Mortgage rates and the Fed taper (sales, housing, banks, prices)
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Rates go up a bit. The market slows. The unforeseen happens. Bernanke's replacement, Yellin, takes further action either way. It's got to happen. I'm in the business, but I have to admit, it's got to happen.
Rates are gonna go up, affordability goes down. Some current home buyers will freak because " the house lost value" and the current houses that are upside down AKA legacy loans will still be underwater and homeowners squatting, banks will wait till house prices get pumped up again and foreclose. Same ol market manipulation, realtors freaking out buyers to GET IN NOW or. You'll be renting forever.
My life experience: when interest rates were really high, real estate was a hot item. The high interest rates were because of very high inflation rates and everyone was desperate to dump their dollars and trade them for hard assets.
Real estate prices did not go down. What happened was that people could not afford as much house, so they spent their money on less house, and were glad to do it.
Real estate prices did not go down. What happened was that people could not afford as much house, so they spent their money on less house, and were glad to do it.
There is only so much less house you can accept..here in the Orange County, CA area in a semi decent neighborhood 1000-1200 sqft is around $400,000-450,000. That is WAY too expensive for most middle class families who want to live in a somewhat safe neighborhood where they will not get shot.
How much less house do you want people to buy? 500sqft house for $300,000? I would like to know. And you would like a family to pay their life savings in the down payment and then live in a home the size of a matchbox carry a quarter million dollar mortgage?
My life experience: when interest rates were really high, real estate was a hot item. The high interest rates were because of very high inflation rates and everyone was desperate to dump their dollars and trade them for hard assets.
Real estate prices did not go down. What happened was that people could not afford as much house, so they spent their money on less house, and were glad to do it.
What was really happening was inflation was driving housing prices sustainably higher, driving incomes higher, keeping interest rates high, and forcing the Fed to encourage even higher rates to stop run away inflation. Now without the inflation component sustainable housing price remains relatively flat, incomes stay flat, interest rates remain relatively low, and the Fed is forced to encourage relatively low rates even when not injecting liquidity directly into the system.
As we have seen twice now, ill conceived government policy and Fed action can drive housing prices higher in low inflation economies without being sustainable, creating bubbles. Unless inflation actually takes hold the echo bubble is destined to collapse, even without the injection of liquidity other policies and measures may allow it to continue for a while longer but it will eventually collapse.
My life experience: when interest rates were really high, real estate was a hot item. The high interest rates were because of very high inflation rates and everyone was desperate to dump their dollars and trade them for hard assets.
Real estate prices did not go down. What happened was that people could not afford as much house, so they spent their money on less house, and were glad to do it.
When exactly was that? 2001-2007? What did you consider high interest rate? 4-6% was not high interest rate considering the amount of money being borrowed was insane along with the house prices. If you make money expensive to borrow prices drop because it has to fall in line with affordability. People will either save to buy, borrow but pay faster or can't buy/don't borrow.
You are not gonna have 8-14% interest rate and high house sale prices. Just not gonna happen.
Some buyers were stupid because they simply banked on their house value. Too bad some realtors forgot to mention. As the values go up they can come down. So people had a false sense of security with the " your house value is going up look at how great it is" KEEP BORROWING KEEP BUYING. MOVE UP TO THAT MCMANSION. You deserve it.
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