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The older 80 year old couple that looks like 60 would definitely agree... they are not exactly flippers in that they buy one home at a time, move in and lived there for a year or two.
She has her Doctorate in education and has been a public school principal and her husband had a business and retired about 25 years ago...
People don't buy a home, they buy a mortgage payment. Payments will rise until people can't make them. Let mortgage rates go back to a more normal 7% and house prices will fall until the mortgage payments are affordable.
The sweet spot for buying a home happened in 2010 and 2011. That ship sailed long ago.
Bingo! People can only buy as much house/land as they can afford mortgage payment. As soon as mortgage rates rise significantly, housing prices will fall.
Bingo! People can only buy as much house/land as they can afford mortgage payment. As soon as mortgage rates rise significantly, housing prices will fall.
The way things are going, I don't expect "normal" interest rates until the 2020s. We've been at near-zero for so long that it's starting to become normal.
The older 80 year old couple that looks like 60 would definitely agree... they are not exactly flippers in that they buy one home at a time, move in and lived there for a year or two.
She has her Doctorate in education and has been a public school principal and her husband had a business and retired about 25 years ago...
He told me the first million is the hardest...
In their 80's..live in a house, sell pack up all of their things, buy a new one unpack...rinse and repeat every one to two years? Who does this? Sounds like a huge pain in the arse!
Bingo! People can only buy as much house/land as they can afford mortgage payment. As soon as mortgage rates rise significantly, housing prices will fall.
Lol. You realize that the big downturn in house prices happened when 30 year fixed rates dropped from 6.5% down to 3.5%, right?
There's never been any connection between rate movements and prices long term. Sure, it could happen but it's not something predictable with any historical precedent.
Bingo! People can only buy as much house/land as they can afford mortgage payment. As soon as mortgage rates rise significantly, housing prices will fall.
Not supported by empirical data and the price floor will be set by cash buyers who don't give a rat's posterior about mortgage rates...
In their 80's..live in a house, sell pack up all of their things, buy a new one unpack...rinse and repeat every one to two years? Who does this? Sounds like a huge pain in the arse!
No one else that I know... the husband and wife could easily pass for 20 years younger... they have two Huskies and out every morning at daybreak walking them.
Slow Flipping is how they make their money and do quite well...
They say it keeps them young planning their next adventure and keeps things fresh for the books they write...
Surprisingly, they don't have a lot of stuff... everything fits into a container.
No flashy cars... a Chrysler Town and Country minivan and Camry.
There's never been any connection between rate movements and prices long term. Sure, it could happen but it's not something predictable with any historical precedent.
Actually, a historical precedent exists and that is home prices (over subsequent years) actually increased after an upward movement in interest rates.
When interest rates increase, more people put more cash down or buy all cash as it reduces or eliminates the amount of higher interest money needed to borrow to acquire a home. Homes less leveraged by debt are less likely to be force sold (or foreclosed on) when markets fluctuate. A higher interest rate environment is more likely to occur in an inflationary environment... which often further translates to increased cost of commodities and higher wages (e.g. home construction material and labor cost increases). Higher wages help to offset the increased cost of mortgages. Rising inflation can also cause an increase in home buying as real estate has proven to be a strong hedge against inflation.
The average person thinks there's an inverse relationship between interest rates and housing prices - when rates go up, housing prices must go down. However, history has proven otherwise. My take is that a sharp and abrupt increase in rates (which is less likely than a slow gradual increase) will likely cause some downward pressure in the short term. But in the longer term, an increase in rates should mean an improving economy, higher wages and (gasp) higher inflation. This will all put upward pressure on housing prices. If rates went sky high in the midst of a declining economy with lower/stagnant wages and deflation, then yes, home prices will likely plummet through the floor. But that is extremely unlikely.
I think a large % of cash buyers are only prevalent in a few markets though.
Had dinner last night with several of my Broker friends... they all commented on what a run the current market has been in the SF Bay Area... Cash Buyers or those with significant downs like 50%.
They also said mortgages are not a slam dunk... many seemingly qualified individuals run into problems or bumps in the road... and this is why cash is still king... especially in a competitive market.
One just closed on a nicely presented post WWII tract home... it was listed for $599 and went over 65k with 27 bids... it did not go all cash... the buyer did put down 300k
My understanding it's just not the SF Bay Area... my friends in Southern California, Portland and Seattle all comment on just how strong the market is.
Maybe it is just a West Coast thing?
Oakland California is particularly a hot market... top 5 in the country and just few years back there were entire neighborhoods that were less than desirable... these have more than doubled in price.
The Brokers said the last time Oakland had such a strong market was in 2007 and we all know how that ended.
The rental market is insane... I go through 50 applications in a two hour showing... a few years back was two or three in a week.
A lot of single family rental homes are becoming owner occupied... so much so the Mayor says the city needs to take quick and decisive action to preserve the City's Low Income Neighborhoods before they disappear.
Only 1 in 5 new Section 8 Housing Voucher Holders is able to secure housing in Oakland... so 4 of 5 are shutout...
As to buying strategy... buy with cash... get in and get settled and then get your 30 year 3.5% fixed rate loan... see it happen all the time... buying with cash is a strategy... it doesn't mean all that cash stays in the home long term.
This is my current reality...
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