Mortgage Rates

[scotchtiger]

Hit a 20 year high.

The average mortgage rate rose to 7.09%, its highest level in more than 20 years, according to data released Thursday by mortgage giant Freddie Mac.

The increase extends a lengthy stretch of high borrowing costs that has slowed the housing market to a crawl. This marked the first time since last fall that the rate on a 30-year, fixed-rate mortgage rose above 7%. A year ago, rates were around 5%.

Glad I refi'd during the Covid dip to 2.875%.

Mortgage Rates Hit 7.09%, Highest in More Than 20 Years

Interest rates have hit housing hard: Would-be buyers are locked out, and would-be sellers are staying put.

www.wsj.com

 

[fatpiggy]

New mortgage rates = 7% makes it cost prohibitive for these prices to maintain. If people have $X dollars to spend they won't be able to buy as much house with rates 3-4% higher. Should put downward pressure on prices.

Old Mortgages = 2.5 - 4% makes it cost prohibitive for people to move. Obviously this keeps supply low and supports prices.

What gives?

 

[yoshi121374]

Hit a 20 year high.

The average mortgage rate rose to 7.09%, its highest level in more than 20 years, according to data released Thursday by mortgage giant Freddie Mac.

The increase extends a lengthy stretch of high borrowing costs that has slowed the housing market to a crawl. This marked the first time since last fall that the rate on a 30-year, fixed-rate mortgage rose above 7%. A year ago, rates were around 5%.

Glad I refi'd during the Covid dip to 2.875%.

Mortgage Rates Hit 7.09%, Highest in More Than 20 Years

Interest rates have hit housing hard: Would-be buyers are locked out, and would-be sellers are staying put.

www.wsj.com

Glad I refinanced as well during Covid. Locked in that super low 1.99%

 

[FranktheDank]

New mortgage rates = 7% makes it cost prohibitive for these prices to maintain. If people have $X dollars to spend they won't be able to buy as much house with rates 3-4% higher. Should put downward pressure on prices.

Old Mortgages = 2.5 - 4% makes it cost prohibitive for people to move. Obviously this keeps supply low and supports prices.

What gives?

You would think the higher rates would be putting more downward pressure on prices. The problem is that supply is still so low and the higher rates go, the more supply tightens. Still a lot of panic buying going on. If you’re a buyer and you see a house for sale that meets all or most of your needs, you offer first and ask questions later because there’s no telling how long it will be until another comes around.

 

[CUT93]

Just think what rates would be if we hadn't passed the inflation reduction bill!!!! LOL. Bidenomics, still winning!

 

[fatpiggy]

30year mortgage rates back above 7% this morning. Thanks Bidenomics

 

[scotchtiger]

30year mortgage rates back above 7% this morning. Thanks Bidenomics

I feel for young people trying to get started. Current prices plus 7%+ mortgage rates make it virtually impossible to afford a good home in a good area on early career earnings.

 

[FranktheDank]

I feel for young people trying to get started. Current prices plus 7%+ mortgage rates make it virtually impossible to afford a good home in a good area on early career earnings.

Yea it sucks for them. Unfortunately I don’t see an end in sight, at least in Charleston and the upstate. Too many people moving here. Even when rates do eventually lower, they’ll still be competing with cash buyers. Even with that being the case, being a young person in America isn’t all bad. There are several perks that older generations did not experience when they were starting out

 

[scotchtiger]

Yea it sucks for them. Unfortunately I don’t see an end in sight, at least in Charleston and the upstate. Too many people moving here. Even when rates do eventually lower, they’ll still be competing with cash buyers. Even with that being the case, being a young person in America isn’t all bad. There are several perks that older generations did not experience when they were starting out

Agree. I'm considering trying to pick up two rentals in Mt. Pleasant or nearby over time that my boys could eventually buy / take over from me. Not sure how else they will live nearby if they want to. I was fortunate enough to move directly to Mt. Pleasant after Clemson and purchase a home here by ~26. That's not going to be repeatable for them. And I don't want them throwing away money on rent vs. building wealth.

 

[FranktheDank]

Agree. I'm considering trying to pick up two rentals in Mt. Pleasant or nearby over time that my boys could eventually buy / take over from me. Not sure how else they will live nearby if they want to. I was fortunate enough to move directly to Mt. Pleasant after Clemson and purchase a home here by ~26. That's not going to be repeatable for them. And I don't want them throwing away money on rent vs. building wealth.

