Mortgage rates skyrocketing !
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8yOwner occupant rate was 4.75% this past week, so yes those rates are in line. Skyrocketing isna bit of hyperbole with rates still on the very low end historically. In the mid 2000s when the owner occupant rated dipped to 6% most of us felt that was the lowest they would ever go in our lives.
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164 Replies
- Rental Property Investor · Coldwater, OH · Member since 2017 · 28 posts · 11 votes8y
@Russell Brazil - I supposed I was looking at this more from a multifamily POV than a residential POV. From a residential position, what you say makes perfect sense.
Does your viewpoint change if we are talking multi-families of 4+ units?
Thanks Again,
Josh
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes8y
Originally posted by @Josh Huber:
@Russell Brazil - I supposed I was looking at this more from a multifamily POV than a residential POV. From a residential position, what you say makes perfect sense.
Does your viewpoint change if we are talking multi-families of 4+ units?
Thanks Again,
Josh
Commercial property will be influenced by a lot more factors. Interest rates should effect commercial more, as well as what other investment vehicles are returning. But commercial will also be effected by what residential properties are performing at. I imagine @Joel Owens who is much more of an expert at commercial grade investments would have better insight on this part of the market than I would.
District Invest Group545 Reviews - Real Estate Agent · Westboro, MA · Member since 2016 · 1k+ posts · 471 votes8y
Yes... they are rising, and have been for months! But overall they are still "low"
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
@Russell Brazil I see your point that interest rates will affect what price point someone is approved for, but it still seems there should be some effect on housing prices. As more buyers are driven towards lower priced homes, wouldn't it put more price pressure at the lower price points and result in softening of values on the higher end?
Another effect of higher interest rates could be less people choosing to move. Let's assume a home owner has a 4% rate on their current home worth $300K. The higher rates effectively reduce their buying power, so in your example maybe they can now only afford to upgrade to a $350K house instead of $400K house. They may choose to just stay in their current home.
It seems more people may consider options like remodeling or additions. I grew up in the 80's and home additions were a very common thing back then as a way to add space. Home additions are uncommon where I live now, people just buy a bigger house. I am not sure if that relates to generational preferences or if it is related to housing costs then versus now.
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8y
@Joe Splitrock to go along with what @Russell Brazil has said I tend to agree with him mostly. Home prices aren’t affected until interest rates are at or above 10 percent from what I’ve read recently...and I don’t think anyone foresees that happening anytime soon
- 8yPeter TverdovBusiness MemberDeveloper · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
Originally posted by @Russell Brazil:
Originally posted by @Josh Huber:
@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
Numerous studies, including those by Nobel laureate Robert Shiller have shown that movements in interest rates have no impact on residential real estate. For most of the general public, this seems counter intuitive...but for loan officers and real estate agents it makes perfect sense. When a buyer goes into the market place, and they are preapproved for say a $400k house...they will buy a $400k house. If rates increase and now they can only afford a $350k house,....that original property they wanted at $400k, the price of that does not drop...but instead the buyer moves down to a cheaper property to coincide with their purchasing power. So as rates go up or down, the buyers simply move up or down in price range with the rates while the property values remain unaffected by rates.
I completely disagree with this. Rates have gone up 75 bps since January and the town I was looking to move to (putting it off 2 years) has sent me nothing but alerts of prices being slashed. Prices on million dollar homes all the way to homes in the 500s. Interest rates up equals housing prices down. It's supply and demand.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes8y
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Josh Huber:
@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
Numerous studies, including those by Nobel laureate Robert Shiller have shown that movements in interest rates have no impact on residential real estate. For most of the general public, this seems counter intuitive...but for loan officers and real estate agents it makes perfect sense. When a buyer goes into the market place, and they are preapproved for say a $400k house...they will buy a $400k house. If rates increase and now they can only afford a $350k house,....that original property they wanted at $400k, the price of that does not drop...but instead the buyer moves down to a cheaper property to coincide with their purchasing power. So as rates go up or down, the buyers simply move up or down in price range with the rates while the property values remain unaffected by rates.
I completely disagree with this. Rates have gone up 75 bps since January and the town I was looking to move to (putting it off 2 years) has sent me nothing but alerts of prices being slashed. Prices on million dollar homes all the way to homes in the 500s. Interest rates up equals housing prices down. It's supply and demand.
Post hoc ergo propter hoc
District Invest Group545 Reviews - Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes8y
Originally posted by @Joe Splitrock:
@Russell Brazil I see your point that interest rates will affect what price point someone is approved for, but it still seems there should be some effect on housing prices. As more buyers are driven towards lower priced homes, wouldn't it put more price pressure at the lower price points and result in softening of values on the higher end?
Another effect of higher interest rates could be less people choosing to move. Let's assume a home owner has a 4% rate on their current home worth $300K. The higher rates effectively reduce their buying power, so in your example maybe they can now only afford to upgrade to a $350K house instead of $400K house. They may choose to just stay in their current home.
