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Old 07-19-2016, 05:25 PM
 
12,449 posts, read 24,116,894 times
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Quote:
Originally Posted by Wittgenstein's Ghost View Post
Why do you think the bolded text is the case? I'm genuinely asking because I don't know. A couple possibilities that come to my mind:

1. Rates are generally increased in response to economic expansion, and economic expansion is generally good for the housing market.

2. Banks are good at foreseeing rising rates from the fed, so the increase in fed rates isn't perfectly reflected in an increase in the rate Joe Homebuyer sees.
The market demand is typically strong in a rising rate situation as buyers scramble to lock in lower rates before their purchasing power decreases. On a $250k home with 20% down, every 1% increase in mortgage rate is about a $100 increase in monthly payments.

The scramble to buy can push prices up, and at a minimum will hold prices steady.
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Old 07-19-2016, 06:16 PM
 
4,536 posts, read 2,538,550 times
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Quote:
Originally Posted by TurtleCreek80 View Post
The market demand is typically strong in a rising rate situation as buyers scramble to lock in lower rates before their purchasing power decreases. On a $250k home with 20% down, every 1% increase in mortgage rate is about a $100 increase in monthly payments.

The scramble to buy can push prices up, and at a minimum will hold prices steady.
Wouldn't this be true for only a short period, though? At some point, the higher rate is going to reduce buying power enough that there are fewer buyers at every price point.
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Old 07-19-2016, 07:08 PM
 
12,449 posts, read 24,116,894 times
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Quote:
Originally Posted by Wittgenstein's Ghost View Post
Wouldn't this be true for only a short period, though? At some point, the higher rate is going to reduce buying power enough that there are fewer buyers at every price point.
It depends on what rates are and how quickly they're rising. Buyer behavior would look different during a slow climb from 4% to 5% than rapid increases. But yes, when rates settle down in the new higher range, sales activity would slow down (not necessarily prices but definifely the quantity of sales) because more buyers are priced out and also a good chuck of sales were pulled forward into the rising rate environment.
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Old 07-19-2016, 10:51 PM
 
4,536 posts, read 2,538,550 times
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Quote:
Originally Posted by TurtleCreek80 View Post
It depends on what rates are and how quickly they're rising. Buyer behavior would look different during a slow climb from 4% to 5% than rapid increases. But yes, when rates settle down in the new higher range, sales activity would slow down (not necessarily prices but definifely the quantity of sales) because more buyers are priced out and also a good chuck of sales were pulled forward into the rising rate environment.
How would prices not be lower if everyone across the board had less buying power, ceteris paribus?
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Old 07-20-2016, 12:22 AM
 
11,017 posts, read 11,090,149 times
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Quote:
Originally Posted by Wittgenstein's Ghost View Post
Why do you think the bolded text is the case? I'm genuinely asking because I don't know. A couple possibilities that come to my mind:

1. Rates are generally increased in response to economic expansion, and economic expansion is generally good for the housing market.

2. Banks are good at foreseeing rising rates from the fed, so the increase in fed rates isn't perfectly reflected in an increase in the rate Joe Homebuyer sees.

I do agree that this recovery has been slow and weak, although it has been pretty long. That aspect makes it difficult to predict what will happen with rates, as evidenced by the wild speculation about when the Fed was going to first hike rates and how aggressive they would be.




My opinion isn't based on any macroeconomic indicators; it's simply based on how long rates have been extremely low, couples with what I believe the Fed would do if we saw another year or two of economic expansion. I just can't believe that we would have such a long expansion with rates remaining as low as they are. I do think the Fed is being intentionally conservative with hikes, however, out of fears that this recovery has been far less than convincing.
1. As TC-80 noted fence sitters on both the supply and demand sides become motivated when they believe rates are rising and will continue to rise.

2. Historically, increasing rates typically underscore a good to very good overall economy, trending towards too good hence Federal Reserve action to increase rates and slow the economy all in efforts to manage inflation.