Wish my parents were as generous as you lol

 

[fatpiggy]

Agree. I'm considering trying to pick up two rentals in Mt. Pleasant or nearby over time that my boys could eventually buy / take over from me. Not sure how else they will live nearby if they want to. I was fortunate enough to move directly to Mt. Pleasant after Clemson and purchase a home here by ~26. That's not going to be repeatable for them. And I don't want them throwing away money on rent vs. building wealth.

If we are being honest, renting is a much better way to build wealth.

I don’t disagree with your actions and would consider doing the same thing. However, the numbers prove out that we would be better off investing that money than owning a home.

“Warren Buffett has shared his thoughts on the topic of homeownership versus renting. In a 2010 letter to Berkshire Hathaway shareholders, he mentioned that, while he owns a home, he believes renting could have been a better financial decision for him. He even said that he could have made much more money had he rented and invested the purchase money into stocks.”

 

[scotchtiger]

Wish my parents were as generous as you lol

Me too!

 

[PrimeIsGettingComfortable]

Not sure what the obsession is in this country with owning real estate. Th stock market has a higher average return, and you don’t have to pay taxes, insurance, or maintenance on a stock.

The only reason we bought our home was because we like where we live and wanted the stability.

If you are young you should want the flexibility to be mobile and move when an opportunity comes your way. Being locked into Greenville or Charleston is going to significantly reduce the number of opportunities you have.

 

[fatpiggy]

Not sure what the obsession is in this country with owning real estate. Th stock market has a higher average return, and you don’t have to pay taxes, insurance, or maintenance on a stock.

The only reason we bought our home was because we like where we live and wanted the stability.

If you are young you should want the flexibility to be mobile and move when an opportunity comes your way. Being locked into Greenville or Charleston is going to significantly reduce the number of opportunities you have.

I try to justify it as diversification, but I question that reasoning everyday.

 

[FranktheDank]

Not sure what the obsession is in this country with owning real estate. Th stock market has a higher average return, and you don’t have to pay taxes, insurance, or maintenance on a stock.

The only reason we bought our home was because we like where we live and wanted the stability.

If you are young you should want the flexibility to be mobile and move when an opportunity comes your way. Being locked into Greenville or Charleston is going to significantly reduce the number of opportunities you have.

You answered it yourself, stability. It isn’t some wild and crazy concept. People prefer to know that where they live is their property and that they aren’t at the mercy of a landlord. No point in comparing the financial return of investing in the stock market and owning your home. One is an investment, one provides you shelter

 

[scotchtiger]

If we are being honest, renting is a much better way to build wealth.

I don’t disagree with your actions and would consider doing the same thing. However, the numbers prove out that we would be better off investing that money than owning a home.

“Warren Buffett has shared his thoughts on the topic of homeownership versus renting. In a 2010 letter to Berkshire Hathaway shareholders, he mentioned that, while he owns a home, he believes renting could have been a better financial decision for him. He even said that he could have made much more money had he rented and invested the purchase money into stocks.”

Not sure what the obsession is in this country with owning real estate. Th stock market has a higher average return, and you don’t have to pay taxes, insurance, or maintenance on a stock.

The only reason we bought our home was because we like where we live and wanted the stability.

If you are young you should want the flexibility to be mobile and move when an opportunity comes your way. Being locked into Greenville or Charleston is going to significantly reduce the number of opportunities you have.

I'd have to see some math on this.

My home is worth 3X what I built it for in 2016. My portfolio hasn't grown at a 300% RoR (not counting contributions).

It would cost me over 2X my mortgage/insurance/taxes to rent a home somewhat comparable to mine, if you could even find one. And even then, it would be a letdown relative to what we have.

Those rents will keep rising too. 3X, 4X... Aside from minimal tax increases and some insurance increases, my monthly cost will remain stable.

With rent, $0/0% goes to equity/wealth. With my 2.875% mortgage, a majority of my payments over time are building equity/wealth.

So I've made an excellent return, am avoiding rapidly escalating rental expenses, carry a super low interest rate (and that interest is tax deductible btw), and it's a bad investment ... how?

Perhaps if I lived in Nebraska and was one of the greatest stock investors in history, my homeownership calculus would be different.

Regarding being able to move, it will be interesting to follow remote work trends. I went fully remote January 2021 and will likely never return to an office-based job. I have national responsibility and Delta allows me to be wherever I need to be.

 

[TigerGrowls]

If we are being honest, renting is a much better way to build wealth.

I don’t disagree with your actions and would consider doing the same thing. However, the numbers prove out that we would be better off investing that money than owning a home.

“Warren Buffett has shared his thoughts on the topic of homeownership versus renting. In a 2010 letter to Berkshire Hathaway shareholders, he mentioned that, while he owns a home, he believes renting could have been a better financial decision for him. He even said that he could have made much more money had he rented and invested the purchase money into stocks.”

