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I live in a small city in northeast TN that has historically had very low property prices and reasonable property taxes. I bought a townhome for $96k in 2019 - PITI with HOA fees is around $700/month. My water/trash/sewer fees are $40-$50/month. There is no state income tax. My dollar stretches farther than you might think.
I've wanted to leave for years, and recently had an offer with ~$20k raise in SC. Looking around, anything to rent comparable to what I have now (2BR/2BA with garage) is at least double my current house payment, maybe pushing $800-$1000/more. State income taxes alone were an effective 6%. By the time I backed out the rent and the housing costs, the $20k was basically gone.
That's not even counting for the fact that I'm renting again, and back on that treadmill. I've never lived in that area before, so wouldn't want to buy immediately. With rising rates and record high prices, it seems like my dollar wouldn't go very far as it is, even buying. I'd be paying a lot more, probably not as much renting monthly, just to get something like what I have.
People are spoiled with super low rates. In 1979 we bought our first house with 12% interest. Shortly after it went up to 16% and no one bought homes. When we relocated for our careers we always had to compare the cost of living in all areas to see if it made sense. Nothing new about this situation except you can research online instead of having to go to the library and find information about various state’s COL.
Now as a relatively high income earner, the OP may find that "cost of living" is at least as much a matter of income taxes, as the daily cost of milk, bread and gasoline. Incrementally earning more money, means paying more federal income tax, and if the OP relocates, also state income tax. So even if the housing question were to be magically resolved, the question of income taxes still gives us pause.
The ideal scenario would be some WFH scheme, were those who comfortably reside in lower-tax and lower-COL areas, could find employment in higher COL areas. Even if the salary-income is taxed by the issuing state, investment income is not. So for example if the OP found a WFH software job out of San Francisco, California would tax his earnings, but would not be able to tax his investment income at Fidelity, because the latter is keyed off of his residential address.
OP~
Mr. Powell is looking at raising the cost of money, again. By the end of July, he's talking 3/4ths% to 1 full percent. This may push loans into a 7ish% arena. Know what comes after that? Yup, 8ish percent. Then 9%, then 10%.
So. the prices should deflate some, since those interest rates will KILL the RE game.
When pricing deflates a bunch, then I become a buyer again...
OP~
Mr. Powell is looking at raising the cost of money, again. By the end of July, he's talking 3/4ths% to 1 full percent. This may push loans into a 7ish% arena. Know what comes after that? Yup, 8ish percent. Then 9%, then 10%.
So. the prices should deflate some, since those interest rates will KILL the RE game.
When pricing deflates a bunch, then I become a buyer again...
Mortgage rates are not directly tied to the Federal Funds rate, which is a short-term rate. Just because that rate goes up 1%, that doesn't automatically mean that mortgage rates are going to rise 1%
Mortgage rates are not directly tied to the Federal Funds rate, which is a short-term rate. Just because that rate goes up 1%, that doesn't automatically mean that mortgage rates are going to rise 1%
Certainly hope you're right. I wish I had bought a second house years ago for my daughter when housing tanked. Thing is, we didn't know to the extent that her spine would continue to give her pain. She needs a one level home and frankly we would like one too now. They are more difficult to find in this area at a reasonable price. Everyone wants so much for a small one that my bigger house might not sell at the price I need in order to purchase two small ones. She is on disability and we pay her rent and utilities. They are increasing her rent in September to $230 more. It's getting difficult to keep paying and at least a house would be owned rather than increased rent yearly. I don't know how people can afford these rates unless they have good paying jobs. Even then.
People are spoiled with super low rates. In 1979 we bought our first house with 12% interest. Shortly after it went up to 16% and no one bought homes. When we relocated for our careers we always had to compare the cost of living in all areas to see if it made sense. Nothing new about this situation except you can research online instead of having to go to the library and find information about various state’s COL.
Maybe South Florida was different but new construction was the thing in the 1980's. I remember spending my weekends (if I had a few hours) to tour a new development and it took longer standing in line than it did to look at the homes. I was a single girl at the time.
When I closed, my rate was 17.125%.
I refinanced 2 years later at 13% and thought I hit the jackpot.
I agree with you that people love the lower rates. Who wouldn't? I do also. Plus I'm a mortgage broker and previously owned a firm tied to the lender industry so very involved.
I agree with you that people love the lower rates. Who wouldn't? I do also. Plus I'm a mortgage broker and previously owned a firm tied to the lender industry so very involved.
For buyers who are cash-strapped, mortgage rates matter enormously. Others, who are buying well below their means, and who can afford to pre-pay the mortgage aggressively, aren't so strapped. For those buyers, what's most important is to score a decent-purchase price and subsequently to enjoy strong capital appreciation. Both are fraught propositions in the present market.
how do you explain until late 1970s,you can get a nice big house for $35K WHEN rate was 10%-12%,with a 20% down?
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Oh yes, they did
