Market Conditions: Are Higher Mortgage Rates the Elephant in the Room?
Welcome back from the holiday break Crib Chatterers.
Last week 30-year mortgage rates rose to a national average of 4.46% from 3.93% the week before, the largest one week increase since 1987.
It pushed mortgage rates to their highest level in 2 years.
Rates may go even higher this week as, while you were all still enjoying your barbecues on Friday, July 5, the bond market sold off resulting in yet another day of spiking mortgage rates.
Some in the mortgage industry were saying it was the worst day for mortgage rates in history. Perhaps our own resident mortgage rate expert, Russ, can chime in to tell us what he’s seeing on the ground.
Rates spiked as high as 4.875% on Friday with rates remaining as high as 4.75%.
Rates have been rising for the past 2 months.
So far, rising rates haven’t put a damper on the hot housing market but most of the May and June sales were conducted at lower rates that were locked in previously. Going forward, that is unlikely to be the case.
Will this mean a slowing housing market come August and September in Chicago?
Or will all cash sales be able to put a floor under the market?
Just posted my June update. Aside from the fact that June was up 16.6% you will see that contract activity is still pretty strong and there are plenty of pending sales. So the next couple of months are locked. We’re also comparing against substantially higher levels of last year by now: http://www.chicagonow.com/getting-real/2013/07/june-chicago-home-sales-2-years-of-continuous-improvement/
Part of what happens at this stage of mortgage rate increases is that potential buyers start to regret not making a move sooner and start to fear that if they don’t buy now it’s just going to get worse. This time it might actually be true – but not because of rising prices but because of rising rates. We all knew the party had to end sometime.
I’m curious the number of deals that were “rate locked” about a month ago, that will now be busted (illegally mind you)…
If I were a buyer, I would be kicking myself for not buying sooner like Gary points out. The new rates wouldn’t price me out of the market, but on a grand scale, the rate has the potential to impact sale prices.
Now, if only I could get even a 3% rate for a CD, I would be happy….
While rates are up quite a bit over the last few months, you have to keep it in perspective. Today’s rates are still VERY low on a historical basis. I don’t think you will see much impact until rates get around 6%.
this is a
this is a temporary spike in a decades long downward trend. like some random better job market report last week is going to upset a decades long downward trend.
I agree, we will be at low rates for a long time, this is just a spike to the top of a long term downward trend channel, buying opportunity if you’re looking for yield
HD, there are some excellent chartists who are interpreting the 30 year bond bull as over at the end of last year. Note that rates this spring never hit the lows they hit at the end of last year.
If Tony Caldaro (EW guy with a great record the past few years) is right, we are now in the first decent wave “3” up in rates/down in bond prices from the extremes hit at the end of last year.
Kevin Depew (Bloomberg briefs editor, TD guy” seems similarly bearish on the bond outlook going forward.
And Chris Kimble shows long bond rates in an inverse head and shoulder up from the extremes hit last year. Not sure if he has a longer term outlook.
Sorry for throwing technician cites on here, as I realize this isn’t a normal topic here. But its possible that the 30 year bond bull died at the end of 2012. Interesting that long bond rates bottomed in the early 50s or late 40s last time, and that bond bear lasted until Volcker in the early 80s. Its possible we may see yields rising for decades from here.
“this is a temporary spike in a decades long downward trend. like some random better job market report last week is going to upset a decades long downward trend.”
carrying Bob’s torch??… I think you should stick to your core competencies like chasing ambulances and dressing up in that bear costume and handing out copies of Spring Breakers on VHS and telling all the ‘lil kids that the only ‘magic’ VHS player left in town is in your basement..
“Today’s rates are still VERY low on a historical basis.”
Was anyone able to buy a home for 5% down when the interest rates were 14%?
oh gz, the heat and humidity and dope is messing with your brain.
“oh gz, the heat and humidity and dope is messing with your brain.”
