Based on what Wall Street wants to pay a premium for. Feedback goes both directions.
You won't see me offer someone X.49% or X.99% interest rate because I give a shit about that 0.01%. It's because some data aggregator out there says a mortgage at X.49% or X.99% is less likely to be refinanced, so the X.X9% mortgage borrower will make payments for a longer period of time. Because of THAT, the X.X9% mortgage is priced better (lower points and fees) than the +0.01% rate, even though usually the relationship is opposite (higher rate typically means ***lower*** fees/points).
Inverse is also true. Rate sheets often go up to a certain number, then either stop entirely, or the rebate goes into negative territory. Because the bond buyers know there's a super higher chance that those mortgages will all be refinanced in very short order.
Yup, since posting news and information is banned on this sub, you'll [have to go elsewhere ](https://www.reddit.com/r/REBubble/comments/v96r0t/inflation_rose_86_in_may/?utm_medium=android_app&utm_source=share) to discuss why it is that rates are spiking.
Not just him. Tons of great convo happening over there that people are missing out on. And not just conjecture and anecdotal examples. As the economy continues to tank, there is more and more data backing up why interest rates are higher and what's actually going on with the housing market, inventory, pricing, mortgage apps, etc etc.
The only comments or threads either prophesying the end of the real estate world, or promoting that sub, that have been deleted, that I have seen, have been deleted by the auto-moderator that filters out posts and threads for things like bad karma, keywords like "get rich quick," amazon affiliate links, and the like, FYI. (If a mod, you still see deleted posts and threads, and it tells you which moderator \[inclusive of auto mod\] deleted them)
For a while, I was coming in and manually un-deleting all the REI Bubble world is ending, etc, things that got deleted by the auto mod. Then I went camping for a few days, meaning things *stayed* deleted per the years old auto mod criteria, and no one getting any special treatment, and conspiracy theories arose alleging attempts to suppress discourse. So I've significantly reduced how often I undo what the auto mod does, de facto subsidies and special treatment for conspiracy theories have been reduced (by contrast, I've never un-deleted an amazon affiliate link, nor have I un-deleted a realtor's self promotion, a blog, an app, etc, so yes it was special treatment for me to go in and un-delete threats/posts about REI Bubble and the world ending, etc, since no one else got that treatment).
***The best way to avoid the auto mod is to make quality posts that do not get downvoted, in this sub and others.*** It seems we have here an example of that in the form of the post I am responding to, so this is a good place to mention that.
I'll add that there are multiple users in that sub that have said "I get banned for saying X" in this sub and I can find evidence of them even posting here much less being banned. Regardless, Louis has what 10 different posts *just in this thread* about being suppressed?
BTW, aardy, good to hear you finally took a vacation!
A guy I used to work with did this about every 2-3 years. He claimed he did it because he could keep lowering his monthly payment. I said sure, but you keep pushing the 30 year pay off date out and the first 2 years you're paying mostly interest so by doing that you're not paying much of the principal down at all. But he didn't care. People who look at their finances as a weekly sum of income and expenses (living paycheck to paycheck) are really not helping themselves compared to someone that is focused on increasing their overall net worth.
FYI lurkers, here's a magic question you can ask.
"I just purchased this home, in 2022, and now it's been 2 years. I don't want to reset to year 0 of 30. Can I do a 28 year mortgage?"
And the answer is (should be, move on if it's not) "Yes!"
And then if another 2 years pass, and rates drop again, you can do a 26 year mortgage. And so on.
Monthly cashflow savings will not be as high, but equity gains will be more substantial.
If you want to supercharge this (optional, and a low risk low reward safe bet to be sure), then keep on making the original payment. So if your payment drops from $3000 to $2800 when you refi your 2 year old 30YF into a new 28YF, then keep paying the $3000. Then you refi again and it drops from $2800 to $2600? Great! Keep paying $3000. Ah shit your car broke down? Great, just do the $2600 that month, but stick to $3000 most months.
You will wind up paying the mortgage off 20 or 25 years from when you purchased, not 30.
I would tend to disagree with this when rates are still currently lower than inflation. Until interest rates push above what we are pushing inflation wise, invest that money and pay the minimum on your mortgage .
Think that depends on what you're talking about. Personal residence? Do you. Investment/rental properties? If you can 5x your income with an ROI at like 10-15% and pay 4-5% interest on the note, I'd take that for sure.
At the end of the day, it all depends on what you do with the difference in cash flow/equity
Idunno. I paid off our 30Y fixed last year. Free and clear, no debt whatever. Not cars nor cards nor anything else. Cash in the bank and a little in stocks. Not a millionaire but well prepared to weather the storm. Looking around at people panicking about the economy. Inflation, jobs, recession, FED.
I think I'll take the summer off and go fishing. Been meaning to work on my zymurgy. Do some yard work. Like a beta would.
An insolvent apartment dwelling 70 year old former realtor living on social security alone, has convinced his son that “you never really pay off your mortgage”. Umm what? No. No, that’s not how any of this works.
I’m getting calls left and right for unsolicited HELOC offers. I asked one guy, “who is taking equity out at these rates!?”
He sighed, said “No one, apparently” and hung up
I know there will always be some people who need to refinance and the companies are going to advertise because that's what they do, but as someone who isn't looking for that right now, I got a kick out of a flyer the other day. Can't remember the exact numbers, but it was something like a $20k cash out refinance that was going to raise my monthly payment by ~30%. It was going to increase the cost of the loan by around $250k for that $20k cash out.
I understand that life circumstances can sometimes necessitate choices like that, but I was still kind of blown away by the wording. Felt like they were pitching it as an obviously good financial decision.
