patrick.net

There is a considerable lag in interest rate effects. Standard supply and demand would say "Costs (interest rates) go up, so demand goes down, prices go down."
In reality, as interest rates start to spike, consumers rush to buy to avoid higher rates. Housing demand and prices spike. A year or two later, interest rates might still be going up but demand has dropped, and prices come down or even crash.

I'm not a realtor, but I've tried to get my wife to SELL HIGH, take our tax exclusion, and rent a nice place on the profits for up to ten years. Buy back in at the right time.
But she wants to STAY PUT. This is why we will never be rich. /sigh

rocketjoe79 says

There is a considerable lag in interest rate effects. Standard supply and demand would say "Costs (interest rates) go up, so demand goes down, prices go down."
In reality, as interest rates start to spike, consumers rush to buy to avoid higher rates. Housing demand and prices spike. A year or two later, interest rates might still be going up but demand has dropped, and prices come down or even crash.

I'm not a realtor, but I've tried to get my wife to SELL HIGH, take our tax exclusion, and rent a nice place on the profits for up to ten years. Buy back in at the right time.
But she wants to STAY PUT. This is why we will never be rich. /sigh

It’s hard to predict top and bottom. Your wife in this case is right to stay. This inflation never go away with massive budgets so does the cost of goods and services.

Interest rates can go down. There's actually a pretty good chance of this.

Blue says

rocketjoe79 says

There is a considerable lag in interest rate effects. Standard supply and demand would say "Costs (interest rates) go up, so demand goes down, prices go down."
In reality, as interest rates start to spike, consumers rush to buy to avoid higher rates. Housing demand and prices spike. A year or two later, interest rates might still be going up but demand has dropped, and prices come down or even crash.

I'm not a realtor, but I've tried to get my wife to SELL HIGH, take our tax exclusion, and rent a nice place on the profits for up to ten years. Buy back in at the right time.
But she wants to STAY PUT. This is why we will never be rich. /sigh

It’s hard to predict top and bottom. Your wife in this case is right to stay. This inflation never go away with massive budgets so does the cost of goods and services.

Our case may be special. We live in a lake community where prices fluctuate frequently. We rented when we got here for 4 years and bought low, then refi'd 3 times (VA - no cost.)

HunterTits says

The other is the Boomer Retirement aspect. They are pulling out wealth to fuel their retirement now. That's going to produce a dearth in savings. I speak of national savings account, not the savings accounts in the banks (but those will be drawn down as well).

You mean like in Japan?

Unless the progressives get a bunch of their wish list social spending programs, the US economy will probably contract unless there is a massive increase in borrowing or draw down of savings from the private sector.

Last year the federal government spent about $2.3 trillion on Covid relief (representing about 10% of the nation's GDP). That spending is not there this year.

The amount of demand destruction is going to be huge unless that amount of money is removed from savings or borrowed and spent. To get an increase in borrowing, interest rates need to go lower not higher.

Misc says

To get an increase in borrowing, interest rates need to go lower not higher.

OR - Prices of big-ticket items like houses and autos fall.

Misc says

To get an increase in borrowing, interest rates need to go lower not higher.

This!

HeadSet says

Misc says

To get an increase in borrowing, interest rates need to go lower not higher.

OR - Prices of big-ticket items like houses and autos fall.

No they won't - not as long as there is unfettered immigration. There is a limited supply of land and houses, even of cars now, esp. with the supply chain crisis, and (legals and) illegals keep pouring in. They will team up as a family and work untaxed illegal jobs then compete with joe sixpack who pays taxes through the nose plus pays for their free healthcare and they will bid up any "starter" to medium homes with their free cash, they don't care if it's 5 people or more in a 2 bedroom to start out with. House prices have nothing to go but up, except for in shithole areas. There will be no housing crash until you see massive layoffs and the next depression, we are very far away from this, esp. with all the govt handouts supporting all the deadbeats and pushing up inflation which will go into assets and services. The 16% increase will likely be hit this year I have no doubt.

I don't see housing prices budging until rental vacancy rates go up. Rental rates are high because of low rental inventory, and this is a direct result of the eviction moratorium. In some markets, like Florida, Arizona, etc. I would assume that there are also lots of newcomers renting while they wait for someplace that they could own once one becomes available and they have been in the area for a while.

Here is a test case: https://www.zillow.com/homedetails/6243-S-Teak-Ave-Boise-ID-83716/79703656_zpid/?source=patrick.net
This home goes on the market tomorrow morning $589k and the sellers say they will pick the winning offer Sunday...
Does anything in this short post seem odd?

What's keeping rental prices high?

*Whistles Cucharacha*

Millions of illegals annually ensure no reasonable rental surplus can ever develop.

Even at minimum wage they can cram 10+ working age in a small house.

If 1978 prop 13 goes away, it will have sizable effect in places like bay area’s housing which is unlikely, other wise historically still low interest rates and inflation eventually push all shack and stock prices higher even if there is crash in the short term. Isn’t it all countries going in lock step in printing and devaluing they currency. Cash is a king for poor people but it’s trash for the rest.

