Mortgage Rates & The Housing Market

FinickyFish wrote:

Rising rates will curb the ‘rates’ of increase in home values but you will not see a drop in overall values. Underwriting is very different from back in 2007 times, borrowers are more credit worthy. Not that you won’t see defaults, but nothing like last time. Biggest factor simply supply and demand. There aren’t enough houses being built. Period. The jobs market is still hot, so drastic unemployment is not an issue. People are definitely stretching themselves credit-wise, but there are so many modification/hardship plans people will manage. And to the people talking about 7%+ interest rates years ago I WOULD LOVE to have higher rates with home prices at only a few multiples of a standard wage. Paying 10% on a $150k house makes sense if a guy makes $50k a year and rewards savers.

Totally nailed it with this ^^^

The collapse of the housing market in 2009 was NOT caused by a recession. Rather the mortgage industry and Wall Street CAUSED that recession because of bad mortgage practices and Wall Street trading in mortgage-backed securities that were a time bomb set to go off.

Rising interest rates are NOT a sign of a bad economy, they are a sign of an economy that is too hot and needs to be cooled to slow inflation. We have record levels of employment and a high stock market so the economy great and therefore is absolutely flooded with people with money burning a hole in their pockets. There is so much pent-up housing demand out there from 5+ years of record-low inventory that even with this rise in rates, buyers gonna buy.

The losers in this situation are the lower-income buyers who were depending on lowinterest rates to be able to qualify for enough to get on the home ownership laddder. They’re going to be able to borrow less and that gives them fewer choices of properties to buy if they can now buy at all.

Talk to any realtor and whatever listings they have that aren’t selling will almost always come with a back story. The most common ones are either the property has issues or the seller is trying to jackpot it by pricing way over the top. Rural property sales have slowed, but the whole COVID trend of selling up in the city and moving to the country is now over, so when they say it’s taking longer to sell a property, that is only “longer” compared to the crazy-train situation we had in 2020 and 2021. By all long-term standards, even the rural market is still red hot, it’s just not freaking white-hot apecrap crazy like it was the last 2 years.

Look at the pent-up demand for houses, recreational toys, new cars/trucks, home renovations, etc, etc basically everything. Not exactly the economy falling off the cliff narrative that some are trying to portray.

Just talked to the contractor that did our garage build last summer. Asked about his business, he said he thought the rate rise would dampen demand but it did just the opposite. He’s busier than ever. Big remodel jobs are now back on because lumber prices came back down and people can’t house hop due to lack of inventory, so they are doing big remodel jobs on their existing houses instead.

Real estate prices & the stock market are in a bubble. Every bubble deflates and history repeats itself. Our current situation is no different.

Here’s an article describing the last time we had inflation like this:
https://www.cnbc.com/2019/12/09/when-volcker-ruled-fed-people-thought-theyd-never-buy-a-home-again.html

From an investor perspective, the good news is that we are heading towards reasonably priced real estate and stock markets. Bad news is there’s a lot of hurt still to come.

The suckers who poured big money into the stock market bubble over the past couple years “trying to get on the bandwagon” probably still have time to get out. The S&P and NASDAQ indexes are still way overvalued when compared to long term averages. My guess is they will go down another 10%-20% (probably more) when the economy goes into recession from inflation/high energy prices.

The Fed used all their ammo to over inflate the bubbles and are now stuck raising interest rates to curb inflation into a declining economy. There fk’d. A recession is the only way to bring the stock and housing markets back to averages.

Everyday food and living expenses are here to stay and will only go up.

Like Dave Ramsey says, my advice is what you paid or it :).

That article was written in 2019 under a different administration where most everything was presented as doom and gloom. Not playing the aisle card, but I’d be willing to bet be hard pressed to find similar articles rn w that author and many others from similar news sources.

🤣🤣 Aren’t you though….here we go. Get your popcorn folks. In before the lock!

Deuces wrote:

That article was written in 2019 under a different administration where most everything was presented as doom and gloom. Not playing the aisle card, but I’d be willing to bet be hard pressed to find similar articles rn w that author and many others from similar news sources.

I would agree the housing market is not the same as 2009.
But a lot of the other industries (boats, campers, toys, 6ton-12 cylinder diesel trucks!) will have busy repo men. Those were all immensely overbought for last two years.
As for affordable housing, here’s an idea, do what the responsible people did and SAVE. Make it a priority above everything else if you want a home. Don’t need new everything always.
If you can’t get the concept but want to complain that you can’t afford your own house, too bad.

