If I recall correctly, we were at 18% coming out of the Carter administration.
Mortgage rates climb above 7%
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Last: 10 days ago by Buck Turgidson
This last summer I fell in love with a 100+ acre piece of land and house. Unfortunately interest rates were at 6.75% at the time. We love the property but not the payment. I am still hoping they come down at some point.
I am a slave of Christ
Long-term rates have reared their head in the last 3 months. Inflation holding steady around 3%.
Trump talked a big game the last 4 years about his ability to crush inflation and lower rates. We'll see in a week what he's got up his sleeve.
Trump talked a big game the last 4 years about his ability to crush inflation and lower rates. We'll see in a week what he's got up his sleeve.
Still trying to sale our old house and this **** doesn't help.
Friend of mine moved to rural Mississippi. Paid $400k for a big house on a couple of acres.AgFan1974 said:Been looking too. Curious... what areas were you looking at?Tree Hugger said:
yeah we are at 2.5% and 4 years into a 15 year note, I don't see us going anywhere for a while. We have enough equity in the house to pay cash in a less expensive area but my current job wouldn't support a move to one of those areas.
Of course, it's Mississippi.
2.75 but should be done with it in 10 years now. Can't wait for that feeling.Tailgate88 said:Damn! We are sitting at 2.5 and thought WE had gotten a great rate!Hoyt Ag said:
1.99%
I'm stuck with this house forever.
Hoyt Ag said:
1.99%
I'm stuck with this house forever.
Company I interviewed for asked if I was open to relocate. I told them "you can't afford to relocate anyone". The recruiter admitted that was true.
When the FED does QE like 2008, they purchase assets like treasuries. Those assets go on the FED balance sheet. The money used to purchase them was taken from the banks with full approval of the banks and government. But the FED itself is a bank. They have to hold 10% of everything they loan out as reserve. Well, those new assets can be considered 10% of money that will now be loaned out. So they can loan out 10x the value of the assets they bought.halfastros81 said:
Retired Engineer here . Not well versed in finance , money supply , etc. I invested consistently well and diversified but do not understand all the inner workings
Can I ask you to walk us thru what the deflationary period and unwinding those derivatives looks like in financial laymen's terms .
So if they bought $1M in treasuries, they can now loan out $10M back to the banks. Now it makes sense why they agreed to give your deposits to the FED without you knowing doesn't it? Where do you think their bonuses come from?
If there is demand, the banks will take the $10M. They now can keep that as their 10% reserve and loan out $100M. Those loans will go into a myriad of vehicles like real estate, businesses, and who knows what else. I don't think it goes straight to consumers though.
So now the money supply has increased 100x the value of the assets the FED bought. No new dollars were printed. It's all derivative leverage. Numbers on a screen. The real estate, businesses, stocks, etc all go consierably higher. But their true value is still only in their productivity and efficiency to generate profits, which didn't go up 100x. It likely didn't go up any more than it historically would have.. maybe 10x. The rest of their value is price inflation from the expanded money supply.
So what is deflation? Deflation is when the economy starts contracting and there is no more demand for loans. Prices start falling. The leverage that was propping up the value of everything starts deteriorating and the value of the dollar measured in what it can purchase in the domestic economy is rising.
Just as when the dollar falls over time, everything valued in it rises. When the dollar rises, everything valued in it falls. It doesn't matter if XYZ stock is profitable. It's valued in dollars which are being sucked out of the system, so it falls too.
That 100x derivative asset value eventually falls back down to 0x. So take a good hard look at where SPX, housing values, etc were at before 2008. In a true deflationary cycle, they probably get back there.
It might take 20 years and might happen slowly, every couple of years things lower than they were before. It's an economic cycle not seen in 100 years outside of a relatively short period in the 70's. Nobody knows what it looks like because you've been trained to think the FED can keep the leverage pumping for eternity. History shows that nothing goes up forever. No matter how hard the Keynesians try, economic cycles will eventually win out.
Paid off my house in 2018 after owning it for 8 years.
No more mortgage, no more debt, no more fretting about interest rates.
I love my house and area but this stinks for jobs. I plan to move to the West in a year and will rent out my house.
Freedom.
No more mortgage, no more debt, no more fretting about interest rates.
I love my house and area but this stinks for jobs. I plan to move to the West in a year and will rent out my house.
Freedom.
Yeah. That's pretty close to when I was finishing up school, then in law school. Adjustable rate mortgages were a thing plus there were still assumable loans in existence, if lucky enough to find them.Funky Winkerbean said:
If I recall correctly, we were at 18% coming out of the Carter administration.