RC2006 says

Even at minimum wage they can cram 10+ working age in a small house.

Prince William County in Virginia tried to solve this issue by passing a law preventing too many unrelated individuals living in a home designed for a single family. A judge struck it down. So now Prince William County has arrangements like 3 bedroom condos shared by a dozen illegals.

https://www.zillow.com/homedetails/6243-S-Teak-Ave-Boise-ID-83716/79703656_zpid/?source=patrick.net
On zillow 5hrs, veiws going off the chart 612 to 617 in the last 2 minutes and 36 people have save the listing.
Any bets that they don't get the top market price for this home?

If people expect interest rates to rise, there may be a spike in housing prices before that happens, as people try to grab the lower rate. It's a toss up: overbid and buy now at inflated price for good interest rate, or wait for prices to crash after the rates have gone up.

Ideally, you buy at lower price when interest rates are high, hang on with big interest payments for a few years, and refinance when rates go back down. Now you have the lower house price and lower interest rate. Easier said than done!

That said, it's important to consider buyers who can pay outright. Those people will prop up prices somewhat because they don't care about high mortgage rates. The house is a shield against inflation, and inflation is the reason for the high interest rates in the first place. Also, with millions of people streaming over the borders yearly, buying a crap-shack as a rental is likely to be profitable as long as you can handle the quick destruction of the property. Yeah, too bad for the neighbors and the neighborhood.

https://www.zillow.com/homes/4488-S-Eaglecrest-Ave-Boise,-ID-83716_rb/79612810_zpid/?source=patrick.net
4hrs, 666 veiws 59 saved

HunterTits says

Fed’s Bullard Backs Supersized Hike, Seeks Full Point by July 1
https://www.bloomberg.com/news/articles/2022-02-10/fed-s-james-bullard-backs-one-point-rate-hike-by-july-1?source=patrick.net

ERECTION INTENSIFYING!!!

Naw, Bullard is talking increasing short term rates, which should lower the long term rates.

If the Fed wanted to hammer home values, they would start selling massive portions of the long end of their balance sheet.

The Impact on Housing of Higher Mortgage Rates
History suggests sales and house price growth will slow

With the ten-year Treasury yield above 2.0% this morning, and mortgage rates nearing 4%, a key economic question is: What will be the impact on housing of higher mortgage rates?

First, housing is a key transmission channel of Federal Reserve policy. I discussed this back in 2012: Analysis: I expect QE3 on Sept 13th [2012]

[O]ne of the key transmission channels for monetary policy is through residential investment and mortgages.

Of course, in 2012, we were discussing how Fed policy would boost housing. Now, Fed policy - higher rates, halting asset purchases, allowing runoff of assets (not reinvesting), and even selling assets - will slow housing.
.......
We will probably see house price growth slow in the coming months (perhaps significantly). House price data is released with a lag, so it might take several months before we see the impact on prices.

Conclusions

With 4% 30-year mortgage rates, we will likely see a slowdown in both new and existing home sales (based on previous periods of rising rates). It also seems likely house price growth will slow. However, the impact on inventory is unclear.

An interesting question: Will higher mortgage rates slow investor buying? Higher rates will make buy-to-rent less attractive. Investor buying - and build-to-rent - will be areas to watch.

There is further downside risk if mortgage rates continue to increase, or if we see a significant increase in inventory (something we didn’t see in previous periods of rising mortgage rates).

https://calculatedrisk.substack.com/p/the-impact-on-housing-of-higher-mortgage?source=patrick.net

HunterTits says

They want to deliberately fuck over the middle class' home values.

The true value of a house is what you can rent it for, not how far into debt you can get to buy it.

The value of a house remains pretty much constant in a constant job market.

HunterTits says

Misc says

If the Fed wanted to hammer home values, they would start selling massive portions of their balance sheet.

Selling the balance sheet reduces the money supply, which raises the value of the dollar, which will reduce interest rates.

I will bet as much as you want to lose that if the Fed Sold $300 billion of MBS tomorrow mortgage rates would spike.

I was talking that to hammer home values they would sell the long end of their balance sheet.

Re-read what I said in #26

I put in the clarifier for my remark in #26. I thought it would have been obvious,

You are the one that brought up the Fed raising short term rates 1% would fuck up home values when all being equal it would decrease mortgage rates.

I think this 16% is the true inflation rate.

Raising the rate will slowdown the economy but doing it as part of the knee jerk reaction to slow inflation a little bit. Biden must stop the dangerous and fake vaccine show and make everyone get back to work and make the country productive immediately to control the inflation. The longer the it takes the damage will continue and eat up savings.

That's good advice, but I don't think Biden is actually in charge.

I think Biden and Trudeau have been ordered to impose the dangerous and fake vaccine show on behalf of the CCP, or maybe Klaus Schwab. People and groups who want universal surveillance and the ability to force arbitrary injections on the public at any time.

Misc says

You are the one that brought up the Fed raising short term rates 1% would fuck up home values when all being equal it would decrease mortgage rates.

