Effect of rising mortgage rates on future Houston real estate prices (Sugar Land: lenders, homes)

[ToyYot]

Originally Posted by Lowexpectations

It's foolish to say rates won't do anything, certainly they could put downward pressure on inner loop properties. On 500m-1mm properties would certainly lose a lot of buyers if rates went up 2 points and values stayed the same

Not really, on a 15yr mortgage the downpayment on a $1M house is the same and the payment only goes up a like $700 bucks on a 2% rise. Peanuts in that price range.

[Lowexpectations]

Originally Posted by ToyYot

Not really, on a 15yr mortgage the downpayment on a $1M house is the same and the payment only goes up a like $700 bucks on a 2% rise. Peanuts in that price range.

If your mortgage value doesn't change it's pretty obvious that the down payment would be the same


Well full disclosure on the numbers it's more than 700 swing on the 15 year and nearly a 15% difference and 25% swing on the 30 year. If you don't think that eliminates buyers simple economics isn't your thing. Currently the 30 year is 43% less commitment a month than the 15 year. On a 36% debt to income ratio the movement in the 30 year mortgage payment would require an additional 2700 a month or 32k a year in income. Don't kid yourself a 2% will reduce the potential pool of buyers for the 500mm-1mm market

[eastontracks]

The economy is pretty good here and if it rises some, there's people still willing to fork out the cash. I thought it was peaking last summer but I don't think it has yet. IMO it will continue to rise somewhat as long as the energy, oil and gas continue their trend upward.

[ToyYot]

Originally Posted by Lowexpectations

If your mortgage value doesn't change it's pretty obvious that the down payment would be the same


Well full disclosure on the numbers it's more than 700 swing on the 15 year and nearly a 15% difference and 25% swing on the 30 year. If you don't think that eliminates buyers simple economics isn't your thing. Currently the 30 year is 43% less commitment a month than the 15 year. On a 36% debt to income ratio the movement in the 30 year mortgage payment would require an additional 2700 a month or 32k a year in income. Don't kid yourself a 2% will reduce the potential pool of buyers for the 500mm-1mm market

True, I guess I was limiting my thoughts to people who could actually afford to buy in that price range.

[Lowexpectations]

Originally Posted by ToyYot

True, I guess I was limiting my thoughts to people who could actually afford to buy in that price range.

Which would make the purchasing pool much smaller than reality currently makes it. That's like saying everyone will be able to retire. Well if they saved and lived within their means

[EasilyAmused]

I'm suprised anyone would be approved for a loan on a house in the million range if 700 bucks would make or break them on a monthly payment. Jeez.

Rising rates would be a bigger hurt in the sub-400 market. IMHO. That's why during crashes and booms many of those neighborhoods have a hard time. Last one to the party,first one to leave.

[Lowexpectations]

Originally Posted by EasilyAmused

I'm suprised anyone would be approved for a loan on a house in the million range if 700 bucks would make or break them on a monthly payment. Jeez.

Well we aren't just talking about making or breaking but rather ability to qualify for a loan. It's a 800-900 difference. If you can't clearly see that a 2% increase in the mortgage rates would reduce the number of buyers in all ranges, even the 500m-1mm I don't know what to tell you. It will reduce buyers and will pressure prices


On a 120k income, 25k down downpayment and no other debt you could purchase in the 525k range

[EasilyAmused]

Originally Posted by Lowexpectations

Well we aren't just talking about making or breaking but rather ability to qualify for a loan. It's a 800-900 difference. If you can't clearly see that a 2% increase in the mortgage rates would reduce the number of buyers in all ranges, even the 500m-1mm I don't know what to tell you. It will reduce buyers and will pressure prices

800-900 a month...hmmm
Yeah... it would kick out the kids that have no reason to be playing in that sandbox in the first place. Not a bad thing when seeking a more stable economy.

125k buying at 500+ plus house?? Guess we learned nothing in 2007.

[Kiovo]

Originally Posted by Lowexpectations

Why people look to a 30 year fixed mortgage baffles me some when most do not stay in their house or keep their mortgage past 7 years or so

Same reason why they take out a 60 or 72 month car note.

And yes, if interest rates goes up 2% and you can no longer afford the home you want, you probably couldn't of afforded it at 3 or 4% rates. Housing will slow down but it's not necessarily a bad thing. Growth has been exponential, it has to slow down at some point.

[Lowexpectations]

Originally Posted by EasilyAmused

800-900 a month...hmmm
Yeah... it would kick out the kids that have no reason to be playing in that sandbox in the first place. Not a bad thing when seeking a more stable economy.

125k buying at 500+ plus house?? Guess we learned nothing in 2007.

If you still aren't getting it then economics as a whole aren't something you understand. The concepts and real world application are very simple. A 2% rise will reduce the number of buyers in all segments and a reduced number of buyers will pressure pricing. This is all very basic