Mortgage demand rises for the first time in six weeks, despite sharply higher interest rates

[PimTac]

Realization that the Seattle housing market is cooling off rapidly.

We just had a neighborhood home sell last week. It was on the market for six weeks plus. We have a few others for sale. The action has definitely slowed.

Once hot Seattle housing market trending downward

With sky-high inflation and spikes in mortgage rates - the once red-hot Seattle housing market has cooled way down.So much so, a new report from Redfin calls Se

komonews.com

 

[Rmay635703]

Mortgage rates are approaching their normal range.

Yeah until mortgage rates are above 9% they really don’t affect the current buying publics behavior.

So long way to go, now if top income earners are affected or areas loose population…

Housing in my area has slowed down but the prices are still about the same. It's just taking longer to sell the homes. Most people put their mortgage payment 1st on the list and will cut back spending in other areas. The new first time buyers have a rude awakening and should have bought when the interest rates were 3%. Plus, lawn mowers, snow blowers, and almost everything that you need when you buy a new home has gone up significantly in price. I guess they will have to wait a little longer for that new BMW even though a lot of them received student loan forgiveness. The sucking of the hind teat may be over for a while hahaha.

Here, There are a LOT more homes for sale but the same elevated prices, compared to peak pandemic about 10x more on the market

Too bad my online savings accounts aren’t paying more than a percent or so.

My credit union won’t even post CD rates because they are changing daily+
Mostly in an upward fashion, I still have a 2.x percent CD, will have to check

I hope everybody remembers who caused this when they go to the polls in November and 2024.

During the shadow bank crisis of 2020 there was a $5 trillion dollar bailout of large banks and property investment companies, our national debt increased 33% in a couple months, more than any other time in our history. After 2020 spending dropped to a trickle of that amount $500b-$1T A year.

The $$$$ event of 2020 is likely to create ripples for the next decade as the affected asset classes slowly unwind the inflation. When something similar to 2020 but more minor happened to Japan they had a lost decade.

It takes a while for prices to fall. Even if they were falling now you wouldn't see it in the statistics until they close, which is a few months out.

For most people there is no longer any real interest rate tax deduction, so those are real numbers people will need to absorb / pay.

According to the experts the big housing crash started as early as 2005 and as the crash was active (all metrics red) home prices still kept going up a little longer in most markets and many Midwest markets didn’t fully collapse until 2010/2011 well after the so called event.

Many people don’t realize how complex market behaviors are and that a crash can easily take 3-5 years to get underweigh with prices lagging years after demand collapses

 

[GON]

Realization that the Seattle housing market is cooling off rapidly.

We just had a neighborhood home sell last week. It was on the market for six weeks plus. We have a few others for sale. The action has definitely slowed.

Once hot Seattle housing market trending downward

With sky-high inflation and spikes in mortgage rates - the once red-hot Seattle housing market has cooled way down.So much so, a new report from Redfin calls Se

komonews.com

PT,

What was the average time on market for homes for sale from 2010-2015 across the USA? On a MACRO level, I suspect across the USA average time on market for a single-family home exceeded six weeks. On a MICRO level, any housing market can be smoking hot, one just needs to look at North Dakota in 2014, the hottest housing market in the USA.

Fact is, the house that took six weeks to sell in your neighbor likely sold ABOVE its appraised 2021 price, and its 2021 price was already smokin hot. Waiting to sell six weeks at a positive price gain over 2021, with interest rates at six plus percent, maybe actually show a VERY STRONG housing market today.

Of note, I am wanting a "weak" housing market for selfish reasons, but the data points I am studying do not reflect a weak housing market whatsoever.

 

[SC Maintenance]

It takes a while for prices to fall. Even if they were falling now you wouldn't see it in the statistics until they close, which is a few months out. They were 3% at the first of the year. It bumped in summer but was down to 5% in most of August - and those are the houses closing now. Its over 6% as we speak. 8% by year end is not out of the question if the fed keeps raising rates.

400K Mortgage / 30 year at 3% = $1686/ month.

400K mortgage / 30 year at 6% = $2400/ month

For most people there is no longer any real interest rate tax deduction, so those are real numbers people will need to absorb / pay.

 

[SC Maintenance]

The so called "experts" that get interviewed on the news (who of course are mostly real estate agents) are telling people to buy now anyway and refinance if and when the rates come down again.

What terrible advice. If the appraised value of the house drops even a little they won't be able to refinance unless they started with a ton of equity.

 

[wpod]

Mortgage rates are approaching their normal range.

