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jakob
Posts:494
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wilson
Posts:569
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| 06/11/2008 1:30 PM |
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| I agree that rates are trending higher, but the graphs do accurately show that changes in the last 5 years have been limited to a rather narrow range. To those of us that can remember back to 10%+ rates, this current change is so far a faily minor change that should not necessarily be extrapolated. |
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chet
Posts:9
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| 06/11/2008 3:50 PM |
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| A house seller has enough to worry about. Rising interest rates will make homes less affordable and thus further drive down prices. A wise seller would be smart to lower their prices now, in hopes of selling before the higher interest rates decimate the already dismal housing market. |
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sokcn
Posts:14
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| 06/11/2008 6:28 PM |
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| I'm looking forward to the higher interest rate, that way the price of the houses will be lower. |
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jakob
Posts:494
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| 06/13/2008 9:46 AM |
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sockn, I too welcome the increases, as I'm waiting to take the plunge. I would love to see conforming loan rates in the 7-8%.
BTW, the graphs I posted update themselves every day from bankrate.com. |
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jspoto
Posts:218
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| 06/13/2008 11:11 AM |
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| So you are waiting for rates to go up so prices might go down. Great logic. Did it ever occur to you that your payment would not change much. Why dont you look at buying now, while rates are still around 6 and prices are great. |
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jpinpb
Posts:1480
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| 06/13/2008 11:25 AM |
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| Your payment would change. Lower priced home = lower property tax. And whenver rates do go down again, refinance at the lower rate. Best of all three worlds, lower priced house, lower interest rates, lower property tax. |
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Eugene
Posts:268
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| 06/13/2008 11:35 AM |
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[quote]So you are waiting for rates to go up so prices might go down. Great logic. Did it ever occur to you that your payment would not change much. Why dont you look at buying now, while rates are still around 6 and prices are great.[/quote]
My payment won't change, but my gains from selling the house (if i have to move in 5 years) might change very significantly. Would you rather get a house for 500k at 6% or for 400k at 8%? |
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jakob
Posts:494
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| 06/13/2008 12:00 PM |
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| jspoto: Exactly as jpinpb and Eugene said. Nobody knows for sure where rates are going, but I think most people believe that rates most likely go up from here, not down. Higher rates == lower prices. From an investors point of view, a property that cash flows at 5.125% is a loser at 7% unless the price is significantly lower. |
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jspoto
Posts:218
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| 06/13/2008 3:16 PM |
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| you guys might be right, but nobody know's for sure. rates might go up - prices might go down another 10% - My point is that you can lock in a great rate and negotiate a 2003 or better price on real estate today. stop trying to pick the bottom - your not that smart |
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rentingman
Posts:313
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| 06/13/2008 4:06 PM |
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JSPoto The posters are right and prices will continue to fall. You do not need to be very smart to pick near the bottom. There are a lot of indicators. All of the following indicate prices will continue to fall for at least a year: Record high foreclosures; Record High delinquent taxes; and Mortgage payments double to triple rents. Those are the easy ones then if you include, higher gas prices, falling countywide employment, resetting negative ams (Option ARM) loans, continued tougher mortgage criteria (downpayments, documented income, and lower debt to income), and historically high home prices to income it is obvious there is a lot of downside risk.
JSPoto, please tell me why prices will rise? I know the standard reason given: Everyone wants to live in San Diego, all the foreigners will buy, and baby boomers will retire here. Of course on closer inspection they do not hold water. I know it is hard to believe but retiring foreigners are not lining up to buy homes in Poway. |
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UnsureBuyer
Posts:212
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| 06/13/2008 4:52 PM |
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[quote]stop trying to pick the bottom - your not that smart[/quote]
I suggest holding onto that stone instead of throwing it... :) |
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LoonyQT
Posts:904
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| 06/13/2008 5:08 PM |
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| ditto unsurebuyer - especially when the stonethrower uses 'your' instead of 'you're' |
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gcurtis1
Posts:8
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| 06/13/2008 6:02 PM |
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| I am trying to follow all the conversations and learn as I go. My husband and I want to buy a home. We need a larger house because we have 4 children and the houses that we fit comfortably in are just at the top of our budget and slightly beyond. We aren't sure whether to wait and see if prices in San Marcos will drop significantly and then try to factor in a payment with a higher interest rate or should we try to stretch our budget. Any suggestions? |
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rwsinmissionhills
Posts:313
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| 06/13/2008 7:20 PM |
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I posted something like this on another thread, but here is what happened to me to my great benefit.
Long ago, I bought a house when fixed rates were 10%. When rates dropped, I refinanced.
I noticed that when rates started to drop, prices started to rise. I am sure prices rose for many reasons, but think of this: At 10% interest, the first year interest payment on a 300,000 loan is $30K. At 6%, the first year interest is "only" $18,000. That's a difference of a $1,000 a month--a big difference for most people.