Lil heat and no humidity this time of year… 🙂
Now time to take my dog for a walk and get her opinion on the commodities market….
“Was anyone able to buy a home for 5% down when the interest rates were 14%?”
No, but that makes the argument that rates won’t affect demand at this level even stronger.
Rates at 14% with 5% down = greater demand than rates at 14% with 20% down. In today’s environment, you have both low down payment requirements and low rates. One can argue that it creates “artificial” demand, but it is demand nonetheless.
“No, but that makes the argument that rates won’t affect demand at this level even stronger.”
there is something to that and the panic that rates will rise and opportunities will be missed. I have a friend who decided to purchase a condo near my old place. I failed to do two things:
1) talk her out of it
2) convince to buy my unit instead. 🙂
in all fairness, she’s paying a more appropriate market value for a similiar if not perhaps better unit than mine.
“Rates at 14% with 5% down = greater demand than rates at 14% with 20% down. In today’s environment, you have both low down payment requirements and low rates. One can argue that it creates “artificial” demand, but it is demand nonetheless.”
I would think it wise, that at 14%, the requirements for down payment would have to increase as well.
(note:my dog shaking her head in agreement…)
(note2: Ze misunderstood dog.. dog was simply excited asking for carrot..Ze needs to be careful as this same mistake once lead Ze to go long, exceeding exchange position limits, in Cotton)
rates have moved up faster then anyone expected. if they can just stabilize and move up slowly over time things will be fine. but if keep going up like this will slow things down a lot. overall rates are still extremely low
I for one am not concerned. I’ve read today that Larry Summers is finally on the short-list for the position that he has so selflessly work towards his entire career: Fed Chairman.
This, to me, signals that the future will be much brighter than even the nighttime glow given off by 10,000 NSA servers in the Utah desert.
After all, guys like Tim Geithner (and Ben Bernanke soon God willing) don’t make millions on the corporate speaking tour because they do a disservice to mankind. No, after toiling for years, being grossly underpaid in the public sector, they are rewarded for passing the baton of prosperity to yet another humble servant. You should be thankful that such benevolence exists, not worrying your small minds about elephants in any room!
You see, dear feeble-minded forum posters, this economy is strengthening. And if you can’t see it by all the new part-time workers at Target, record tweeting, or the new bike share stalls on Michigan Avenue well, then, by God you’re not looking. You certainly won’t be asking questions at press conferences any time soon.
We are on the verge of the greatest economic renaissance known to man. Rates are rising out of sheer excitement!
Excitement that the Fed will be exiting. Like a victorious booster rocket that falls away from the space shuttle, we’re headed into orbit and we don’t need that thrust anymore. Smooth, friction free sailing from here on out. Just be sure to thank Mr. Bernanke if you ever see him driving by in his armored limo. You see, we almost had a problem back in 2008, but he fixed that for us.
Bow down if you really want to show the respect the man has earned.
As for the future. Well, you can’t spell unfunded liabilities without fun!
So sit back and smile. This time, it is different.
My friend lives down the street from this place. He told me about it last week.
http://www.redfin.com/IL/Chicago/1650-W-Winona-St-60640/home/13403492
When I bought in ’98, I was happy to get an interest rate below 7.5%. When I bought in 2003, I was thrilled to get an interest rate below 5.5%. At neither time did I think that interest rates were “too high” for me to purchase a home.
BTW, I was ecstatic to refi (for the 2nd time) at 3.4% about a year ago…
“After all, guys like Tim Geithner (and Ben Bernanke soon God willing) don’t make millions on the corporate speaking tour because they do a disservice to mankind.”
Old Hick are you sure about that……. 400k for three speaking engagements…… http://www.nydailynews.com/news/politics/treasury-secretary-tim-geithner-jump-lucrative-public-speaking-circuit-article-1.1392826
old_hickory should win a prize for the best comment on the thread, or out of many, many threads.