My first first house I bought in 1976 was 8%. It was scary owing the money for the house purchase. Got some great roomies and it was a go.

 

[wpod]

It takes a while for prices to fall. Even if they were falling now you wouldn't see it in the statistics until they close, which is a few months out. They were 3% at the first of the year. It bumped in summer but was down to 5% in most of August - and those are the houses closing now. Its over 6% as we speak. 8% by year end is not out of the question if the fed keeps raising rates.

400K Mortgage / 30 year at 3% = $1686/ month.

400K mortgage / 30 year at 6% = $2400/ month

For most people there is no longer any real interest rate tax deduction, so those are real numbers people will need to absorb / pay.

It is all about affording the monthly payment at purchase time for most buyers.

 

[GON]

It takes a while for prices to fall. Even if they were falling now you wouldn't see it in the statistics until they close, which is a few months out. They were 3% at the first of the year. It bumped in summer but was down to 5% in most of August - and those are the houses closing now. Its over 6% as we speak. 8% by year end is not out of the question if the fed keeps raising rates.

400K Mortgage / 30 year at 3% = $1686/ month.

400K mortgage / 30 year at 6% = $2400/ month

For most people there is no longer any real interest rate tax deduction, so those are real numbers people will need to absorb / pay.

For fun, let's look again at your numbers.

400K Mortgage / 30 year at 3% = $1686/ month.

400K mortgage / 30 year at 6% = $2400/ month

Taxes in Illinois (or NJ, NY, etc) on a home appraised at 500 k (400k mortgage, 25 percent down/ equity) of 12k per year


400K Mortgage / 30 year at 3% = $1686/ month.- with taxes $2686 per month

400K mortgage / 30 year at 6% = $2400/ month- with taxes $3400 per month

Same home price, but in Alabama property taxes of 1200 per year

400K Mortgage / 30 year at 3% = $1686/ month. with taxes $1806

400K mortgage / 30 year at 6% = $2400/ month with taxes $2520 per month.

So, if one moves from Illinois on a 500k house, at three percent interest, at a mortage of 400k, 30 years, and moves to Alabama with a same 400k mortgage, but at six percent interest- that homeowner moving from Illinois to Alabama, even though they are paying two percent more in mortgage interest, will have a net gain living in Alabama of $166 per month, $1992 per year.

If one moves from a high property tax state with a three percent mortgage, to a low property tax state with a six percent mortgage- the homeowner may not be negatively impacted by the three-point rise in their mortgage rate.

 

[GON]

Property taxes in some areas may play a bigger role in single family home affordability than interest rates. Below is an extreme example, but the example may support the theory that interest rates impact home affordability different based on the state the home is located.

The is a posting from the Rev. Phalese Binion who is the President, Westside Ministers Coalition, Chicago, Illinois

"" I live in Park Forest and we pay some of the highest taxes in the state of Illinois. When I purchased my home I didn’t understand the process until my first tax bill came: $14,000 on a $98,000 home.”

“This is not the American Dream. This is the American nightmare.”

“My regular mortgage without the taxes was about $500 monthly and the rest of it was taxes."""

In the above extreme example, property taxes, not current interest rates, is what most impacts monthly home affordability.

 

[PimTac]

PT,

What was the average time on market for homes for sale from 2010-2015 across the USA? On a MACRO level, I suspect across the USA average time on market for a single-family home exceeded six weeks. On a MICRO level, any housing market can be smoking hot, one just needs to look at North Dakota in 2014, the hottest housing market in the USA.

Fact is, the house that took six weeks to sell in your neighbor likely sold ABOVE its appraised 2021 price, and its 2021 price was already smokin hot. Waiting to sell six weeks at a positive price gain over 2021, with interest rates at six plus percent, maybe actually show a VERY STRONG housing market today.

Of note, I am wanting a "weak" housing market for selfish reasons, but the data points I am studying do not reflect a weak housing market whatsoever.

I was out of country during that time period so I wouldn’t know.

 

[DwightFrye]

Okay who? Our current inflation has something to do with the pandemic whose name we dare not say, world wide government support for workers who were out of work because of the pandemic, the Russian invasion of the Ukraine which raised energy prices world wide, central banks in all countries that were slow on the draw, and perhaps a few other things I've missed.

It would be easy enough to blame someone. If only there was someone to blame.

We do have a choice to put people in charge who may be better prepared to deal with the current economic situation, and refusing to lay blame on anyone will only exacerbate the recession. The buck stops at 1600 Pennsylvania Ave. and at the desks of a dozen or so policy makers who are appointed and easily replaced.