ARMs had teaser rates that would then adjust after two-three years. Talk about sticker shock when those rates would adjust. Law firm I was working for had some banks and other lenders as clients. I was defending Truth in Lending cases quite often due to ARMs.
A fixed interest rate below 10% was considered a great deal, back then.
Mathguy64 said:Mine has been paid off for a long time. Moving upwards just means higher property taxes, higher insurance and a mortgage north of 7%.Hoyt Ag said:
1.99%
I'm stuck with this house forever.
Yeah, thats a no for me Dawg.
And now we are entering a world where taxes + insurance are higher than the mortgage. WSJ had an article on this the other day where something like 20% of homeowners are in this "upside down" arrangement now. (I may be a little off on that number).
I feel like there is a bit of false hope in the wait until the boomers die, move to a retirement community or downsize mentality. While boomers may own a large amount of the homes in the US, a significant amount of that inventory is in places where few younger people need or want to live like Cleveland, OH, Freer, TX and Fresno, CA. Boomers do not all only own homes at the coast, lakes, mountains and desirable rural areas.
They own homes everywhere.
Definitely approaching historic norms...HOWEVER, 30+ years of super low rates is what the vast majority of people are used to now. Not sure how, but I'm afraid the gov't is going to try to enter the lending market to boost construction (both residential and non-residential).
3.5% here, with less than 80k left on the house, I'm not moving.Hoyt Ag said:
1.99%
I'm stuck with this house forever.
"All the gods, all the heavens, all the hells are within you". Joseph Campbell
The federal reserve isn't a government. It's our overlord.
infinity ag said:
Paid off my house in 2018 after owning it for 8 years.
No more mortgage, no more debt, no more fretting about interest rates.
I love my house and area but this stinks for jobs. I plan to move to the West in a year and will rent out my house.
Freedom.
Curious question: why not sell your home and put the money in an ETF that does rental properties?
Yukon Cornelius said:
The federal reserve isn't a government. It's our overlord.
Their state/local/property taxes were practically zero compared to ours, for the record.
Excellent meme. I've thought about this before but never seen the comparison like that.
Yes we, Americans, are slaves to the Fed
Yes we, Americans, are slaves to the Fed
Yukon Cornelius said:infinity ag said:
Paid off my house in 2018 after owning it for 8 years.
No more mortgage, no more debt, no more fretting about interest rates.
I love my house and area but this stinks for jobs. I plan to move to the West in a year and will rent out my house.
Freedom.
Curious question: why not sell your home and put the money in an ETF that does rental properties?
What would be the reason for doing that?
I live in the paid-off house and I like the area, safe, nice people around, good school for my kid. I don't see this house as investment. Appreciation has been slow and steady though prop taxes are high. I can't move until my kid is in college.
My investments are separate and I do well there.
Am I missing something?
kb2001 said:
Deflation can spiral and quickly, all non-liquid assets devalue, and the real cost of debt increases. If you have debt, this can be crushing. Most companies carry debt, this is where the real pain comes in. Once jobs start getting cut, and salaries start dropping, anybody with a mortgage or a car payment could quickly find themselves in over their head. We've seen expectations for car loans get insane the last decade, even going out to 8 year loans, which is crazy.
The risks of deflation are substantial, and our economic system is very scared of this happening. This is why it's designed to maintain 1-2% rate of inflation, that is the target. For better or worse, this is the system we live in.
This assumes non-variable interest rates. If your interest rates are variable, or you can in any way refinance, there's a good chance you can minimize this effect since interest rates are almost certain to decrease. Deflation means the money supply is contracting and therefore interest rates must decrease because borrowing would be decreasing if the money supply is. You can't keep interest rates at the same level if banks want to keep making any profits, so the first thing they'll do is cut rates.
Obviously, in terms of mortgages, if the value of your home decreased due to deflation and your fixed rate mortgage can't be refinanced because of the loss of equity (i.e. you're now effectively upside down), THEN you've got a problem. But not everyone would be in this situation. Many people currently have a 20-60% LTV on their remaining balance and even a 35% drop in their home value won't prevent them from refinancing.
I thought you said you were moving and keeping paid off house as rental. Maybe I misunderstood.
If the average mortgage was $30,000 no one would care about interest rates
The real issue is the cost of housing and the amount of debt the average homebuyer has to take on to buy a home
The real issue is the cost of housing and the amount of debt the average homebuyer has to take on to buy a home
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My Pronouns Ultra and MAGA
Trump 2024
My Pronouns Ultra and MAGA
Trump 2024
You're right. Large part of it is driven by regulations, impact fees and property taxes.