Spikes in rates will affect the market in irrational ways because potential buyers are emotional.
If you think rates increasing won’t affect the market prices much, you must be assuming one of 2 things –
1. that buyers qualify for much more house than they were going to buy, and when rates go up they can still qualify to buy that property with the higher monthly payment, or
2. potential buyers are willing to switch down to a slightly less expensive property so that the increase in rates is muted somewhat and their overall monthly payment is similar
“Spikes in rates will affect the market in irrational ways because potential buyers are emotional.”
Too true. But the mortgage brokers I’ve talked to have said that spiking rates do nothing to increase the actual numbers of buyers. They’ve told me that there aren’t all these buyers on the sidelines who suddenly wake up, listen to the news about spiking rates, and immediately call a realtor.
People who are in the market to buy, are already in the market to buy. It was a decision they already made. Spiking rates may make them buy faster- but they are still buying, nevertheless. Spiking rates doesn’t create a class of new buyers.
Additionally, all the homebuilders have been on tv recently saying that home sales won’t slow with spiking rates, but that buyers will simply trade down. So a buyer who was looking at $500,000 homes, now looks at $420,000 homes. It’s a big difference in price though. It could mean having to look in a whole new neighborhood or town or the difference between getting 3 bedrooms and 2 baths versus 2 bedrooms and 1 bath.
I was actually thinking that depending upon how properties are distributed along the price spectrum you could pretty much see an offset from people moving down INTO a price range and people moving down OUT of a price range.
Interest rates spiraling up to the upper 4’s in a matter of weeks resulted in crazy pricing differences. I got a jumbo quote that was 0.25% lower than a conforming mortgage at the 417,000 limit with the same large bank on the same day (Chase). Both with over 20% down. Sounds counterintuitive as the banks have to hold on to the jumbo loans, I thought?
“Too true. But the mortgage brokers I’ve talked to have said that spiking rates do nothing to increase the actual numbers of buyers. They’ve told me that there aren’t all these buyers on the sidelines who suddenly wake up, listen to the news about spiking rates, and immediately call a realtor.”
totally, anecdotal, but a few of our friends and a neighbor told me they want to buy before the rates get any higher so I think some buyers are emotional. I would be surprised otherwise, I think emotions govern even trading at professional level, why should ordinary folks buying homes be any more rational?
” I think emotions govern even trading at professional level, why should ordinary folks buying homes be any more rational?”
Markets and people tend to do what they want regardless of 95% of the information available. Wife wants a house she can rationalize rates going up as a reason to close immediately.
“If you think rates increasing won’t affect the market prices much, you must be assuming one of 2 things”
Theoretically, it should be a self regulating feedback loop. If rates are sustainable at this level, activity will not decrease, if rates are too high then activity will decrease and thus force rates lower. Anyone (apparently the majority) who think the Fed can hold rates where they want, without the market being in agreement, has no idea what they are saying.
Higher rates can have a a negative effect on demand, but what people fail to understand is that those higher rates can effect supply as well. If the home you own has a 3 % mortgage and let’s say current rates are at 6% and appreciation is zero, and wage inflation is zero. Do you stay in your current home or do you trade down while having to spend the same or more per month?
“totally, anecdotal, but a few of our friends and a neighbor told me they want to buy before the rates get any higher so I think some buyers are emotional.”
miumiu- your neighbors and friends are probably already looking. It’s just not the norm that someone who isn’t thinking about moving suddenly wakes up and says “rates have gone from 3.5% to 5% in the last 2 months. Let’s go start looking.” They have already been scouring Redfin every day and have gone to open houses etc. Maybe they haven’t actually gotten a realtor yet but they’re already looking.
It’s a myth that there are all these people on the sidelines waiting. Waiting for what? Rates were at record lows. If you weren’t buying then when you wanted to move, you’re dumb.
“It’s a myth that there are all these people on the sidelines waiting. Waiting for what? Rates were at record lows.”
