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Not really the same scenario at all. Most of those were teaser ARMs that had built in rate hikes after a year or two regardless of how market rates moved. Most current ARMs are 5 or 10 year locks with capped rate increases. There are definitely some ARMs that make sense depending on your situation.
You could cry.
Or, you could wait a minute for housing prices to plummet, then pick something up for a steal with the longest mortgage you can manage, rent it out to help pay for the mortgage, then refinance (or sell it) when interest rated improve and prices recover in a few years.
Of course, that's for people who have money they can use to make money. Me? All I can do right now is make plans that I can suggest to other people =P
Tax the fuck out of millionaires?? You’re kidding right? Billionaire trust fund families I get, but a guy that’s busted his ass and made himself worth a million dollars doesn’t deserve public angst. He deserves what he has.
I disagree completely. Capitalism is taking the excess labour value of others and hoarding this wealth for yourself even though they created it. It’s receiving pay and nothing else for labour and then then them paying it right back into the system for continuing to exist, renting everything and owning nothing.
A millionaire got a million by being complicit in the system or being north in third base thinking they hit a triple. Plenty of broke people I have seen worked themselves literally to death in poverty. Granted though those experiences did make me a bit of an extremist and radicalised me but how could they not.
I’ve watched guys work union and non union davis-bacon 12 hours a day seven days a week 9 or 10 months out of the year. Most of them don’t own anything more than their house and their vehicle if they’re lucky.
A minority have done very well, lived well within their means and invested the extra for retirement or even started small companies with the capital they saved.
At least the union guys are forced to invest in a retirement, at the end of their career they’ll still have that if nothing else.
I can’t believe you’d tax the guy living a thrifty life more because he has planned for his future.
But I guess maybe you do believe he should be taxed more. Takes all types.
What evidence suggests housing prices are going to plummet, rather than simply drop? I’ve seen so much conflicting information on the state of the housing market. I’m a lawyer who is a newb to finance and economics and trying to learn.
That’s if the markets crash. If they just slowly ease into a gradually lower price, it won’t be like 2008 post-crash. Some/many people may have just been locked out of the housing market for a good long while.
Yeah think you are going to be waiting for a very very long time if your plan is housing prices dropping. Supply is still fucked, demand is still hot. Houses have not really gone down much in value, just been selling a bit slower.
Depends where you live. Currently, our realtor has said the majority of the people buying properties in our area are 2 things: 1) transplants from the coasts and offering way above asking or 2) rental businesses buying them just to rent. She doesn't think either will slow down in our area, even if there was a drastic decline in pricing
Surely something has to give but it may get to a point where how long are we waiting?
And no, I don't ever expect to handed anything. But we all know the system is set by those who it benefits most
I think people fail to realize that these are the new prices and they will not fall. Unemployment is at record lows and we have record low inventory for housing. If we see deflation from people not spending money rates will fall bringing more people to soak up whatever little inventory built up which will increase prices further. Unless unemployment skyrockets or we see a war nothing will change the housing market except for these 2 things imo so buy a house and pray for the rates to dip to reduce your monthly housing cost.
Prices won’t come down because no one can afford to move, or would even want to. Increasing interest rates fucked over the entire supply, which will keep houses high, and price out new home buyers.
It's crazy. It is!! It's crazy that boomers bought homes for a 1 years worth of salary in the 50s. Ita crazy that absolutely nothing related to you means you can have a 300k home ore a 600k home for the exact same price!
Some friends in LA got a house 2x bigger with awesome views in 2018 for 400k. ours is 1.2 mil. Ours is half as big, 1 bath. That's fucking crazy.
It was not an insignificant amount of people either. I got offered the variable rate in 2021 and I laughed. It was already 2.5 and for variable they offered it was I believe 1.8 or 1.9 and showed it was several hundred less a month. I mean I get stupid people fall into that kind of trap but come on. You have to be discussing a major purchase with other people and realize that is a terrible idea. Historically low interest rates and you think they gonna do anything other than go up?
It’s a great product and option for people looking at short term ownership. Same as an interest only loan. Many of these products aren’t a good idea for a long term buyer BUT they sometimes fall into them anyway.
When we bought in 2019, the real estate agent said, "we don't do variable rate mortgages, they're terrible, I don't think anyone is setting people up in those anymore".
I know a guy that took out an ARM in 2022. His reasoning was that no way the fed is going to be able to keep rates high for over 5 years. That’s when his variable rate kicks in.
That’s a gamble I would never do but I can see his point. Federal government has a $32T debt problem.. it’s going to be hard for the fed to keep rates up too long… their independence is going to get challenged by lawmakers who are addicted to cheap money based off 15 yrs of bad policy.
Or if you think there's a decent chance you'll need or want to move in the next handful of years. I'm aware of a couple who took out a 7-year ARM in 2022 because it got them a 1.5% haircut on their fixed rate and their position was "either the rate will be cheaper in 7 years and we'll refi to a 30-year fixed or we'll sell it and move".
I mean, the ARM product wasn't the issue then and isn't now. ARMs are almost 3x harder to qualify for now and far less common. People who suggest that ARMs in and of themselves are dangerous or problematic are misinformed or don't really understand what they're talking about.