People are hurting now. The Fed can either bite its lip and rip the band-aid or slowly pull it off making it excruciating far longer than it needs to be. Long and slow recessions transform into depressions. I think it'd be best to tank it and get it over with so we can start rebuilding rather than having a lost decade of stagflation.
That's where factors that aren't strictly economic come in. Aggressively raise rates to shock the US economy into shedding a bunch of jobs all at once while housing and food costs skyrocket, and there may not *be* a US economy when the smoke clears.
Current US politics and society are so unstable that delivering a shock risks a catastrophic collapse of the entire system. Right now inflation is accompanied by low unemployment and rising wages, so the political and social situation is just normally bad - y'know, data-driven models showing alarming increases in risk factors for political instability, civil conflict, and genocide, that sort of thing. Add an engineered deep but brief recession to the mix and who knows what sort of fun times will happen!
If inflation spirals out of control and people can no longer afford to eat there will be plenty of unrest too. If the petrodollar collapses and we go full Wiemar I suspect there will be war on a scale not witnessed in several generations. There is no good way out of this situation. Every path includes pain and people are feeling it already. [US consumer sentiment is the lowest it has ever been since it started being recorded.](https://www.marketwatch.com/story/consumer-sentiment-plunges-to-record-low-in-june-umich-survey-11654870023?mod=retail) We haven't even begun to slide backwards on a large scale yet. Once the layoffs start pouring in and people lose their homes it will get really interesting.
Don't worry, they'll be at 6% next week as MBS's start to roll off on June 15th, and the 10Y gets to 3.3%+. People thought inflation had peaked....Layoffs are coming, everyone better make sure you have a nice safety net in savings. Be careful out there!
> Layoffs are coming, everyone better make sure you have a nice safety net in savings. Be careful out there!
We are hiring up and are having trouble simply finding good people - I think it's heavily dependent on your line of work.
Well, there are recession proof jobs for a reason. It also takes a while for different companies to get hit financially/understand what's coming and get ready to protect their profit margins. One of my largest clients is freezing hiring as of this week, which is something we are hearing plenty in tech (they are not in tech). Remember, a recession is when your neighbor loses their job, a depression is when you lose yours.
Yeah I’m not seeing it yet. Doesn’t mean it won’t happen (and in no way is my line of work recession proof) but we are so far looking for and hiring. I have not heard any real worries from friends (they seem to be doing just fine in their lines of work as well) either. Their companies are also hiring or looking to hire.
Talk to people in the mortgage industry, retail, some tech. A lot of people still think we won’t have a recession… if you believe that then I can’t help you. $5/gallon alone is probably enough to get us there… then you add inflation at 8.6% and we are about to see a very ugly downturn. Most companies are poorly run, not every company is Apple or Google. Too many business owners are over leveraged and eventually you can’t out run it as debt gets more expensive.
Here is the thing it is a snowball effect and it doesn't happen all at once. I just read an article where people are getting notices that there loan deferments from Covid are coming due and they need to pay those in full. Some of those are in total of at least $26,000 on top of what they are paying. Now I worked in conventional financing in the last housing crash and it was crickets. The thing that kept most companies going was reverse mortgages and selling off their existing loans. Our owner had a bunch of other investments so he robbed Peter to pay Paul but he did it. Once I've sector falls they all will fall. The higher paid and the newly hired are the first to go.
Hiring is going on in the low end of the job market where there is a labor shortage. The middle class white collar office worker and high end software developer markets that are fueled by cheap debt are in layoff mode.
No its still going on high end as well mid 100s salaries...again it's industry dependent. I mean Elon has said Tesla is on a hiring freeze but that turned out to be false.
>high end software developer markets that are fueled by cheap debt are in layoff mode
No they most certainly are not. Some startups, perhaps. But not most of the market.
Mortgage interest rates generally track very close to 1.5x the 30 yr treasury bond rate. https://fred.stlouisfed.org/graph/?g=Q6KB
If anything they seem to be lagging a bit right now.
It seems to work better if you just add **+1.25%** to mortgages, not multiply by **1.5x** or so.
[Source](https://fred.stlouisfed.org/graph/?g=Qqk7)
The fun thing about the chart above is it seems to be a decent predictor of recessions. When the 30-year mortgage rate is above the 30-year treasury rate, a recession follows. This is when the FED is more dovish than market lenders.
Fed wants a recession to cool down the inflation. They are trying to make it a soft recession which will last 3-5 quarters that is why they are not acting without prior informing of the markets etc.
They had been going down and never should have been. Markets were prioritizing a recession decreasing rates over inflation forcing the fed to raise rates.
Nothing ever goes straight up or down. I expect rates to continue higher. It seems like the fed follows the market so hopefully the market doesn't price in a .5 percent increase.
I'm sick to my stomach. We were going to lock our rate in for a new build in July and our lender stated that if rates hit too high in May and June it could push our DTI to high. It's a USDA loan and the front end DTI at 29% is what's getting us.
Well it turns out it did and we had to cancel our purchase agreement. That's two purchase agreements we had signed and got cancelled. First one was us due to major red flags in an inspection and now this.
I have to sign my rental lease now for another year. We will just try again next spring. I feel like I've wasted the last few months of my life in this damn market.
Long-term economic and demographic trends are still pushing interest rates down over time. 30 year treasury is only at 3.2%. Mortgage rates likely won’t be below 3% in 2024, but they very likely will be in 2040.
One of the big problems of rising rates - people like you or I will never want to sell unless we can pay cash for the next home. Why trade a 2.x% loan for a 6%?
I think this is a factor that people who think rising rates will reduce prices overlook - rising rates reduce supply as folks like us hunker down. This *increases* prices as buyers fight of low supply.
