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Message
re: “Rates will come down, just re-fi then.” Why do people keep saying this in today’s world?
Posted on 10/26/23 at 7:42 am to Big Scrub TX
Posted on 10/26/23 at 7:42 am to Big Scrub TX
quote:
Yes, of course. If the LTV has only gone up, then of course it will be very difficult to refi.
It doesn't have to go up from the current rates. It just has to fail to come down significantly. People buying at 7-8 are hoping to refinance at 5 something. And (like last time) being misled into believing this is the likely opportunity to ease cash flow in the near future
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Posted on 10/26/23 at 7:54 am to molsusports
quote:
The builders right now selling are doing "buy downs" costing a significant amount of the selling price. The buyer in that case is in possession of a mortgage already greater than the cash value of the house (before the realtors take their cuts and put the seller further underwater).
The buyer in possession of the new build with a buy down needs significant appreciation in base value as well as a significant drop in lender rates to be treading water (e.g able to pay for the privilege of refinancing for a similar monthly mortgage payment in the future).
What?
Posted on 10/26/23 at 8:23 am to SDVTiger
quote:
quote:The builders right now selling are doing "buy downs" costing a significant amount of the selling price. The buyer in that case is in possession of a mortgage already greater than the cash value of the house (before the realtors take their cuts and put the seller further underwater). The buyer in possession of the new build with a buy down needs significant appreciation in base value as well as a significant drop in lender rates to be treading water (e.g able to pay for the privilege of refinancing for a similar monthly mortgage payment in the future). What?
Exactly. 2008-2010 is imprinted on people’s mindset with housing. That ain’t happening this time.
Posted on 10/26/23 at 8:33 am to SDVTiger
quote:
Because inflation is coming down
Hedgefunds are in a short squeeze with their Bond positions
Every recesscion rates drop and values increase
And yeah if Rates do drop to even high 5s it will increase listings but bring up to 5mil new potential buyers. Still low inventory
So buying now at 7% with a deal and maybe lower price is better than 4% at a much higher value. If you can even get your offer accepted when rates drop
When that starts values will jump again
Theres 700k homes for sale. In 2008 there was 4mil
Population in 2008 was 300mil. Its now 330mil
Biggest points here. There is a huge number of buyers sitting on the sideline waiting for rates to drop. Once they do, even just sub 6%, they're back in the chase to get their offers accepted.
Posted on 10/26/23 at 8:48 am to thegreatboudini
GDP just grew at the fastest pace in two years. good luck to the "rates coming down" crowd.
Posted on 10/26/23 at 8:48 am to Big Scrub TX
We could very well go full YCC to save the bond market and rates plummet so I'll leave that as a caveat
Posted on 10/26/23 at 8:56 am to JimMorrison
quote:
GDP just grew at the fastest pace in two years. good luck to the "rates coming down" crowd.
MBS up and 10yr dropped with this news. No one believes any of these numbers
Posted on 10/26/23 at 9:07 am to JimMorrison
True
Plus the flood of buyers waiting for opportunity is likely overstated. FRED data on historical rates of home ownership shows we're above, not below, the historical average.
And the affordability data are extremely stretched. We'd be fine with current (or higher) interest rates if home prices as a multiple of income were lower. They are not. Case-Shiller home price index is over 300 in 2023 (several multiples above the 80s and 90s).
This is a new phenomenon since the 2000s when homes began to be treated not just as a durable place to live but more and more as an investment vehicle. That change in philosophy combined with aggressive lending and the mortgage backed securities industry have increased speculation and undermined the stability and affordability of the American housing market.
I'm seeing some mistakes by young friends right now that make me worry the 30 year olds buying now just don't understand the wood chipper they are running into with the new builds they bought. And you can't entirely blame them. The NAR and politicians have captured the narrative and the basic data on affordability, rates of home ownership, rates of second home ownership are being passed over in favor of a NAR created housing gap that doesn't exist in the FRED or CS data.
Plus the flood of buyers waiting for opportunity is likely overstated. FRED data on historical rates of home ownership shows we're above, not below, the historical average.
And the affordability data are extremely stretched. We'd be fine with current (or higher) interest rates if home prices as a multiple of income were lower. They are not. Case-Shiller home price index is over 300 in 2023 (several multiples above the 80s and 90s).
This is a new phenomenon since the 2000s when homes began to be treated not just as a durable place to live but more and more as an investment vehicle. That change in philosophy combined with aggressive lending and the mortgage backed securities industry have increased speculation and undermined the stability and affordability of the American housing market.
I'm seeing some mistakes by young friends right now that make me worry the 30 year olds buying now just don't understand the wood chipper they are running into with the new builds they bought. And you can't entirely blame them. The NAR and politicians have captured the narrative and the basic data on affordability, rates of home ownership, rates of second home ownership are being passed over in favor of a NAR created housing gap that doesn't exist in the FRED or CS data.
Posted on 10/26/23 at 9:27 am to molsusports
quote:
Plus the flood of buyers waiting for opportunity is likely overstated.
I disagree completely.
And the longer we are in a high rate environment, the larger the list of "sidelined" homebuyers will be.
It isn't first time homebuyers. It is homeowners with low rates that need a larger home or different geography or smaller home (retiree).