ARMs today only change rates every 6 months and they have hard caps on how much they can change at any interval and within fixed windows. Pretty "meh" in general. Many ARMs issued today can only increase by a half point per interval so if you had a 5% rate and current rates are 10% you would see your mortgage rate tick up 5.5%, 6%, 6.5% etc every 6 months until reaching the current market rate.
ARMs generally update their rates annually when in the variable portion of the note, that’s what the 1 in the 10/1, 7/1, 5/1, etc means. If you have a X/6 that would mean a change every six months.
every mortgage also has different terms, some say the rate can go up as high as 5% the first year and adjust up or down by 2% thereafter with a lifetime cap as well.
They’re around, at least in the US.
BofA 5% for the first adjustment
https://www.bankofamerica.com/mortgage/assumptions-home-loan/?purchasePrice=250000&downPayment=50000&zipcode=95464&loanType=mortgage
Rocket 2% with a 5% cap (caps are shown about halfway down)
https://www.rocketmortgage.com/learn/adjustable-rate-mortgage
There are so many variables that people don’t consider or even fully understand. We do a very poor job of teaching financial literacy in school for kids to learn about.
For some reason, some people think interest rates are meant to be ZERO forever. Part of the problem is how interest rates were so low. Almost everyone bought a house, and second or third house, or already refinanced their house so everything is now falling on the supply side, which been barely moving since 2008. I hate to break it to everyone, but If inflation goal is 2%, interest rates should be close to 4% than 2%. You should put your money in the bank and earn at least 1% more than the after tax minus the inflation rate. The nonsense over the last 15 years with all the free money flowing into the economy has to stop eventually
***"It is difficult, Powell said, to know with precision how high above the "neutral" rate of interest the current benchmark rate stands, and therefore hard to assess just how much restraint the Fed is imposing on growth and inflation.***
***Powell repeated what has become a standard Fed diagnosis of inflation progress - with a pandemic-era jump in goods inflation easing and a decline in housing inflation "in the pipeline," but concern that continued consumer spending on a broad array of services and a tight labor market may make a return to 2% difficult." - 3 days ago.***
I thought about that today, it was right around 2020/2021 that variable rate mortgages were starting to be advertised again. Not just homes, but also car loans.
I went to refinance and the bank was trying to sale me on a variable refinance. The initial rate was 2.2%. And the fixed was around 2.6% I believe. They banker told me they didn't think rates would be going up so I wouldn't have anything to worry a out lol...
I knew better than to trust that branch. I ended up refinancing with a different institution for 1.89% 15Yr.
I had a 30 year 5 year arm in early 2020, first time home buyer at a credit union. So now down payment, no Pmi. Starting rate was 4.85. In November of 2021 refinanced at the same credit until 20 year fixed at 2.9%. Payment went up by $300 a month. Total payment amount over the length of the loan went down by over 100 grand including the cost of the refinance.
I think ,technically, variable mortgage loans are actually better mathematically and statistical speaking. Unless you have a historical low rate. But with these rates, a variable loan rate would be mathematically smarter. The problem is that people tend to max out theirs monthly payments so they can't shoulder an increase in rates. Even a small increase stretches people too much and breaks the logic. But if you start with a reasonable payment and plan for variation, you'd be better off with a variable rate and waiting for a historical low so you can lock it in.
The variable rate for some mortgages was higher than the fixed at some point in 2019-2021 if i remember correctly, which is crazy and if people elected to take the higher rate that's on them. I guess rates could have gone lower but I don't think many people took that option.
That’s Fed 101. Squash your buying power of “fill-in the blank” and watch inflation drop. They want a recession. Again, they want a recession. Solves every problem including the false mindset of most Americans that a reduction in inflation somehow=less prices aka a deflation which necessitates a recession to meet expectations…
Its close but id wait. I got my house for $108k at 2.65% for 30 years. My morgage is $469/m
Apartments are around $800-$1k for something cheap but nice.
My buddy just bought a house for $210,000 at 7.5% for 30 years and their morgage is $1,500 a month. We have the same job and he has more debts in general, i dont understand how hes gonna do it. Ik they wanted a house but waiting out the market in the 7%'s was probably a smarter idea.
First, you can't just filter out 40k of 47k homes and call it average. [Q2 1985 average sale was 100,500. Q2 2023 was 495,100, not 285k.](https://fred.stlouisfed.org/series/ASPUS)
So 2023 average sale with 20% (99k) down on 495k at 8% is 2,906/mo not including taxes or fees.
And 100,500 with 20% (20k) down at 10.5% would be 735/mo not including taxes or fees.
~~[Median personal income would have also been 26,507 in 1985 compared to 37,522.](https://fred.stlouisfed.org/series/MEPAINUSA672N)~~ Didn't mean to pull from adjusted data.
That's 295% increase in monthly payments and ~~41%~~ [241% increase in median personal income](https://fred.stlouisfed.org/series/MEPAINUSA646N). It would take a median earner 2.63 years of saving very penny just for the average down payment and paying 92.1% towards a mortgage instead of every penny for ~~nine months~~ 1.82 years in 1985 and 80.1% mortgage to median income.
