Hey Augie, actually no. Betting on rates to go back to 2% is probably not a good bet. What pushed rates down to the historic levels of 2% was a combination of factors that created a perfect storm. Trillions were pumped into the economy.The Fed making the decision to put mortgage assets on its balance sheet was the biggie. The Fed was buying every mortgage loan originated in America. So every lender knew that they could originate a loan and immediately sell it at profit with no risk. If you recall we were bombarded with mortgage ads all day and night. When the Fed stopped buying loans it sent rates spiraling up and threw housing into the slump it’s still in today.
In a normal market when rates go up prices start coming down as less buyers are able to afford to buy. As of now, rates have crushed sales volume and prices have cooled but not dropped.
My approach has been to buy when distressed sales are at a high. When foreclosures are ramped up and the Buyer has the negotiating advantage over the Seller. Where I can negotiate hard. Clearly that is not the case today. Or when banks are loaded with real estate owned that they need to unload. I ran a REO dept for Home Savings for a few years in the 90’s. The pressure to unload properties at discount prices is heavy at those places. Non performing loans kill a banks balance sheet.
My objective is to never pay more than 80% of the market value of a property. I need to have equity baked into the purchase on day one rather than betting on appreciation to make money. I walk away from 90% of the deals I’m offered. I’m a small volume guy , buying one property a year works fine for me.
If rates get back to just in the 5’s is good enough.
Thank you Bruddah51, anyone can question my knowledge of football, and on this board they often do 😂, but my financial services resume is bullet proof.
Home prices are such that a young couple will find it very difficult to buy a home. There are loan programs out there that allow you to buy with as little as 3% down. But with such a low down payment there will be mortgage insurance, property taxes are high and now even a homeowners insurance policy is also very expensive. Then the wham of high mortgage rates! The monthly payment on just a regular house s going to hit $6000 a month. Wages aren’t keeping up with that. Curiously homeownership in America is over 65%. Close to the highest on record. Homeownership rates are highest among people in their early 70’s and lowest among people in their 20’s.
It warms my heart to hear how you guys banded together to help your kids buy a home. Kokua is a blessing. And guess what? When you help someone it boomerangs back. I lost both parents at a very young age, it was messed up, but the lessons they taught me, along with my business school experience carried me. Along with some great timing and complete dedication to hard work. I have been fortunate enough to be in a position to help my kids too.
When it comes to home prices people can have short memories. Price crashes do happen, just 10 years ago we were in a severe downturn. It will happen again, when is the question we can’t answer.
Good talk, on a board replete with conflict and hate, you manage to stay positive with everyone. Cheers!
Hey Augie, actually no. Betting on rates to go back to 2% is probably not a good bet. What pushed rates down to the historic levels of 2% was a combination of factors that created a perfect storm. Trillions were pumped into the economy.The Fed making the decision to put mortgage assets on its balance sheet was the biggie. The Fed was buying every mortgage loan originated in America. So every lender knew that they could originate a loan and immediately sell it at profit with no risk. If you recall we were bombarded with mortgage ads all day and night. When the Fed stopped buying loans it sent rates spiraling up and threw housing into the slump it’s still in today.
In a normal market when rates go up prices start coming down as less buyers are able to afford to buy. As of now, rates have crushed sales volume and prices have cooled but not dropped.
My approach has been to buy when distressed sales are at a high. When foreclosures are ramped up and the Buyer has the negotiating advantage over the Seller. Where I can negotiate hard. Clearly that is not the case today. Or when banks are loaded with real estate owned that they need to unload. I ran a REO dept for Home Savings for a few years in the 90’s. The pressure to unload properties at discount prices is heavy at those places. Non performing loans kill a banks balance sheet.
My objective is to never pay more than 80% of the market value of a property. I need to have equity baked into the purchase on day one rather than betting on appreciation to make money. I walk away from 90% of the deals I’m offered. I’m a small volume guy , buying one property a year works fine for me.
If rates get back to just in the 5’s is good enough.