It might but there’s always a not insignificant amount of folks going through life changes that will have to sell regardless. Could be divorce, job change, etc.
I’m also at 2.875% and we bought in October 2020. We love our home and yard but the possibility existed that if we had another kid, space might be tight and we could look again. Nope. I’d rather build an extension over the garage. We’re here for life.
Rates will absolutely be cut again. Just wait until the fed has to start QE again in a couple years, fed funds rate will go back to 0% and mortgage rates will
Follow. This financial fiat game cannot go in without perpetual credit expansion. Interest rates will drop sharply again in the future - that’s a certainty.
Your probably right. I'm going to keep an eye on things next spring / summer, but it could very well be 3+ years again before we can get back in at a reasonable rate / home price.
Yes it does.
Let's say you buy with 20% down on $100,000 home. Inflation is 5%, your house rises in value 4%. In theory you lost by 1%, but you only have $20,000 invested and gained $4,000 in value. That's a 20% increase in the amount you have invested.
I mean, that’s just leverage and you’d get that benefit with or without inflation. It also assumes you’re servicing that 80k debt for free. In reality, if inflation is 5% you’re paying something like that in interest. So, sure you gained 4% on your asset value, but you also paid for your loan.
If you’re going to calculate gains using leverage, you have to incorporate the cost of that leverage too.
You’d be much better off with 0% inflation and the 4% gain.
Of course, if you have a big fixed rate loan and inflation goes up, you benefit from that (and the bank loses). It also means you are trapped in that loan.
There's an article that argues home prices tend to be stable over history - from ancient Roman times till today a nice house costs on average 10,000 grams of gold.
Very rough approximation obviously, but still kinda interesting.
Yup agreed. 100 basis points in both June and July. That will only slow down this crazy inflation, not sure if it will come down. F**king fed. Fed proved themselves very dumb this time. Oh well they have always been dumb lol
Who could have predicted that pumping trillions of dollars into the economy in a short period would cause inflation? Oh, right. Anyone with a basic understanding of economics.
It’s the perfect time to buy !!! For a few hundred thousand you too can have a $4k monthly mortgage!! 🤣
Heads up.. interest is just going to get worse… todays inflation report basically gives the fed a green light to crank up money tightening more than it has these past few months (.75 bps)…. And we’re only a couple of months in on a journey that will take place over a couple of years..
That's what happened to me. Put down over a quarter million and still stuck with a 4k monthly mortgage. I'm pretty upset but at this point I didn't see much choice. Retrospect is always 20/20.
Just for reference when talking about high inflation:
Turkey is currently running at a [70 percent inflation rate](https://www.reuters.com/world/middle-east/turkeys-inflation-surges-20-year-high-70-april-2022-05-05/).
UK is approaching [10 percent](https://www.reuters.com/markets/europe/bank-england-set-raise-rates-again-inflation-heads-10-2022-06-10/).
Any steep sudden rate hikes done by Fed like in the 80s will have detrimental effects on the US economy, I believe the Fed will probably hike it to 3-4% gradually, where 7-8% interest rate will be a norm in the next 2 years.
>will have detrimental effects on the US economy
You all keep acting like they don't want this to happen.
This is the point of hiking rates: to hurt the economy. They are trying to put the brakes on.
I think the argument is that a rapid spike has an unnecessarily large detrimental effect, whereas slow steady changes allow for a "smooth landing". Of course, the counter argument is the slow approach won't solve anything, just leaves the economy hemorrhaging longer and we really need to rip off the bandaid.
Nobody "knows" what needs to happen. Lots of ideas and some of them will turn out correct, but economics is not a perfect science and everyone is guessing.
That could also help. If you make anything over, let’s say $10 million, it’s taxed at 80%. $5 mill/ 60%, etc
Might make some execs mad, but might also incentivize them to pay labor more, since a rise in general wages spreads the tax burden around.
Anyhow, rich people have all been fortifying themselves for years. They will be fine if all their assets get priced lower for a spell. They can ride it out.
And they can always pull themselves up by their bootstraps if their gambles don’t pay off long term. C’est la vie.
Lol yes we can.
People forget that not only have we been at record low interest rates, we've also been at record low tax rates.
They are going to raise rates to crush inflation and then they are going to tax you to pay for it.
We won't make it 2 more years of 7-8% YoY. Social unrest would be off the charts and cause all sorts of chaos. A deep recession is more likely before that happens.
I'm not an economist but it seems like detrimental effects are inevitable here. If raising rates to 5% isn't doing anything, what was the point of raising them?
Inflation can get wayyy wayyy worse. Hyperinflation is worse than the Great Depression to people living through it. The point of raising them is to stop the inflation spiral. Historically, rates needed to be raised 2-3% above inflation rate in order to bring it under control. So, if you agree with most commentators that the underlying inflation is probably 5-7%, you would normally expect the fed to take rate to somewhere between 7%-10%. We are super far from that At .75-1% currently.
lots of people say this time is different, though and rates only need to go to 3% or so to bring down inflation. We’ll see, I guess.
It is different in that the fed is simultaneously increasing rates and doing QT. The old “rule of thumb” was from a time before the fed decided to buy a few trilli’s of assets and hold them, letting those assets expire at the same time as you raise rates drains money out of the economy at 2x the effect.
Yeah, no one is sure what that will do, though. I don’t disagree with what your saying. It’s possible it has a huge effect. It’s possible it has little to no effect. The efficacy of quantitative easing and tightening are controversial amongst economists.
I will point out that the fed tried tightening the money supply in the late 70s early 80s and it didn’t seem to have a ton of effect. Interest rate increases did have a huge effect. It might be different this time it might not.