3. GREATLY SIMPLIFIED EVEN TRUNCATED..........Mortgage rates are only indirectly tied to Federal Reserve moves. The Federal Reserve system via The Federal Open Market Committee FOMC) attempts to influence short terms interest rates only. The Fed. implies interest rates through "The Discount Window" a suite of four key types of credit available to member banks, and sometimes other institutions. Via the price/interest rates The Fed. charges for these loans the Fed. manipulates member institutions to drive rates members charge their customers the direction the Fed. desires. Between The Discount Window, changing reserve ratios (higher bank reserve ratios mean less money to lend, less in the system, higher rates in effect slowing the system and the economy, lower ratios mean the opposite), and adjusting the money supply and a few other operations The Fed. is very effective driving short rates the desired direction. The end game is really nothing more or less than trying to wrangle the economy as close to Milton Friedman's "optimal" general price inflation rate of 2.5-3% per year. All of that is important because if The Fed. is fighting inflation interest rates are increasing. In an inflating economy 5 and 10 year government bond prices fall and their yields increase (generally 5 and 10 year yields rise due to inflation/fears of inflation not Fed action, although clearly there is a relationship). That's important because the people/companies/multi-nationals/Crown Princes/Kings/governments who buy mortgage backed securities also buy US Treasuries. Assuming the same yield or even close to the same yield many of these folks prefer treasuries because treasuries are safer and easier to sell. So rising treasury yields drive mortgage rates higher. The takeaway is mortgage rates are very closely and directly associated with 5 and 10 year US Treasuries and very loosely although directly in terms of direction tied to FOMC/Fed. action. Whew!

Regarding your last point. If the country never faces inflation/inflationary fears The Fed. will never increase rates.
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Old 07-20-2016, 07:55 AM
 
Location: Shady Drifter
2,444 posts, read 2,134,376 times
Reputation: 4098
Jesus Christ, even 16 threads asking about the difference between Coppell and Plano school districts is better than this.
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Old 07-21-2016, 12:20 AM
 
Location: Both feet on banana peel's, on ice.
352 posts, read 493,867 times
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Quote:
Originally Posted by lepoisson View Post
Dallas is a nice place to live, but I would NEVER pay Chicago prices for housing here. And I would hope that DFW prices never approach that amount.



I remember those times. But gas prices went up across the entire country. There is/was really no way of avoiding it.

However, it's alarming to me that housing prices keep skyrocketing here, yet salaries stay the same. What happens to all of the people who are here and can afford $1000 rent or a $175,000 home, but cannot afford $1500 rent or a $250,000 home (like myself)? My guess is that these people will simply leave and that the influx of people will slow as housing keeps increasing. I guess this will make prices more stable.

I moved here from Kansas City to get into a different field. I got a small salary increase. But now that I think about it, I probably lost money because I am paying $900 for rent instead of $700.

I've come to accept the fact that I will never be able to own a home here unless I get a salary increase, or find a better paying job.

I guess the alternative is just to move somewhere where the cost of living is more stable and affordable.
We left DFW a month ago, and are so glad we did; DFW was great for our careers, but over the last few years, our overall preferred quality of life was going downhill there. Its great for some, but not for all, so consider what is truly important to you and your lifestyle.
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Old 07-21-2016, 08:37 AM
 
Location: The Windy City
5,332 posts, read 3,933,695 times
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Quote:
Originally Posted by USNomad View Post
We left DFW a month ago, and are so glad we did; DFW was great for our careers, but over the last few years, our overall preferred quality of life was going downhill there. Its great for some, but not for all, so consider what is truly important to you and your lifestyle.
Where did you move to?

I'll probably be moving back to the East Coast when my lease is up here next April. It will be nice to be closer to family anyways. I really miss being just a few hours drive from the beach, mountains, and DC.
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Old 07-21-2016, 12:01 PM
 
Location: North Texas
24,571 posts, read 35,611,791 times
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Quote:
Originally Posted by USNomad View Post
We left DFW a month ago, and are so glad we did; DFW was great for our careers, but over the last few years, our overall preferred quality of life was going downhill there. Its great for some, but not for all, so consider what is truly important to you and your lifestyle.
Where'd you end up?

DH and I literally talk about moving every day.
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Old 07-21-2016, 03:07 PM
 
2,070 posts, read 1,538,269 times
Reputation: 2396
Quote:
Originally Posted by USNomad View Post
We left DFW a month ago, and are so glad we did; DFW was great for our careers, but over the last few years, our overall preferred quality of life was going downhill there. Its great for some, but not for all, so consider what is truly important to you and your lifestyle.
Obviously the climate and scenery can't be changed. What can be changed are the man made environments that can improve the quality of living. Dallas needs to go beyond just being great for careers and for those looking to save a few bucks. The greatest potential is in the city itself. City leaders need to focus on the city first and not coddle to the self serving suburbs.
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