Rates won’t go much above 6, anything higher than what they are now will just be ammo for the Fed to bring rates back down and be heroes.

the_hat wrote:

As for affordable housing, here’s an idea, do what the responsible people did and SAVE.

plenty of people have and are without houses despite great credit, great jobs, and a lifetime of responsible decision making. How will saving up a measly 100k help you when the few houses that do exist are being sold for that much over asking price without inspection on all cash offers and no contingencies?

the_hat wrote:

I would agree the housing market is not the same as 2009.
But a lot of the other industries (boats, campers, toys, 6ton-12 cylinder diesel trucks!) will have busy repo men. Those were all immensely overbought for last two years.
As for affordable housing, here’s an idea, do what the responsible people did and SAVE. Make it a priority above everything else if you want a home. Don’t need new everything always.
If you can’t get the concept but want to complain that you can’t afford your own house, too bad.

Rates won’t go much above 6, anything higher than what they are now will just be ammo for the Fed to bring rates back down and be heroes.

I’m going to go ahead and disagree completely on the bolded part.

There are so many programs and steps involved with having something repossessed that it’s a longshot to actually happen. Banks are not in the business of owning homes, RVs, toys, etc. They have no interest in owning depreciating assets or even homes. My uncle was the long time VP of a small local bank in a nearby town. He always said that they welcome calls from people who are struggling to make ends meet and work with them. They don’t want the house, car, etc. back as they don’t make money in that way and it takes labor and margins to evaluate the assets, fix them, then sell them.

When it comes to loaning money for stuff, banks use algorithms that price in known losses ahead of time accordingly. In other words, we all pay a tiny bit to more than make up for the people who cost banks money. Banks never lose and never will…especially with today’s absurd demand from consumers. Our government has also set the precedent that in the rare case a bank does actually “lose”, they will come charging in and bail them out too.

Where did I say anything about banks losing money?
Small local and large mainstream are two different things.
Dealers will gladly take repo’d items on consignment or even purchase to bolster there used inventory as 80k boats at 10 percent interest will have a bit longer sales cycles I’m guessing.

Those who will default likely made payments fine before the everyday cost of living went up. Now, the spending account is continuing to be consumed by necessities and at some point something will have to give. Do I make all the payments on my absolute needs and bills or do I pay for my “toy”.
It’s called correction, and it will be ugly for some, but many will be self inflicted.

crappie55369 wrote:

<div class=”d4p-bbt-quote-title”>the_hat wrote:</div>
As for affordable housing, here’s an idea, do what the responsible people did and SAVE.

plenty of people have and are without houses despite great credit, great jobs, and a lifetime of responsible decision making. How will saving up a measly 100k help you when the few houses that do exist are being sold for that much over asking price without inspection on all cash offers and no contingencies?

If a person saved 100k liquid and has his/her finances in order right now, there are plenty of houses to be had. Look harder, or settle for the fact you aren’t going to get everything you dreamed of in your first house. It’s reality (yes I know it’s cruel). Rates are 5%, so what. Put some money down to get past the PMI and refi when rates drop in 24 months, it’s the cost/sacrifice of owning a home.

the_hat wrote:

Where did I say anything about banks losing money?
Small local and large mainstream are two different things.
Dealers will gladly take repo’d items on consignment or even purchase to bolster there used inventory as 80k boats at 10 percent interest will have a bit longer sales cycles I’m guessing.

Those who will default likely made payments fine before the everyday cost of living went up. Now, the spending account is continuing to be consumed by necessities and at some point something will have to give. Do I make all the payments on my absolute needs and bills or do I pay for my “toy”.
It’s called correction, and it will be ugly for some, but many will be self inflicted.

Where did I say that you said anything about banks losing money??? Quit trying to be offended because someone doesn’t agree with every single word you post.

The simple point is that banks make more money pushing loans than they do repossessing stuff. Banks aren’t on a mad rush to take things back even from borrowers who can’t afford whatever it is as that’s not how they make their money. Will they do it in some instances? Absolutely. Is it likely to be some widespread event? No. They have better ways to make money and already price in those who may not make every payment on whatever it is they purchase.

Offended?? Yeah aren’t I though…
🤡

You understand how banks work right? Just wondering.
Cuz if you can call Mr/Mrs Banker snd say “I have no money this month to pay you” snd they say” oh no problem get it to me when you can” then that is one sweet bank.

They want there money back….

My buddy runs a repo business. He said business is at a all time high right now. To many people loaned what they couldn’t afford the last few years

Bearcat89 wrote:

<div class=”d4p-bbt-quote-title”>slough wrote:</div>
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

5 years ago I bought a really expensive diesel pickup. I got pretty good trade in value on my 1500. The diesel was way more than I could afford, but since I had good credit I financed it for 0%. Now here’s the funny thing. I’ve been driving a truck I couldn’t afford outright for 5 years, and I’m still driving it, but now it’s paid off. Now had I not bought back then and instead pay off the truck I was driving and saving for the eventual new truck, my trade would be far less in value and the new truck would be much higher in price. Thank god for cheap financing.