Many were waiting thinking that prices would continue to decline……….. never taking into consideration the effects of increased rates on the cost of ownership.
I’ll have to ask my friends that are currently looking for a place if there are still hundreds of people at all the open houses they go to like a few months ago.
My guess is going to be ‘yes’
“It was a decision they already made. Spiking rates may make them buy faster- but they are still buying, nevertheless. Spiking rates doesn’t create a class of new buyers.”
Nonsense.
“It’s a myth that there are all these people on the sidelines waiting. Waiting for what? Rates were at record lows. If you weren’t buying then when you wanted to move, you’re dumb.”
So rates are the only thing that drives buying? What about prices? Don’t you remember all of your nonsense posts a year ago about how long it would be before prices moved up? And here we are just a year later with some prices up 30%+.
“It’s a myth that there are all these people on the sidelines waiting. Waiting for what?”
Waiting for inventory. Lots of frustrated buyers right now.
I have 3 friends who all have given up their seach right now due to the spike in rates. They are hoping for a correction and slightly lower rates, but the spike in rates pushed them into less expensive places they would prefer not to buy (went from 2 bedroom/2 bath places down to 1 bedroom and den places, or to undesireable neighborhoods). Rates have negatively affected the market even if just temporarily. All those who think otherwise are just cheerleading for their own livelihood.
http://www.reuters.com/article/2013/05/30/usa-housing-idUSL2N0EB0U320130530
click your heels three times and say
there’s no inventory
there’s no inventory
there’s no inventory
i’d be a believer in the housing market if you could actually call it a market.
instead, it’s just another manipulation. over the last few years all government has done is incentive the hell out of demand while simultaneously creating a restriction of supply.
one really must turn off their brain these days to be an optimist.
Lower inventories are here to stay. I can’t tell you how many people I know alone that have refinanced their current properties and plan to never sell. They have all moved on and purchased new homes but the homes they owned will be rental properties for the next 20 years. I am not alone as this is a common theme from everyone I talk to. Inventory levels will be reduced and will change our market structure for years to come. How will this effect pricing going forward? I can only imagine reduced supply will continue to support higher prices.
I just did a search of West Loop 2 bed condos priced from $300k – $450k. There are 5 currently listed… yes just 5. There are 25 pending and 81 closed over the past 6 months. Where did the sellers go?
“The April shadow inventory was under 2 million homes, representing a supply of 5.3 months. At its peak in 2010 the shadow inventory contained 3 million homes.”
http://www.mortgagenewsdaily.com/07092013_foreclosures.asp
All markets are artificial these days. All that matters is supply and demand.
“I just did a search of West Loop 2 bed condos priced from $300k – $450k. There are 5 currently listed… yes just 5. There are 25 pending and 81 closed over the past 6 months. Where did the sellers go?”
Anecdotal information at best, 3 weeks ago we received an unsolicited offer on the 2 foreclosures we purchased 2.5 years ago.
Like most things in life, reduced inventory is the result of complex and multifaceted issues, including:
– millions of loan modifications;
– investors buying foreclosures for rentals;
– underwater homeowners who can’t afford to sell;
– reduction in the number of new foreclosures and DQ’s
– reduction of the number of mortgages made since 2007/2008 that would ordinarily default;
– shadow inventory.
However, this temporary reduction in inventory may last longer than more buyers can afford to wait. Many of the 40 year loan mods will eventually redefault; and the underwater homeowners will eventually short sale; and the investors who bought in bulk will realize that it’s a lot easier to flip a house for money than it is to be a landlord; and the boomers will need to sell as they downsize and move into attached housing.
Markets rarely go sideways, and sure there’s been some upwards movement, but don’t expect it to last forever.
Keep in mind that the banks have been offering unsolicited loan modifications in mass in the last two years, often without even filling out the HAMP or financial forms. IN fact, in cook county, loan companies are required to complete ‘loss mitigation affidavits’ certifying under oath they’ve taken steps to offer loan mods or short sales.
