Who remembers when rates were over 17% ?

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Who remembers when rates were over 17% ?

Grant ShipmanPro Member

Rental Property Investor · Estes Park, CO · Member since 2017 · 283 posts · 1k+ votes

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Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

Nominal housing prices have doubled in the past ten years. Inflation adjusted prices are 100% higher than in the 1970s. Government debt is off the charts. Interest rates matter...a lot. The mortgage rate chart in isolation is not relevant without the other side of the equation...price (and related debt level).

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Carlos Valencia
Lender · 92703 · Member since 2022 · 326 posts · 538 votes
3y
Not me as I was not even born yet haha. I love this graph. I just watched the original ghostbusters from the 80s and they actually reference mortgage rates being 20%. I can't even imagine paying that much but housing was also more affordable as well. If I could buy a home priced at $47,800 which was the avg home price in the 80s I'll take it haha.

@Albert Bui @Matthew Kwan
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
3y
I just laugh when people post and complain about todays rates. They ask “do you think rates are going to drop soon?”
NO we are as likely to se 30 years of rising rates.
PS yes I was alive and receiving those rates on my savings!

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Grant ShipmanPro Member
OP
Rental Property Investor · Estes Park, CO · Member since 2017 · 283 posts · 1k+ votes
3y
Quote from @Carlos Valencia:

Not me as I was not even born yet haha. I love this graph. I just watched the original ghostbusters from the 80s and they actually reference mortgage rates being 20%. I can't even imagine paying that much but housing was also more affordable as well. If I could buy a home priced at $47,800 which was the avg home price in the 80s I'll take it haha.

@Albert Bui @Matthew Kwan

so awesome! I watched the newest GB a few months ago and really enjoyed it :) I'm guessing that in 20-30 years we will look back at what the prices are in 2023 and which we would have bought more- I've got my realtor searching for properties now.
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Grant ShipmanPro Member
OP
Rental Property Investor · Estes Park, CO · Member since 2017 · 283 posts · 1k+ votes
3y
Quote from @Ned Carey:

I just laugh when people post and complain about todays rates. They ask “do you think rates are going to drop soon?”
NO we are as likely to se 30 years of rising rates.
PS yes I was alive and receiving those rates on my savings!

Totally! I love your company logo btw :) Best savings account I know of now is w/Robinhood at 4% (sometimes 5%). Have you found any better anywhere?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
3y
I worked in that environment as a broker investor etc.
what it did was force us into creative financing.. we debuted our Zero % financing model that model we killed it with.
We created a company that did nothing but sub too wraps and those we killed it with it was many years before we dealt with banks again.
all owner finance creative finance ..
And now today you see the new generation that was not even born yet coming out with the same ideas and thinking they invented it LOL
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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
3y
Quote from @Grant Shipman:

I saw a recent survey that 60%~ of potential buyers thought that today's interest rates were unprecedently high! As in rates have never been this high. We have such short term memories. The last 10 years have been the anomaly, not todays rates.
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
3y
@Grant Shipman

Have you found any better anywhere?

Most of my cash is working capital for my company. My personal cash savings are not enough to worry about he best rates. The difference between 2% and 4% on the small amount I have, just isn't worth the time to look for a better rate.
1 Reply
Bud Gaffney
Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
3y
Will rates ever be in the 3's again?
0 Reply
Jeff S.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
3y
@Grant Shipman yes was selling RE. There was no cash available so cash buyers got at least 40% discounts. We took many commissions on notes. We had a landlord that took my commission notes discounted with my guarantee.
My investor would pay cash discounted price (40%) and turn around and sell it on contract for full value getting 12% with 5% down, my commission.
In those days we sold our own listings. Of course lots of people were upside down so the question sometimes was how much does the seller bring to closing or do they give it back to the bank.
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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
3y
Yep, the first property I bought the loan had a rate of about 18%.Never thought twice about it, just went ahead, because that's how it was. No other options. Had a 2nd with a 3 year balloon too. Scary as s**t when I think about it now... :-)
Made a killing on that house.....
Goes to show interest rates don't matter, it's the monthly payment and the ROI....
4 Reply
Hugh Thompson
Investor · Palm Beach County, FL · Member since 2015 · 27 posts · 28 votes
3y
Bought my first condo in 1989 for $38,000. Got a FHA loan for 11.25%. It was still better than writing a rent check. This was right around the Resolution Trust fiasco. @today's rate of 6.5% Rates are low......back in Q1 of 22, @3% that was free money. Worst thing about it even then there were fence stragglers.
1 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
3y
Nominal housing prices have doubled in the past ten years. Inflation adjusted prices are 100% higher than in the 1970s. Government debt is off the charts. Interest rates matter...a lot. The mortgage rate chart in isolation is not relevant without the other side of the equation...price (and related debt level).
10 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
Barely. My parents bought some rentals just after that.
0 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
Quote from @Mike Dymski:

Nominal housing prices have doubled in the past ten years. Inflation adjusted prices are 100% higher than in the 1970s. Government debt is off the charts. Interest rates matter...a lot. The mortgage rate chart in isolation is not relevant without the other side of the equation...price (and related debt level).

One thing I always wonder when they compare prices, is are they comparing houses of similar sizes or simply the average house price? Houses in the 1970s vs 2020 are very different in terms of finishes and size.
1 Reply
Dan Kennerson
Rental Property Investor · Sacramento, CA · Member since 2018 · 51 posts · 11 votes
3y
Quote from @Bud Gaffney:

Will rates ever be in the 3's again?

I can't imagine the fed won't want to buy another boom with low rates. I just think it'll be five years from now.
the monetary policy of the USA basically requires more than the "target" inflation over the next 30 years, and money in motion does pretty good at that. but that 30 Trillion won't come without a few more boom/bust cycles, and I don't see the spending slowing down significantly in the next 20 years.
I'll just accumulate RE at prices that make sense with current rates, and swim in it when rates finally drop again and I can refinance them lol.
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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
3y
Quote from @Theresa Harris:

Quote from @Mike Dymski:

Nominal housing prices have doubled in the past ten years. Inflation adjusted prices are 100% higher than in the 1970s. Government debt is off the charts. Interest rates matter...a lot. The mortgage rate chart in isolation is not relevant without the other side of the equation...price (and related debt level).

One thing I always wonder when they compare prices, is are they comparing houses of similar sizes or simply the average house price? Houses in the 1970s vs 2020 are very different in terms of finishes and size.

Most use median price...and that's all that matters. If the houses are bigger and nicer now, that's reflected in the higher median price (and related debt service levels).

Inflation adjusted prices stayed nearly flat for 40 years from 1970-2010 and then more than doubled in the last 10+ years.

I have a number of transactions in process and interest rates matter to them a lot. Transaction levels are way down. I don't know what people are talking about when they say that rates don't matter right now (unless they are cash buyers, quick flippers, or spam posts - no reference to the OP).
1 Reply
Account Closed
Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
3y
I don’t but I remember locking in my primary residence 30 yr at 2.625% lol
6 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Grant Shipman:

what's the difference between 1970 and 2022
1. petrodollar
2. dollar no longer peg to gold
3. arab israeli crisis that droves up gas price

that's to understand above context in the chart.
1 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
3y
@Mike Dymski
Without turning this into the housing crash thread, do you have any additional info on how this is affecting your strategy / any very near-term predictions? I totally agree that transaction levels are down. In my market, properties at good prices still get snapped up immediately, and properties with sellers holding out for peak of peak 2021/2022 prices just sit.
And personally, I'm willing to accept lower to minimal cash flow on something if I can force substantial equity. I don't count on interest rates falling, and I assume for now that they won't.
0 Reply
Jeremy Horton
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
3y
Quote from @Mike Dymski:

Nominal housing prices have doubled in the past ten years. Inflation adjusted prices are 100% higher than in the 1970s. Government debt is off the charts. Interest rates matter...a lot. The mortgage rate chart in isolation is not relevant without the other side of the equation...price (and related debt level).

This is what gets me coupled with housing affordability. I would have to imagine affordability was much higher in previous years (I was born in 1991 so have very limited experience!). But from what it seems like affordability in a lot of parts of the country is extremely low.