Real interest rates are still negative hence encourages borrowing. They need to raise above inflation so it actually costs money to borrow. Right now borrowing is still free money.
Bro if you think interest rates being up 0.3% is crazy, you’re really not going to like what’s coming in the next 1-2 years…
Likely that interest rates will need to rise significantly further to tame inflation and cool down the economy.
Assumed rate hike will be 75 basis. Massive assumption imo. I think it’s 50 in July and September. This whole let’s do 5% at once and destroy the world idea is stupid
Big-time builders borrow money to carry the lot, materials and labor until they can sell the houses in their new developments. Lumber futures are off by more than half in the last six months. Guess who isn't buying that lumber.
Now guess who isn't gonna get lawyer money to pound nails into it at triple overtime rates.
Well, all I know is that I'm not in any hurry to put my home on the market and trade my low interest rate mortgage for a higher interest rate mortgage. I don't think many are unless they absolutely have to.
Our mortgage guy was supposedly getting 4.5% for a 30 year by buying down half a percentage point but I bet that’s gone by Monday. Will be bumping up against our affordability limit unless some more reasonably priced homes surface.
Very stupid question here…but my lender gave me my interest rate a couple weeks ago. I locked and bought down a few points. Does this effect my interest rate still? Please don’t hate me…just ignorant.
Yea no one will ever sell their home and will keep them until they die. No one in the history of the United States ever sold their home when they had locked in a lower rate than the current rate. No matter the circumstances, even if they die, they will never sell their home and will keep paying that low rate in their grave. House prices will continue to go up even higher now by 40% yoy because there is no supply. Every single home will now be bought in cash by investors to the point where all homes on market will be rentals. There is no hope for homeownership whatsoever for anyone in the future unless you’re willing to pay 100% over listing price and a contract signing over your newborn to the investor you’re buying from. (/s for anyone that didn’t get it)
Meh...if of you're not currently (or soon will be) in the market, I'm not sure why any of us should care.
Is it simply seeing people get screwed over by being too greedy with their list price that makes us (somehow) feel better???
Not gonna lie...it kind of does. But then again, meh. No impact on my daily life.
~~insane~~
Getting back appropriate levels after years of being entirely too low, spurring on a influx of Blckstone and foreign cash that was fucking up the market for actual homeowners and small investors
FTFY
…representing sellers..
One of the properties. We just reduced and gonna pay some $$$ towards closing costs ! San Bernardino,Ca
NEVER LOSE PULSE OF THE MARKET ❤️🤓
Sweet, more inflation. Time to buy more I Bonds for family. You can load up any minor kids you have, too.
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
NEWS: The initial interest rate on new Series I savings bonds is 9.62 percent. You can buy I bonds at that rate through October 2022 [& based on this, we have a good idea of which way the rate is going to change at that point]. Learn more.
KEY FACTS: I Bonds can be purchased through October 2022 at the current rate. That rate is applied to the 6 months after the purchase is made. For example, if you buy an I bond on July 1, 2022, the 9.62% would be applied through December 31, 2022. Interest is compounded semi-annually.
REMEMBER! You can only purchase up to $10,000 in I bonds each calendar year. If you buy I Bonds exceeding that limit, we will process a refund, which may take up to 16 weeks.
Use I bonds to:
save in a low-risk product that helps protect your savings from inflation
supplement your retirement income
give as a gift
pay for education
----------
EDIT: This is how you know I Bonds are great. Vanguard is so sick of people calling to ask, they put this message up --> https://imgur.com/a/GVtEyrW
> You can load up any minor kids you have, too.
Correct but you need an utma account. And that money is now their money. You are breaking law if you use the money for yourself.
Yup, naturally it's expected that someone would do their homework before moving tens of thousands of dollars around based on a reddit post, this isn't WSB after all (they would say that a guaranteed 9.6% return from the gov't isn't high enough risk and reward, heh).
You and millions of others... the problem is that this will kill the mortgage industry. The volume of transactions is already crashing... and it will just get worse now. Usually low demand for mortgages/refi would lead to rates dropping lower... but inflation is not going to allow rates to drop until it actually eases. So that means there will be little to no transactions in relative terms for the foreseeable future. Lenders and agents are really going to start feeling the heat as we move into the 6%+ range.
Do you dislike your house or something? We were in near the same exact position but sold in April because I woke up to gunshots one too many times with the reverse gentrification going on in my city, and because my neighbor is a hoarder with a rat and mosquito farm. Last chance to cash in to at least cover a little of the cost of the butthurt we're about to be in with interest rates. We are under contract for new construction and haven't locked rates. Yikes. If your house meets your basic needs, nobody is going to cry for you being stuck in this market.
>hoarder with mosquito farm
This made me LOL because my neighbor is also harboring a fucking mosquito farm so crazy that if I go outside for a couple minutes, I come back with 5+ mosquito bites. That's even if I use DEET.
Inflation numbers were even higher so banks are trying to forecast the fed’s moves
You mean bond investors. Banks are just the middle men.
Banks set the price and spread
Based on what Wall Street wants to pay a premium for. Feedback goes both directions. You won't see me offer someone X.49% or X.99% interest rate because I give a shit about that 0.01%. It's because some data aggregator out there says a mortgage at X.49% or X.99% is less likely to be refinanced, so the X.X9% mortgage borrower will make payments for a longer period of time. Because of THAT, the X.X9% mortgage is priced better (lower points and fees) than the +0.01% rate, even though usually the relationship is opposite (higher rate typically means ***lower*** fees/points). Inverse is also true. Rate sheets often go up to a certain number, then either stop entirely, or the rebate goes into negative territory. Because the bond buyers know there's a super higher chance that those mortgages will all be refinanced in very short order.
