Uh oh Mortgage rates

Thank you and no not a long post at all enjoyed the read very informative.

Hey rwc1952, Thanks for the question. I took a break from posting because the football season started and i got busy posting about that. I live, eat and breathe residential Housing Industry news. I enjoy posting about it. Rates today for a 30 year fixed, single family residence, are 6.375%. If you are buying a condo the rate is 6.75%. Condo's and 2-4 units pay higher interest rates, than a single family residence, fyi. If you are an investor buying an investment property the rate is well into the 7's. Today.

So lets say you are regular buyer wanting to buy a house to live in. The payment at todays rate on, say, a loan of $500,000 is $3119, Principal and interest. In March the rate was 3% and your payment $2108. So over $1000 dollars more for the same house. Thats no fun.

The Fed has basically one tool to fight inflation. Interest rates. We saw the playbook in the 80's, raise rates until you crush real estate and create massive layoffs to stop consumer spending. Back then, they forced mortgage rates into the 13's%. They wont go up to that level this time but they will get above 7% here pretty soon. After yesterdays news on inflation, we can expect more increases to rates. Increase in interest rates will also start creating unemployment. Many mortgage companies are shutting down due to lack of business, laying off thousands. Another FED objective is to create what they consider "healthy unemployment". Layoffs will begin happening as we approach the 4th quarter. If people don't work they can't pay their house. How will it all end? Home prices will drop 10% to 15% by next year. Basically wiping out the COVID bump. Many of those folks that stretched their budgets to buy will be underwater and will begin walking away from their house. That will cause a drop in prices that will force pre pandemic buyers to also walk away. At minimum those that put low down payments at time of purchase. The government will step in to stem the flow of blood, but the market ultimately speaks.

Right now we are seeing houses sit on the market unsold as buyers process the payment shock. Days on Market are increasing every day for listings. Some overheated areas like Boise and Austin and Phoenix are seeing huge price drops as Sellers get a taste of their own medicine. In Socal, which im watching closely, we see builders stopping activity and desperately cutting prices to attract buyers. Inventory (house available for sale) is not increasing in most Socal counties..yet.. but the inland empire is showing signs of cracking. The worst is yet to come. Inventories will increase creating competition among Sellers to attract Buyers, ie, lower prices of homes. The buying season is coming to a close here in 2022. Real estate activity in The winter will be interesting to observe.

The stimmie money, the un employemnt money giveaway, the FED pushing cash into the economy with Quantitative Easing policies,the super low interest rates, all of that was fun but the chickens are here to roost.

sorry for the long post. Updates coming...

{ some of my friends get annoyed when I tell them this, so i started telling them, the drops in value will be to other peoples houses , not yours.}