I know of at least three people (not clients but just people I know) that defaulted, went into foreclosure, and were offered some ridiculous loan mod that either wiped away principal or reduced the interest rate to something like 2.0%. These would otherwise be on the market right now but for these loan mods. They’ll all eventually default or short sale again in the future, some sooner than others, but it’s real, and it’s there.
The GZ is a slightly different market, more transit in some respect, in that a good majority ends up moving to the suburbs, and there’s always a new crop of young professional whom will buy a $400k 2/2 condo. Prices have remained stable there but they’re still down in most cases. all there needs to be is a few more listings to upset the ‘low inventory’ mantra to put a damper on prices.
“and the investors who bought in bulk will realize that it’s a lot easier to flip a house for money than it is to be a landlord”
While I certainly didn’t buy in bulk, I did buy 2 properties in 2012. A 1br that I am using, and a 2br that I am renting. I have a very good monthly return on the rental, but considering the fact that I could sell for a 50k profit now, I am tempted to flip it. It will take me a lot of months rentals to make 50k.
Underwater homeowners are definitely stagnating the market. It means less inventory, less upward pressure on pricing due to more demand (compounding the low inventory problem) and throw even the idea of higher rates into the mix and people are gonna stay put. Who is selling right now who doesn’t absolutely need to?
chuk: I was thinking more of blackstone et al but the onesies and twosies are included too.
“chuk: I was thinking more of blackstone et al but the onesies and twosies are included too.”
Blackstone is buying with all cash. To flip- they have to sell it to somebody at now higher mortgage rates. Who’s that going to be? Sales aren’t booming. They are much better than two years ago but it’s not exactly a race to buy right now.
Seems to me they are just replacing the banks now with the shadow inventory. They’re going to have to flip it very slowly over the course of years in order not to flood the market.
It’s a disaster in the making. The only good thing for the Chicago area is that Blackstone and some of the others haven’t been as active here (at least not yet.)
“They have all moved on and purchased new homes but the homes they owned will be rental properties for the next 20 years.”
Really? Yuck. Can you imagine have some old (and in need of repairs) property in like Lincoln Park or Lakeview that you have to rent out for the next 20 years? Ugh.
Stopped up toilets, new roofs, new windows, tuckpointing, 20-somethings trying to burn the place down, burglaries, meth labs in the basement, marijuana growing in the bathroom, cleaning of the woodburning fireplace every year, snowshoveling, buying new laundry machines, stoves, refrigerators every few years, endlessly listing it on Craiglist for rent, evicting deadbeat tenants, replacing counter tops when they’re ruined with wine and other things, having to paint every time someone moves out, having to have the floors refinished or the carpet replaced every few years.
Ugh.
Who would want to ever live like that? To be responsible for that? For what? A 5% return? No thanks.
For the renters, on the other hand, it’s a good deal. They don’t have to do ANY of that and they are free to take jobs anywhere in the world. The next generation that is going to college right now that will graduate in a few years will have few worldly restrictions. They will take jobs anywhere they want. They won’t want to be tied down to a piece of property in some random city.
Maybe it will all work out for the best for everyone.
” They’re going to have to flip it very slowly over the course of years in order not to flood the market.”
Nope.. make it so big that it turns into a spreadsheet and then build metrics with it, and then, management around it, and spin it out… which for them, doesn’t even have to be done externally.
Lawyers happy, Investors happy, Bankers happy… Then ONE DAY…. Sell it to someone else.. once again… Lawyers happy, Investors happy, Bankers happy!!!
Not too hard to figure out what to tell the kids to be,,,
“Not too hard to figure out what to tell the kids to be,,,”
Bankers?
Because there are no jobs for lawyers anymore. Layoffs all over the place (big firms, small firms, government, corporate lawyers.) You make less money than a “project manager” with a BA at a mid-sized corporation these days.