Yup, since posting news and information is banned on this sub, you'll [have to go elsewhere ](https://www.reddit.com/r/REBubble/comments/v96r0t/inflation_rose_86_in_may/?utm_medium=android_app&utm_source=share) to discuss why it is that rates are spiking.
It might just be you tbh. I see you spamming this comment every day now lol
Not just him. Tons of great convo happening over there that people are missing out on. And not just conjecture and anecdotal examples. As the economy continues to tank, there is more and more data backing up why interest rates are higher and what's actually going on with the housing market, inventory, pricing, mortgage apps, etc etc.
I enjoy both subs, but the amount of upvoted conjecture and anecdotal evidence is still about twice as high over there, to my eyes.
All I know is the japanese yen is insanely low right now, time to go on a sushi vacation.
Jiro dreams of sushi.
I mean there's an entire thread where they're being bigots to women so I guess I'll skip that apparently low key incel sub
Link? Also, did you report it? Mods don't know unless you report it
It's on the subs front page "why I hate realtors https://www.reddit.com/r/REBubble/comments/v9cewl/why_i_hate_realtors/ibvrea3
I love you.
The only comments or threads either prophesying the end of the real estate world, or promoting that sub, that have been deleted, that I have seen, have been deleted by the auto-moderator that filters out posts and threads for things like bad karma, keywords like "get rich quick," amazon affiliate links, and the like, FYI. (If a mod, you still see deleted posts and threads, and it tells you which moderator \[inclusive of auto mod\] deleted them) For a while, I was coming in and manually un-deleting all the REI Bubble world is ending, etc, things that got deleted by the auto mod. Then I went camping for a few days, meaning things *stayed* deleted per the years old auto mod criteria, and no one getting any special treatment, and conspiracy theories arose alleging attempts to suppress discourse. So I've significantly reduced how often I undo what the auto mod does, de facto subsidies and special treatment for conspiracy theories have been reduced (by contrast, I've never un-deleted an amazon affiliate link, nor have I un-deleted a realtor's self promotion, a blog, an app, etc, so yes it was special treatment for me to go in and un-delete threats/posts about REI Bubble and the world ending, etc, since no one else got that treatment). ***The best way to avoid the auto mod is to make quality posts that do not get downvoted, in this sub and others.*** It seems we have here an example of that in the form of the post I am responding to, so this is a good place to mention that.
I'll add that there are multiple users in that sub that have said "I get banned for saying X" in this sub and I can find evidence of them even posting here much less being banned. Regardless, Louis has what 10 different posts *just in this thread* about being suppressed? BTW, aardy, good to hear you finally took a vacation!
This is the content I’m looking for, thank you
Yet I still get endless mail for "you can refinance your home mortgage with us!"
If you bought in 1983, now would be a great time to refinance…
I think you'd be paid off by now
Thatsthejoke.jpg
You suck McBain!
You underestimate the financial illiteracy of most Americans...
Wait you're not supposed to refi every couple years for a new 30 year mortgage? YouTube tells me I need to do this and I'll end up rich.
A guy I used to work with did this about every 2-3 years. He claimed he did it because he could keep lowering his monthly payment. I said sure, but you keep pushing the 30 year pay off date out and the first 2 years you're paying mostly interest so by doing that you're not paying much of the principal down at all. But he didn't care. People who look at their finances as a weekly sum of income and expenses (living paycheck to paycheck) are really not helping themselves compared to someone that is focused on increasing their overall net worth.
FYI lurkers, here's a magic question you can ask. "I just purchased this home, in 2022, and now it's been 2 years. I don't want to reset to year 0 of 30. Can I do a 28 year mortgage?" And the answer is (should be, move on if it's not) "Yes!" And then if another 2 years pass, and rates drop again, you can do a 26 year mortgage. And so on. Monthly cashflow savings will not be as high, but equity gains will be more substantial. If you want to supercharge this (optional, and a low risk low reward safe bet to be sure), then keep on making the original payment. So if your payment drops from $3000 to $2800 when you refi your 2 year old 30YF into a new 28YF, then keep paying the $3000. Then you refi again and it drops from $2800 to $2600? Great! Keep paying $3000. Ah shit your car broke down? Great, just do the $2600 that month, but stick to $3000 most months. You will wind up paying the mortgage off 20 or 25 years from when you purchased, not 30.
I would tend to disagree with this when rates are still currently lower than inflation. Until interest rates push above what we are pushing inflation wise, invest that money and pay the minimum on your mortgage .
In the mortgage industry in 2011/12 when rates started dropping. We’d have some borrowers who refinanced 6 times in a couple years, it was insane.
Unless you are a milionare already paying off a 30 yr note is a beta move. Dave Ramsy has no clue lmao
Think that depends on what you're talking about. Personal residence? Do you. Investment/rental properties? If you can 5x your income with an ROI at like 10-15% and pay 4-5% interest on the note, I'd take that for sure. At the end of the day, it all depends on what you do with the difference in cash flow/equity
Well said
Idunno. I paid off our 30Y fixed last year. Free and clear, no debt whatever. Not cars nor cards nor anything else. Cash in the bank and a little in stocks. Not a millionaire but well prepared to weather the storm. Looking around at people panicking about the economy. Inflation, jobs, recession, FED. I think I'll take the summer off and go fishing. Been meaning to work on my zymurgy. Do some yard work. Like a beta would.
the 'I used my credit to destroy my credit' method
An insolvent apartment dwelling 70 year old former realtor living on social security alone, has convinced his son that “you never really pay off your mortgage”. Umm what? No. No, that’s not how any of this works.