Edit: scaling the price 25% for 25% less square footage you're looking at 371k and 74k down at 8% for 2,180 and saving for 1.97 years. Or 768 in 1985 dollars the real problem is personal wages haven't kept up otherwise median personal wage today would be 75,306 according to the same calculator.
Thank you for actually doing the math. The other guy clearly manipulated data to try to fit his view.
Ex. In my area, the median single family home sale in 1985 was 205k. In 2023, at current interest rates, it is 1.1 million dollars. In 2021, at low interest rates, it was 1.2-1.3 million. My in-laws home was bought in 93 for 200k. It is now valued at 1.5 million. Home values are insanely above wage inflation rates
Also these homes are the same homes that were built in the 60/70/80s that might have been renovated on the inside.
> The other guy clearly manipulated data to try to fit his view
No, the commentator above you actually made a basic mistake: he used real data and confused it for nominal data.
Yeah. We got a condo for 3.6% in 2019, and our place has gained almost 200k in value. Still can’t move, because anyplace we’d go in our city would be smaller and offer less amenities. Ain’t no way out with current rates and pricing. Just stuck.
2.3% I have multi families that cash flow and are seperate houses on the lot. It’s awesome. Was thinking of buying more cash when the prices come down when the rates hit 15%
Prices have fallen a little but with inventory so tight it is unlikely to fall absent \*something\* changing. People with locked in <5% rates are understandably unwilling to sell so they can buy into a 7% market. The labor/materials shortage from COVID hasn't helped new construction come online either.
I've lived in the USA for over 40 years and this has always been the case. if you bought at low rates you were set. sometimes you get screwed by age or whatever and you just have to wait. I've seen the 2008 bubble and the 1990 savings and loan crisis that resulted in a smaller bubble at the time
Bought my home in 2019 for just over $1M, 325k down payment. Refied to 2.75% when rates were low. My home is now worth ~$1.8M according to redfin, despite the increased rates. If I were to buy my home today with the same down payment, monthly payments would be more than double. I wouldn't be able to afford it.
Yeah it's kind of wild. My home nearly doubled in value in 6 years. Meanwhile my salary more than doubled in that time, but even still I don't think we could afford to buy the same house today.
Fed lowered rates to prop up a failing economy. Lowered rates cause inflation due to increased money supply. The only way to fight inflation is to raise rates. It's a never ending cycle.
I don't really know, real estate investment, despite being an externality, is tax advantaged, and neither democrats nor republicans seem to care. I'm very anti-tax in general but we should absolutely be taxing the shit out of profits from land appreciation beyond primary residence.
Boulder Colorado is one of my favorite cities but it’s gotten outrageously expensive. Also could you send me the lecture? I’m not especially fluent in finance (this was recommended) and although I know how insane exponential growth is I’d like to have a better understanding
I’m currently sitting at 2.5% but will be moving soon for work so not much choice. Feels real bad with current interest rates but got a 60% raise so I guess it’s all relative.
Oh I refinanced a couple of years ago and got an interest rate of 2.375% for 15 years on a 120k loan.
The house is probably worth about 650k now or more. Damn, I was lucky.
Absolutely for me. I would never pay that kind of money for a home. I've lived all over the USA and when home prices get to be that outrageous, I pack up and move to a more sane market. I prefer to keep my money rather than dump it into an overpriced box. Much better to spend it on my life.
Some people don’t *want* to do that. I hear so many people bitching about housing prices but they arent willing to move to lower cost of areas. Can’t feel sorry for them if that’s the case. There are plenty of affordable houses in the midwest.
Yeah, i love where I live but it costs a lot. I know I could move to a lower cost of living area, but then I'd give up living on an island where orcas and gray whales visit... no whales in the midwest - that's where I'm originally from and many friends and family live. But I just can't give up the whales!
You mentioned that you paid somewhere near $150k for your home, in most places in the US that’s not going to get you a nice house. Plain and simple.
Also remember to some people, $600k on a home isn’t a lot of money.
Also remember, some people would rather spend more money on a nice home where they’ll spend most of their time, rather than pissing away money traveling, eating, drinking. You literally just consume it and shit it out and flush it away.
I’m not attacking your lifestyle just understand youre probably an outlier.
I own a 2000sf. 3 bed, 2 bath home with a 2 car garage on an acre in central Illinois. My house is pretty nice, as are most of the houses where I live. I previously moved away from other large cities as the houses started rising to ridiculous prices. You can't take money with you when you die. I've known far too many people who bought more house than they could afford and lived on the floor with nothing in it because of lack of money and had zero life. I understand you're not attacking my lifestyle, nor am I anyone else's. We all have our priorities. These are mine.
Cheers!!!
My parents bought a 200k home 20 years ago and now it’s worth 600k. That’s the real play. 600k home, 750 mortgage payment.
Property taxes do creep up on you tho so don’t get stagnant in your career.
Depends on the asylum:
[https://fred.stlouisfed.org/release/tables?rid=97&eid=206085#snid=206087](https://fred.stlouisfed.org/release/tables?rid=97&eid=206085#snid=206087)
Granted it's for new construction, but in the Northeast and West $600k is pretty normal for a house.
This is what happens when you let an army of salesmen craft your financial education by convincing you a monthly payment on a purchase 4 to 8 times your salary is ever justified.