Anyone with a need to repurchase but is locked into a low mortgage rate is sidelined. And that list only grows by the month.
Posted on 10/26/23 at 9:32 am to Covingtontiger77
A few have said it all along that 3% was the not normal rates but people began to believe that was normal. Long Term average was above 6%. I believe they will come down from here but hilarious to believe they'll be below 3% again.
Posted on 10/26/23 at 9:39 am to meansonny
quote:
Plus the flood of buyers waiting for opportunity is likely overstated.
I disagree completely
Many people do. The mainstream narrative definitely agrees with you.
And I don't disagree with the idea that a flood of potential buyers exist for their own personal desire to upgrade. Those people always exist. Many I know have already over leveraged to buy right now. Many people always want to upgrade.
My argument is with the "fundamental shortage" argument. I can't find that in the home ownership rates. And the affordability is way outside of the norm. We can all want bigger homes and more expensive things but we can't afford them (at current prices) unless salaries grow significantly.
Posted on 10/26/23 at 10:01 am to molsusports
You acknowledge that it exists (always exists is your term) but do not acknowledge that there currently is not a release valve for that demand (which was present in 2021).
In most markets, the shortage of first time homebuyer inventories is directly tied to previous first time homebuyers moving out into better homes.
Even suburban areas near urban cities can be "built-out" for first time inventory for decades. And the only release on that inventory in those geographic markets is a homeowner moving into a nicer location.
Everyone is looking at new build inventory. But most of that is an expansion on geographic territory (creating new suburbs out of what was previously rural land. Or filling out land from suburbs that were new 10-15 years ago).
In most markets, the shortage of first time homebuyer inventories is directly tied to previous first time homebuyers moving out into better homes.
Even suburban areas near urban cities can be "built-out" for first time inventory for decades. And the only release on that inventory in those geographic markets is a homeowner moving into a nicer location.
Everyone is looking at new build inventory. But most of that is an expansion on geographic territory (creating new suburbs out of what was previously rural land. Or filling out land from suburbs that were new 10-15 years ago).
Posted on 10/26/23 at 10:01 am to SlowFlowPro
quote:
t's insane how much the realtors protect their bottom line and influence sellers to do closing cost credits instead of just lowering the price of the home. Completely gross industry.
I may be be a moron here but I just did the math and you're better off taking the interest buydown rather than the price reduction, aren't you?
Let's say you do 400k at 6% on a 30 year. Your monthly will roughly be $2,400 for a total payment of $864,000 or $464,000 in interest.
If you take a 10k price reduction but keep the higher rate at 7%, your monthly payment would be almost $2600. Total payment is around $934,000 or an interest payment of $544,000.
Over the life of the loan, you'd be better off mathematically eating the 10k and giving them full asking but getting your rate bought down.
This post was edited on 10/26/23 at 10:03 am
Posted on 10/26/23 at 10:02 am to meansonny
quote:
My argument is with the "fundamental shortage" argument. I can't find that in the home ownership rates. And the affordability is way outside of the norm. We can all want bigger homes and more expensive things but we can't afford them (at current prices) unless salaries grow significantly.
Posted on 10/26/23 at 10:05 am to molsusports
So there is no evidence of a shortage of first time homebuyer homes near urban centers (not even urban centers but in the immediate suburbs surrounding the urban centers).
Have you not seen millenial and whatever is younger than them "threads" for the past 5 years?
Have you not seen millenial and whatever is younger than them "threads" for the past 5 years?
Posted on 10/26/23 at 10:07 am to JiminyCricket
Yes and no.
Yes, any rate reduction has a huge impact on the math for 15 and 30 years.
No, the average duration of a mortgage is just over 4 years. That will most likely stretch in the immediate future (next 5 years). But people pay off their loans (cash out refinance, debt consolidation loans, new purchase) at rates which make buydowns virtually break even options.
Yes, any rate reduction has a huge impact on the math for 15 and 30 years.
No, the average duration of a mortgage is just over 4 years. That will most likely stretch in the immediate future (next 5 years). But people pay off their loans (cash out refinance, debt consolidation loans, new purchase) at rates which make buydowns virtually break even options.
Posted on 10/26/23 at 10:10 am to meansonny
Of course, it depends on your individual circumstance of how long you plan to have the house you're buying, is it your forever home, etc. I was mainly just replying to SFP's assertion that it's always just greed that would cause someone to negotiate for seller credits instead of price drop.
Posted on 10/26/23 at 10:10 am to Covingtontiger77
My Banker says they will most likely go up according to all the info they are receiving.
Posted on 10/26/23 at 10:20 am to meansonny
quote:
there is no evidence of a shortage of first time homebuyer homes near urban centers (not even urban centers but in the immediate suburbs surrounding the urban centers).
Based on what I have already written what do you think I believe about this?
Hint it relates to affordability and historical rates of ownership. I've also mentioned the treatment of homes as investment vehicles has distorted the normal relationship between household income and home prices.
FWIW in spite of significant affordability issues the rate of under 35 home ownership is also in the middle the 35-45% range it has occupied over the last 40 years according to census data.
Posted on 10/26/23 at 10:38 am to meansonny
quote:
the current rates are closer to historic averages.
I bought my first house in 1994 and my rate was 6 percent and that was great at the time. I was happy to get it that low.
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