Once yearly payments jump to 1000 extra a year, I don't see that number deterring people from buying. At 1500 or higher, I can see some buyers start feeling the pinch.

At such a tight market, I will be curious at what range rates will spark a "correction", if we even see one.

Payment shock is not in play, so agreed. We would need to get to 6%.

But this rate increase cost real money. And the increase is dead money i.e. Does not increase the buyers net worth. You could argue it decreases net worth.

The market has had a two day gentle slide. Good news compared with a relentless up tick the last three weeks or so.

Basically, rates are controlled by the Fed. As the Fed moves rates so do banks. If a bank can buy government secured 30 yr bonds at 3.08% the bank isn't going to loan unsecured debt at 4.0%. The bank wants some juice.

Since the beginning of the year the 30 yr treasury bond has moved from 2.81 to 3.06, similarly the 30 yr mortgage has move from 4.1 to 4.38.

Iirc, the Fed is deleveraging their balance sheet. In doing so they are increasing yield to enticing banks to purchase more bonds.

I'm afraid you are mistaken. I'm 15 year plus in mortgage and can tell you the Fed controls short term rates not long term. They influence longs but my OP is correct.

Note the rates jumped in the last 3-4 weeks and the fed has taken no action during that time.

2017 Overnite Lending Rate increases by FOMC were March 15, June 14 and December 13.

It appears the first hike in 2018 will be the March FOMC Meeting and not the February Meeting.

Mid-Sept 2017 the FOMC announced the unwinding of the stimulus. That started Oct 2017 and ends Oct 2018 cutting $4.5 Trillion off the balance sheet (25% of US Debt). The unwinding gets progressively larger in dollar amounts, tiered steps, as time progresses to Oct 2018.

The FOMC has made no secret about either move, the rate hikes and the unwinding, and was telegraphed months in advance. If you didn't see rising rates coming from the FOMC Meeting Minutes and the Unwinding announcement, attention was not being paid.

Albeit, the FOMC sets Overnite Rates and influences long term mortgage packages; I have never had a conversation with a mortgage banker who would decouple FOMC decisions and the 10 Year Treasury.

Transitioning to a tight money supply policy and rising interest rates means one thing in the housing market..

94chem said:

---

So...

1) Interest rates go to zero for 15 years;
2) Bush, then Obama, run the money printing presses as hard as they can to prop up the market, bail out banks, and pay the Chinese;
3) Trump hands out massive tax cuts; and
4) The stock market goes sky high and people start profit-taking by the billions.

I can't imagine why any of this would lead to inflation...

Seriously, all of us laissez-faire types were ecstatic to see Wal-Mart give its entry-level employees a 50% raise. Not one person in my circle - granted, I'm not that well read - seemed to notice that this is a huge amount of INFLATION.

Even Exxon-Mobil decides they're going to invest $40 billion, much of it due to their tax "savings." With the way prices are about to go up, I hope XOM and others are planning to spend at least some of their windfall on employee retention, because our lifestyles are about to get more expensive.

Edit - also going to post this on the Business board.

---

Second time I've seen this post. Nothing much to add other than that they ran the printing pressed hard BECAUSE the Chinese would buy - not the other way around. They are our largest foreign creditor & somewhat beholden to us because buying our paper props up their currency. Anyway, moving on...

BQ75 said:

---

Meh. Call me when they get to 14%, like my first mortgage.

---

A lot of pearl clutching for less than 1% movement. Buy a house and live in it for 20 years. Else Rent.

When did "pearl clutching" become such a popular phrase on Texags?

Went up again today...

Carnwellag2 said:

---

Farmer @ Johnsongrass, TX said:

---

As interest rates rise, the house price will eventually fall. As explained in the thread, what you pay per month goes up with higher rates; therefore, to afford what you want, it's either buy it with cash, buy a lesser priced home or wait.

Remember, interest rates are going up and your pay-check did not increase. Housing prices have to come down eventually to equilibrate with rising rates because pay-checks are a "certain sum" and how far can you stretch it? If housing prices stay the same, the buyer pool shrinks and days on the market number increases.

---

Hold up this is NOT accurate.

The whole premise of the thread is rates are rising because wages are rising and inflation is quickening.

Home prices aren't coming down. They going up up up

---

Yes. This is accurate.