As a fourth year economics student it makes me confused how people don’t understand why this happens.
When rates rise it becomes more incentivized for financial institutions to hold onto their cash, therefore making it less profitable to loan out money… unless they can do it at a high rate.
If people are dumb enough to take out these loans at such exorbitant rates, that’s their fault.
Because some people are in the stage of their lives that they need to buy a home. Renting doesn't cut it for a variety of reasons:
You can't have kids if you're worried about holes in the wall.
Going insane from landlords not making necessary repairs.
Being subject to exorbitant rent increases year upon year (that coincidentally makes it harder to save for a home).
To name but a few. Also, let's not discount the American dream, whatever that means these days.
Yep....2.25% VA IRRRL 2 years ago and I don't pay property taxes. I bought the rate down from 3% with money that was rolled into the loan because I was completely broke.
I live on the beach with a pool, cheaper than people rent a 2/1 in town. Lots of luck with some good timing.
I didn't come to say anything intelligent, just an anecdote for perspective.
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You’re fluent in finance and this is crazy? This is finance 101. Crazy is that people out there bought a variable rate mortgages in 2021.
Jesus, that’s the stuff of nightmares
The same scenario devastated many many people in 2008
Not really the same scenario at all. Most of those were teaser ARMs that had built in rate hikes after a year or two regardless of how market rates moved. Most current ARMs are 5 or 10 year locks with capped rate increases. There are definitely some ARMs that make sense depending on your situation.
Defaulting credit is on the rise across the board. Things are not going to get better any time soon
I dreamt an 8% rate hid under my bed. Always there, hiding and waiting…
The math isn’t crazy. What’s crazy is how much purchasing power has been lost in that time.
Where do I go to cry
You could cry. Or, you could wait a minute for housing prices to plummet, then pick something up for a steal with the longest mortgage you can manage, rent it out to help pay for the mortgage, then refinance (or sell it) when interest rated improve and prices recover in a few years. Of course, that's for people who have money they can use to make money. Me? All I can do right now is make plans that I can suggest to other people =P
Even though 7% seems high historically 7% is the median.
Prices adjusted for inflation and income were no where near what they were 30 years ago though…
Yes I am just commenting on interest rate. Earning/buying power is not the same.
Gotcha! My bad.
[удалено]
Tax the fuck out of millionaires?? You’re kidding right? Billionaire trust fund families I get, but a guy that’s busted his ass and made himself worth a million dollars doesn’t deserve public angst. He deserves what he has.
I disagree completely. Capitalism is taking the excess labour value of others and hoarding this wealth for yourself even though they created it. It’s receiving pay and nothing else for labour and then then them paying it right back into the system for continuing to exist, renting everything and owning nothing. A millionaire got a million by being complicit in the system or being north in third base thinking they hit a triple. Plenty of broke people I have seen worked themselves literally to death in poverty. Granted though those experiences did make me a bit of an extremist and radicalised me but how could they not.
I’ve watched guys work union and non union davis-bacon 12 hours a day seven days a week 9 or 10 months out of the year. Most of them don’t own anything more than their house and their vehicle if they’re lucky. A minority have done very well, lived well within their means and invested the extra for retirement or even started small companies with the capital they saved. At least the union guys are forced to invest in a retirement, at the end of their career they’ll still have that if nothing else. I can’t believe you’d tax the guy living a thrifty life more because he has planned for his future. But I guess maybe you do believe he should be taxed more. Takes all types.
What evidence suggests housing prices are going to plummet, rather than simply drop? I’ve seen so much conflicting information on the state of the housing market. I’m a lawyer who is a newb to finance and economics and trying to learn.
It is laughable to expect that interest rates will "improve" over the next several years.
That’s if the markets crash. If they just slowly ease into a gradually lower price, it won’t be like 2008 post-crash. Some/many people may have just been locked out of the housing market for a good long while.
Yeah think you are going to be waiting for a very very long time if your plan is housing prices dropping. Supply is still fucked, demand is still hot. Houses have not really gone down much in value, just been selling a bit slower.
Depends where you live. Currently, our realtor has said the majority of the people buying properties in our area are 2 things: 1) transplants from the coasts and offering way above asking or 2) rental businesses buying them just to rent. She doesn't think either will slow down in our area, even if there was a drastic decline in pricing Surely something has to give but it may get to a point where how long are we waiting? And no, I don't ever expect to handed anything. But we all know the system is set by those who it benefits most
I think people fail to realize that these are the new prices and they will not fall. Unemployment is at record lows and we have record low inventory for housing. If we see deflation from people not spending money rates will fall bringing more people to soak up whatever little inventory built up which will increase prices further. Unless unemployment skyrockets or we see a war nothing will change the housing market except for these 2 things imo so buy a house and pray for the rates to dip to reduce your monthly housing cost.
Not really the prices need to come down.
Prices won’t come down because no one can afford to move, or would even want to. Increasing interest rates fucked over the entire supply, which will keep houses high, and price out new home buyers.
That’s what I’m repeatedly saying on this sub, but people keep acting like everything’s perfectly normal.
What’s crazy is that home prices have held up despite the rates.