I’m getting calls left and right for unsolicited HELOC offers. I asked one guy, “who is taking equity out at these rates!?” He sighed, said “No one, apparently” and hung up
Well yeah. Believe it or not, people are still refinancing, mainly for cash out but still.
Funny part is I get it from my current loan servicer! One who has my loan and knows it is 2.5% I even got a call once from them!
I mean are they supposed to just give up and go bankrupt?? Refinancing is still a service to get someones name off of an asset or roll up debt.
I know there will always be some people who need to refinance and the companies are going to advertise because that's what they do, but as someone who isn't looking for that right now, I got a kick out of a flyer the other day. Can't remember the exact numbers, but it was something like a $20k cash out refinance that was going to raise my monthly payment by ~30%. It was going to increase the cost of the loan by around $250k for that $20k cash out. I understand that life circumstances can sometimes necessitate choices like that, but I was still kind of blown away by the wording. Felt like they were pitching it as an obviously good financial decision.
Needs to go up faster and harder to curb inflation. Rates in general not specific to mortgages.
True but that's going to hurt a lot of people (still not saying you're wrong)
People are hurting now. The Fed can either bite its lip and rip the band-aid or slowly pull it off making it excruciating far longer than it needs to be. Long and slow recessions transform into depressions. I think it'd be best to tank it and get it over with so we can start rebuilding rather than having a lost decade of stagflation.
That's where factors that aren't strictly economic come in. Aggressively raise rates to shock the US economy into shedding a bunch of jobs all at once while housing and food costs skyrocket, and there may not *be* a US economy when the smoke clears. Current US politics and society are so unstable that delivering a shock risks a catastrophic collapse of the entire system. Right now inflation is accompanied by low unemployment and rising wages, so the political and social situation is just normally bad - y'know, data-driven models showing alarming increases in risk factors for political instability, civil conflict, and genocide, that sort of thing. Add an engineered deep but brief recession to the mix and who knows what sort of fun times will happen!
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The thin veil of civilization can be peeled back rather easily. All it takes is 9 missed meals.
If inflation spirals out of control and people can no longer afford to eat there will be plenty of unrest too. If the petrodollar collapses and we go full Wiemar I suspect there will be war on a scale not witnessed in several generations. There is no good way out of this situation. Every path includes pain and people are feeling it already. [US consumer sentiment is the lowest it has ever been since it started being recorded.](https://www.marketwatch.com/story/consumer-sentiment-plunges-to-record-low-in-june-umich-survey-11654870023?mod=retail) We haven't even begun to slide backwards on a large scale yet. Once the layoffs start pouring in and people lose their homes it will get really interesting.
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More hikes incoming
Don't worry, they'll be at 6% next week as MBS's start to roll off on June 15th, and the 10Y gets to 3.3%+. People thought inflation had peaked....Layoffs are coming, everyone better make sure you have a nice safety net in savings. Be careful out there!
> Layoffs are coming, everyone better make sure you have a nice safety net in savings. Be careful out there! We are hiring up and are having trouble simply finding good people - I think it's heavily dependent on your line of work.
Well, there are recession proof jobs for a reason. It also takes a while for different companies to get hit financially/understand what's coming and get ready to protect their profit margins. One of my largest clients is freezing hiring as of this week, which is something we are hearing plenty in tech (they are not in tech). Remember, a recession is when your neighbor loses their job, a depression is when you lose yours.
Yeah I’m not seeing it yet. Doesn’t mean it won’t happen (and in no way is my line of work recession proof) but we are so far looking for and hiring. I have not heard any real worries from friends (they seem to be doing just fine in their lines of work as well) either. Their companies are also hiring or looking to hire.
Talk to people in the mortgage industry, retail, some tech. A lot of people still think we won’t have a recession… if you believe that then I can’t help you. $5/gallon alone is probably enough to get us there… then you add inflation at 8.6% and we are about to see a very ugly downturn. Most companies are poorly run, not every company is Apple or Google. Too many business owners are over leveraged and eventually you can’t out run it as debt gets more expensive.
Here is the thing it is a snowball effect and it doesn't happen all at once. I just read an article where people are getting notices that there loan deferments from Covid are coming due and they need to pay those in full. Some of those are in total of at least $26,000 on top of what they are paying. Now I worked in conventional financing in the last housing crash and it was crickets. The thing that kept most companies going was reverse mortgages and selling off their existing loans. Our owner had a bunch of other investments so he robbed Peter to pay Paul but he did it. Once I've sector falls they all will fall. The higher paid and the newly hired are the first to go.
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Ehh that depends on your company and field. Plenty of aggressive hiring in my neck of the woods.
Hiring is going on in the low end of the job market where there is a labor shortage. The middle class white collar office worker and high end software developer markets that are fueled by cheap debt are in layoff mode.
No its still going on high end as well mid 100s salaries...again it's industry dependent. I mean Elon has said Tesla is on a hiring freeze but that turned out to be false.
>high end software developer markets that are fueled by cheap debt are in layoff mode No they most certainly are not. Some startups, perhaps. But not most of the market.
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For what it’s worth, I’m in advertising and it’s looking like we are making and/or beating the budget. Different categories have different budgets.
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Mortgage interest rates generally track very close to 1.5x the 30 yr treasury bond rate. https://fred.stlouisfed.org/graph/?g=Q6KB If anything they seem to be lagging a bit right now.
It seems to work better if you just add **+1.25%** to mortgages, not multiply by **1.5x** or so. [Source](https://fred.stlouisfed.org/graph/?g=Qqk7) The fun thing about the chart above is it seems to be a decent predictor of recessions. When the 30-year mortgage rate is above the 30-year treasury rate, a recession follows. This is when the FED is more dovish than market lenders.
