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Started By
Message
re: Mortgage Rates Killed Me
Posted on 5/11/23 at 8:52 pm to TomRollTideRitter
Posted on 5/11/23 at 8:52 pm to TomRollTideRitter
quote:What?
There hasn’t been a time in American history when rates this high coincided with home prices and building costs this high.
0
Posted on 5/11/23 at 8:55 pm to GAFF
My first mortgage was in the 6% range over a decade ago. 3% was because of rate drops during Covid. Doubt we ever see 3% again. I’d imagine we look back in 5 years and think 4%-4.5% is a decent rate. I doubt prices of materials drops too.
But hey, I could be wrong.
But hey, I could be wrong.
Posted on 5/11/23 at 8:55 pm to GAFF
quote:The 10-year treasury is already "only" about 3.4% - that's much lower than the shorter-term rates. It's not always an exact correlation, but mortgage rates tend to key off the 10 year. IMO, it's hard to see the 10-year materially lower than this, although if a severe recession, then maybe 2.5 or 2? If that happens, I'd say you had a chance at mid-4s.
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?
FWIW, a friend of mine owns and runs a large mortgage company and he thinks we'll hit high 4s by the end of 2023. I think he's crazy, but we'll see!
Posted on 5/11/23 at 8:56 pm to thegreatboudini
quote:Isn't this literally just a present value calc of whatever the "saved" payments would be?
buy down
Posted on 5/11/23 at 9:13 pm to PhiTiger1764
quote:
What were houses going for when rates were 18%? Is that the equivalent of what you get today at 6%? Or nah?
When adjusted for inflation the average monthly mortgage payment has not changed that much from the late 80s until today. We all know real estate is very localized and in many metro areas it is actually lower today. Of course if we stay on the recent trend it could get out of hand quickly.
Case-Shiller Adjusted
To the OP, it is unfortunate but it seems like at least you figured this out before actually building and being in a real bind. I am guessing you are asking when we think 4% interest rates will be back. No one knows if and when we will be back in the 4% range. If we take a hard dive in interest rates there is a good chance the economy is in some real pain and you might still not be in a position to pull the trigger.
Posted on 5/11/23 at 9:25 pm to Big Scrub TX
quote:
If he was THAT dependent on leverage AND he didn't pre-arrange his leverage, then he fricked himself.
Out of curiosity, how would you recommend someone do this when building? Obviously you have to have a ball park number in mind before you start. You budget for that amount, save a little extra for overages and surprises. The build process is 8-12 months. How do you prearrange leverage when the banks won't allow you to lock in your rate until the build is almost complete? Same for trying to ball park your final number a year out?
You keep insinuating this is all my fault and that rates nearly doubling within a year has no bearing on the outcome of someone attempting to build a home. I'm not saying that it's completely the fault of the rates, but I'm smart enough to understand that high rates are detrimental to someone trying to finance a build.
Posted on 5/11/23 at 9:50 pm to Big Scrub TX
quote:
Isn't this literally just a present value calc of whatever the "saved" payments would be?
You could think of it that way, but it's really just a calculated bet if you do it. At some point I cross the "saved" payment inflection and I've now made a good decision if rates pump higher.
Posted on 5/11/23 at 10:16 pm to GAFF
I bet you voted for the potato brain
Posted on 5/11/23 at 10:16 pm to GAFF
Usa people are going to find out why a lot of the world rides motorcycles and lives with family.
Posted on 5/11/23 at 11:15 pm to TigerTatorTots
quote:
It is highly unlikely we go below 5% in rates again possibly in our lifetimes
That’s not true at all.
Posted on 5/12/23 at 12:12 am to GAFF
quote:For starters, build in bigger variances. A good rule (in investing and in life) is: the left tails are ALWAYS bigger and more present than you assume.
Out of curiosity, how would you recommend someone do this when building? Obviously you have to have a ball park number in mind before you start. You budget for that amount, save a little extra for overages and surprises. The build process is 8-12 months. How do you prearrange leverage when the banks won't allow you to lock in your rate until the build is almost complete? Same for trying to ball park your final number a year out?
For rates, if you couldn't find a way to lock, then there's any number of ETFs and the like that let you place bets on rates. TLT is a popular one.
quote:I don't know about "it's your fault" - but you shouldn't be as surprised as you are, is all I'm saying. Again, rates were already pretty historically low - then the covid + government "stimulus" caused a truly historic period of ultra-low rates. Anyone being conservative would have had to thought it wasn't smart to count on that being sustainable. Now, it sounds like you budgeted up to 4.5% - but I don't have a good sense of where rates were when you were using that variance.
