Re: "Marry the house date the rate" from 2 years ago. Did the FED achieve a soft landing?

I made this thread two years ago and was curious to revisit

This is what I was calling out.



Thread: New Realtor talking point: "Marry the house, date the rate"




I am going to use Lake Charles as an example. Keep in mind RE is local and this is only for Lake Charles since the Realtor I saw posting this is from LC

According to FRED data, home values in Lake Charles have dropped about 2.2% since then. On a $250,000 home, that’s $5,500 in lost value.

Not only does that mean you have negative equity compared to today's prices, but you also purchased when FHA rates were around 6.91%.

Let’s assume a $250K FHA loan at 6.91%, financed 100% (for simplicity), with no refinancing for two years. Here’s what that looks like:

Original Loan at 6.91%:

Year 1: Interest $17,169.14 | Principal $2,588.86

Year 2: Interest $16,984.75 | Principal $2,773.25

Total (2 years): $34,153.89 in interest, $5,362.11 toward principal

So after two years, you’ve paid over $34K in interest but reduced your principal by only about $5.3K, and your home value dropped $5.5K. That’s still negative equity.

Now, let’s say you refinance after a year (FHA typically requires 210 days minimum, but with appraisals and underwriting, a year is realistic). The new rate at that time would have been 6.34%.

After Refinance:

Year 1: Interest $17,169.14 | Principal $2,588.86

Year 2: Interest $15,603.98 | Principal $2,850.39

Total (2 years): $32,773.12 in interest, $5,439.25 toward principal

That doesn’t include refinancing costs (appraisal, title work, etc.), but at least you’ve almost broken even: only about $60 in negative equity, and now you could refinance again at today’s rate of 6.06%. Paying more closing costs to do so.

I used FHA, but I am sure it works the same for VA, Conventional, USDA, etc


Did the FED actually achieve the elusive "soft landing"?


BTW, the first response in my thread from two years ago: