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Old 01-16-2015, 10:25 AM
 
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Quote:
Originally Posted by luv4horses View Post
All the news outlets are happy to report how low mortgage rates are running. 30-year below 3.66 and 15 year below 3%. Potential buyers are thrilled. Young people may be able to afford a house for the first time.

But are any other retirees bothered by this? For example, if I was 60 and planning to live another 30 yrs, would I loan the money to buy a house to someone at 3% interest? This is not a reasonable investment option, given all the risks of default and decay involved--is it? Likewise, these sorts of loans are related to my returns on my investments if you take the broad view. Does this mean that I should start to expect a major decline in the staying power of my retirement funds? Luckily these buyers will not keep their loans for the full 30-years, what with many homes being resold every 5 to 10 yrs, but are these low interest rates not hurting retirees? Please show me I am wrong (leaving politics out of the discussion).
Typically high rates happen at times of high inflation as well - thus do not get fooled into thinking they had it better with their savings back then.

In much of the 1970's and 1980's, people were earning 6-10% on their savings, but inflation was also about 6-10% each year, so in the end, they got.....nothing.
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Old 01-16-2015, 10:29 AM
 
12,705 posts, read 9,970,523 times
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Quote:
Originally Posted by mathjak107 View Post
that is not true about higher mortgage rates decreasing values.

in fact just the opposite . rates increase because the economy is humming , people are working and spending.

our best appreciation has been in the 6-7% mortgage range historically.

if it was only about rates prices should be at the highest levels ever.

usually as mortgage rates rise it puts more pressure on buying now before we can afford even less house and that is good for prices.

until rates become very high there is not a lot of historical links between JUST RATES and appreciation.
'
Actually there is a correlation, but only between real house prices and real interest rates. If you don't adjust them both for inflation, they will appear uncorrelated.
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Old 01-16-2015, 11:01 AM
 
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even so , if it was true we wouldn't have collapsed we would be soaring.

the fact is rates are only one of the ingredients that go in the mix that determines if prices go up or down . most of the other stuff is local market parameters.

the point is you can never say if rates rise prices will fall.
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Old 01-16-2015, 01:35 PM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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low rates are very good for me NOW(for the time being..) early retiree and not near SS age, getting income from cash flowing real estate investments.

I also enjoy the benefit of using my LOW rate personal residence mortgage (30 yr) to finance my commercial properties. (usually capped / renegotiated at 5 yrs)

End game (~15 yrs) I plan to be selling RE assets on contract. I hope the rates will be adequate to provide a decent return (5+%). If not, I will use plan B. (Buyers get cheap mortgage money and I take their loan proceeds to a better investment opportunity)
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Old 01-16-2015, 03:28 PM
 
12,705 posts, read 9,970,523 times
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Quote:
Originally Posted by mathjak107 View Post
even so , if it was true we wouldn't have collapsed we would be soaring.

the fact is rates are only one of the ingredients that go in the mix that determines if prices go up or down . most of the other stuff is local market parameters.

the point is you can never say if rates rise prices will fall.
There's a correlation. Not a perfect one, mind you, but a correlation nonetheless.
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Old 01-16-2015, 03:37 PM
 
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it is included in the mix ,that is about the best you can say about it,.


forbes had an article on just that myth that prices fall when mortgages rise


'I took every case from 1976 through the present in which mortgage rates rose by one percentage point or more. I then looked at the FHFA’s Home Price Index for that period. It turns out that in every case, home prices rose over the period in which mortgage interest rates are rising."
"

When Mortgage Rates Rise, Will Home Prices Fall? - Forbes
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Old 01-16-2015, 05:18 PM
 
Location: Maryland
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I agree with Ncole1.
But mathjak makes a good point that other factors are also present.
Low mortgage rates do artifically raise prices since people buying with a mortgage are willing to pay more for the house since the monthly payment is so low. High mortgage rates may not actually cause values to drop, they might just rise slower in a good economy since people with better jobs can afford to buy. However, like many finanical/economic things, there can be a delay in effect since the other factors are there.

I don't have a mortgage (or a car loan, etc), so the only way I benefitted was the value of my 401k went up. I would like to see high rates and low inflation... but that doesn't typically happen !
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Old 01-16-2015, 05:31 PM
 
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low mortgage rates coincide with poorer economic conditions so while mortgages are cheaper fewer folks are working ,earning enough or want to risk buying ala the last few years.

you can see rates and prices move up together . the early 80's bucked that only when rates were sky high. in fact they only time they moved in lockstep together was the last few years when prices fell and rates fell. kind of the opposite of what people think happens.


Last edited by mathjak107; 01-16-2015 at 05:46 PM..
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Old 01-18-2015, 08:28 AM
 
3,196 posts, read 1,814,436 times
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Quote:
Originally Posted by mathjak107 View Post
most of america has little savings and lots of debt so they benefit far more from lower rates than they would give up since many live hand to mouth basically.

retirees with money have seen huge increases in equities and bonds just because of these low rates.

the only ones who got hurt are the ones that did not listen to the fed who did everything but drop leaflets from helicopters saying do not invest in cash instruments you will get nothing.

if you chose not to listen and if you made the classic mistake of putting all your assets in one asset class as yes ,cash is an asset class. then you paid the price . you got hurt the same as any other investor who picks the wrong asset class at the wrong time.
The only reason that low interest rates increase the 'value' of equities is because people pull billions of dollars from their investments in certificates of deposit making a guaranteed pittance, and purchase speculative equities that 'could' be more profitable. This shift pours money into the stock market, pushing up the paper value of the stocks but not increasing the base value of the companies represented by those stocks. Where does the money go? To profit takers like Warren Buffet & gigantic mutual fund managers.
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Old 01-18-2015, 10:10 AM
 
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I would disagree at this point . stock valuations are fine based on earnings. they are not cheap but right in line and after all that is why we own shares in a business.

if interest rates are taken into consideration the values are even better .
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