Blackstone doesn’t have the management capabilities to build the management around managing them. That’s the thing. It’s really, really hard to manage single family homes on that scale. They are already running into problems in Florida. Some of the smaller players aren’t even renting out the houses they have bought- letting them sit there with the weeds growing. That is how unorganized they are.
They’re also buying at much higher prices than they did 2 years ago. Before, Blackstone was getting houses under $150k in Florida. Recently they couldn’t get anything under $250k. So they’re buying around $300k now just to buy (sometimes over appraised value.) It’s insanity.
How’s it going to work out for them? Not good. They’ll make money off the initial investments because they got in so early- but these later investors? Complete fools. Some of the big equity funds have stopped buying altogether saying just that. There are no deals now.
Oh- and Blackstone had to borrow billions just to do what it’s doing. In order to spin it off someone else will have to have the credit in order to buy it off of them for billions. What players have that right now who aren’t already in the game?
It’s more than just Blackstone in this game. Plenty of other private equity groups buying up thousands of homes. And now they’re saying the banks are buying foreclosures to hold onto too (after all – why sell to Blackstone at this point?)
It’s all going to end really badly.
Lol.. it might… usually does. They have every incentive to continue buying. Comp is set at book value this year- book value last year.. So if I’m holding the book and looking at a market made of small individuals and relatively few transactions, each of which set new level of value for the entire market.. I have funds.. i keep buying… makes the p+l on all the inventory held look nice – nice..
Oh Sabrina… is it always a dark and rainy day at your house? You are so negative on everything.
So sorry your attorney friends are getting pick slips. Maybe they should have seen it coming as there were more law school students than lawyers over the past 10 years. Simple supply and demand applies here…
And I am sure you are right Sabrina, land owners have always ended up with less wealth than non-land owners. Keep following that formula and I am sure you will be financially independent in no time.
“And I am sure you are right Sabrina, land owners have always ended up with less wealth than non-land owners. Keep following that formula and I am sure you will be financially independent in no time.”
This is one of the biggest lies that has been perpetuated on the American people. That if you buy a house somehow you are accumulating wealth. Buying stocks, or over the last 30 years, bonds, has been how you accumulate wealth. A house is simply a forced savings plan. And yes, many Americans DO need that because they are incapable of saving on their own. I am not one of them.
The economy has changed. You are too old to understand it Steve. Being tied down to a piece of property (especially in your 20s and 30s) is a disadvantage- not an advantage. All you have to do is look at the sales history on 1 and 2-bedroom condos and lofts around the city to understand that the odds of someone living there for 10 or 20 years is slim. It’s 3 years. It makes no sense to buy.
Now if you’re going to buy a Lincoln Park house to live in for the next 20 years because you’re 40 and you’ve hit your peak earnings in a job where you won’t be transferred or have other opportunities in LA, DC, NY, Sydney, Shanghai etc. – then that’s different.
Cost reductions at the bottom generally lead to increased income at the top. Which explains why certain neighborhoods are doing extraordinarily well these days
http://www.americanlawyer.com/PubArticleALD.jsp?id=1202609915657&June_Swoon_Legal_Sector_Shed_3600_Jobs_Last_Month
Thanks HD, maybe Sabrina will take note.
Sabrina, I am not talking about a 1 – 2 bedroom being a good short term investment for a homeowner. But this is the same reason it can be such a great investment for the long-term holder. The transient renters will pay a premium for the convenience of moving on from year to year. If you are careful and buy a property with low maintenance and utility, the yields are so much better than what you can get long term in the stock or bond market. If you buy a townhome in a better neighborhood and better school district, the returns are even greater; plus some of us purched distressed properties far under market today’s value (not included in the yields). You stick to your 2% bond yields and I will stick to my 10% cash flow returns (partially tax free), and we will see who does better…
Same old, same old. Don’t buy if you have any possibility of needing/wanting to move in less than 7 years. If you plan on staying put for more than 7, pay down your own mortgage, not your landlord’s. Not to mention, paying a mortgage on time is good for your credit rating, something I’d wager most twentysomethings don’t have a clue about.
