Obviously rates can't stay at 3% forever, so if you didn't know increases were coming then I don't know what to tell you. I'd start worrying when they crack 6%, 4.5% is still cheap money.
I am always wary of 'the sky is falling, everything will be different now' predictions. Things are constantly changing, but people will always be buying, selling, and renting houses.
Sure, the interest rates will change things. But they were never going to stay at record lows for very long. Just adapt and roll with it... all of us on here are primed to survive the changes if we keep our eyes open.
Jon Holdman I'm only 35 so I was a little kid back in the early 80's but still to this day my parents see me refinancing in the high 3's for investment properties and they bring up their new build in '83 at 14% and I cringe. So yes today is defiantly cheap money. My first house in 2005 was 5.75% new construction for an 80% 1st and 6.875% for a 15% 2nd and 5% down with no pmi. And that was a good rate then so I can relate a little to what you said. I look at the rates in the 4's and think its expensive!! It's funny how we get used to something :)
I don't worry about things I can't control or that have not happened yet. Actually I don't really worry about anything. I just deal with the facts and do the best I can with what I've got. Can't change the past and you can't predict the future.
Rising rates only affects those who strongly depend on debt.
So true! BUT that probably excludes the Top 2% income earners and another 3% of people who have Dave Ramsey audio books in their car. (and I'm guessing about 50% of the 3% who listen to Dave are in the Top 2% ha)
Threatens Boom? I wonder if this might actually increase sales activity.
This has been my thinking too. I imagine that some first time home buyers will be thinking "Last chance to buy a house before rates go up and you are locked out forever"
In 1982-83 OO rates on 30 year mortgages were 15%. Houses were selling like hotcakes.
4.5% means the sky is falling? Hardly.
Jon Holdman and William Brace that was probably because inflation in the early 80% was as high as 15%!! So the real rate on your 80's mortgage was 0%! :p
Today inflation is around 2% so that 4.5% mortgage is a real rate of 2.5%.
In 1982-83 OO rates on 30 year mortgages were 15%. Houses were selling like hotcakes.
4.5% means the sky is falling? Hardly.
Jon Holdman and William Brace that was probably because inflation in the early 80% was as high as 15%!! So the real rate on your 80's mortgage was 0%! :p
Today inflation is around 2% so that 4.5% mortgage is a real rate of 2.5%.
In 1982-83 OO rates on 30 year mortgages were 15%. Houses were selling like hotcakes.
4.5% means the sky is falling? Hardly.
Jon Holdman and William Brace that was probably because inflation in the early 80% was as high as 15%!! So the real rate on your 80's mortgage was 0%! :p
Today inflation is around 2% so that 4.5% mortgage is a real rate of 2.5%.
I don't worry about things I can't control or that have not happened yet. Actually I don't really worry about anything. I just deal with the facts and do the best I can with what I've got. Can't change the past and you can't predict the future.
This is the healthiest attitude anyone can have. Kudos Mark!
In 1982-83 OO rates on 30 year mortgages were 15%. Houses were selling like hotcakes.
4.5% means the sky is falling? Hardly.
Jon Holdman and William Brace that was probably because inflation in the early 80% was as high as 15%!! So the real rate on your 80's mortgage was 0%! :p
Today inflation is around 2% so that 4.5% mortgage is a real rate of 2.5%.
Rising rates only affects those who strongly depend on debt.
This covers pretty much everyone in the RE business, regardless of whether they use debt directly or not.
If you're a landlord and your tenants suddenly can't afford your rental rates because their consumer debt has gotten more expensive, you're affected. If you're a rehabber and demand for your product decreases because your buyers can afford as much house, you're affected. If you're holding notes and your notes are lower rate than market, you're affected. If you're a mortgage broker, and higher rates cause fewer refis and purchases, you're affected.
You don't need to be a borrower or lender to be affected by changing interest rates.
My first property was at 12.5%, No it wasn't hard money, that was for an owner occupied conventional loan in the early 1980s
As a contrarian lets talk about the obvious conclusions
Prices will drop; Higher rates make houses less affordable so prices will drop.
Banks will make more loans; Hell I loan now at 1%, but just like banks nobody qualifies. Higher rates mean banks will start actually making loans that make sense.
Banks will make more investor loans; since fewer consumers will be able to afford the higher loans amount banks will be forced to make more loans to investors.
Sales will accelerate; Buyers on the sidelines will jump into the market to avoid increasing rates.
Rates will go to 4% below the long term average; As Jon mentioned above rates are still very low. The average rate from 1972 until 2012 from Freddi mac charts is 8.69%. At 4.5% they are still over 4% below the long term average.
Will all of my conclusions come true? Of course not but they could and they are as rational as any prediction the market will tank. - Ned
In 1982-83 OO rates on 30 year mortgages were 15%. Houses were selling like hotcakes.
Originally posted by Ned Carey:
My first property was at 12.5%, No it wasn't hard money, that was for an owner occupied conventional loan in the early 1980s
My first home in 1982 was a CalVet loan at 9% and we thought we got a great deal! Well, I guess we did because most other people we knew were paying double digits in interest. And like Jon said, houses were selling like hotcakes back then.
While I agree that everyone is affected by the rates rising, I don't know that you could say they're going to all be negatively affected.
I don't know that buy and hold investors really like the super low rates. That allows more people to qualify for mortgages and sucks people out of the rental pool that we'd like to have renting our homes.
I think rates are nothing more than a wash. Yea. My payments will go up due to higher rates. But more tenants will be available. Its kind of like a house thats sitting because the rent is set to high. I'd rather lower the rent $50/month and get it rented then have it sit for 3 months.
Same way with rates. I'd rather maintain the demand in rentals so my houses continue to stay occupied than save the additional $40 or $50 a month in interest.