Mortgage Rates & The Housing Market

Joe Jarl wrote:

I kinda think the best answer is…nobody knows. But, I believe rising interest rates will temper things noticeably. Combined with high material and labor costs, I think a lot of people will sit on the fence. Especially when it comes to home improvement projects. Additions, garages, etc. Home prices will likely come down simply due to lack of buying power the average person will have with higher interest rates. For those saying that lumber will never come down close to what was pre-pandemic, it actually did for a short time last fall. 1/2″ OSB was down to $13/sheet. It peaked a year ago over $50 and is now around $38. Last year lumber as a whole began dropping about this time due to the big wholesale buyers saying enough is enough. Word has it that the same thing will likely happen again.

We paid $16.25 a sheet last August from our local yard. 2×4 studs were $3.29 at the same time I believe. For years those lumber futures barely moved, now every 2 weeks there’s a violent swing.

For people looking to build/renovate, do yourself a favor and go to a true lumber yard and have them create an itemized estimate. From there, most places will update it as prices change every few weeks. We got all our ducks in a row then pulled the trigger officially last August to buy the house package at numbers we liked. This saved us somewhere near $40k.

FinickyFish wrote:

And to the guys with under 3% interest rates trying to pay off your mortgage as fast as you can WHAT THE HELL ARE YOU DOING! At borrowing rates that low you grab as much as you can with both hands especially with inflation the way it is. We call that free money even when inflation is at normal rates.

I totally get the “pay it off!” mentality, but our financial planner told me the exact same thing. We refied at 2.5% last year. Unfortunately, our tax assessed value is going up 30% next year.

I don’t like debt. I like to own my things that’s why I pay every thing off fast. Why buy more and have the bank own my world.

Bearcat89 wrote:

I don’t like debt. I like to own my things that’s why I pay every thing off fast. Why buy more and have the bank own my world.

But you could use those payments towards vehicles that need light work, flip them, and then payoff the loan even faster… Not trying to give you a hard time, just trying to explain the rationale behind using these low rates in a different way.

FinickyFish wrote:

<div class=”d4p-bbt-quote-title”>Bearcat89 wrote:</div>
I don’t like debt. I like to own my things that’s why I pay every thing off fast. Why buy more and have the bank own my world.

But you could use those payments towards vehicles that need light work, flip them, and then payoff the loan even faster… Not trying to give you a hard time, just trying to explain the rationale behind using these low rates in a different way.

I understand what you mean and I appreciate the advice. I just look at the long run. 6 to 8 years I will have 0 debt. 0 that will make me happy. The bank will have nothing on me. Then I pay cash for a new boat. At the same time I keep on saving just incase I find the land I want.

The supply of homes for sale will stay low as most people have mortgages under 4%. People will stay put and only people who need to move will sell. This will keep prices up. I wish my home value would tank. Then my taxes would go down!

I was talking to a realtor in Alex MN about putting our lake house up for sale and she told me she would have multiple offers even with the rates going higher

Part of the lack of supply/increased demand is the fact that the two largest generations are competing for the same housing stock. On one hand, you’ve got your millennials looking for their first or second home while at the same time, the empty nested boomers are downsizing to something more reasonable to live out their years. Obviously this is not true for everyone in both generation demographics, but is true for a lot of them. When you have the two largest demographic groups (by population) competing for largely the same housing stock, it is most definitely going to drive up demand and as a result, diminish supply.

Bearcat89 wrote:

I don’t like debt. I like to own my things that’s why I pay every thing off fast. Why buy more and have the bank own my world.

I’m with ya there BC. Being debt free is a heck of a feeling and I pay things off as fast as I can like you do. My only debt is my mortgage and even that financing an appreciating asset, drives me crazy.

Housing prices will still rise, but start to plateau. Buyers are already switching to ARMs instead of 30-year fixed rates and that will only increase. And before people start harping on them, most of the time they are not a bad idea. If you do the math, even if they reset at the expiration period and increase by the maximum 2 percent (worst case), you still come out ahead even multiple years after that reset. And most people move within 10 years anyway.