 

[JeffKeryk]

We do have a choice to put people in charge who may be better prepared to deal with the current economic situation, and refusing to lay blame on anyone will only exacerbate the recession. The buck stops at 1600 Pennsylvania Ave. and at the desks of a dozen or so policy makers who are appointed and easily replaced.

Sorry, that makes little sense. The world wide economy is like a huge ocean going ship. It does not turn on a dime. The current economy is a result of years of decisions, reactions and especially world wide events. Not to mention the economy is cyclical. You need to look at long term to get answers.

 

[alarmguy]

Its crazy to pay off a home over 30 years if you have the means to pay it off sooner.
For safety sake, sure take out a 30 year mortgage, you do take a hit paying a higher interest rate because its 30 years but its still for most people might be a little less scary than tied to a 15. If you fall on hard times you can stop making monthly additional principle payments and fall back to the lower 30 year payment.

Then have the maturity once you own the home and are secure in your finances to pay down that mortgage in 15 years or less if one prefers.
All it takes is an extra payment a month roughly equal to a car payment and you will save $318,355.20 on a 30 year $450,000 mortgage.
Hope you all are understanding that, you will pay $318,355.50 less in interest paying it down in 15 years instead of 30.

So instead of paying the bank $1,023,951.60 = yes One Million Twenty Three Thousand Nine Hundred Fifty One Dollars and 60 cents over thirty years for a $450,000 mortgage

You will be paying $705,596.40 - Seven Hundred Five Thousand Five Hundred and Ninety Six Dollars and 40 cents over 15 years for a $450000 Mortgage.

A savings of $318,355.50 in interest you will not have to pay. Assuming a soon to be 6.5% interest rate.
Its always best to pay down the debt then spend the money on toys for your life.
I know the old argument from some, well you can go invest that money that you would have used to make extra payments. I say that is a HUGE falsehood to the average income earner in this country. IN fact its a disservice to tell that to people yet BANKS WOULD LOVE YOU TO BELIEVE IT TO BE TRUE!

Giving banks an extra $318,355,50 of your family income is NOT in your best interest. If your one of those who say they want to invest, then invest in your home first, its the shelter for you and your family, get it paid off and you will be secure in owning a home no matter what curves life may throw you in the future, then do whatever you want with the 15 YEARS of payments you will not be making. Any argument to the contrary is laughable for the average American family income.

 

[Snagglefoot]

Interest rate reductions typically occur when the economy gets stressed, such as 9-1-1, the 2008-2009 financial meltdown, and the C word issues. We still have Russia issues hanging over our head. There is always pressure keeping rates from climbing, but it looks like inflation has caught the attention of the Fed, so it looks like there won’t be any relief unless we get a large dose of really bad news.

 

[GON]

Funny thing, the jumbo mortgage rates are averaging.75 lower than non jumbo rates. There is a message in that, but I am not sure what the message is.

Also, rates this morning on 30 year conventional now averaging above seven percent.

 

[CKN]

We do have a choice to put people in charge who may be better prepared to deal with the current economic situation, and refusing to lay blame on anyone will only exacerbate the recession. The buck stops at 1600 Pennsylvania Ave. and at the desks of a dozen or so policy makers who are appointed and easily replaced.

Well... if you look at what is happening in New York right now-maybe the other guy may not have been qualified either.

 

[JeffKeryk]

Its crazy to pay off a home over 30 years if you have the means to pay it off sooner.
For safety sake, sure take out a 30 year mortgage, you do take a hit paying a higher interest rate because its 30 years but its still for most people might be a little less scary than tied to a 15. If you fall on hard times you can stop making monthly additional principle payments and fall back to the lower 30 year payment.

Then have the maturity once you own the home and are secure in your finances to pay down that mortgage in 15 years or less if one prefers.
All it takes is an extra payment a month roughly equal to a car payment and you will save $318,355.20 on a 30 year $450,000 mortgage.
Hope you all are understanding that, you will pay $318,355.50 less in interest paying it down in 15 years instead of 30.

So instead of paying the bank $1,023,951.60 = yes One Million Twenty Three Thousand Nine Hundred Fifty One Dollars and 60 cents over thirty years for a $450,000 mortgage

You will be paying $705,596.40 - Seven Hundred Five Thousand Five Hundred and Ninety Six Dollars and 40 cents over 15 years for a $450000 Mortgage.

