Tapering and the effects on home prices, mortgage rates, etc.? | TigerDroppings.com
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kennypowers816
LSU Fan
Houston
Member since Jan 2010
2273 posts

Tapering and the effects on home prices, mortgage rates, etc.?

The other thread is blowing my mind with everything about the Fed. Don't get me wrong, its interesting and I'm learning, but I'm hoping someone can spell things out a little bit more clearly for those of us who are not quite as financially literate.

I would assume tapering is going to cause an increase in mortgage rates.. If so, any idea how much and how quickly?

Thus, home prices could potentially be affected, correct? Any predictions on the significance?

Sorry if this seems simple-minded, just trying to get ideas on how this could impact my 5 & 10 year goals, if that makes sense.


hawkeye007
LSU Fan
greenwell springs
Member since Feb 2010
2069 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
the 30yr rate has gone from 3.5 to 4.25% in the last 30 days and the rate has gone up the last 2 days straight.. it will be close to 4.5% pretty quickly(2weeks) if the 10yr yield doesnt level off..long term mortgage rate hawks(myself)see the rate on a 30yr around 5% by this point next year.


XanderCrews
LSU Fan
Member since Mar 2009
323 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
Just read this articl, had some quick math numbers without braking out xls.

LINK


MoreOrLes
LSU Fan
Member since Nov 2008
18582 posts
Online

re: Tapering and the effects on home prices, mortgage rates, etc.?
quote:

see the rate on a 30yr around 5% by this point next year.



Im willing to make a friendly wager its closer to 6.25.

Which by the way is still a very good rate


Sigma_
Wake Forest Fan
Member since Jun 2013
46 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
Good article. I am hoping to buy a new house in a couple of years and specifically waited in hopes rates would go up and drive prices down. It's still way too early to tell, I guess.


Mr.Perfect
Louisiana
Member since Mar 2013
7254 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
Rates going up will not drive prices down. Not at all


Drummin Fool
LSU Fan
Yo momma knows where I'm at!
Member since Jun 2010
1099 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
We have our new house being built now and we are scheduled for closing at the end of August, if construction stays on track. If we can close by then, our rate is locked in at 3.78%. That rate is guaranteed if construction finishes when it is supposed to. I wonder how much it will increase if construction extends beyond the time limit for the guaranteed rate.


Mr.Perfect
Louisiana
Member since Mar 2013
7254 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
Read your loan docs


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djmicrobe
LSU Fan
Planet Earth
Member since Jan 2007
1314 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
can you explain why you think home prices will increase if interest rates increase?

Wages are not going up, so people will not be able to pay a higher interest rate and a higher home price. I think this means people will not buy until home prices drop.
If one calculates inflation and include food and energy into the calculation, then wages are increasing less than the inflation rate. Something will have to give, and it seems home prices would drop.
If home prices do not drop with higher interest rates, then few people will be moving.


ItNeverRains
LSU Fan
Franklin, TN
Member since Oct 2007
7613 posts
Online

re: Tapering and the effects on home prices, mortgage rates, etc.?
quote:

Good article. I am hoping to buy a new house in a couple of years and specifically waited in hopes rates would go up and drive prices down. It's still way too early to tell, I guess.




Lemme know how this works out for you.


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hawkeye007
LSU Fan
greenwell springs
Member since Feb 2010
2069 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
no friendly wager i am guessing at straws over here..


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ZereauxSum
LSU Fan
Lot 23E
Member since Nov 2008
10176 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
It is looking more and more like I am screwed. Im looking to buy in mid 2014


ItNeverRains
LSU Fan
Franklin, TN
Member since Oct 2007
7613 posts
Online

re: Tapering and the effects on home prices, mortgage rates, etc.?
quote:

It is looking more and more like I am screwed. Im looking to buy in mid 2014


No offense, but you're still talking 5% or sub 5% money realistically.

This is kind of along the lines saying looks like i'm screwed because I saw apple was 50/share and i couldn't buy until it was 100/share


kennypowers816
LSU Fan
Houston
Member since Jan 2010
2273 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
quote:

It is looking more and more like I am screwed. Im looking to buy in mid 2014


That's why I'm asking... I'm looking to buy in mid 2015


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TejasHorn
Texas Fan
High Plains Driftin'
Member since Mar 2007
4059 posts
Online

re: Tapering and the effects on home prices, mortgage rates, etc.?
quote:

can you explain why you think home prices will increase if interest rates increase?


Speculators are back. Of course, there is downward pressure in demand among the general public when rates go up. But as mentioned 5 to 6% is still great. Rates the past couple of years have been insanely low.


ItNeverRains
LSU Fan
Franklin, TN
Member since Oct 2007
7613 posts
Online

re: Tapering and the effects on home prices, mortgage rates, etc.?
Wealthy people who have been on the fence have more than likely experienced or aware of the days of 10% mortgage rates. At 3.5%, that still feels like shaky ground and not sound enough to enter RE market. Rates going into 4-5 is good, because investors know this is still cheap money and more sound economy as a whole, so they feel better about jumping in. Did they catch the bottom? Nope. Did they buy at top? Not even remotely close.

You apply this philosphy enoughin life and you'll retire wealthy.


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ZereauxSum
LSU Fan
Lot 23E
Member since Nov 2008
10176 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
quote:

No offense, but you're still talking 5% or sub 5% money realistically.



You're right in an absolute sense. It's just that I really didn't count on QE ending so soon, so I was expecting mid-high 3s. 4.5 to 5 means less house for roughly the same income.


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dinosaur
LSU Fan
Louisiana
Member since Aug 2007
665 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
I think you are correct. I built a house in 1980. Construction loan at 6.5%. It was 12.5% by the time I was done, and hung above 9 for years. House prices fell. It became a factor of how much could a buyer pay per month. Higher rate meant smaller loan, meaning slow sales, because of the need for bigger down pmt.


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acgeaux129
USA Fan
We are BR
Member since Sep 2007
15011 posts

re: Tapering and the effects on home prices, mortgage rates, etc.?
IMO, you aren't going to see a huge effect on housing prices, if at all. While there should be an increase in supply for mortgages which would intuitively lower prices, increased rates should allow for slightly more risk exposure for banks, subsequently adding more borrowers to the market (although I'm not sure how much due to stricter regulatory environment).

That being said, the underlying fundamentals of the housing market are strong... there is a lot of pent-up demand as a result of construction not keeping up with housing destruction and population increases over the past few years. That has finally begun to manifest in Case-Schiller/starts and permits/NAHB sentiment index/etc.

Just my inclination, would like to see Benny's thoughts on this.


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