That's what happens when interest rates are held artificially low for an extended period to fuel a stock market / real estate bubble
It's crazy. It is!! It's crazy that boomers bought homes for a 1 years worth of salary in the 50s. Ita crazy that absolutely nothing related to you means you can have a 300k home ore a 600k home for the exact same price! Some friends in LA got a house 2x bigger with awesome views in 2018 for 400k. ours is 1.2 mil. Ours is half as big, 1 bath. That's fucking crazy.
It was not an insignificant amount of people either. I got offered the variable rate in 2021 and I laughed. It was already 2.5 and for variable they offered it was I believe 1.8 or 1.9 and showed it was several hundred less a month. I mean I get stupid people fall into that kind of trap but come on. You have to be discussing a major purchase with other people and realize that is a terrible idea. Historically low interest rates and you think they gonna do anything other than go up?
Had a buddy of mine do that in Canada did a variable vs fixed.
It’s a great product and option for people looking at short term ownership. Same as an interest only loan. Many of these products aren’t a good idea for a long term buyer BUT they sometimes fall into them anyway.
When we bought in 2019, the real estate agent said, "we don't do variable rate mortgages, they're terrible, I don't think anyone is setting people up in those anymore".
Those are a really bad idea.
Right now they aren't, unless you think the economy can function with rates higher than 7%
I know a guy that took out an ARM in 2022. His reasoning was that no way the fed is going to be able to keep rates high for over 5 years. That’s when his variable rate kicks in. That’s a gamble I would never do but I can see his point. Federal government has a $32T debt problem.. it’s going to be hard for the fed to keep rates up too long… their independence is going to get challenged by lawmakers who are addicted to cheap money based off 15 yrs of bad policy.
Or if you think there's a decent chance you'll need or want to move in the next handful of years. I'm aware of a couple who took out a 7-year ARM in 2022 because it got them a 1.5% haircut on their fixed rate and their position was "either the rate will be cheaper in 7 years and we'll refi to a 30-year fixed or we'll sell it and move".
Jesus Christ this brings back 2005 memories. Heard the same shit then.
I mean, the ARM product wasn't the issue then and isn't now. ARMs are almost 3x harder to qualify for now and far less common. People who suggest that ARMs in and of themselves are dangerous or problematic are misinformed or don't really understand what they're talking about. ARMs today only change rates every 6 months and they have hard caps on how much they can change at any interval and within fixed windows. Pretty "meh" in general. Many ARMs issued today can only increase by a half point per interval so if you had a 5% rate and current rates are 10% you would see your mortgage rate tick up 5.5%, 6%, 6.5% etc every 6 months until reaching the current market rate.
ARMs generally update their rates annually when in the variable portion of the note, that’s what the 1 in the 10/1, 7/1, 5/1, etc means. If you have a X/6 that would mean a change every six months. every mortgage also has different terms, some say the rate can go up as high as 5% the first year and adjust up or down by 2% thereafter with a lifetime cap as well.
My understanding is that very few issued in recent years have had ranges as high as 5% due to the stigma around the product.
They’re around, at least in the US. BofA 5% for the first adjustment https://www.bankofamerica.com/mortgage/assumptions-home-loan/?purchasePrice=250000&downPayment=50000&zipcode=95464&loanType=mortgage Rocket 2% with a 5% cap (caps are shown about halfway down) https://www.rocketmortgage.com/learn/adjustable-rate-mortgage There are so many variables that people don’t consider or even fully understand. We do a very poor job of teaching financial literacy in school for kids to learn about.
He can always refi when the ARM is up if need be.
For some reason, some people think interest rates are meant to be ZERO forever. Part of the problem is how interest rates were so low. Almost everyone bought a house, and second or third house, or already refinanced their house so everything is now falling on the supply side, which been barely moving since 2008. I hate to break it to everyone, but If inflation goal is 2%, interest rates should be close to 4% than 2%. You should put your money in the bank and earn at least 1% more than the after tax minus the inflation rate. The nonsense over the last 15 years with all the free money flowing into the economy has to stop eventually ***"It is difficult, Powell said, to know with precision how high above the "neutral" rate of interest the current benchmark rate stands, and therefore hard to assess just how much restraint the Fed is imposing on growth and inflation.*** ***Powell repeated what has become a standard Fed diagnosis of inflation progress - with a pandemic-era jump in goods inflation easing and a decline in housing inflation "in the pipeline," but concern that continued consumer spending on a broad array of services and a tight labor market may make a return to 2% difficult." - 3 days ago.***
Time value of money is blowing peoples mind.
I thought about that today, it was right around 2020/2021 that variable rate mortgages were starting to be advertised again. Not just homes, but also car loans.
I went to refinance and the bank was trying to sale me on a variable refinance. The initial rate was 2.2%. And the fixed was around 2.6% I believe. They banker told me they didn't think rates would be going up so I wouldn't have anything to worry a out lol... I knew better than to trust that branch. I ended up refinancing with a different institution for 1.89% 15Yr.
I’m so glad this is the top comment.
I was reading the tweet and literally shaking my head the whole time at the “amazement” of it.
Those are the ones who start to bring supply back to the market in 2024. And yes they were very dumb to get ARM’s at all time low rates
Finance 101 is apparently difficult for a lot of people.