You keep insinuating this is all my fault and that rates nearly doubling within a year has no bearing on the outcome of someone attempting to build a home. I'm not saying that it's completely the fault of the rates, but I'm smart enough to understand that high rates are detrimental to someone trying to finance a build.
It seems to me you should be able to live to fight another day - just bank the land until rates come down and/or you move into a higher financial position such that you can still afford the new, more expensive build and hold. That's the other thing - sometimes, even if you plan everything, low-probability outcomes happen. It sounds like you have been quite conservative financially overall in the lead up to this, so just keep it up. You're young. You'll be fine.
Posted on 5/12/23 at 6:44 am to TomRollTideRitter
quote:
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.
Home price to income ratio is higher because people think they need to live in a Mc Mansion these days
Posted on 5/12/23 at 6:57 am to GAFF
OP was absolutely fricked by timing and most in here can’t be bothered to commiserate
Sucks man. I had plans to build finalized in 2019 and we got fricked by a builder who refused to start for months after the signed contract (inline contractors- stay away!), that house value would’ve doubled by now and we’d have a sub-3% rate.
We’re looking around again now because the family is bursting at the seams in our 1800sqft home. We have a sub-6% loan on the table, tough pill to swallow because yea like you said, was always taught to save and not over-extend where in reality, those who did over the past few years are going to come out ahead.
Oh well, beer is too good and life is too short to be too down on bad timing. I’ll have one for OP this evening
Sucks man. I had plans to build finalized in 2019 and we got fricked by a builder who refused to start for months after the signed contract (inline contractors- stay away!), that house value would’ve doubled by now and we’d have a sub-3% rate.
We’re looking around again now because the family is bursting at the seams in our 1800sqft home. We have a sub-6% loan on the table, tough pill to swallow because yea like you said, was always taught to save and not over-extend where in reality, those who did over the past few years are going to come out ahead.
Oh well, beer is too good and life is too short to be too down on bad timing. I’ll have one for OP this evening
Posted on 5/12/23 at 6:59 am to Tigerpaw123
quote:
Home price to income ratio is higher because people think they need to live in a Mc Mansion these days
There's much more to it than this simplistic boomer mentality.
The barrier to entry is vastly different today than ever before, especially in regions where decent jobs actually exist. Add in the fact that most new construction in these areas aren't coming online across all price points. It's either low slums, or high end finishes. Nothing in between.
Similar to the truck market. I can go get a stripped down XL model truck, or a loaded Lariat, but something in between that I think is all I need is hard to come by.
Posted on 5/12/23 at 7:21 am to GAFF
quote:
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.
That kinda sucks. But you seem like your dream is just delayed a bit. Has the land at least appreciated in value?
Posted on 5/12/23 at 7:30 am to Dawgfanman
quote:
Has the land at least appreciated in value?
Yes. $140k increase in equity in just over a year. (26 acres)
Posted on 5/12/23 at 7:57 am to Bow08tie
quote:
Remember when rates were in the 18% range
Yeah and you could buy a nice house for $36k.
These comments are stupid. Average homes cost about $300k now. At 8% that’s out of reach for a lot of people. Majority really.
But sure. Go on about how tough boomers had it in the 70s when college was cheap, you could live off single income, and you didn’t have all these extra expenses that are standard now like cell phones, internet, etc.
Posted on 5/12/23 at 8:16 am to GAFF
quote:
I know 3% rates are likely not coming back for a long long time but what’s the boards opinion on high 4’s?
If you can hang on for 18-24 months I’m very confident you will get a chance at one around 5%.
Posted on 5/12/23 at 8:27 am to GAFF
quote:
build a forever home to raise our kids and retire in.
Very few people actually have a "forver home."
Many PLAN to have one. But such is life...plans, money, health...they are always changing.
quote:
Saved up, paid off debt, etc
This is still a good thing. Timing just wasn't on your side.
quote:
It’s demoralizing
I've been there. I've also seen builds cause divorces with couples. It happens often.
Posted on 5/12/23 at 8:39 am to elprez00
Why does the original comment about a once upon a time interest rate trigger one so?
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