Your level of expectation to observe something of this magnitude to happen may be, in one day, one week or one month, for it to be "accurate" and that's not reasonable. Transitioning from ZIRP to interest rate normalization via a tight money policy, I expect will take shape over the course of 2018. Sure, the housing prices can continue to bubble up to mid-2018; however, rest assured as the FOMC overnight lending rate increases a full percent, or more, over 2018 moving the 10 Year Treasury yield up that happens to influence mortgage rates - will move up faster. And, interest rates will rise faster than increases in wages.

Fifteen years of "free" dollars through ZIRP are going away. By October of 2018, 25% of our National debt goes off the balance sheet through QT (that started in October 2017). Tight money supply and a lender pool that will stay away from risky borrowers in a high rate environment reduces your housing buyer pool. Remember, all the foreclosed folks and bankrupt folks from the 08 crisis are entering the 10 year anniversary of getting their credit record erased. Those folks, a lot of them, that should not be buying a house will return to the housing market to buy again. Once that buying surge is over the window closes as rates move beyond their means to finance and folks outside that pool will also struggle. I would estimate that housing prices begin to dip between Q418 and Q119, if not before. Just takes a matter of a house sitting on the market longer than "average days on the market" for it all to soak in.

If you are young, it's not what you want to hear or read. If you are old, you have already experienced this once before. We agree to disagree.

BQ75 said:

---

Meh. Call me when they get to 14%, like my first mortgage.

---

I only wish. I'd be loading up on 30yr T-bills.

And housing prices, as always, will be more influenced by local demand and how many people are moving from and to a region, state, city than the change in mortgage rates over any short period. I'd be happy though if prices stagnate, we aren't moving and I already pay enough in taxes.

Can we sticky this thread up on top of the real estate board?

Carnwellag2 said:

---

The whole premise of the thread is rates are rising because wages are rising and inflation is quickening.

Home prices aren't coming down. They going up up up

---

This isnt a shot at you, but one of the biggest gripes I've had in the last 5 years has been real estate gurus trying to sound like economist. Are wages rising at the rate of appreciation the housing makret is seeing?

Scientific said:

---

Carnwellag2 said:

---

The whole premise of the thread is rates are rising because wages are rising and inflation is quickening.

Home prices aren't coming down. They going up up up

---

This isnt a shot at you, but one of the biggest gripes I've had in the last 5 years has been real estate gurus trying to sound like economist. Are wages rising at the rate of appreciation the housing makret is seeing?

---

Vice/ versa. Nothing worse than a bunch of Mays grads trying to sound like real estate pros. Plenty of past markets have proven that wages do not have to rise proportionately to home prices. Hell, look at California right now. Texas is currently seeing a huge influx of people. That can more than make up for slow wage growths. Also, are people forgetting that the vast majority of workers just got a significant pay raise in the last couple weeks?

So, if I'm going to make a move to sell my house and buy another, I should make it now and not in a year?

Just got pre-approved for my first house and will be making an offer today/tomorrow. Who knows!

Either way, this thread has my interest

Yes, rates are up to 4 year highs. BUT, historically they are still very low.

Of course, timing sucks if you are buying this spring as you want the lowest rate possible of course. But some perspective is needed I think as I notice folks tend to look at rates themselves and do not always understand what higher or lower rates actually translates into their payments.

On a 200k loan at 4.0% which you could have gotten a few weeks back, the 30 year fixed payment is 954. Now, with the half point rise of the 30 year fixed rate that same 200k loan at 4.5% would be 1013. That is a 59 dollar a month difference. That of course adds up, but if 59 dollars makes you question if you can afford the payment you are likely looking at way too much house in the first place in my opinion.

Obviously the difference is bigger on bigger loans but likely your free cash flow is greater per month to absorb the difference. and if rates keep going up which is likely the number starts to be more relevant and could cause some of the issues on this thread. I have my theories but I am not an economist so that is all they are. But, where we are currently I do not think will meaningfully effect the housing market either way.

JUst found out that real estate do has a board. Will link a thread (question) I started on the Bitcoin forum (B&I).

https://texags.com/forums/57/topics/2932671

So back down a bit yesterday? What is current 30 year mortgage?

jpb1999 said:

---

So back down a bit yesterday? What is current 30 year mortgage?