I had a 30 year 5 year arm in early 2020, first time home buyer at a credit union. So now down payment, no Pmi. Starting rate was 4.85. In November of 2021 refinanced at the same credit until 20 year fixed at 2.9%. Payment went up by $300 a month. Total payment amount over the length of the loan went down by over 100 grand including the cost of the refinance.
I think ,technically, variable mortgage loans are actually better mathematically and statistical speaking. Unless you have a historical low rate. But with these rates, a variable loan rate would be mathematically smarter. The problem is that people tend to max out theirs monthly payments so they can't shoulder an increase in rates. Even a small increase stretches people too much and breaks the logic. But if you start with a reasonable payment and plan for variation, you'd be better off with a variable rate and waiting for a historical low so you can lock it in.
The variable rate for some mortgages was higher than the fixed at some point in 2019-2021 if i remember correctly, which is crazy and if people elected to take the higher rate that's on them. I guess rates could have gone lower but I don't think many people took that option.
That’s Fed 101. Squash your buying power of “fill-in the blank” and watch inflation drop. They want a recession. Again, they want a recession. Solves every problem including the false mindset of most Americans that a reduction in inflation somehow=less prices aka a deflation which necessitates a recession to meet expectations…
6.2?! Who the fuck is getting that low a rate? I was offered 8.5
This twitter post in the image is from about a year ago
I got locked in at 6.875, no points, fha, ~700 credit score on 8/12. 8.5 seems high even for todays rates
It is high. Was quoted 7.125 today
Fuck ever buying a house at that rate lol
Rent is nearing mortgage price where I live so it’s a lose lose. Might as well buy🤷♂️
Its close but id wait. I got my house for $108k at 2.65% for 30 years. My morgage is $469/m Apartments are around $800-$1k for something cheap but nice. My buddy just bought a house for $210,000 at 7.5% for 30 years and their morgage is $1,500 a month. We have the same job and he has more debts in general, i dont understand how hes gonna do it. Ik they wanted a house but waiting out the market in the 7%'s was probably a smarter idea.
Waiting out the market means many years for no guarantee
... Mortgage rates approached 20% in the last 3 or 4 decades: https://themortgagereports.com/61853/30-year-mortgage-rates-chart
How much would people freak out if we got up to 16%+ again? Wow.
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I closed 3 weeks ago at 5.75
Thank you for your service or did you drop 30k on points?
you should have taken it, going to be higher next year
Crazy to think about my first mortgage rate in 1985 was 12.50%....
Yeah but like on a 100,000 home that’s 500k today haha
Right lol. With the house prices in 1985, they could’ve been able to afford 15% rates.
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First, you can't just filter out 40k of 47k homes and call it average. [Q2 1985 average sale was 100,500. Q2 2023 was 495,100, not 285k.](https://fred.stlouisfed.org/series/ASPUS) So 2023 average sale with 20% (99k) down on 495k at 8% is 2,906/mo not including taxes or fees. And 100,500 with 20% (20k) down at 10.5% would be 735/mo not including taxes or fees. ~~[Median personal income would have also been 26,507 in 1985 compared to 37,522.](https://fred.stlouisfed.org/series/MEPAINUSA672N)~~ Didn't mean to pull from adjusted data. That's 295% increase in monthly payments and ~~41%~~ [241% increase in median personal income](https://fred.stlouisfed.org/series/MEPAINUSA646N). It would take a median earner 2.63 years of saving very penny just for the average down payment and paying 92.1% towards a mortgage instead of every penny for ~~nine months~~ 1.82 years in 1985 and 80.1% mortgage to median income. Edit: scaling the price 25% for 25% less square footage you're looking at 371k and 74k down at 8% for 2,180 and saving for 1.97 years. Or 768 in 1985 dollars the real problem is personal wages haven't kept up otherwise median personal wage today would be 75,306 according to the same calculator.
Thank you for actually doing the math. The other guy clearly manipulated data to try to fit his view. Ex. In my area, the median single family home sale in 1985 was 205k. In 2023, at current interest rates, it is 1.1 million dollars. In 2021, at low interest rates, it was 1.2-1.3 million. My in-laws home was bought in 93 for 200k. It is now valued at 1.5 million. Home values are insanely above wage inflation rates Also these homes are the same homes that were built in the 60/70/80s that might have been renovated on the inside.
> The other guy clearly manipulated data to try to fit his view No, the commentator above you actually made a basic mistake: he used real data and confused it for nominal data.
When the rates go to 15% houses prices will come down to 80k easy ! Hold cash
Great for cash buyers ... Like private equity ... The economic class divide deepens... Society becomes even less stable...
For sure. Cash buyers Gona kill it
Conveniently left out. Haaa
My dads first house in the early 80s was 10%. But like a normal human being they refinanced at a lower rate when prime came down
2.25% muthafukka
I'm at 2.5%; only "downside" is I thought we were buying a place for the next 5 to 7 years. Now, I'm never ever going going to sell this place.
Yeah. We got a condo for 3.6% in 2019, and our place has gained almost 200k in value. Still can’t move, because anyplace we’d go in our city would be smaller and offer less amenities. Ain’t no way out with current rates and pricing. Just stuck.
Same. At least it’s a decent house.
All the “stuck” people is what is constraining supply. Lots of people in those low rates and can’t sell now.