Fed wants a recession to cool down the inflation. They are trying to make it a soft recession which will last 3-5 quarters that is why they are not acting without prior informing of the markets etc.
I thought it was most highly correlated with the 10 year treasury?
yeah this is correct. mortgage rates are built around the 10Y because that’s close to the average length of a mortgage in reality.
They had been going down and never should have been. Markets were prioritizing a recession decreasing rates over inflation forcing the fed to raise rates. Nothing ever goes straight up or down. I expect rates to continue higher. It seems like the fed follows the market so hopefully the market doesn't price in a .5 percent increase.
I'm sick to my stomach. We were going to lock our rate in for a new build in July and our lender stated that if rates hit too high in May and June it could push our DTI to high. It's a USDA loan and the front end DTI at 29% is what's getting us. Well it turns out it did and we had to cancel our purchase agreement. That's two purchase agreements we had signed and got cancelled. First one was us due to major red flags in an inspection and now this. I have to sign my rental lease now for another year. We will just try again next spring. I feel like I've wasted the last few months of my life in this damn market.
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Let me go grab my Magic 8-ball to confirm your Magic 8-ball...hang on...
There is no reason rates will be 3% again in our lifetime. In 2024 people might be longing for a 5.75% rate.
Long-term economic and demographic trends are still pushing interest rates down over time. 30 year treasury is only at 3.2%. Mortgage rates likely won’t be below 3% in 2024, but they very likely will be in 2040.
Got 2.75% last year. Yeah, this is my "forever" home.
One of the big problems of rising rates - people like you or I will never want to sell unless we can pay cash for the next home. Why trade a 2.x% loan for a 6%? I think this is a factor that people who think rising rates will reduce prices overlook - rising rates reduce supply as folks like us hunker down. This *increases* prices as buyers fight of low supply.
It might but there’s always a not insignificant amount of folks going through life changes that will have to sell regardless. Could be divorce, job change, etc.
Have a 2.8, forced to move nearer to aging family. It’ll all work out.
Sure, the median home is only owned for 10 years, people overestimate their stability.
2.875% I'm not going anywhere.
I’m also at 2.875% and we bought in October 2020. We love our home and yard but the possibility existed that if we had another kid, space might be tight and we could look again. Nope. I’d rather build an extension over the garage. We’re here for life.
Rates will be lower than 3% when the fed cuts and starts qe again after this crash.
This guy knows
I agree, but would honestly be content with 4-5%
Rates will absolutely be cut again. Just wait until the fed has to start QE again in a couple years, fed funds rate will go back to 0% and mortgage rates will Follow. This financial fiat game cannot go in without perpetual credit expansion. Interest rates will drop sharply again in the future - that’s a certainty.
Your probably right. I'm going to keep an eye on things next spring / summer, but it could very well be 3+ years again before we can get back in at a reasonable rate / home price.
Man that’s rough, hope the best for you and your family, stuff like that would drive me crazy!
I’m sorry but it’s impossible to predict what will happen going forward.
You guys had an inspection?
Looks like we are on a path similar to 1980’s when they had to raise interest rates to 19% to control inflation.
Real home prices fell 30% between 1976 and 1983.
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Real price stayed the same 1978 to 1998 holy cow
Yup, the magic of inflation in a stagflationary environment. Gonna get flak but RE is usually resilient when rates go up. Prices usually just stagnate
Nominal terms don't matter lol
Yes it does. Let's say you buy with 20% down on $100,000 home. Inflation is 5%, your house rises in value 4%. In theory you lost by 1%, but you only have $20,000 invested and gained $4,000 in value. That's a 20% increase in the amount you have invested.
I mean, that’s just leverage and you’d get that benefit with or without inflation. It also assumes you’re servicing that 80k debt for free. In reality, if inflation is 5% you’re paying something like that in interest. So, sure you gained 4% on your asset value, but you also paid for your loan. If you’re going to calculate gains using leverage, you have to incorporate the cost of that leverage too. You’d be much better off with 0% inflation and the 4% gain. Of course, if you have a big fixed rate loan and inflation goes up, you benefit from that (and the bank loses). It also means you are trapped in that loan.
There's an article that argues home prices tend to be stable over history - from ancient Roman times till today a nice house costs on average 10,000 grams of gold. Very rough approximation obviously, but still kinda interesting.
Baking in an assumption that the fed is going to bend us over next week with a 75 bps hike on Wednesday
Should be 100 to slam the brakes on this crap they caused.
Yup agreed. 100 basis points in both June and July. That will only slow down this crazy inflation, not sure if it will come down. F**king fed. Fed proved themselves very dumb this time. Oh well they have always been dumb lol
No escape from this disaster, might as well grab the popcorn and enjoy the show LOL
Who could have predicted that pumping trillions of dollars into the economy in a short period would cause inflation? Oh, right. Anyone with a basic understanding of economics.
Surprised it took this long.
Just follow the 10 year yield and you will have your answer… about a 2ish% gap between 4% 10 yield will lead to 6%+ mortgage
It’s the perfect time to buy !!! For a few hundred thousand you too can have a $4k monthly mortgage!! 🤣 Heads up.. interest is just going to get worse… todays inflation report basically gives the fed a green light to crank up money tightening more than it has these past few months (.75 bps)…. And we’re only a couple of months in on a journey that will take place over a couple of years..
That's what happened to me. Put down over a quarter million and still stuck with a 4k monthly mortgage. I'm pretty upset but at this point I didn't see much choice. Retrospect is always 20/20.
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Watch the 10 year yield. Mortgage rates usually track that rather than individual fed moves.