Some people are house poor and are fine w it, pays off for many in the long run, it’s their choice, can’t concentrate on the few it doesn’t work for. Some people are home bodies and perfectly content w it

Same thing with toys, there a many many people who have them and are just fine, look at any state campground or body of water or ATV trails this summer on a nice day, let’s not concentrate on the very small percentage getting repo’d.

castle-rock-clown wrote:

Now had I not bought back then and instead pay off the truck I was driving and saving for the eventual new truck, my trade would be far less in value and the new truck would be much higher in price. Thank god for cheap financing.

Yeah like the housing market the vehicle market is ridiculous too. Pretty much everything is. I sold my truck last Fall since I have been working from home and I wasnt driving it and planned to order a new 2022. I got 3k less than I paid for it 3 years earlier with 42k miles on it. Now Im waiting for my new truck which I “ordered” in January, but its still not technically ordered since GM does stupid Allocations to dealers and I have no idea when I will get it. Probably Fall and I have to pay full sticker price. Ouch.

That was your choice however Muskie. You can’t really complain to much or really at all in the scenario you just stated. You basically drove a truck for free for 42k miles and now your upset because you wanted new and have to pay full price?

Ripjiggen wrote:

That was your choice however Muskie. You can’t really complain to much or really at all in the scenario you just stated. You basically drove a truck for free for 42k miles and now your upset because you wanted new and have to pay full price?

Not complaining at all. It is what it is. I made out well on the sale of my truck its what I made up for it will be going into a higher priced new one. So really a wash.

5 years ago I bought a really expensive diesel pickup. I got pretty good trade in value on my 1500. The diesel was way more than I could afford, but since I had good credit I financed it for 0%. Now here’s the funny thing. I’ve been driving a truck I couldn’t afford outright for 5 years, and I’m still driving it, but now it’s paid off. Now had I not bought back then and instead pay off the truck I was driving and saving for the eventual new truck, my trade would be far less in value and the new truck would be much higher in price. Thank god for cheap financing.
[/quote]

Yes that is a good situation. But not relevant to a family buying a home they can’t afford. I could get financed for a 200k car with low interest, but I still couldn’t realistically afford it. Or if I did afford it, it would be all I would afford.

the_hat wrote:

Offended?? Yeah aren’t I though…
🤡

You understand how banks work right? Just wondering.
Cuz if you can call Mr/Mrs Banker snd say “I have no money this month to pay you” snd they say” oh no problem get it to me when you can” then that is one sweet bank.

They want there money back….

They would literally have you do this before defaulting and actually encourage it rather than just ghosting the bank which costs them even more. You are the one who has no first-hand knowledge of how banks work. Go ask any loan officer, mortgage lender, or bank executive and they will give you a brief education.

There are so many people upside down on things now, in the past, and will be in the future that won’t have them repossessed. This isn’t something new to the Covid era. Again repossessions happen obviously, but more often than not the bank works with the customer to try and keep the income coming in their preferred avenue. I highly doubt we’re about to see a record number of repossessions on recreational purchases. Banks hedge their income over time and by scaling things. They aren’t in the business of vehicles, side by sides, boats, homes, etc. for a reason. They make more handing out loans by far…even questionable ones.

CaptainMusky wrote:

<div class=”d4p-bbt-quote-title”>Ripjiggen wrote:</div>
That was your choice however Muskie. You can’t really complain to much or really at all in the scenario you just stated. You basically drove a truck for free for 42k miles and now your upset because you wanted new and have to pay full price?

Not complaining at all. It is what it is. I made out well on the sale of my truck its what I made up for it will be going into a higher priced new one. So really a wash.

Exactly all relative price wise.

Ripjiggen wrote:

Exactly all relative price wise.

I just dont like paying full price

They would literally have you do this before defaulting and actually encourage it rather than just ghosting the bank which costs them even more. You are the one who has no first-hand knowledge of how banks work. Go ask any loan officer, mortgage lender, or bank executive and they will give you a brief education.

There are so many people upside down on things now, in the past, and will be in the future that won’t have them repossessed. This isn’t something new to the Covid era. Again repossessions happen obviously, but more often than not the bank works with the customer to try and keep the income coming in their preferred avenue. I highly doubt we’re about to see a record number of repossessions on recreational purchases. Banks hedge their income over time and by scaling things. They aren’t in the business of vehicles, side by sides, boats, homes, etc. for a reason. They make more handing out loans by far…even questionable ones.
[/quote]

How in F do you know what I do or don’t have knowledge or experience in? You don’t know me (thank god) or anything about me. I never said there would be record anything, I said they would be busy and the industry was overbought, that was it. And someone with first hand knowledge backed it up.