What you can pay every month is going to determine how much you spend on housing. It is also going to determine how much everyone else can spend on housing. It has to (even if you don't realize it right away!) Rising payments, for whatever reason (prices going up, interest rates) will eventually put downward pressure on prices. Classical economic theory (and real world observations) says less dollars chasing around the same inventory drives prices down (in a normal market when you have rational people)
In my case, I really benefitted from the fact I bought when interest rates were 10%. Because the interest rates helped keep prices low, I bought low and now my taxes are forever low thanks to prop 13. I don't live in the house anymore. One of the reasons I kept it was because of that nice low tax rate. Might be a nice thing in retirement.
At peak, I could have sold the house for 800,000. Someone would be paying $10,000 a year just for taxes if they bought that house!!!! Because of prop 13, I pay only a little more than 2000 (taxes do increase every year, but they increase is capped).
In my case, it gets even better. Prop 60 allows people 55 and over to do a one-time transfer of their tax base if they buy a house of equal or less value in the same county. That means, at some point, I could go back to using the place as my primary residence, and after I am 55, sell it and move to a new house of equal or lesser value and keep the same low tax rate. This is great for old people who sometimes need to leave a two story house or something that is too far away and move closer to town or to a one level house.
I could have another 40 years in me. If I save $8,000 a year in taxes, that would be a tax savings of about $300,000. That's mind boggling! (of course, I could have just cashed out at peak, invested the gain in...something... and that may have been OK too, but that's another analysis. And, it is comforting to know I have a nice, cheap place to live in in geezer-hood. A bank statement doesn't give me the same warm fuzzies...especially with all this corporate fraud etc. I can always live in the house and I always know what it is worth to me. It's harder to do that with a portfolio)
So, rising interest rates are not the end of the world. I never thought interest rates would go as low as they did, but when the did I refinanced. This turned out to be great.
One thing that helps is to take the long term view. Buy something you really like and can imagine affording and loving over the long haul. |
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LoonyQT
Posts:904
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| 06/13/2008 8:12 PM |
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| gcurtis - San Marcos is taking a beating price-wise already. In my opinion, while San Diego will reduce prices further county wide, the already heavily discounted areas will maybe not fall as much as other areas that haven't bit hit as much yet. If I were in your shoes, I would start seriously looking for a bank owned property starting in September with the intention to buy around the holidays and/or keep an eye on what the government will be doing incentive-wise next year. This way you get the 7k tax credit for buying REO AND you can lock in a lower interest rate. That's just me - I think the bottom won't hit in general until 2010 at the earliest. |
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gcurtis1
Posts:8
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| 06/14/2008 8:40 AM |
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| LoonyQT -- Thank you for your thoughts. It good to hear that if I wait for a few months then I won't have missed the real estate boat. I will definitely take your advice about waiting until later on in the year and we'll see what happens. |
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Brian
Posts:2276
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| 06/14/2008 11:07 AM |
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Interest rates will definitely go up. I would not be surprised to see 10%. There are some macro factors to consider:
1) Inflation. Commodities and consumer prices are increasing.
2) In a normal situation, money should flow from developed economies to developing economies. The reversed occurred thus keeping interest rates in USA low for the last decade. Other parts of the world are now politically stable and money will flow away from USA to those developing countries (Brazil, India, China, Eastern Europe, etc...).
Best to buy when rates are high and prices are low.
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jspoto
Posts:218
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| 06/15/2008 9:24 PM |
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| LoonyQT - thanks for correcting the grammer on my earlier post. When I hire employees to work for my company, I am looking for people with special skills. If you desire you can forward your resume to my office. It would be given very special consideration. I love hearing everybody saying how dumb it is to buy today - please keep it up. Convince as many people as you know not to buy and keep renting. I need a constant pool of renters available to lease my properties to. As per, LoonyQT, Please keep renting until 2010!! NOBODY SHOULD BUY UNTIL THEN. |
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Brian
Posts:2276
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| 06/16/2008 8:32 AM |
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Entitlements are another macro factor to consider as the baby boomers retires. We very well could end up with high interest rates and low house prices, thus sinking the retirement plans of millions of Americans.
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The New York Times
June 16, 2008
Bernanke: Entitlement Spending May Hit Rates, Growth
By REUTERS
Filed at 10:57 a.m. ET
WASHINGTON (Reuters) - Rising spending on U.S. Social Security and Medicare programs, if unchecked, will inflate national debt and the budget defect, ultimately affecting interest rates and economic growth, Federal Reserve Chairman Ben Bernanke said on Monday.
"There are limits to how big the deficit and the debt can be. Soon it will begin to have effects on interest rates, it will have effects on economic growth, and on stability, so ... it's not just balancing the federal budget, it's really a much broader question of the stability and strength of our economy over a longer period of time," Bernanke said in response to questions at a health care event on Capitol Hill.
(Reporting by Mark Felsenthal; Editing by Theodore d'Afflisio) |
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