It seems more people may consider options like remodeling or additions. I grew up in the 80's and home additions were a very common thing back then as a way to add space. Home additions are uncommon where I live now, people just buy a bigger house. I am not sure if that relates to generational preferences or if it is related to housing costs then versus now.
While I certainly agree with the logic, the historical data just shows us what we think is logical has not happened in the past at least. Instead the market adapted in different forms. With sky high rates in the 80's, while values did not come down.....the amount of assumable loans went up drastically.
Funny enough, many think our current lack of inventory is due to people deciding to stay put and remodel instead of trade up. That is an affect of rising prices though, not rising rates, due to how many bought 7-8 years ago at a much cheaper price point.
Now historical data can enlighten us, but it doesnt always become a predictor of future events. So what has held true since the late 1800s, could very well be different going forward.
District Invest Group545 Reviews - 8yPeter TverdovBusiness MemberDeveloper · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
Originally posted by @Russell Brazil:
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Josh Huber:
@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
Numerous studies, including those by Nobel laureate Robert Shiller have shown that movements in interest rates have no impact on residential real estate. For most of the general public, this seems counter intuitive...but for loan officers and real estate agents it makes perfect sense. When a buyer goes into the market place, and they are preapproved for say a $400k house...they will buy a $400k house. If rates increase and now they can only afford a $350k house,....that original property they wanted at $400k, the price of that does not drop...but instead the buyer moves down to a cheaper property to coincide with their purchasing power. So as rates go up or down, the buyers simply move up or down in price range with the rates while the property values remain unaffected by rates.
I completely disagree with this. Rates have gone up 75 bps since January and the town I was looking to move to (putting it off 2 years) has sent me nothing but alerts of prices being slashed. Prices on million dollar homes all the way to homes in the 500s. Interest rates up equals housing prices down. It's supply and demand.
Post hoc ergo propter hoc
I guess what I am seeing is magic then.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes8y
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Josh Huber:
@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
Numerous studies, including those by Nobel laureate Robert Shiller have shown that movements in interest rates have no impact on residential real estate. For most of the general public, this seems counter intuitive...but for loan officers and real estate agents it makes perfect sense. When a buyer goes into the market place, and they are preapproved for say a $400k house...they will buy a $400k house. If rates increase and now they can only afford a $350k house,....that original property they wanted at $400k, the price of that does not drop...but instead the buyer moves down to a cheaper property to coincide with their purchasing power. So as rates go up or down, the buyers simply move up or down in price range with the rates while the property values remain unaffected by rates.
I completely disagree with this. Rates have gone up 75 bps since January and the town I was looking to move to (putting it off 2 years) has sent me nothing but alerts of prices being slashed. Prices on million dollar homes all the way to homes in the 500s. Interest rates up equals housing prices down. It's supply and demand.
Post hoc ergo propter hoc
I guess what I am seeing is magic then.
By your same logic, then prices rising in my market (as well as rising prices across the nation) should be attributable to rising interest rates?
District Invest Group545 Reviews - Rental Property Investor · Houston, TX · Member since 2018 · 106 posts · 56 votes8y
For MFs above 5 units, there are numerous studies done that cap rates are not directly proportional to the fed rates. You would also have to look other point of view where Hong Kong, Japan and other Asian markets are having negative cash flow. Most foreign investors are buying up properties above 1m deals which push the price up higher.
Fed can only change the short term curve of the rate where 10Y treasury which correlated to mortgage is determined by market. As you can see, most EU and Japan has lower yield on their treasury notes which pushes US 10Y notes down as well.
Please let me know if you disagree with me.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Josh Huber:
@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
Numerous studies, including those by Nobel laureate Robert Shiller have shown that movements in interest rates have no impact on residential real estate. For most of the general public, this seems counter intuitive...but for loan officers and real estate agents it makes perfect sense. When a buyer goes into the market place, and they are preapproved for say a $400k house...they will buy a $400k house. If rates increase and now they can only afford a $350k house,....that original property they wanted at $400k, the price of that does not drop...but instead the buyer moves down to a cheaper property to coincide with their purchasing power. So as rates go up or down, the buyers simply move up or down in price range with the rates while the property values remain unaffected by rates.
I completely disagree with this. Rates have gone up 75 bps since January and the town I was looking to move to (putting it off 2 years) has sent me nothing but alerts of prices being slashed. Prices on million dollar homes all the way to homes in the 500s. Interest rates up equals housing prices down. It's supply and demand.
Post hoc ergo propter hoc
I guess what I am seeing is magic then.
His point is that assuming one thing happened, therefore caused something else, isn't always valid. Property values at all price points in my market are up 8% since the beginning of the year. Should I conclude the same thing, that the higher interest rates drove up prices in my market? That would imply the same factor causes opposite results in two different markets. It is possible, but more likely other factors are driving the prices up or down.
