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Old 10-09-2018, 09:33 AM
 
64,551 posts, read 66,100,109 times
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Quote:
Originally Posted by Lovehound View Post
I don't see what everybody is arguing about. An increase in the prime causes an increase in all lending rates, including mortgage rates. When mortgage rates rise fewer people are able to afford mortgages so there are fewer buyers in the housing market. Fewer buyers increases days on market and increases supply. If the situation is extreme then housing prices will fall. At the present time IMO the prices will simply increase at a slower rate. I don't believe that we have reached the point where interest rates are going to cause a decrease in valuation. Note also that real estate markets are local so different areas will experience different trends. The recent increase will hit slow markets harder, and in these areas prices may in fact fall, desperate sellers needing to get out. Brisk markets may experience only trivial effects.
A change of a point or two does not knock someone out of the housing market . What it does is just have them buy a bit less house or consider another area . My son would have bought in rye ny if rates were lower . Rye has a dedicated train station . Instead they just bought a house for a bit less in rye brook which has no station .the homes are less because the town has no dedicated station and use rye.

Sure someone on the lower end may just pull out all together rather then switch areas , but just as many who were on the fence may decide to buy before they can afford even less house. So far most nice areas are seeing more demand then there is supply

Last edited by mathjak107; 10-09-2018 at 09:48 AM..
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Old 10-09-2018, 09:44 AM
 
Location: El Pueblo de Nuestra Señora la Reina de los Ángeles del Río Porciúncula
13,547 posts, read 14,044,894 times
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Quote:
Originally Posted by damba View Post
JC already- Please stop posting in bold. You just aren't that important LOL.
I find that VERY ANNOYING too. Please stop it.
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Old 10-09-2018, 09:49 AM
 
Location: El Pueblo de Nuestra Señora la Reina de los Ángeles del Río Porciúncula
13,547 posts, read 14,044,894 times
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Quote:
Originally Posted by mathjak107 View Post
A change of a point or two does not knock someone out of the housing market . What it does is just have them buy a bit less house or consider another area . My son would have bought in rye brook ny if rates were lower . Rye brook has a dedicated train station . Instead the bought a house for a bit less in rye brook which has no station .the homes are a few hundred thousand less.

Sure someone on the lower end may just pull out all together rather then switch areas , but just as many who were on the fence may decide to buy before they can afford even less house. So far most nice areas are seeing more demand then there is supply
An increase in lending rates has a statistical effect in all but the most expensive homes (perhaps those above $2M just to grab a number out of the air, FIs don't care about interest rates, they pay cash).

Buying a house for a bit less affects the market for houses listed for a bit more. The aggregate effect amounts to an across-the-market slow down. A few will probably be kicked out of the market. A few more will probably just bite the bullet harder.

I think the recent 0.25% increase will factor in a few weeks later. Note that's the prime, I haven't followed mortgage rates, which might have gone up a bit more percentage.
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Old 10-09-2018, 09:54 AM
 
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I should keep a copy paste ready to show to the peter schiff worshippers.

The guy has been wrong an absolutely outrageous amount of times (on the dollar, the euro, gold, commodities). His clients also got decimated during the crash that his worshippers claimed that he predicted.
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Old 10-09-2018, 09:55 AM
 
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It is the lower end houses that get spurred the most when rates rise. Those are the ones in the affordable range. They tend to see the big burst in demand and supply issues .

You have all those who are getting pushed down in to lower and lower housing choices as rates rise . They now feel an urgency to buy. But it is usually the lower end to middle range homes that most of our wives will find issues with and so a lot get rejected and stays unsold . This range has had such demand bidding wars are happening in many places.

Higher end homes are usually pretty nicely done and maintained and seem to have better supply
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Old 10-09-2018, 10:00 AM
 
7,283 posts, read 8,116,246 times
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Quote:
Originally Posted by Lovehound View Post
I don't see what everybody is arguing about. An increase in the prime causes an increase in all lending rates, including mortgage rates. When mortgage rates rise fewer people are able to afford mortgages so there are fewer buyers in the housing market. Fewer buyers increases days on market and increases supply. If the situation is extreme then housing prices will fall. At the present time IMO the prices will simply increase at a slower rate. I don't believe that we have reached the point where interest rates are going to cause a decrease in valuation. Note also that real estate markets are local so different areas will experience different trends. The recent increase will hit slow markets harder, and in these areas prices may in fact fall, desperate sellers needing to get out. Brisk markets may experience only trivial effects.
Think of it like this.

1). The prime rate is the rate banks charge their very best customers/lowest risk. If Exxon wants to borrow $50MM for something they pay the prime rate. If you or I want to borrow $50K for something we pay a higher rate.

2). The only interest rates the Federal Reserve controls directly is the, "discount rate". That's simply what regional Federal Reserve banks charge member institutions for loans. The Fed. does not set mortgage rates and the relationship between Fed. policy and mortgage rates is real but indirect and is tightly correlated to longer term securities.

3). Outside a few oddball markets I believe your conclusions are correct.
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Old 10-09-2018, 10:02 AM
 
Location: El Pueblo de Nuestra Señora la Reina de los Ángeles del Río Porciúncula
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I understand and agree with all the posts since my most recent post. Some of us may have different ways of explaining it.

I doubt this will have any significant long term effect, and I doubt there will be a further increase in the prime until 2019 in which I see it is not only likely but probable, probably another 0.25% increase if the economy continues as it's going at present.
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Old 10-09-2018, 01:49 PM
 
27,447 posts, read 44,947,050 times
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Quote:
Originally Posted by mathjak107 View Post
It is the lower end houses that get spurred the most when rates rise. Those are the ones in the affordable range. They tend to see the big burst in demand and supply issues .

You have all those who are getting pushed down in to lower and lower housing choices as rates rise . They now feel an urgency to buy. But it is usually the lower end to middle range homes that most of our wives will find issues with and so a lot get rejected and stays unsold . This range has had such demand bidding wars are happening in many places.

Higher end homes are usually pretty nicely done and maintained and seem to have better supply
Don't know about your area but in TX where there are many public ISDs that often have homes of similar age and size and style, the school district is the premium that people pay for-even with a higher tax bite...because ISDs set their own tax rate separate from city or county...

In TX one suburban town can have 3 independent school districts that cross its city's limits
One town might have one area in an ISD that is more desireable even if older than the newer homes at similar price points because their ISD is perceived as not equal to the other...

And I think you--the NY area--are seeing upsurge in homes listed for lease because there is slowing of demand to buy...over taxes or uncertain economy or other factors--
Just read article in NYTimes RE section...
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Old 10-09-2018, 01:54 PM
 
64,551 posts, read 66,100,109 times
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yes , here too school districts count a lot . in my sons case school districts are just as good as where they were but the station is the biggie .

so far from what i see quality homes are selling within days . a lot of the 2nd tier stuff ends up going for lease , it is hard to sell .
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Old 10-09-2018, 09:33 PM
 
18,242 posts, read 11,653,926 times
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All this moaning and wailing over five percent mortgage rates. People have become soft and very spoiled.


For much of the 1980's through 1990's and really just before the fiscal crisis/great recession mortgage rates ranged from 10% to nearly 20%, and people managed.


https://www.valuepenguin.com/mortgag...age-rates#nogo


Higher interest rates help bring a little discipline to the housing market. Sellers will get realistic as to what their properties are worth. Buyers OTOH will learn smarten up to how much house they can afford.


Everybody today wants to go from an apartment to large home, with no stop at a "starter" in between.
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