While it is true one never knows what may happen in their workplace re: layoffs, downsizing, at least in Chicago there’s a diverse economy and job base.
WASHINGTON (Reuters) – New U.S. home sales vaulted to a five-year high in June, showing no signs of slowing in the face of higher mortgage rates.
Single-family home sales increased 8.3 percent to a seasonally adjusted annual rate of 497,000 units, the highest level since May 2008, the Commerce Department said. Sales rose 1.3 percent in May.
Compared with June last year, single-family home sales were up 38.1 percent, the largest increase since January 1992.
Wow, timing the top and the bottom was so easy, all you had to do was read cribchatter. I did, and guess what, I avoided buying at the top, and buying last year, I purchased at the bottom. Thanks everybody!
“I avoided buying at the top, and buying last year, I purchased at the bottom. Thanks everybody!”
I disappeared just after you bought and never did ask if all those times you made me nuts explaining some of my more esoteric philosophies on purchasing, you were just doing it to be difficult… I think you kept being clucky lucky after you had already purchased.. of course clucky-lucky HD was still wayyyy better than the HD to Clio incarnation. That actually gave us all the creeps..
I am not so certain “the bottom” will mean that much because appreciation isnt going to be double digits as mortgage rates rising will temper a lot of the “gains” that sellers have realized at the end of the Spring. If you bought last year or this year and got locked in at 3.75% or below and plan on staying a while, you got a good deal in terms of overall monthly payment. Watch out for rising RE taxes and state income taxes though, as Illinois can’t declare bankruptcy to pay for teacher and state worker pensions.
“I avoided buying at the top, and buying last year, I purchased at the bottom. Thanks everybody!”
except last year (2012) you were singing that you had quietly purchased the year before?
“New U.S. home sales vaulted to a five-year high in June, showing no signs of slowing in the face of higher mortgage rates.”
They would have already locked in the rates. The higher mortgage rates won’t affect closings until August. It was on July 5th that they jumped to between 4.5% and 4.75%.
New home sales are also a completely different animal. You go “under contract” with a builder but many times the house isn’t even completed for 6 to 9 months. You’re not even locked in on a mortgage which is why the homebuilders see a lot of dropped contracts when rates rise because suddenly those eager buyers realize 4 months later they can no longer afford it.
I think the higher rates will affect homebuying decisions in some areas. If you’re in California and looking at that $500,000 house and you were stretching to begin with, then, yeah, another 0.75% could push you out of the game. Incomes aren’t rising. They simply won’t be able to afford it.
If you can’t afford the house at 4.5%, but could afford it at 3.75%, I got news for ya… you couldn’t afford the house in the first place so its good you aren’t buying it as it sounds like a forclosure waiting to happen.
“If you can’t afford the house at 4.5%, but could afford it at 3.75%, I got news for ya… you couldn’t afford the house in the first place ”
Payment difference, at $417k mortgage, is ~$2200 per year. If that’s the difference bt “afford” and “foreclosure”, it was, as sonies sez, a bad idea anyway.
Yeah thats a big mortgage too, and its only slightly under 200 bucks or less than 10% of your overall mortgage cost, not even including maintenance, taxes, blah blah blah
Pulte and DR Horton reported earnings today. Both got asked about rising mortgage rates and sales on their conference calls. Pulte said the higher rates are having little impact (in July sales.) DR Horton said the exact opposite- that it WAS impacting. More cancellations and lighter traffic in June.
http://www.bloomberg.com/news/2013-07-25/homebuilders-fall-as-pulte-horton-orders-miss-estimates.html
But over the longer term, housing was still recovering so everything was going to be fine.
It’s still too early to really know how it’s impacting though. August numbers should reflect the higher rates though.