- Jun 20, 2006
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Housing market
- Thread starter simply1
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The problem will be job relocation. If there is a requirement to be at your job (medical and ag type jobs for example) in person then that could throw wrenches into the deal. You now have little equity in your house in order to sell and relocate and the interest rate is up. From stuff I posted earlier, you can see the correlation between the interest rates and prices. When you convert them to payments, they seem to level out pretty well.
What makes me sad about this is my wife and I had houses that were at 3% interest, most recently as of 6 months ago. We sold to move for her job and currently renting and probably missing really low mortgage rates because of it.
The 15 years of mortgage rates has conditioned consumers that 3% is normal where 6% is closer to the historical normal. The only thing that's going to help us is a recession so interest rates decrease again.
The 15 years of mortgage rates has conditioned consumers that 3% is normal where 6% is closer to the historical normal. The only thing that's going to help us is a recession so interest rates decrease again.
Do the math and it may not be that much different. Price a 3% rate and a 6% rate, but he 6% has seen a 10-20% drop in housing prices and you sold on the higher side so you have more cash to put down than what you would have otherwise.
Yeah, the monthly "cost to own" is what matters, not the rate or principal on their own. The two obviously have an inverse relationship, so higher rates are going to push prices down.
So it might not net out too differently for buyers, but certainly less of a sellers' market.
This is why I've always been skeptical of anybody proposing to improve "affordability" by making something easier to finance (e.g., student loans). The seller isn't stupid. If they know you've got more ability to finance behind you, then they know they can charge more upfront to reap that windfall.
But hey, sometimes that indirect transfer of income and wealth (either to homeowners or to colleges and universities themselves) is much the point, a feature rather than a bug of the system.
Agree. Go into a car dealership and look at cars when you tell them someone smoked your car and have an insurance check from the other person. (well, about 2 years ago before now, now they want trade ins) They will be happy to sell you but you are probably going to be paying 500 more or so than you would have before. I had a piece of equipment catch fire. I had received a bid before harvest to see what replacement would be. Magically the new equipment shot up in price and the saleman was going to take some of my added windfall from the fire insurance.
Wonder how much they shot up already? Guessing we may have seen those numbers by now and they didn't anticipate the rise that we would have seen.
God willing we will not see a 10-20% drop in home prices. There is still significant pent up demand for housing with well qualified buyers. And investors looking for somewhere else than the equities market to park cash.
Could be wrong, but we’re in a completely different place than 2008.
Realtors I know (yes, that's just a small segment) have said the houses are actually sitting longer than before and the lower quality homes have dropped off quite a bit. Typically your lower end stuff drops first and then it is a ripple effect on the rest. If houses are sitting longer the prices will start to soften.
In my area, upper New Jersey, I have seen an increase in houses listed as "price drop" on Redfin. So it looks like the days of bidding massively over asking are at or near an end. But overall, the final sale prices of houses have had a tremendous several years of price increases.
Of course, this does not account for quality of home nor neighborhood. It's still very possible high quality homes in good neighborhoods are going over asking still.
With pressure on debt to income ratios (from inflation) and high interest rates, softening will start with higher priced homes. Not quite the luxury market where buyers are more immune to economic realities, but in those price tiers where values got really frothy and buyers were able to stretch because rates were so low.
More affordable homes should be safer because demand will always be there.
There is no credible industry source (I work in this business and specialize in property valuation) that is reporting significant decrease in prices and no one projecting this big of a drop. Although it’s already well documented that things are slowing.
Could it happen? Absolutely. Economic conditions can change on a dime. But if you consider that reputable housing economists think we’re short several million single family units in the US this should be a much softer landing than last time (barring other significant economic changes).
I can clarify.
Home equity around 2008 was dramatically lower than it was right now. Exotic loan products like negative amortization, option ARMs, 100% LTV (or more), stated income and asset, no income and asset, etc were rampant.
We built a housing bubble through qualifying borrowers that had no business owning a home. Combine that with low home equity and you’ve got massive foreclosure problems. Even people that could pay were giving up.
Underwriting standards have been much stronger the last 10+ years and a lot of loan investors are seeing mark-to-market loan to value rations in the low 60s on average. Unemployment is low (for now) and most owners are in at sub 3% internet rates. There is infinitely more motivation for owners to ride out a storm this time and if they do experience things like Job loss, divorce, death, etc they can sell their house and walk away with their equity. Rather then just let the bank take it which is what happened en masse 14 years ago.
My point about the investors is that there is also a lot of people with money to invest that could buy rental properties- especially if markets soften a bit - because they’re getting $hit returns in the stock market right now.
My point about “different place” is specifically in relation to mortgage profiles and homeowner positions.
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Per a 40 year RE agency owner at the Lake of the Ozarks, the market has steadied. Not getting multiple offers and the listing days are longer but still getting an offer at asking price. Crazy over priced listing days are over but the market has stabilized. New home cost is $175 per sq ft which has not risen from last year. Driving around the Lake this week, I saw lots of Lakefront homes in construction more than I’ve seen in the past.
Polk County property owners could see sizable increase in property value
The Polk County assessor says homeowners can expect about a 22% increase.
www.kcci.com
Polk County property owners could see sizable increase in property value
The Polk County assessor says homeowners can expect about a 22% increase.
Great, so taxes will go up 22% then also.