- 8yPeter TverdovBusiness MemberDeveloper · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
Originally posted by @Russell Brazil:
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Josh Huber:
@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
Numerous studies, including those by Nobel laureate Robert Shiller have shown that movements in interest rates have no impact on residential real estate. For most of the general public, this seems counter intuitive...but for loan officers and real estate agents it makes perfect sense. When a buyer goes into the market place, and they are preapproved for say a $400k house...they will buy a $400k house. If rates increase and now they can only afford a $350k house,....that original property they wanted at $400k, the price of that does not drop...but instead the buyer moves down to a cheaper property to coincide with their purchasing power. So as rates go up or down, the buyers simply move up or down in price range with the rates while the property values remain unaffected by rates.
I completely disagree with this. Rates have gone up 75 bps since January and the town I was looking to move to (putting it off 2 years) has sent me nothing but alerts of prices being slashed. Prices on million dollar homes all the way to homes in the 500s. Interest rates up equals housing prices down. It's supply and demand.
Post hoc ergo propter hoc
I guess what I am seeing is magic then.
By your same logic, then prices rising in my market (as well as rising prices across the nation) should be attributable to rising interest rates?
I don't know where your market is. I live in one of the hottest real estate markets in the country, an area that is nearly recession proof. When rents and real estate prices start tightening up on the coasts, it's a sign for the rest of the country. I have seen prices cool in multiple markets as well as landlords slash rents.
- Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes8y
Originally posted by @Russell Brazil:
When a buyer goes into the market place, and they are preapproved for say a $400k house...they will buy a $400k house. If rates increase and now they can only afford a $350k house,....that original property they wanted at $400k, the price of that does not drop...but instead the buyer moves down to a cheaper property to coincide with their purchasing power.If we go with this assumption - this would imply a bigger assumption that the demand for houses priced higher than $400k is the same as the demand for prices priced at $400k. Because someone who wanted a $460k house can now only afford $400k.....
- Real Estate Professional · Brentwood CA / Dallas, TX · Member since 2016 · 185 posts · 146 votes8y
This is an interesting discussion. I just went into contract on selling my primary residence today in the far East Bay Area and the market is still red hot (granted it's the Bay Area). We had 50 groups through an open house over the course of a weekend and accepted an offer slightly over asking price.
The main thing is the lack of inventory for us, at times there are single digits worth of homes in entire cities and tons of buyers still looking. I work for a lender (in marketing) and we have folks with huge lists of approved buyers and nothing to buy.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes8y
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Peter Tverdov:
Originally posted by @Russell Brazil:
Originally posted by @Josh Huber:
@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
Numerous studies, including those by Nobel laureate Robert Shiller have shown that movements in interest rates have no impact on residential real estate. For most of the general public, this seems counter intuitive...but for loan officers and real estate agents it makes perfect sense. When a buyer goes into the market place, and they are preapproved for say a $400k house...they will buy a $400k house. If rates increase and now they can only afford a $350k house,....that original property they wanted at $400k, the price of that does not drop...but instead the buyer moves down to a cheaper property to coincide with their purchasing power. So as rates go up or down, the buyers simply move up or down in price range with the rates while the property values remain unaffected by rates.
I completely disagree with this. Rates have gone up 75 bps since January and the town I was looking to move to (putting it off 2 years) has sent me nothing but alerts of prices being slashed. Prices on million dollar homes all the way to homes in the 500s. Interest rates up equals housing prices down. It's supply and demand.
Post hoc ergo propter hoc
I guess what I am seeing is magic then.
By your same logic, then prices rising in my market (as well as rising prices across the nation) should be attributable to rising interest rates?
I don't know where your market is. I live in one of the hottest real estate markets in the country, an area that is nearly recession proof. When rents and real estate prices start tightening up on the coasts, it's a sign for the rest of the country. I have seen prices cool in multiple markets as well as landlords slash rents.
You further prove the point here. Rising interest rates certainly have no correlation to falling rents, so in whatever anecdotal evidence you have on falling prices, likely is a market condition to the market you are looking at as opposed to an effect of rising interest rates, since you state there are other factors that are not correlated to your thesis. Because what we do see historically is higher interest rates will actually correlate with rising rents.
And if the market you are referring to is Northern Jersey....a much likelier cause of falling prices would be essentially the elimination of the deductibility of property taxes. Most economists have conjectured that Northern Jersey with it having the highest real estate tax rates in the country in some of these cities would be the most susceptible to change in prices due to the new tax structure.
And everyone in the country feels they lived in the hottest market in the country. NYC, DC, San Fran, Boston, Seattle...everyone. It is simply a matter of confirmation bias.