One problem is my kids are spending more on their rents than I paid on my mortgage when I still had one less than ten years ago. The apartments in the metro ATL area are just gouging the young folks so they are still paying a lot on rent but with nothing to show for it.

 

[gardentiger]

Hit a 20 year high.

The average mortgage rate rose to 7.09%, its highest level in more than 20 years, according to data released Thursday by mortgage giant Freddie Mac.

The increase extends a lengthy stretch of high borrowing costs that has slowed the housing market to a crawl. This marked the first time since last fall that the rate on a 30-year, fixed-rate mortgage rose above 7%. A year ago, rates were around 5%.

Glad I refi'd during the Covid dip to 2.875%.

Mortgage Rates Hit 7.09%, Highest in More Than 20 Years

Interest rates have hit housing hard: Would-be buyers are locked out, and would-be sellers are staying put.

www.wsj.com

Where is the "we don't have enough supply" guy at?

 

[PrimeIsGettingComfortable]

You answered it yourself, stability. It isn’t some wild and crazy concept. People prefer to know that where they live is their property and that they aren’t at the mercy of a landlord. No point in comparing the financial return of investing in the stock market and owning your home. One is an investment, one provides you shelter

Exactly. You buy a home because you enjoy living in it, not because it’s a great investment.

 

[PrimeIsGettingComfortable]

I'd have to see some math on this.

My home is worth 3X what I built it for in 2016. My portfolio hasn't grown at a 300% RoR (not counting contributions).

It would cost me over 2X my mortgage/insurance/taxes to rent a home somewhat comparable to mine, if you could even find one. And even then, it would be a letdown relative to what we have.

Those rents will keep rising too. 3X, 4X... Aside from minimal tax increases and some insurance increases, my monthly cost will remain stable.

With rent, $0/0% goes to equity/wealth. With my 2.875% mortgage, a majority of my payments over time are building equity/wealth.

So I've made an excellent return, am avoiding rapidly escalating rental expenses, carry a super low interest rate (and that interest is tax deductible btw), and it's a bad investment ... how?

Perhaps if I lived in Nebraska and was one of the greatest stock investors in history, my homeownership calculus would be different.

Regarding being able to move, it will be interesting to follow remote work trends. I went fully remote January 2021 and will likely never return to an office-based job. I have national responsibility and Delta allows me to be wherever I need to be.

You are cherry-picking. The last 7 years were assisted by inflation, historically low rates, and a migration away from tier 1 cities. Would bet we see very little price appreciation over the next 7.

Long term returns on real estate are around 7%, while the stock market is around 9%. And that is not counting the carrying costs for real estate, like taxes, insurance, and maintenance. Forget about the pain in the ass of dealing with renters. I get returns in the high teens for my venture capital investments, why would I buy rental property?

All the best investors I know (these are folks who are worth $100mm+), do not invest in real estate. They own property, but it’s always for pleasure and never as an investment.

I really think folks try to simplify the real estate game because it’s easy to say I paid X for this property and now it’s worth 2X. It’s also a crutch for status to say “we own 7 investment properties” which is oddly has more social currency than saying I own 10,000 shares of Costco. People like to flex, and real estate gives them an opportunity.

 

[PrimeIsGettingComfortable]

One problem is my kids are spending more on their rents than I paid on my mortgage when I still had one less than ten years ago. The apartments in the metro ATL area are just gouging the young folks so they are still paying a lot on rent but with nothing to show for it.

NIMBYism has had seriously dire effects on our economy.

 

[FranktheDank]

Where is the "we don't have enough supply" guy at?

We don’t have enough supply. Hence home values remaining high and still increasing in some areas despite mortgage rates north of 7%

 

[scotchtiger]

You are cherry-picking. The last 7 years were assisted by inflation, historically low rates, and a migration away from tier 1 cities. Would bet we see very little price appreciation over the next 7.

Long term returns on real estate are around 7%, while the stock market is around 9%. And that is not counting the carrying costs for real estate, like taxes, insurance, and maintenance. Forget about the pain in the ass of dealing with renters. I get returns in the high teens for my venture capital investments, why would I buy rental property?

All the best investors I know (these are folks who are worth $100mm+), do not invest in real estate. They own property, but it’s always for pleasure and never as an investment.

I really think folks try to simplify the real estate game because it’s easy to say I paid X for this property and now it’s worth 2X. It’s also a crutch for status to say “we own 7 investment properties” which is oddly has more social currency than saying I own 10,000 shares of Costco. People like to flex, and real estate gives them an opportunity.