I normally avoid posts that you are running your mouth in for this exact reason, and shame on me for not sticking to that practice. So in an effort to take the high road I will leave it at that.
I look forward to reading more about all the things your father in law has that you get to use…

Turkey to kill and fish to catch after Wild win, enjoy the sunshine fellas!

Feels a lot like the late 70s early 80s. Carters oil embargo, farming was going crazy, land values all time high. We paid 21 % on farm operating note. Not saying it’s going to happen again but you are suppose to learn from history. One thing I would do, if you have any variable interest loans I would get them on fixed interest!

klang wrote:

Feels a lot like the late 70s early 80s. Carters oil embargo, farming was going crazy, land values all time high. We paid 21 % on farm operating note. Not saying it’s going to happen again but you are suppose to learn from history. One thing I would do, if you have any variable interest loans I would get them on fixed interest!

I agree 100%. Back in the early 80s if a bank gave you a 9% home loan you think you’d won the lottery and be doing jumping jacks. Today that rate spells the end of the world.

the_hat wrote:

They would literally have you do this before defaulting and actually encourage it rather than just ghosting the bank which costs them even more. You are the one who has no first-hand knowledge of how banks work. Go ask any loan officer, mortgage lender, or bank executive and they will give you a brief education.

There are so many people upside down on things now, in the past, and will be in the future that won’t have them repossessed. This isn’t something new to the Covid era. Again repossessions happen obviously, but more often than not the bank works with the customer to try and keep the income coming in their preferred avenue. I highly doubt we’re about to see a record number of repossessions on recreational purchases. Banks hedge their income over time and by scaling things. They aren’t in the business of vehicles, side by sides, boats, homes, etc. for a reason. They make more handing out loans by far…even questionable ones.

How in F do you know what I do or don’t have knowledge or experience in? You don’t know me (thank god) or anything about me. I never said there would be record anything, I said they would be busy and the industry was overbought, that was it. And someone with first hand knowledge backed it up.

I normally avoid posts that you are running your mouth in for this exact reason, and shame on me for not sticking to that practice. So in an effort to take the high road I will leave it at that.
I look forward to reading more about all the things your father in law has that you get to use…

Turkey to kill and fish to catch after Wild win, enjoy the sunshine fellas!
[/quote]

I’m with bucky on this and I have first hand knowledge, I’m a consultant on the home lending side for the largest home lending traditional bank and I worked auto lending prior. Not sure where you’re getting your info from but dealerships rarely repo, “there financing” is generally another lender so it’s the lender repoing for nonpayment, and like bucky said, it’s the last thing we want to do. To Bearcats point that repos are at an all time high I can believe that by the sheer numbers, but I would guess (though I don’t know) that per capita it’s probably at a normal level (there were just so many things bought during the last 2 years). And to Hats comment about how people should just “save”, this is an ignorant comment. Go back and look at a chart of average wages to average home prices, they don’t correlate, low interest rates were forced on the latest generation or two and have punished savers. This is the kind of thing that gets boomers and millennials at eachothers throats. Some talk of entitlement, but it’s obvious the can (or bill) keeps getting kicked down to those who never saw the benefits. That’s just the way of the world, and I’m not here to get everyone riled up, but just want to open some eyes to the fact there’s no simple answer and instead of blaming people for not doing it “your way” or the “way it’s always been” we need to realize things have drastically changed and new solutions or strategies need to be utilized. Just “saving” is probably not on the table in larger markets.

the_hat wrote:

🤣🤣 Aren’t you though….here we go. Get your popcorn folks. In before the lock!

<div class=”d4p-bbt-quote-title”>Mr.Beads wrote:</div>
That article was written in 2019 under a different administration where most everything was presented as doom and gloom. Not playing the aisle card, but I’d be willing to bet be hard pressed to find similar articles rn w that author and many others from similar news sources.

This clown was looking to be triggered all along and cause an issue. Some people just lose it when someone else doesn’t agree with every word they post.

You assume my words are an attempt to put things in your mouth. Quit being so flattered boy.

I predict 10%+ on a 30 year fixed mortgage interest rate in the next year. Others thoughts?

I’ll take the under.

Dutchboy wrote:

In 1980 interest rates were 18%. The country survived but people had to learn how to live within their means.

Not looking forward to that again! lol

Dave Lozier wrote:

<div class=”d4p-bbt-quote-title”>Dutchboy wrote:</div>
In 1980 interest rates were 18%. The country survived but people had to learn how to live within their means.

Not looking forward to that again! lol

We seemed more self reliant back then (or so it seems) now it seems everybody thinks the government will bail the country out of this situation. I don’t know if it’s the governments job or if it has the ability. We allowed our jobs to be taken over seas and have become a nation reliant on others. Which for sure isn’t a good thing.

History will let un know how this turns out.