I wouldn’t say it would screw up home value, but it would likely slow down the rate of price increase. The refinance market will likely see a huge drop.

What do you mean when all being equal, it would decrease mortgage rates?

Blue says

Raising the rate will slowdown the economy but doing it as part of the knee jerk reaction to slow inflation a little bit. Biden must stop the dangerous and fake vaccine show and make everyone get back to work and make the country productive immediately to control the inflation. The longer the it takes the damage will continue and eat up savings.

Raising interest rate won't "slow the economy", because this inflation has nothing to do with uncontrolled rising of economic output. Federal Reserve the only tool is useless in this case.

Current inflation is the effect of surplus of money (borrowed) given for NOTHING (not paid for economic afford) to people and businesses, plus shortage of goods and services as an effect of pandemic slow down (lockdown). Getting all back to business will indeed slow inflation.

Who the fuck is renting all these rental houses that these investors keep buying? I mean a rudimentary internet search tells me to stay the fuck away from invitation homes even if I were inclined to rent. They most likely wouldn't be in the rental business if they had no tenants.

Eman says

Misc says

You are the one that brought up the Fed raising short term rates 1% would fuck up home values when all being equal it would decrease mortgage rates.

I wouldn’t say it would screw up home value, but it would likely slow down the rate of price increase. The refinance market will likely see a huge drop.

What do you mean when all being equal, it would decrease mortgage rates?

All being equal, means keeping asset purchases on the long end of the rate curve the same and not selling long term obligations they have purchased along with keeping other economic measures the same.

Raising short term rates slows the economy reducing inflationary pressures, thus reducing long term mortgage rates.

Misc says

Eman says

Misc says

You are the one that brought up the Fed raising short term rates 1% would fuck up home values when all being equal it would decrease mortgage rates.

I wouldn’t say it would screw up home value, but it would likely slow down the rate of price increase. The refinance market will likely see a huge drop.

What do you mean when all being equal, it would decrease mortgage rates?

All being equal, means keeping asset purchases on the long end of the rate curve the same and not selling long term obligations they have purchased along with keeping other economic measures the same.

Raising short term rates slows the economy reducing inflationary pressures, thus reducing long term mortgage rates.

How does lowering mortgage rates help inflationary pressure? Housing is already a serious problem.

WineHorror1 says

Misc says

Eman says

Misc says

You are the one that brought up the Fed raising short term rates 1% would fuck up home values when all being equal it would decrease mortgage rates.

I wouldn’t say it would screw up home value, but it would likely slow down the rate of price increase. The refinance market will likely see a huge drop.

What do you mean when all being equal, it would decrease mortgage rates?

All being equal, means keeping asset purchases on the long end of the rate curve the same and not selling long term obligations they have purchased along with keeping other economic measures the same.

Raising short term rates slows the economy reducing inflationary pressures, thus reducing long term mortgage rates.

Mortgage rates went up to 4% for the 30 year fixed. That will help put an end to the bidding wars.

Booger says

Who the fuck is renting all these rental houses that these investors keep buying? I mean a rudimentary internet search tells me to stay the fuck away from invitation homes even if I were inclined to rent. They most likely wouldn't be in the rental business if they had no tenants.

Here in SF Bay Area there is a housing shortage, so landlords charge what the market can bear. People's willingness do double/triple/quadruple up with relatives or roommates is the elasticity in the demand to pay the high rents.

Cash says

Here is a test case: https://www.zillow.com/homedetails/6243-S-Teak-Ave-Boise-ID-83716/79703656_zpid/?source=patrick.net
This home goes on the market tomorrow morning $589k and the sellers say they will pick the winning offer Sunday...
Does anything in this short post seem odd?

Sold: 46k Over asking

Misc says

Mortgage rates went up to 4% for the 30 year fixed. That will help put an end to the bidding wars.

House in our neighborhood went on the market. This one is in the low 1M range. First day, 6 showings, second day already 5 offers. 3 of them are all cash. For the square footage, this one will break a record for the neighborhood. People trying to rush in before interest rates go up further or will this year just be a continuation of last years craziness?

Bitcoin says

People trying to rush in before interest rates go up further

This.

House a couple of doors down from the GF's house. 1/4 acre lot 4BR built in 2019, sold for 450K, now for sale asking 575K, and LOTS of people looking at it on Friday and Saturday. OK area but nothing special, in Anne Arundel County, MD (think Glen Burnie type of area). The people are leaving the area. He works on the Delmarva Peninsula (which makes him a super commuter) and her job in the DC are just went remote, so they are moving to the other side of the bridge. Presumably they will be paying too much there too, but at least they won't be in the DC area any more.

Cash says

Cash says

Here is a test case: https://www.zillow.com/homedetails/6243-S-Teak-Ave-Boise-ID-83716/79703656_zpid/?source=patrick.net
This home goes on the market tomorrow morning $589k and the sellers say they will pick the winning offer Sunday...
Does anything in this short post seem odd?

Sold: 46k Over asking

Boise is probably more of a bubble than anywhere else in the country.