But yeah, way too much demand to work itself out first before home prices go down. It’s a weird time. And rents are also going up so it’s not like people can seek relief there either. As others have said, all of these people who bought or refi’d into super low rates are in no rush to give that loan up anytime soon unless they are forced to.

Gitchi Gummi wrote:

<div class=”d4p-bbt-quote-title”>Bearcat89 wrote:</div>
I don’t like debt. I like to own my things that’s why I pay every thing off fast. Why buy more and have the bank own my world.

I’m with ya there BC. Being debt free is a heck of a feeling and I pay things off as fast as I can like you do. My only debt is my mortgage and even that financing an appreciating asset, drives me crazy.

X2 there’s nothing wrong with paying off debt early, even if the math doesn’t add up right now.

There was a story on the news not long ago where rent is up 11% nationally and some cities 33%. Thats nuts, but when the landlords don’t collect rent for how long during Covid what did Washington think was going to happen. Nothing is free folks…nothing.

Dutchboy wrote:

There was a story on the news not long ago where rent is up 11% nationally and some cities 33%. Thats nuts, but when the landlords don’t collect rent for how long during Covid what did Washington think was going to happen. Nothing is free folks…nothing.

I saw that too. If I remember correctly, one of the cities they were specifically referring to was Miami, FL.

I’m literally living it right now. I just put my house on the market last week and the Realator says offers are way down in our market which is single family year round residences.

castle-rock-clown wrote:

I’m literally living it right now. I just put my house on the market last week and the Realator says offers are way down in our market which is single family year round residences.

Maybe you’ll do another winter in the camper.

Dutchboy wrote:

<div class=”d4p-bbt-quote-title”>castle-rock-clown wrote:</div>
I’m literally living it right now. I just put my house on the market last week and the Realator says offers are way down in our market which is single family year round residences.

Maybe you’ll do another winter in the camper.

Already prepared for that. I love the Ice Castle and 40’ shipping container on my 40 acres. Thankfully I don’t need to sell my house, just want to sell it.

I should mention that a lot of houses are getting sold unseen and without any kind of inspection. I’m not that kind of buyer, so maybe that is why it took me over a year to get a house. If the house is relatively new, I would be willing to forego an inspection, but I still need to look at the house in person first. Some people are making offers just based on the photos and description.

As mostly stated already, rising rates will slow things, but certainly not stop. Material delays will slow things, but again certainly not stop on the construction side of things. Residential and now light commercial I’m not seeing any foreseeable slow down whatsoever. New builds are going up many places on the outskirts of the cities. Great time for anyone in construction. Interest rates are still really low, wages went up for most, housing will need to be meet.

From my small focus the houses that are sitting a bit longer either are run down, priced too high, or are in less desirable places, too far out or too far in.

Deuces wrote:

New builds are going up many places on the outskirts of the cities. Great time for anyone in construction.

Yup, I know in Carver we had 300+ new build permits in 2021, which was a record. And over 500+ for 2022. Victoria was significantly more, and will soon (like 5-10 years) be the largest town in Carver County.

Holy cats, this thread has so much conflicting information we are going to need the homeland security’s “Minister of Truth” to sort it out!

I tend to listen to smart elderly people when they talk. Common thread with them is “buy once, buy it right, and pay it off”. Too many can “afford the payment”, but truly can not “afford the item”.

docfrigo wrote:

Holy cats, this thread has so much conflicting information we are going to need the homeland security’s “Minister of Truth” to sort it out!

I tend to listen to smart elderly people when they talk. Common thread with them is “buy once, buy it right, and pay it off”. Too many can “afford the payment”, but truly can not “afford the item”.

I like this advice, my mom always taught me to pay my things off immediately. Credit cards and vehicles are to build credit not to build loans. I don’t get the idea of, well it’s low interest I might as well take out a bunch of loans. I was taught to pay off and own items not continue to keep loaning and loaning.
And with that mind set I own everything I have besides my house has a loan we are working hard to get paid off and pay it off in less then half the loan term

bigfatcroixbaby wrote:

Glad we locked in our 15 when it was 2.25%, but we’ve paid as much as 6% and lived to tell the story.