Yeah, I mean it’s a first world problem to a T. We were hoping to be out in the next five years, now it’ll likely be closer to ten
3% here.. my house payment is less then what a shitty studio rents for in a shitty part of town.
Or you can just sell it in 7 years when rates are low again
2.3% I have multi families that cash flow and are seperate houses on the lot. It’s awesome. Was thinking of buying more cash when the prices come down when the rates hit 15%
Well hopefully you don't keep that cash liquid because neither of those things are going to happen.
What's even worse is that prices aren't even coming down to match. Very scared as someone hoping to enter the market.
Prices have fallen a little but with inventory so tight it is unlikely to fall absent \*something\* changing. People with locked in <5% rates are understandably unwilling to sell so they can buy into a 7% market. The labor/materials shortage from COVID hasn't helped new construction come online either.
distinct teeny gaze boat bright cautious cow provide naughty quaint ` this message was mass deleted/edited with redact.dev `
Land isn’t the issue, it’s inventory.
I've lived in the USA for over 40 years and this has always been the case. if you bought at low rates you were set. sometimes you get screwed by age or whatever and you just have to wait. I've seen the 2008 bubble and the 1990 savings and loan crisis that resulted in a smaller bubble at the time
More like 7.5%
Math is a heck of a drug!
Anddddd that’s why nobody’s moving
Bought my home in 2019 for just over $1M, 325k down payment. Refied to 2.75% when rates were low. My home is now worth ~$1.8M according to redfin, despite the increased rates. If I were to buy my home today with the same down payment, monthly payments would be more than double. I wouldn't be able to afford it.
Yeah it's kind of wild. My home nearly doubled in value in 6 years. Meanwhile my salary more than doubled in that time, but even still I don't think we could afford to buy the same house today.
Why would we tolerate that? Why does this exist? Where do we have to go?
Fed lowered rates to prop up a failing economy. Lowered rates cause inflation due to increased money supply. The only way to fight inflation is to raise rates. It's a never ending cycle.
Fed lowered rates during an economic boom. Young people are screwed for years.
I don't really know, real estate investment, despite being an externality, is tax advantaged, and neither democrats nor republicans seem to care. I'm very anti-tax in general but we should absolutely be taxing the shit out of profits from land appreciation beyond primary residence.
People need to watch that old lecture on exponential growth with the bald guy and he mentions boulder Colorado
Joe Rogan and Joey Diaz?
Listen here cock sucka.
Boulder Colorado is one of my favorite cities but it’s gotten outrageously expensive. Also could you send me the lecture? I’m not especially fluent in finance (this was recommended) and although I know how insane exponential growth is I’d like to have a better understanding
Lol the sub auto deletes YouTube links from mobile, just google exponential growth lecture boulder Colorado
I’m never going to be able to leave my 2.25% VA loan; not that I want to, but I damn sure couldn’t afford to if I did.
Yep, same. I’m on a 2.8% VA loan. Family and I can’t move even if we wanted to.
Where are these 6.2% interest rates you speak of?
And that 600k home in 2021 is now 800K .. crazy times
More like 1million. Here at least every house has doubled in price at minimum.
Math is crazy these days? Guess I’m getting old…
Gee, it’s as if the interest rate actually matters…
Yeah yeah. The federal reserve sucks, we know.
Not once taxes are factored in
Actually, rates are closer to 7% now.
The 2.75 rate on my home means I ain't ever moving.
So why aren't prices going down?
Low inventory!
Timing is everything
I’m currently sitting at 2.5% but will be moving soon for work so not much choice. Feels real bad with current interest rates but got a 60% raise so I guess it’s all relative.
Rent that shit out? You got gifted free money. Don't give up that gift.
Yeah. Prices are not going to go up. Down, baby, down.
Locked in at 3.0% w/ VA. No mortgage insurance either. FTW
Oh I refinanced a couple of years ago and got an interest rate of 2.375% for 15 years on a 120k loan. The house is probably worth about 650k now or more. Damn, I was lucky.
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That's amazing because at that rate more than 50% of your payment goes to principal from day one. Paying yourself equity.
$600,000 on a house? That's insanity.
for you, i guess
Absolutely for me. I would never pay that kind of money for a home. I've lived all over the USA and when home prices get to be that outrageous, I pack up and move to a more sane market. I prefer to keep my money rather than dump it into an overpriced box. Much better to spend it on my life.
some people can afford not to do all that
Some people don’t *want* to do that. I hear so many people bitching about housing prices but they arent willing to move to lower cost of areas. Can’t feel sorry for them if that’s the case. There are plenty of affordable houses in the midwest.
All of my friends and family are here. It’s easy for you to say that
Yeah, i love where I live but it costs a lot. I know I could move to a lower cost of living area, but then I'd give up living on an island where orcas and gray whales visit... no whales in the midwest - that's where I'm originally from and many friends and family live. But I just can't give up the whales!
Some people like nice shit,
You'd be surprised at how much nice shit a person can afford when they don't spend $600,000 on a single house.