---

Wells Fargo showing Brazos County, TX, 2/16/18

$300k home, 10% down/$30k, Loan $270k

30 Yr Fixed with BPMI = 4.5% Rate & 4.775% APR = $1,460 Payment
15 Yr Fixed with BPMI = 4.0% Rate & 4.181% APR = $2,044 Payment

-OR-

$300k home, 20% down/$60k, Loan $240k

30 Yr Fixed = 4.625% Rate & 4.671% APR = $1,234 Payment
15 Yr Fixed = 4.125% Rate & 4.204% APR = $1,790 Payment

https://www.wellsfargo.com/mortgage/

*************************************************************************

Bank of America showing Brazos County, TX, 2/16/18

$300k home, 10% down/$30k, Loan $270k

30 Yr Fixed with BPMI = 4.25% Rate & 4.609% APR = $1,420 Payment
15 Yr Fixed with BPMI = 4.00% Rate & 4.278% APR = $2,044 Payment

-OR-

$300k home, 20% down/$60k, Loan $240k

30 Yr Fixed = 4.375% Rate & 4.496% APR = $1,198 Payment
15 Yr Fixed = 4.000% Rate & 4.214% APR = $1,775 Payment

https://www.bankofamerica.com/mortgage/home-mortgage/

CS78 said:

---

Vice/ versa. Nothing worse than a bunch of Mays grads trying to sound like real estate pros. Plenty of past markets have proven that wages do not have to rise proportionately to home prices. Hell, look at California right now. Texas is currently seeing a huge influx of people. That can more than make up for slow wage growths. Also, are people forgetting that the vast majority of workers just got a significant pay raise in the last couple weeks?

---

Are we arguing that CA has been immune to market cycles? People get caught up in the hyperbole of bubble talk, and think if the market gets into buyers terriory we'll see steep discounts. On the other end, the bullish attiude a lot real estate folks have, should at least raise a small flag about what is contributing to the market conditions. We'll see.

IMO, here's a fairly balanced article about housing sales, supply and interest rates.

The "Comments" at the bottom of the article are worthy.

https://www.marke****ch.com/story/existing-home-sales-tumble-at-the-fastest-pace-in-more-than-3-years-as-supply-crunch-deepens-2018-02-21

The link is Market W A T C H

Side Note:

The FOMC overnight lending rate is currently 1.25% to 1.50% range and during this period the 10 Year Treasury has been in an average range of 2.80-ish%. (today trading at a 2.895-ish%) Current 30 Year Fixed is 4.50-ish%, or a tad higher, in this environment.

With the FOMC announcements of 3 rate hikes this year (they meet March, June, Sep and Dec), if the FOMC stays at increasing in quarter point moves, in theory the year ends with a range of 2.0 to 2.25%.

For simple math, let's just say 2% on the FOMC overnight rate, that should translate to a 3.73% on the 10 Year Treasury. By ratio, the 30 Year Fixed should increase to 5.9946% by the end of 2018.

If the FOMC increases in larger increments (greater than a quarter point) or hikes 4 times versus the 3 announced/suggested, interest rates would be higher.

Keep your eye of the Inflation Rate announcement scheduled for March 9th.

the 30 year fixed rate doesn't track the Fed Fund rate nearly that closely.

I know. I was going address this in the thread but got side tracked. Will come back later. The "Fed controls long rates" is not correct. As I said they influence them but not control them.

I am thinking more transitive,...overnight rate influences the 10 Year Treas and....the 10 year Treas influences the 30 Year Fixed (mortgage rates in general). In those "estimates", I think I was conservative overall.

"Influence" yep. There's a spread or ratio relationship.

but if you look at charts for how correlated those various rates are over the years, they don't track that well.

Some years they're very tight, and others not so much. In general, as the FFR increases, the spread gets thinner (and vice versa).

Your mistake is tying short term, overnight to week, rate controls by the Fed to longs, 10 years. Raising shorts often times lower the longs by addressing inflation concerns in the longs.

I've been following 10 years daily for fifteen years. Longs go down much more often then up when the Fed increases its short term rates.

I also fail to see the correlation between the Fed Funds rate and mortgage rates. Fed funds is a very controlled market, bank to bank.

10 year is at 2.93% right now and I think that's nearing a pressure point for rates again.

Diggity said:

---

but if you look at charts for how correlated those various rates are over the years, they don't track that well.

Some years they're very tight, and others not so much. In general, as the FFR increases, the spread gets thinner (and vice versa).

---

What years are you looking at?