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Started By
Message
Mortgage Rates Killed Me
Posted on 5/11/23 at 6:33 pm
Posted on 5/11/23 at 6:33 pm
Last year my wife and I decided to follow our dream and build a forever home to raise our kids and retire in. We did all the right things. Saved up, paid off debt, etc. Found some land, had house plans drawn up, everything was good to go within our budget. I’m 36 so I based everything off of the rates I’d always been accustomed to. Flash forward a year later and rates are nearly double. No way we can now afford to build the house. It’s demoralizing.
I know 3% rates are likely not coming back for a long long time but what’s the boards opinion on high 4’s?
I know 3% rates are likely not coming back for a long long time but what’s the boards opinion on high 4’s?
20
Posted on 5/11/23 at 6:42 pm to GAFF
quote:How do you mean? There's been plenty of times in your adult life when the rates were much higher than 3% - including in 2018 when they were in the 4s nearly the entire year...with some months spent flirting with 5%. In any event, 2 very good lessons here: a)never just casually take recent past experience and project it indefinitely into the future (especially not when the recent past has been a massive historical anomaly) and 2)pay close attention to asymmetry - at 3%, it was VERY unlikely that rates would go much lower and HIGHLY LIKELY that they could go (a lot) higher.
I’m 36 so I based everything off of the rates I’d always been accustomed to.
LINK
quote:What opinion are you looking for? Only you can know if the numbers still work for you. Literally nobody can predict future rates, so you should stop trying to. At 6%-7% - and with rate volatility this high - any future outcome is in play.
what’s the boards opinion on high 4’s?
If your plan depends this much on cheap leverage, then you should probably re-assess your plan.
Posted on 5/11/23 at 6:56 pm to GAFF
quote:
Saved up, paid off debt, etc. Found some land, had house plans drawn up, everything was good to go within our budget. I’m 36 so I based everything off of the rates I’d always been accustomed to. Flash forward a year later and rates are nearly double. No way we can now afford to build the house.
You should be getting decent return on that savings right now. The debt remains paid off I’d assume. If you bought land it’s still there. So what are you really out?
Posted on 5/11/23 at 6:58 pm to GAFF
I’m in at 4.4% and am fine with it. If it goes back down we can refinance. My suggestion to you would be to build what you can afford, but build on a plan where you can expand later if rates come down or income changes so you can remodel easily. Don’t give up on your dream, just plan accordingly.
Posted on 5/11/23 at 6:59 pm to Big Scrub TX
quote:
If your plan depends this much on cheap leverage, then you should probably re-assess your plan.
This is kind of a dick thing to say. It’s not his fault building costs and interest rates exploded in the last few years. He’s right, he was ready and got fricked.
My wife and I do ok, we’re in a similar situation, and thankfully finished our house when the rates bottomed out. If we missed thaf window by 6-8 months later, we would not be able to afford our house. Our note would have been over $1000 more per month. I’m willing to bet very very few people could absorb an extra $1000 per month hit.
Here’s my math:
Financed 434k at 2.875: $1800/month
Todays rate is 7.25: $2960/month
Todays rate + let’s say 33% building increase to $
577k: $3936/month
That’s not peanuts
This post was edited on 5/11/23 at 7:35 pm
Posted on 5/11/23 at 7:03 pm to GAFF
To be honest it will be a long time before rates probably ever touch 3% again. The fed screwed up bigtime not raising rates over the last 5 years. I think in the 4's is still really good because i can see them going higher in the next few years. If you have a chance in the 4's that's not terrible.
This post was edited on 5/11/23 at 7:04 pm
Posted on 5/11/23 at 7:14 pm to GAFF
Remember when rates were in the 18% range. 6% is still a decent rate
Posted on 5/11/23 at 7:33 pm to Big Scrub TX
quote:
How do you mean? There's been plenty of times in your adult life when the rates were much higher than 3% - including in 2018 when they were in the 4s nearly the entire year...with some months spent flirting with 5%.
There hasn’t been a time in American history when rates this high coincided with home prices and building costs this high.
I’m sure the OP would have been fine with a higher rate if the cost of the house hadn’t gone up by 30+% in a year or two.