You missed the 18% days I started with,,,,

One other thing, don’t think you need 3000sf, granite countertops, a four season porch, 40×50 attached heated garage with epoxy floors, or a enough guest bedrooms for all your wife’s family the ONE DAY A YEAR they all come to visit!

Now that’s just crazy talk! Hahaha, HRG

Doesn’t it even out a bit? Rates go up – housing prices go down…rates go down, prices go up? Trouble I’d see is for those people that make 100K as a couple and bought a 500k house if they end up needing to sell…

slough wrote:

Doesn’t it even out a bit? Rates go up – housing prices go down…rates go down, prices go up? Trouble I’d see is for those people that make 100K as a couple and bought a 500k house if they end up needing to sell…

Those people never could afford that house and shouldn’t have bought it in the first place. I know a couple of them. Bank approved them for 600k and they spent 595 lol. Nothing like working and only being able to afford the house. Nothing else

Bearcat89 wrote:

Bank approved them for 600k and they spent 595 lol. Nothing like working and only being able to afford the house.

I was pre-approved for some absurd amount too like that. It blew my mind. There’s no freaking way I would consider spending that much on a house. What you’re pre-approved for and what you should be spending normally don’t fall in line. You really should not be spending more than 1/3 of your monthly income on a mortgage.

Banks have done a better job at being sure people qualify for the mortgages based on their incomes compared to the housing crisis of 2008/2009. They will still qualify people for absurd amounts though. This market is crazy, but I wouldn’t predict some big financial fallout or record foreclosures in the near future.

In the end I couldn’t care less if someone making $15 an hour buys a million dollar home, or if Bill Gates chose to live in a trailer house. The market is always “undefeated” and will squeeze out those who cannot afford something or reward those who live within their means with more investment options, purchases, and financial freedom.

It’s interesting to read all the different (and agreeing) perspectives on where this market is heading. It’s also interesting how unique each region within MN/WI is with regards to housing. Our nearest community of about 3,000 people + the surrounding rural area there are literally 6 houses currently for sale. One is a 2 million dollar home on the river. One comes with $800k worth of land on an old farmhouse, and one is a side by side modular home that someone is asking $240k for. The remaining couple sell in a week or so, only to be replaced by a couple more than move just as fast. In year’s past I’d predict ~40 homes on the market in the immediate area was the norm at any given time. Interesting times…

gim wrote:

<div class=”d4p-bbt-quote-title”>Bearcat89 wrote:</div>
Bank approved them for 600k and they spent 595 lol. Nothing like working and only being able to afford the house.

I was pre-approved for some absurd amount too like that. It blew my mind. There’s no freaking way I would consider spending that much on a house. What you’re pre-approved for and what you should be spending normally don’t fall in line. You really should not be spending more than 1/3 of your monthly income on a mortgage.

While that’s a good general rule, it can be really hard to even find an apartment under that 1/3 threshold for lower income folks. My wife and I bought our place in Saint Paul in 2006 when we were 25. 3 bedroom ranch style, 1300 sqft — a modest house in a quiet/desirable neighborhood. It took us over 10 years to get on the right side of that 1/3 number, but I don’t think it was a bad choice to buy that house when we did.

Money is free, just ask the government, use other peoples money and enjoy life, when your dead who will care. Bank will get your truck, house and boat.

gim wrote:

<div class=”d4p-bbt-quote-title”>Bearcat89 wrote:</div>
Bank approved them for 600k and they spent 595 lol. Nothing like working and only being able to afford the house.

I was pre-approved for some absurd amount too like that. It blew my mind. There’s no freaking way I would consider spending that much on a house. What you’re pre-approved for and what you should be spending normally don’t fall in line. You really should not be spending more than 1/3 of your monthly income on a mortgage.

Same. What I was approved for I thought was nuts. No way I want a giant house payment. Even at low interest.

bigcrappie wrote:

Money is free, just ask the government, use other peoples money and enjoy life, when your dead who will care. Bank will get your truck, house and boat.

My son will get mine and be debt free. Besides maybe my ongoing bar tab at the legion