Im not even arguing that prices are falling where you see them....Im acknowledging that as a possibility...but prices are rising nationally, so as @Joe Splitrock said, it is very unlikely to have 1 thing cause two separate outcomes in 2 different areas. The likelier instance is X is causing falling prices in your market while Y is causing rising prices in another market, as opposed to Z causing a rise in one place and a fall in another place. Although if Z were to be something like a major corporation moving from one market to another...that very well could cause opposite outcomes in different markets.
District Invest Group545 Reviews - 8yJacob CaddickPro MemberInvestor · Casa Grande, AZ · Member since 2017 · 20 posts · 12 votesMaybe the higher rates will get rid of some of the owner occupant buyers and make more properties available. Interest could go up to 100% for all I care, if the numbers work, they work. If they don't, I don't need to buy, or I look at other options. The real interesting thing that might come is people with an ARM, and if we hit another foreclosure wave because people all of a sudden can't pay a higher rate.
- Investor · Sewell, NJ · Member since 2016 · 68 posts · 48 votes8yBack in 1981 they were 18 per cent. Could be much worse!
- Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes8y
They have gone up quite a bit, dipped about 2 weeks ago, but on the way up. They couldn't really go any lower.
- Rental Property Investor · Bennington, VT · Member since 2017 · 79 posts · 60 votes8y
local bank is 4.625% OO and 5.75% investment. I'm too young to remember the high rates of yesteryear, but my parents have told the story of being thrilled for the low 12.75% they got buying our house in 198?
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes8y
Didn't read all of this.
For commercial retail properties 2 million and under interest rates rising means very little. Big buyer pool of all cash purchasers so a 6 to 7 cap IS STILL a 6 to 7 cap depending on location and tenant credit.
Once you start moving into 4,5 million and up properties there are less buyers with all cash so sellers have to adjust more with the market as most buyers will use debt. Having said that there is about a 6 month time period of adjustment between sellers and buyers when a big shift with interest rates in the market.
The buyers notice right away and want to adjust offer price to maintain cash on cash yields with down payment and spread between debt and cap rates. The sellers on the other hand have a hard time accepting rising rates are a new normal and not just a temporary blip in the market where they will come back down again and the seller will not erode their equity proceeds expectations on the sales price.
There has been a shift the last 3 to 4 months with the changing and the sellers are coming more around with pricing expectations. Sellers wanting pricing of 1 year ago are hoping for an all cash buyer or a poor planning 1031 buyer with 1 week left and a short fuse to have to buy something or face a big tax penalty for a failed exchange. Sellers are left with deciding do they still want to sell, hold and keep existing loan, or place new long term debt on the property?
So you have a clearing out of the market from greedy sellers who just hoped to hit the jackpot and (swing for the fences) on pricing and those who truly need to sell.
- 8yKen NyczajPro MemberInvestor · Grasonville, MD · Member since 2017 · 453 posts · 415 votes
From a local portfolio lender I'm seeing loans to an LLC at 5.5% 10 year fixed at a 25 year term.
Or short term loans at 5.5% 12 month interest only, with a term of 25 years.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Joe Splitrock:
@Russell Brazil I see your point that interest rates will affect what price point someone is approved for, but it still seems there should be some effect on housing prices. As more buyers are driven towards lower priced homes, wouldn't it put more price pressure at the lower price points and result in softening of values on the higher end?
Another effect of higher interest rates could be less people choosing to move. Let's assume a home owner has a 4% rate on their current home worth $300K. The higher rates effectively reduce their buying power, so in your example maybe they can now only afford to upgrade to a $350K house instead of $400K house. They may choose to just stay in their current home.
It seems more people may consider options like remodeling or additions. I grew up in the 80's and home additions were a very common thing back then as a way to add space. Home additions are uncommon where I live now, people just buy a bigger house. I am not sure if that relates to generational preferences or if it is related to housing costs then versus now.
the issue is with the million dollar home buyer they are not as interest rate driven.. normally have a few hundred grand down.. etc.
I was thinking the new tax law would hurt the high end more than rates not allow interest write offs for a mortgage over I think its 750k when it used to be a million.. but my son in law just dropped a 1.5 million dollar loan on their person resi in Vegas and he did not even know about the write off or care.. and they got a stunning rate for a jumbo.. ....
on my 420 to 460k Portland community I am now building we did have 2 that backed out as their payment was a little higher than they wanted given todays rate and their lack of down stroke.. but someone replaced them.. as Russ said they were still buyers just bought from someone else or bought a used home with a little lower Price point.
Although I am not building more than one 2 million spec at a time LOL.. and that in the historic district in Charleston and I suspect that will sell for cash..
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Josh Huber:
@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
rental houses price for rents they can achieve and perceived risk.. HIGH risk lower price IE D neighborhoods .. low risk higher price.
INvestors set those prices not interest rates.. its what an investor will pay for a given cash flow.
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