Posted on 5/11/23 at 7:39 pm to Bow08tie
quote:
Remember when rates were in the 18% range. 6% is still a decent rate
What were the home prices then? The home price to income ratio is higher than ever before, and that’s largely because of government market manipulation.
OP is right that he got screwed on timing.
Posted on 5/11/23 at 7:40 pm to Bow08tie
quote:
Remember when rates were in the 18% range. 6% is still a decent rate
What were houses going for when rates were 18%? Is that the equivalent of what you get today at 6%? Or nah?
Posted on 5/11/23 at 7:52 pm to Bow08tie
quote:
Remember when rates were in the 18% range. 6% is still a decent rate
Such a boomer mentality
We aren’t just getting fricked by rates. We’re getting fricked by the total cost to build + rates
Posted on 5/11/23 at 7:52 pm to Big Scrub TX
quote:
How do you mean? There's been plenty of times in your adult life when the rates were much higher than 3%
I figured my rate around the 4.5% range. As one poster mentioned rates at 7.5% adds almost $1000 to the note. I could handle a little over my budget but not that extreme.
quote:
What opinion are you looking for?
On if we think ~4% rates are possible in the short term..? I know the rates aren’t a direct correlation with the fed rate hikes but with them backing off (possibly) do we think the market will react favorably?
This post was edited on 5/11/23 at 8:17 pm
Posted on 5/11/23 at 8:01 pm to GAFF
I went under contract for a house we plan to be in for a long time. Terrible time since it's a mix between high rates but the high rates haven't been around long enough to pull prices down, so it's high prices, too, but that's life.
I'll now spend the next 3 weeks debating between buying down substantially or sending a prayer to refi within 24-36mo.
I'll now spend the next 3 weeks debating between buying down substantially or sending a prayer to refi within 24-36mo.
Posted on 5/11/23 at 8:02 pm to Dawgfanman
quote:
So what are you really out?
We used majority of the savings to buy the land with the intention to use the land as equity for the down payment. Debt is still paid off tho.
Posted on 5/11/23 at 8:09 pm to GAFF
quote:
almost $1000 to the note. I could handle a little over my budget but not that extreme
You’re awesome, congrats.
Posted on 5/11/23 at 8:10 pm to GAFF
quote:
On if we think ~4% rates are possible in the short term..? I know the rates aren’t a direct correlation with the fed rate hikes but with them backing off (possibly) do we think the market will react favorably?
I've worked with 3 lenders this week and they've all had mixed emotions about this.
One says don't buy down at all as he and his clan expect sub 5 in 18-24mo.
The other two say buy down some to find a number in comfortable with, but don't go deep as there will be an opportunity to refi in a few years.
Good news for you is they all think the feds rapid increase will have to be walked back at least some in the near future.
This post was edited on 5/11/23 at 8:11 pm
Posted on 5/11/23 at 8:11 pm to thegreatboudini
quote:
refi within 24-36mo.
Have thought hard about this as well. My fear tho is that rates don’t subside and I’m stuck with the rate 5+ years scraping by. I can’t do it.
Posted on 5/11/23 at 8:21 pm to GAFF
That's the gamble, for sure.
I'm able to absorb this increase but I can't deny it makes me uneasy. Especially where we are in life starting a family and my wife not working right now.
My risk anxiety usually floats around 2-3, but I'm living day in day out at a 7+ right now.
I'm able to absorb this increase but I can't deny it makes me uneasy. Especially where we are in life starting a family and my wife not working right now.
My risk anxiety usually floats around 2-3, but I'm living day in day out at a 7+ right now.
Posted on 5/11/23 at 8:46 pm to GAFF
quote:It is highly unlikely we go below 5% in rates again possibly in our lifetimes
I know 3% rates are likely not coming back for a long long time but what’s the boards opinion on high 4’s?
Posted on 5/11/23 at 8:52 pm to poochie
quote:He didn't mention building costs. The entire post was about rates.
It’s not his fault building costs and interest rates exploded in the last few years.
quote:If he was THAT dependent on leverage AND he didn't pre-arrange his leverage, then he fricked himself.
he was ready
quote:I didn't say they could. You took a risk, and it paid off. That doesn't mean it was necessarily a conservative plan.
I’m willing to bet very very few people could absorb an extra $1000 per month hit.
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