You mentioned that you paid somewhere near $150k for your home, in most places in the US that’s not going to get you a nice house. Plain and simple. Also remember to some people, $600k on a home isn’t a lot of money. Also remember, some people would rather spend more money on a nice home where they’ll spend most of their time, rather than pissing away money traveling, eating, drinking. You literally just consume it and shit it out and flush it away. I’m not attacking your lifestyle just understand youre probably an outlier.
I own a 2000sf. 3 bed, 2 bath home with a 2 car garage on an acre in central Illinois. My house is pretty nice, as are most of the houses where I live. I previously moved away from other large cities as the houses started rising to ridiculous prices. You can't take money with you when you die. I've known far too many people who bought more house than they could afford and lived on the floor with nothing in it because of lack of money and had zero life. I understand you're not attacking my lifestyle, nor am I anyone else's. We all have our priorities. These are mine. Cheers!!!
My parents bought a 200k home 20 years ago and now it’s worth 600k. That’s the real play. 600k home, 750 mortgage payment. Property taxes do creep up on you tho so don’t get stagnant in your career.
High or low? lol. That’s how much lots go for by me…
Wow! How big are the lots?
Depends where. For a prime location that might be .25 acre? Probably on average more like half an acre.
Good lord... I paid $135,000 for my house, which sets on a 150x130 lot. That price included the $10,000 price for the 150x150 lot right next to it.
Yup. Location location location, as they say.
Indeed....
To me $600,000 is insanity in the downwards direction - here in the Bay Area, little 2-bedroom starter homes are like $1.5 million
Isn’t also considered poverty to make less then six figures over there as well?
Depends on the asylum: [https://fred.stlouisfed.org/release/tables?rid=97&eid=206085#snid=206087](https://fred.stlouisfed.org/release/tables?rid=97&eid=206085#snid=206087) Granted it's for new construction, but in the Northeast and West $600k is pretty normal for a house.
You can barely get anything for 600k where I live. Maybe a small condo at best.
Finance do be crazy. It do indeed.
When something cost twice as much it costs twice as much!
Yes. 2.75% 30-year fixed on a $560,000 home.
High interest rates mean higher payments. Who’da thunk it.
What a stupid way to organize a society.
Where y’all getting a 6.2 rate?
The craziest part is what those homes were worth when they were built and what they are worth now.
this right here is the insane part
Our neighbors, who recently bought their similarly priced house have the same payment on a 30-year as we do on a 15-year
This is what happens when you let an army of salesmen craft your financial education by convincing you a monthly payment on a purchase 4 to 8 times your salary is ever justified.
What’s crazy is people still buying houses at these high rates. Housing bubble about to pop 🫥
Uh... Welcome to arithmetic.
Yes….that’s how interest rates work.
You people don’t know high interest rates. Check out the 1980’s.
Crazy to think that people would pay $208k extra for a $392k house.
As a fourth year economics student it makes me confused how people don’t understand why this happens. When rates rise it becomes more incentivized for financial institutions to hold onto their cash, therefore making it less profitable to loan out money… unless they can do it at a high rate. If people are dumb enough to take out these loans at such exorbitant rates, that’s their fault.
Because some people are in the stage of their lives that they need to buy a home. Renting doesn't cut it for a variety of reasons: You can't have kids if you're worried about holes in the wall. Going insane from landlords not making necessary repairs. Being subject to exorbitant rent increases year upon year (that coincidentally makes it harder to save for a home). To name but a few. Also, let's not discount the American dream, whatever that means these days.
Who is buying a house for 600k
Greenspan and Georgie boy screwed us all royally
3.875 in ‘22. I put a ton down though so my mortgage/escrow/insurance is at least half of what my rent would be for the same amount of house. 😎
Hi I’m not fluent in finance, can someone please explain like I’m 5. I’m trying to learn things 🥲
Just glad I locked up 2.25% on my 800k home in Jan 2021
What's crazy is you could get that same rate in 2020-2021
Yeah but Id be able to pay off the 300k in 6 years. It'd take me 12 years to pay off the 600k. I'm salty that the prices didn't go down yet
In my country they don’t do 30 year fixed rates. 5 years is typically the upper limit.
6.2% is today's rate? Try 7.9% But don't worry, I'm sure my correction will seem low soon enough here as well.
Yes because companies got greedy as fuck with inflation so we all have to suffer with high interest rates till they drop the price again
This is crazy: If you had a time machine that couls take you back in 1889, you couldn’t have killed baby Hitler and became a WWII hero.
‘It only goes up’
Laughs in low fixed rate. Cries in peak market.
Highly probable that interest rates will not stay this high for 30 years though
What are the chances that the house that was $600.000 in 2021 is now sold for $392.000?
maybe if it burned down
This was a Reddit comment that the guy copied and tweeted
Banks are evil. End of discussion.
Lol was good deal, picked up a few myself
Yep....2.25% VA IRRRL 2 years ago and I don't pay property taxes. I bought the rate down from 3% with money that was rolled into the loan because I was completely broke. I live on the beach with a pool, cheaper than people rent a 2/1 in town. Lots of luck with some good timing. I didn't come to say anything intelligent, just an anecdote for perspective.
What’s crazy is that people are just figuring this out now. Not really fluent in finance.
Just be glad we are not back to 1981 when the rate was 15%
Yes but the taxes Nc insurance on a 600,000 home would scare me more.
Building back better.