Yukon Cornelius said:
You're right. Large part of it is driven by regulations, impact fees and property taxes.
Central Texas rural ranch land can go for $100k an acre.
High housing costs have a lot more to due with migration, low interest pushing up housing costs for existing homes and the feds money printer going exponentially since Covid
Property taxes are a non issue to a negative to housing costs because they reduce the payment people can afford
The others are minute in the scheme of things
The world needs mean tweets
My Pronouns Ultra and MAGA
Trump 2024
My Pronouns Ultra and MAGA
Trump 2024
Tree Hugger said:
yeah we are at 2.5% and 4 years into a 15 year note, I don't see us going anywhere for a while. We have enough equity in the house to pay cash in a less expensive area but my current job wouldn't support a move to one of those areas.
This is kind of the reverse of my problem. 2.875% and almost 10 years into a 15 year. Plenty of equity, but we'd be looking to upgrade and move to a nicer area/larger house for me to be closer to work. I wouldn't mind financing the move, but taking debt at 7% seems stupid compared to what I have. Commuting sucks, but it's worth not having $10k/yr in interest for the near future.
There have been times when I have fantacized about going back renting, not gonna lie. Typically when 2 or 3 things go wrong with the house back to back...or when stressing about a flood or hurricane or busted pipes from freeze in Houston. I miss not having to worry about that stuff, but I have very simple tastes, which most females don't share. I just need a sturdy place, preferably with a covered back patio.tysker said:Work flexibility will keep a particular segment of the workforce in the rental market, imo.Hoyt Ag said:My company is begging me to relocate but it doesn't make a lot of financial sense for me. I will stay a few more years and make a decision then and most likely keep this as a rental. With a note of $1200 and the home able to rent for $3500, its a no brainer.Mathguy64 said:Mine has been paid off for a long time. Moving upwards just means higher property taxes, higher insurance and a mortgage north of 7%.Hoyt Ag said:
1.99%
I'm stuck with this house forever.
Yeah, thats a no for me Dawg.
Homeownership isn't all it's cracked up to be, and public school zones, aren't going to be as important as they once were. The younger generations don't have as much 'stuff,' and even furniture is becoming more disposable.
I disagree with the notion that renting is never smart. Especially after buying our most current home in the Houston burbs at the absolute high water mark of prices...luckily we rate locked at 3.6% right before rates started skyrocketing.
DallasAg 94 said:
I look at our Insurance renewal... we're sub 3 on Interest rate... there is no chance people are going to buy houses.
Our escrow is now 144% of our P&I.
Part of it is the value of the house has more than doubled since we bought it... so the Taxes have grown rapidly. And then, if you want to be Insured for the full value... well, you'll Insured for twice what you paid.
The Squeeze is on.
The house doesn't need to be insured to the property value, just the cost to rebuild. My in-laws place has absolutely skyrocketed in value strictly because of the land value, so the rate of insurance increase for them has not been nearly the same as the total property valuation.
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Yukon Cornelius said:
I thought you said you were moving and keeping paid off house as rental. Maybe I misunderstood.
That will be a year in the future after my younger one goes to college. That is when I look to move. Stuck until then.
I am not planning to sell in case I don't like the new place and feel like going back. I've lived in this city for over 2 decades so hard to think of another place but gotta do it.
DallasAg 94 said:Technically, doesn't the Insurance just need to cover the loan?!ABATTBQ11 said:DallasAg 94 said:
I look at our Insurance renewal... we're sub 3 on Interest rate... there is no chance people are going to buy houses.
Our escrow is now 144% of our P&I.
Part of it is the value of the house has more than doubled since we bought it... so the Taxes have grown rapidly. And then, if you want to be Insured for the full value... well, you'll Insured for twice what you paid.
The Squeeze is on.
The house doesn't need to be insured to the property value, just the cost to rebuild. My in-laws place has absolutely skyrocketed in value strictly because of the land value, so the rate of insurance increase for them has not been nearly the same as the total property valuation.
For the lender? Yeah. For you? If you want that kind of exposure, the why not?
Honestly though, I'm seriously considering foregoing insurance when we're paid off. I think we've easily paid north of $20k and never used it.
For new developments the regulations and impact fees are pushing housing costs completely arbitrarily by 1000s and 1000s of dollars.
let it go up, my money market cash funds are loving it.. I dont have any loans so as long as they keep jacking the rates up, my monthly money market is getting sweeter!
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