Now we’ve ventured outside of personal home ownership. On that front, I agree that the last 7 years have been unique. Can’t imagine my home 3Xing over the next 7 years. Still, the rapidly escalating rents as an alternative to home ownership, with no equity or net worth to show for it, surely have some offset to slightly-below-market returns.

There are ways to invest in real estate to generate more than the 7% mentioned. I have access to private REITs as an accredited investor that project 20%+ IRR. One that closed early returned 56% in one year. I also have access to a couple of large LLCs with a niche investment approach. Anticipating 12%+ returns. Not amazing, but better than market. Also am periodically asked to participate in small development deals that do much better than market.

I also own investment properties, but they are hardly flex worthy. These are class C type properties that offer a higher ROI due to the challenges with those properties. We’ve made above market returns there too.

Anyways, I’m not ready to write off real estate from a personal home ownership vs. renting standpoint or investment standpoint.

 

[FranktheDank]

You are cherry-picking. The last 7 years were assisted by inflation, historically low rates, and a migration away from tier 1 cities. Would bet we see very little price appreciation over the next 7.

Long term returns on real estate are around 7%, while the stock market is around 9%. And that is not counting the carrying costs for real estate, like taxes, insurance, and maintenance. Forget about the pain in the ass of dealing with renters. I get returns in the high teens for my venture capital investments, why would I buy rental property?

All the best investors I know (these are folks who are worth $100mm+), do not invest in real estate. They own property, but it’s always for pleasure and never as an investment.

I really think folks try to simplify the real estate game because it’s easy to say I paid X for this property and now it’s worth 2X. It’s also a crutch for status to say “we own 7 investment properties” which is oddly has more social currency than saying I own 10,000 shares of Costco. People like to flex, and real estate gives them an opportunity.

A lot of folks overspend on their home and use the investment tagline to justify being house poor. I strongly believe in investing in RE of done correctly though. It’s been very good to me. I’m sure the stock market has a higher return rate annually but it takes a lot of cash to make a lot of money investing in the stock market. You can make a lot of money with very little cash in RE if you know what you’re doing. That’s the main difference. If you’re already a millionaire, yea may not want to bother with investing in RE. But if you’re a hundred thousandaire and want to become a millionaire, RE is capable of getting you there a lot faster than dumping your extra cash in the stock market

 

[PrimeIsGettingComfortable]

Now we’ve ventured outside of personal home ownership. On that front, I agree that the last 7 years have been unique. Can’t imagine my home 3Xing over the next 7 years. Still, the rapidly escalating rents as an alternative to home ownership, with no equity or net worth to show for it, surely have some offset to slightly-below-market returns.

There are ways to invest in real estate to generate more than the 7% mentioned. I have access to private REITs as an accredited investor that project 20%+ IRR. One that closed early returned 56% in one year. I also have access to a couple of large LLCs with a niche investment approach. Anticipating 12%+ returns. Not amazing, but better than market. Also am periodically asked to participate in small development deals that do much better than market.

I also own investment properties, but they are hardly flex worthy. These are class C type properties that offer a higher ROI due to the challenges with those properties. We’ve made above market returns there too.

Anyways, I’m not ready to write off real estate from a personal home ownership vs. renting standpoint or investment standpoint.

There are always exceptions. I have a 17x return on one of my fund investments. But for my 2021 vintage funds, I’ll be lucky to get my money back. The long-term average nets out, which I what I trust because I know I’m not smart enough to time the market.

I’m not saying it’s dumb to buy your home, but people over-index on it as an investment. Real estate just doesn’t have the return profile as an asset class. And people often ignore the carrying costs, as well as the opportunity cost. The data proves it. And the smart money confirms it.

 

[PrimeIsGettingComfortable]

A lot of folks overspend on their home and use the investment tagline to justify being house poor. I strongly believe in investing in RE of done correctly though. It’s been very good to me. I’m sure the stock market has a higher return rate annually but it takes a lot of cash to make a lot of money investing in the stock market. You can make a lot of money with very little cash in RE if you know what you’re doing. That’s the main difference. If you’re already a millionaire, yea may not want to bother with investing in RE. But if you’re a hundred thousandaire and want to become a millionaire, RE is capable of getting you there a lot faster than dumping your extra cash in the stock market

A return is a return. Yes, you can lever more with real estate but that leverage isn’t free. And the vast majority of folks aren’t generating better returns than SPX by buying properties.

 

[FranktheDank]

A return is a return. Yes, you can lever more with real estate but that leverage isn’t free. And the vast majority of folks aren’t generating better returns than SPX by buying properties.

Yea they’re different investment strategies and the head to head comparison between the 2 depends on how the RE deal was structured imo