I know a few people that jumped off in 2020 and they are 17ed.

Living with family for years with kids or bouncing from rental to rental. One friend in Plano TX sold for $350k in fall of 2020 and the same house now would go for $550. They could have refied at 3% or lower. Property taxes and HOI would have stayed low. His mortgage was $1800 a month all in when he sold. Put $150k in his pocket. To buy the same house today at $550, he pays property taxes and hoi on a $550k house. Gets a 5%+ interest rate. And even with the big down payment, his mortgage would be around $3700 per month. Epic 17up.

Do not get off the carousel. Sit on your horse or move to another. To crash the housing market it's going to take an epic recession that forces people to sell homes they don't want to sell. Guess what that means, massive job losses and tight lending. You know why most of us didn't buy up all the deals in 2008-10??? We couldn't. I know for me personally, everyday I thought I might lose my job. I wasn't buying a house if I could have.

Off my soap box now.

ETA. As for mortgage rates, 30 year rates almost always have a 2-2.25% premium over the 10 year Treasury yield so for 7-8% rates you are talking 5-6% 10 year Treasury rates. If it gets there I can't see anyway it holds. I have not seen anyone in the bond market predicting even 4%. We are becoming Japan with our demographics and long term, deflation will win out.

 

[DogStuckAtUM.sixpack]

Haha. As I was reading this post, I got a text to buy my West Nashville house.

View attachment 24384

 

[archdog]

Housing prices have had years of decline from 2008-2010 and for some states like Mississippi, this stayed around until maybe 2012. The price increase now is driven by the extreme lack of inventory and an economy flush with cash. Both will be put to the test with the interest rate increase. Which needs to happen.

I will add, by raising the rates now, it will hurt home sales in the next couple of years, but gives the fed a great level to pull if they ever need to spur the economy in the future.

 

[bsquared24]

I will generally agree with most things said here, but there may be a small dip in house prices simply because construction costs were so out of whack for the past year or so. Some of that has been eaten up by supply chain and worker shortages but lumber was insane for a bit. I literally closed on selling my old house yesterday and will be purchasing one under construction in a few weeks (with locked in rates from 40 days ago). It's not a great time to buy, but IMO real estate is a safer investment than a lot of things right now, and in our case I feel like were just shifting the equity from our old home into the new one.

I would also recommend not tying a statement to price per square foot since the price of the dirt it sits on varies so much. The same stick house in one place may be 150 per sq ft and 250 per sq ft somewhere else.

 

[TNT.sixpack]

This is my situation in a nutshell because of the pandemic and inflation. That money you speak off is going to gas and food. I will just add that we are trying to slowly eliminate what debt we have that is not necessary such as home, car, etc.

I'm going to have to agree with this as it relates to my original point about people overpaying for homes and going well above asking price. I don't see how the student loan forgiveness and eating out less, fewer vacays, etc.... have had that much of an impact on a person's ability to simply come out of pocket with $20K, $50K, $100K to pay over asking price in a bidding war on a home. The kind of money it takes to do that has to come from a sudden unexpected windfall like life insurance policy benefits or some other inheritance passed down. Whatever was saved by eating out less, is being consumed by everything else - gas prices, other inflation, etc... I am convinced i can eat out just about as cheap as i can cook at home on some days depending on what I'm cooking. Groceries are ridiculous right now. The money being tossed around driving this current bidding war on homes is an influx of sudden BIG money.

 

[stateu1]

I'm going to have to agree with this as it relates to my original point about people overpaying for homes and going well above asking price. I don't see how the student loan forgiveness and eating out less, fewer vacays, etc.... have had that much of an impact on a person's ability to simply come out of pocket with $20K, $50K, $100K to pay over asking price in a bidding war on a home. The kind of money it takes to do that has to come from a sudden unexpected windfall like life insurance policy benefits or some other inheritance passed down. Whatever was saved by eating out less, is being consumed by everything else - gas prices, other inflation, etc... I am convinced i can eat out just about as cheap as i can cook at home on some days depending on what I'm cooking. Groceries are ridiculous right now. The money being tossed around driving this current bidding war on homes is an influx of sudden BIG money.