A savings of $318,355.50 in interest you will not have to pay. Assuming a soon to be 6.5% interest rate.
Its always best to pay down the debt then spend the money on toys for your life.
I know the old argument from some, well you can go invest that money that you would have used to make extra payments. I say that is a HUGE falsehood to the average income earner in this country. IN fact its a disservice to tell that to people yet BANKS WOULD LOVE YOU TO BELIEVE IT TO BE TRUE!

Giving banks an extra $318,355,50 of your family income is NOT in your best interest. If your one of those who say they want to invest, then invest in your home first, its the shelter for you and your family, get it paid off and you will be secure in owning a home no matter what curves life may throw you in the future, then do whatever you want with the 15 YEARS of payments you will not be making. Any argument to the contrary is laughable for the average American family income.

Good advice. Take a payment you can live with, make extra principal reductions and keep at it. Have a rainy day fund!
I did it a little differently... I refied time and time again, usually taking the teaser rate and refying quickly. My strategy was quite simple: minimize interest expense while making a consistantly higher payment. **** thing worked!

I do believe in diversified investing; max out your 401K, stock options, index funds along with your house payment. And then further diversifying.
New cars are fun but ya wouldn't wanna live in one. As you say, save your fun for later. Because a free-and-clear home is killer piece of mind.

 

[alarmguy]

Good advice. Take a payment you can live with, make extra principal reductions and keep at it. Have a rainy day fund!
I did it a little differently... I refied time and time again, usually taking the teaser rate and refying quickly. My strategy was quite simple: minimize interest expense while making a consistantly higher payment. **** thing worked!

I do believe in diversified investing; max out your 401K, stock options, index funds along with your house payment. And then further diversifying.
New cars are fun but ya wouldn't wanna live in one. As you say, save your fun for later. Because a free-and-clear home is killer piece of mind.

I was expecting a reply from you, not sure if I was expecting one that sort of agreed with me! *LOL* I know we have our differences at times~!
Anyway yes and we have to realize that you and to some degree myself are in or close to the 10% or so population. this part of the population investing methods are very different then most of the population.
The numbers are staggering and I really do care about people, I see the waste and addiction to credit before making sure the basics are covered. Housing, future retirement before the toys in life. There really is an addiction to credit or maybe it is more not examining what the credit is costing someone.
Thankfully I taught this to my kids and well at least one of them is REALLY into it, maybe too much *LOL*
The others have the concept and I know think twice about debt.

45% of Americans carry credit card debt/15% of those have had this debt for 15 years, 54% live paycheck to paycheck, the median 401k balance of people 55 to 64 years old is $72,000 !!! that means half of the people have less and half more (source https://www.financialsamurai.com/median401k-retirement-balance-by-age-is-dangerously-low/) and that's only for people with a 401k at all.
I always use median as its useless to use average, means nothing when looking at these numbers.

Anyway, have no idea why I am typing all this, Im just crazy about the subject, I made my mistakes in life as far as what I did with my income, buying toys ect but whether by luck or not, I made some wise choices or maybe better said opportunities presented to me that if they weren't at the time, decades ago, Im not sure what shape I would be in. Long time ago I was presented with an offer to buy a commercial property with a private mortgage, best decision of my life and that was my turning point of learning about amortization sheets and paying down principle ahead of time, that stayed with my my entire life with paying down principle on my homes as fast as possible.
I still have the commercial building paid off in record time decades earlier.

 

[JeffKeryk]

@alarmguy the answer is education. We have to arm people with financial tools, financial knowledge.
IMO, no one should get outta grade school without a working knowledge of banking, credit, retirement funds.
No one should get outta high school without an understanding of markets, time value of money, etc.

Will everyone heed good advice? Of course not, but at least give them a fighting chance.

 

[DwightFrye]

Sorry, that makes little sense. The world wide economy is like a huge ocean going ship. It does not turn on a dime. The current economy is a result of years of decisions, reactions and especially world wide events. Not to mention the economy is cyclical. You need to look at long term to get answers.

Understood about the world wide economy. Not much we as US citizens can do about that but we sure have a choice as to who is making policy decisions here. Like our energy policy and deficit spending on giveaway programs and the yet unpublished cost of allowing more than 2 million indigent, unskilled and uneducated people to walk into the country and become immediate liabilities.

Also, understood about the economy not being able to turn on a dime. However it sure did pretty quickly in 2016. A lot of it has to do with consumer and investor confidence. And currently there isn't any reason to think that the people in charge have the skills or even worse, the economic philosophy necessary to make the right choices.

If our citizens think there is no one to blame, and think the current administration is capable of making the right decisions to pull us out of it, they will vote for the status quo. If they think another group of leaders and appointees to critical positions will do a better job, they will vote for that team.