But the crazy thing - at least where I live - the new construction houses are some of the biggest most expensive yet. They're building a new neighborhood a a couple blocks away from mine (my neighborhood was built in the mid 70s early 80s prices are 175-220) and these are starting at 369k. And you know the crazy thing...they'll fill up just as fast as they are building them. Most of the new construction is somewhat luxurious - granite countertops, recessed lighting, walk-in closets etc.

I do hear "well I'll just refi when rates go back down" as a justification for many purchases. I wouldn't be so sure we see rates go back down - who knows? And if they do, when? Then again they almost need to to get some affordability back in the equation. Either prices or rates need to see a drop. Too complicated for me to think about this morning
4 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
3y
Quote from @Nicholas L.:

@Mike Dymski
Without turning this into the housing crash thread, do you have any additional info on how this is affecting your strategy / any very near-term predictions? I totally agree that transaction levels are down. In my market, properties at good prices still get snapped up immediately, and properties with sellers holding out for peak of peak 2021/2022 prices just sit.
And personally, I'm willing to accept lower to minimal cash flow on something if I can force substantial equity. I don't count on interest rates falling, and I assume for now that they won't.

Forcing substantial equity is perfect...that's what I am doing as well. I just need my lenders to go with me and have somewhat rational terms. LTVs are irrelevant...DSC is the limiting factor that is driving leverage down right now, particularly in CRE, which is where I currently invest. I'm renewing my unsecured LOC today...at prime plus 2.2%, which means a rate north of 10%. I don't plan to use it but it's prudent emergency liquidity for other stuff in the works. I am building a hybrid hotel/apartment that will have substantial built in equity at inception.

I focus on preparation rather than prediction.

Interested to hear details on the transactions that you are doing.
1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
Quote from @Mike Dymski:

Quote from @Theresa Harris:

Quote from @Mike Dymski:

Nominal housing prices have doubled in the past ten years. Inflation adjusted prices are 100% higher than in the 1970s. Government debt is off the charts. Interest rates matter...a lot. The mortgage rate chart in isolation is not relevant without the other side of the equation...price (and related debt level).

One thing I always wonder when they compare prices, is are they comparing houses of similar sizes or simply the average house price? Houses in the 1970s vs 2020 are very different in terms of finishes and size.

Most use median price...and that's all that matters. If the houses are bigger and nicer now, that's reflected in the higher median price (and related debt service levels).

Inflation adjusted prices stayed nearly flat for 40 years from 1970-2010 and then more than doubled in the last 10+ years.

I have a number of transactions in process and interest rates matter to them a lot. Transaction levels are way down. I don't know what people are talking about when they say that rates don't matter right now (unless they are cash buyers, quick flippers, or spam posts - no reference to the OP).

Thanks. I agree rates do matter. People saying rates are at an all time high, need a history lesson.
1 Reply
Luka Milicevic
Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
3y
I wasn't alive back then, but I saw old newspaper clippings on CDs and I feel like the smartest investment back then was just to park your money in the bank, in CDs and in US T bills. You were making double digit returns with "zero" risk.
2 Reply
Jay ThomasPro Member
Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
3y
It's incredible how quickly people forget history, especially when it comes to Real Estate. Just 30 years ago, interest rates were far higher than they are now - and yet, there are still those who complain about the current rate and keep asking if they will soon drop further. The truth is that we're just as likely to see another 30 years of rising rates! I remember being alive and receiving those higher rates on my savings - talk about a blast from the past!
it's important to keep perspective and remember that Real Estate is a long-term investment. If you do your research and make smart decisions then you can ride out any fluctuations in the market for successful gains down the road. Don't get bogged down by short-term fluctuations - they are part of the Real Estate game.

[email protected]832-889-5607
4 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
3y
@Mike Dymski
I'm just slowly grinding out SF BRRRRs. On the current one, I'm hoping to get near 100% of my costs reimbursed, including all fees and holding costs, and force about 50K of equity, while breaking even / slightly positive on rent once rented.
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