It could very well be coming from the huge profit on the house you are selling. If you sell, then buy, you'll experience the bidding war under both scenarios and you have a huge gain on your original sale. This is more likely than some estate scenario.

 

[Cooterpoot]

It's always good to review your insurance policies, but I'd encourage you (and anyone else) to make sure you don't get exposed to being under-insured especially on houses and cars, which have a soaring replacement cost.

Also: talk to your agent about an umbrella policy if you don't have one. If you ever need it, best ~$225 a year you'll ever spend.

Got more coverage, same deductible, for a much lower price. Dropped my escrow $200 a month. Sometimes you have to change agents, LOL.

 

[dorndawg]

Got more coverage, same deductible, for a much lower price. Dropped my escrow $200 a month. Sometimes you have to change agents, LOL.

Good looking out. Never hurts to shop it around, particularly if it's been a few years.

 

[fishwater99]

We will not see a bubble burst because there really isn't a bubble right now.
The 2008 bubble was because of some very bad lending practices and that is not the case right now.
We may see a small dip due to people in loan forbearance, but it will be minor.
I do think we will see interest rates rise and less homes being sold in the next few years until rates come down.

https://www.simplifyingthemarket.co...900805&utm_source=dlvr.it&utm_medium=facebook

https://www.simplifyingthemarket.co...le/?a=467268-8a67d209dd5a33c61aef64049a900805

 

[BoDawg.sixpack]

Maybe, but Bernake said he didn't see the Great Recession coming either

"We believe the effect of the troubles in the subprime sector on the broader housing market will be limited and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system," Bernanke said in his remarks, copies of which were distributed in Washington.

May 17, 2007

How someone as educated as him misses the 2nd largest economic downturn in our country's history is an entirely different thread, but the US dollar index has quietly made some large gains recently and even if we do have a technical recession it will likely be papered over again. The steady increase in our country's population on a year to year basis is providing a backdrop for a bouyant dollar value against Japan and a plethora of European/Baltic countries that are seeing sharp decline forecasts over the next few decades. South America is a mess and even China's debt to GDP ratio is expected to balloon over 90% in the next 5-10 years while their marital rates are plunging which will lead to fewer children.

So I would agree with those in this thread that are against selling a home if you don't absolutely have to. States like Mississippi that have a stagnant or declining population may not enjoy some the gains in the top 25% of the housing markets but it will be stable most likely.

 

[BoomBoom.sixpack]

I'm going to have to agree with this as it relates to my original point about people overpaying for homes and going well above asking price. I don't see how the student loan forgiveness and eating out less, fewer vacays, etc.... have had that much of an impact on a person's ability to simply come out of pocket with $20K, $50K, $100K to pay over asking price in a bidding war on a home. The kind of money it takes to do that has to come from a sudden unexpected windfall like life insurance policy benefits or some other inheritance passed down. Whatever was saved by eating out less, is being consumed by everything else - gas prices, other inflation, etc... I am convinced i can eat out just about as cheap as i can cook at home on some days depending on what I'm cooking. Groceries are ridiculous right now. The money being tossed around driving this current bidding war on homes is an influx of sudden BIG money.

I'm guessing because I'm not this type of person, but it could be that they don't realize their finances are as good as they seem with all those delayed payments and forgone costs, so they think they can afford more than they really can.

 

[BoDawg.sixpack]

There is an enormous transfer of wealth going on right now

as boomers die and bequeath their estates to Gen Xers and some of their millennial children which was accelerated by COVID which also put a lid on traveling expenses. Then you had the crypto craze and large gains the stock market on top of this, with several tranches of QE mixed in, ultra low interest rates and student loan deferrals. Sure the national debt has exploded but most countries are in the same boat.

 

[Uncle Ruckus]

And here I am about a month out from breaking ground on construction…