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the article had an example of a certain monthly payment that at one interest rate would afford a loan of $300k, but one point higher interest they could only borrow $270 for the same monthly payment. So the choice would be that you'd have to choose a cheaper house or save up a higher down payment.
after recently closing on this house and now paying our bills for a few months and getting to see our current budget at work (or not work, lol), and thinking about the math, if our income isn't higher in a few years, but interest rates are, we will not be able to afford to "move up" much at all. Maybe we can get something bigger if/when we need it, but not nicer. Bummer. I probably should've just started with that after all. I'll go back and read that "buyers remorse" thread now
LOL, no. You're forgetting the most likely case - the seller would have to capitulate on price and lower the price. Buyers set the price for market value, not sellers, despite what many think, based on what they can afford. Sure, when you give buyers carte blanche and loan them more than they deserve via ultra loose lending and ridiculous, artificially low rates, they will throw that money into the market and compete with others just like them.
I can add one to your list....
I know of a family that pays for all these pricey extra curricular activities (sports, etc) for their kids, but is late on their mortgage. I cannot even comprehend that
It is about choices for many...but I deleted the sentence b/c for some it isn't. But you are right about some people paying for extras and not paying their mortgages. If things got too tight for us you better believe the first thing that would go would be our enhanced cable and trips to the mall, lol! We actually ARE working on our eating out as one month it was like $350 and that is crazy for us. I can think of much better things to do with that money-like save for retirement!
Tried to rep you back...have to spread it aroud, but I like your point about what's LEFT after the bills, lol!
the article had an example of a certain monthly payment that at one interest rate would afford a loan of $300k, but one point higher interest they could only borrow $270 for the same monthly payment. So the choice would be that you'd have to choose a cheaper house or save up a higher down payment.
after recently closing on this house and now paying our bills for a few months and getting to see our current budget at work (or not work, lol), and thinking about the math, if our income isn't higher in a few years, but interest rates are, we will not be able to afford to "move up" much at all. Maybe we can get something bigger if/when we need it, but not nicer. Bummer. I probably should've just started with that after all. I'll go back and read that "buyers remorse" thread now
You know people have to qualify for a certain debt to income ratio. Your assumption is that interest rates will go up but prices won't drop to compensate. I think many people believe that prices will come down more as interest rates go up in order for people to qualify for financing for the homes.
Silverfall and Delron-- but if prices go down to account for the higher rates, I won't be able to sell my home for as much either and so I probably still couldn't afford what I could if rates stayed low.
But I guess I have to remind myself that with such a low rate on this house and a free $8k from the gov't, I won't be losing as much money. Right?
I agree rates will and should go up and not stay artificially low. I'm just kicking myself for not thinking more about the long term of that before I bought this year.
Last edited by campmom123; 04-07-2010 at 08:24 PM..
Mortgage interest rates were about 10%, 20 years ago.
Education, fuel and insurance are disproportionally higher now than then. Food, electronics, travel, clothing and home goods are cheaper now.
And then there is the black hole of discretionary spending, communications that did not exist 20 years ago and coffee at $3 a pop.
Yeah I'm sure the hotel maids, taxi drivers, home builders, and most working people are buying $3/coffees and thats why they cant afford a mortgage. Very insightful. Its insulting in the extreme to attack the victim they cant even afford to buy their own children health insurance for petes sake.
I think the market has it its low and will start to rebound ever so slowly. I know it has rebounded a bit just from 4 months ago when I purchased my home. Think I got in with 5.25 but I'm not too considered about it. I'm planning on flipping this home in 3-4 years. I do think the market will rebound enough by then so I can make about 30% profit.
Mid-class COULD afford it, but chose other things to spend their money on. I have a home and we can afford it but we could be much better if we cut out
eating out: $250 a month
Crazy Cable/phone/internet $150 a month
Entertainment $100 a month (movies, parks, etc.)
Coffee Runs $50 or so a month (WE have cut this out!)
Trips to Target just for fun $100 plus a month
Cell plan $100 a month
Just those items alone total $750. Our mortgage is about $2400 a month...If I took that money and applied it to the mortgage that would be $1650.
Why would you want to cut out any sort of entertainment and fun from your life just to overpay for a house (which is probably going down in value anyway)? I know it would be good for the real estate market and those who profit from it, but I don't see what's in it for the average homeowner. If housing isn't affordable to the average buyer - and that average buyer isn't willing to give up 10-30 years of their life just to feed money into a house - then you're going to run out of buyers long before you run out of houses to sell. That's a recipe for continued price drops.
Anyway, I view the article as another in a long line of attempts to generate urgency in the market. "Prices won't go down forever", "interest rates are going up", "the tax credit is expiring", "all that will be left is trashed-out foreclosures", etc are all just excuses to try and get people to buy now.
The average rate on a 30-year loan has jumped from about 5 percent to more than 5.3 percent in just the past week. As mortgages get more expensive, more would-be homeowners are priced out of the market — a threat to the fragile recovery in the housing market.
If you have time on your side, let the interest rate go up to around 6.5%. You will see home prices will come down (with a lag of around 6 months). Lower prices and higher rate is historical normal (when Fed is not screwing it up). Lower prices make paying off easier.
I think the market has it its low and will start to rebound ever so slowly. I know it has rebounded a bit just from 4 months ago when I purchased my home. Think I got in with 5.25 but I'm not too considered about it. I'm planning on flipping this home in 3-4 years. I do think the market will rebound enough by then so I can make about 30% profit.
El Oh El.
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