The Carnage of todays mortgage rates

The potential borrower/buyer pool has now shrunk by -56% since 2021 when rates were 3%

Cash buyers will dominate and guess who those people are? Institutional investors mostly.

We need a reset in a major way or our kids will only become homeowners when we drop dead and leave them aa house. Its stuff like this that makes me believe a crash is inevitable even tho the data (at this precise moment) says otherwise.

9 comments

9 Comments

Brad Stevens

Oct 21, 2023

Crazy stuff happening these days. Something I haven't seen discussed here.... What about rising costs of home insurance? Electricity is also up almost 50% in the last few years. Talking again about affordability. Perhaps they're trying to turn this country into Europe. We can all live 8 deep in 2 bd/2ba apartments.

BigBallss

Oct 22, 2023

Replying to

Insurance is crazy right now. It's harder to get on a new purchase and waaaay more expensive. My insurance on the lake arrowhead home has doubled and this is after State Farm threatened to cancel altogether. Great point Brad. Insurance is a cost of homeownership that many are not taking into account right now. I started watching my electricity bill closely in March 2019 after I bought an electric car and I havent seen a dramatic change there. But I'm expecting rate hikes.

TEE

Oct 20, 2023

Why didn't prices crash when rates were 18% in 1981?

Java

Oct 21, 2023

Replying to

Because real estate is seen as an inflationary hedge. And if they'd stayed at 18 for a long time perhaps they would have eventually fallen as confidence and things broke apart.

Another reason is sellers suppressed supply because they didn't want to sell and lose their 5-6% mortgages and then borrow at 18%. For the new place.

There was a huge market in assjmable mortgages back then. If you could assume the remainder on someone's mortgage at 5-7%? That severely buttressed the price and value of that home. People played all sorts of games back them to sustain those lower interest rate mortgages and not let them die

My mom

Had to take a second on our house to pay for a new roof and had to borrow at those rates. Was pretty awful

BigBallss

Oct 22, 2023

Replying to

Prices remained flat in the 1980's. Demographics helped keep prices stable. Millions of baby boomers came of home buying age in the 70's and early 80's which helped demand .As this chart shows, prices remained pretty flat until around 1985 when rates started getting better as inflation declined. Similar Demographics are helping demand now, along with a lack of building from 2008-2018

Edited

BigBallss

Oct 22, 2023

Replying to

Good point about assumable mortgages. I used to see those when I got into real estate lending in the late 80's. Houses being sold with wraparound mortgages ( also called, all inclusive trust deeds) . Haven't seen that in years but I wonder if they will make a comeback now that so many people have 3% mortgages. A buyer can assume the 1st instead of getting an 8,9, % or higher.

Daystalker

Oct 20, 2023

Just listened to the most obnoxious drunk real estate agent lady going on and on at the sushi bar at lunch. This lady was not good looking and is not getting any younger, so she is screwed. Just on and on, bleeting like a loud goat in between gulps of white wine about how bad it is out there. Almost ordered her an extra handroll to keep her quiet. Almost. It was a bad scene man, too ugly to pay her any attention, but too loud to ignore.

Edited