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One reason there is a shortage of homes on market is that those who purchased years ago when mortgage rates were 3% or less literally cannot afford to sell in today's market.
Mortgage rates have inched up to 7% or above and aren't likely to drop back down to historical lows anytime soon. Thus those who now own homes and are holding low interest mortgages have little incentive to sell. If they do finding another mortgage with same low rates isn't really possible. Thus they will be paying more each month in housing costs unless can find something so inexpensive things become a wash.
What you're also seeing is people renting their homes or condos out instead of outright selling. In many areas of country high demand for rentals means they can easily bring in each month more than enough to cover mortgage and other costs plus still earn a tidy profit.
I'm locked into a 2.75% rate. No way in hell am I selling today, even though I can afford to buy the same place at the higher rate. Put differently, why pay more for housing when I don't have to? It helps that I don't have to move anytime soon (not until the end of 2026 when I am next up for military orders). But, as you mentioned BugsyPal, you have many people who cannot afford to (or otherwise don't want to) sell as they cannot afford to buy something comparable at these higher rates. Due to this phenomenon, I say don't expect housing prices to go down as quickly or persistently as some envisioned.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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On the other hand, many of us that bought in the 80s at 10% and refinanced at 3-4% while remaining can now downsize to a lower cost area and not worry about the interest rate by paying cash. Several of the original owners in our neighborhood have done this. They bought new in the late 1980s for about $150k, sold for $800-$900k and bought elsewhere fin the last 2-3 years for $300-$400k, with leftover cash. We intend to do the same, but we are at about $1.3 million now, though that's dropped from $1.6 about 6 months ago. Fortunately the prices in places we are considering were in the $500 range, now $400k.
We still have brand new homes here selling for $2 million and up, but these buyers have huge down payments and are just planning to refinance when the rates drop again.
Yes and No...if economy sucks and rates fall back to say 4% range I think you will see some uptick in transactions. For sure right now I agree the rate disparity is too big, but fast forward 2 years from now and the world might be very different.
I began my real estate career when interest rates were as high as 16% and creative financing was something you knew how to do. When rates ratcheted down to 9% we thought we died and went to heaven Compared to those artificially low interest rates of the pandemic time, yes 7% is high, but not where I sit now.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by prospectheightsresident
I'm locked into a 2.75% rate. No way in hell am I selling today, even though I can afford to buy the same place at the higher rate. Put differently, why pay more for housing when I don't have to? It helps that I don't have to move anytime soon (not until the end of 2026 when I am next up for military orders). But, as you mentioned BugsyPal, you have many people who cannot afford to (or otherwise don't want to) sell as they cannot afford to buy something comparable at these higher rates. Due to this phenomenon, I say don't expect housing prices to go down as quickly or persistently as some envisioned.
I’m in the same situation. I’m not giving up 2.75
I’m still laughing at all the naysayers that are waiting for houses to crash to 2008 levels.
Total non thinking morons.
I began my real estate career when interest rates were as high as 16% and creative financing was something you knew how to do. When rates ratcheted down to 9% we thought we died and went to heaven Compared to those artificially low interest rates of the pandemic time, yes 7% is high, but not where I sit now.
Everyone talks about interest rates from the 80's but never the prices and/or income needed to afford a home. Those are more out of whack now than they have ever been.
At this point, I'd probably benefit if interest rates went to 12%+ and housing prices did truly crash. I could probably put in competitive offers with a lot of cash. But for now... I'll just camp on my 2.5% rate even though I'd like a newer, larger home.
I began my real estate career when interest rates were as high as 16% and creative financing was something you knew how to do. When rates ratcheted down to 9% we thought we died and went to heaven Compared to those artificially low interest rates of the pandemic time, yes 7% is high, but not where I sit now.
Spot on!
These cry babies moaning about sub ten percent interest rates don't have a clue.
Thirty year average mortgage rates peaked at 16.63% in 1981, dropped to 16.04% in 1982, then slowly started coming down.
Key word there is "average", there were people paying over 18% in early part of 1980's.
Ironically 2021 even with covid panic was when average 30 year mortgage rates hit rock dirt bottom (hair over 2%). There's no place to go from there but up.
Well, if you're going to expand the money supply to "pay for" spending money you don't have, near-zero interest rates will tend to push the inevitable resulting inflation into housing and equity, where it doesn't show up in CPI. Thus the real estate and stock bubbles.
Unfortunately once CPI price increases start showing up, you gotta increase the federal funds rate, and then banks and lenders have to raise consumer/mortgage interest rates.
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