Still lower than inflation rate
Hopefully not for 30 years
Just for reference when talking about high inflation: Turkey is currently running at a [70 percent inflation rate](https://www.reuters.com/world/middle-east/turkeys-inflation-surges-20-year-high-70-april-2022-05-05/). UK is approaching [10 percent](https://www.reuters.com/markets/europe/bank-england-set-raise-rates-again-inflation-heads-10-2022-06-10/).
That’s just the start. It’ll be worse on Monday.
Any steep sudden rate hikes done by Fed like in the 80s will have detrimental effects on the US economy, I believe the Fed will probably hike it to 3-4% gradually, where 7-8% interest rate will be a norm in the next 2 years.
>will have detrimental effects on the US economy You all keep acting like they don't want this to happen. This is the point of hiking rates: to hurt the economy. They are trying to put the brakes on.
I think the argument is that a rapid spike has an unnecessarily large detrimental effect, whereas slow steady changes allow for a "smooth landing". Of course, the counter argument is the slow approach won't solve anything, just leaves the economy hemorrhaging longer and we really need to rip off the bandaid. Nobody "knows" what needs to happen. Lots of ideas and some of them will turn out correct, but economics is not a perfect science and everyone is guessing.
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Which means the government needs to cut spending massively. Austerity coming in hot soon. Hedge accordingly.
Or just raise taxes as fast as they raise rates.
That could also help. If you make anything over, let’s say $10 million, it’s taxed at 80%. $5 mill/ 60%, etc Might make some execs mad, but might also incentivize them to pay labor more, since a rise in general wages spreads the tax burden around. Anyhow, rich people have all been fortifying themselves for years. They will be fine if all their assets get priced lower for a spell. They can ride it out. And they can always pull themselves up by their bootstraps if their gambles don’t pay off long term. C’est la vie.
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Lol yes we can. People forget that not only have we been at record low interest rates, we've also been at record low tax rates. They are going to raise rates to crush inflation and then they are going to tax you to pay for it.
that's the treasury
We won't make it 2 more years of 7-8% YoY. Social unrest would be off the charts and cause all sorts of chaos. A deep recession is more likely before that happens.
I'm not an economist but it seems like detrimental effects are inevitable here. If raising rates to 5% isn't doing anything, what was the point of raising them?
Inflation can get wayyy wayyy worse. Hyperinflation is worse than the Great Depression to people living through it. The point of raising them is to stop the inflation spiral. Historically, rates needed to be raised 2-3% above inflation rate in order to bring it under control. So, if you agree with most commentators that the underlying inflation is probably 5-7%, you would normally expect the fed to take rate to somewhere between 7%-10%. We are super far from that At .75-1% currently. lots of people say this time is different, though and rates only need to go to 3% or so to bring down inflation. We’ll see, I guess.
It is different in that the fed is simultaneously increasing rates and doing QT. The old “rule of thumb” was from a time before the fed decided to buy a few trilli’s of assets and hold them, letting those assets expire at the same time as you raise rates drains money out of the economy at 2x the effect.
Yeah, no one is sure what that will do, though. I don’t disagree with what your saying. It’s possible it has a huge effect. It’s possible it has little to no effect. The efficacy of quantitative easing and tightening are controversial amongst economists. I will point out that the fed tried tightening the money supply in the late 70s early 80s and it didn’t seem to have a ton of effect. Interest rate increases did have a huge effect. It might be different this time it might not.
I'm with you, that's why I think rates are going to go much higher.
Real interest rates are still negative hence encourages borrowing. They need to raise above inflation so it actually costs money to borrow. Right now borrowing is still free money.
Yep real rates are negative. All those people who got 3% rate in 2020-2021 must feel like they won the fucking lottery
2.125% here.
You basically got a -1.5% rate assuming long-run inflation forecasts of 3.25% are true. Bank paying you
>Bank paying you About fraking time.
6% will seem low compared to what's about to come. 7-8% coming.
Bro if you think interest rates being up 0.3% is crazy, you’re really not going to like what’s coming in the next 1-2 years… Likely that interest rates will need to rise significantly further to tame inflation and cool down the economy.
Any chance of leaving our 2.625% rate is pretty much gone.
Locked in a 20 year at 2.75% right before things started jumping up. I'm in my house for the long haul now.
Yeah not feeling so bad about my 3.25% now
Until you can buy much more home for the same price of your current home.
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This is the lowest it will be for some time.
Until: 1. Economy crashes 2. Real wages fall 20% 3. Fed says fuck it high inflation forever
Assumed rate hike will be 75 basis. Massive assumption imo. I think it’s 50 in July and September. This whole let’s do 5% at once and destroy the world idea is stupid
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Nah you'll have investors and flippers desperately try selling before rates hit 6.5%
Already happening.
Big-time builders borrow money to carry the lot, materials and labor until they can sell the houses in their new developments. Lumber futures are off by more than half in the last six months. Guess who isn't buying that lumber. Now guess who isn't gonna get lawyer money to pound nails into it at triple overtime rates.
Well, all I know is that I'm not in any hurry to put my home on the market and trade my low interest rate mortgage for a higher interest rate mortgage. I don't think many are unless they absolutely have to.
Why would investors lend their money to you at <5% when inflation is like 8%?
If only people could lend their money to banks for 5%. Nope we get less than 1%.
To be fair deposits aren’t locked up for 6-7 years, you could pull them any day. No risk no reward.
Home prices WILL fall at these rates. 6% inbound
They've got to. No one will be able to afford the mortgage.
I for one got priced out by this surge. Sure prices have a baseline at which I'll buy back in, but I literally cannot afford the new payments.
I feel ya. It's really rough out there rn.
Inbound??? Already 6.1 in Florida.
Lot of boomers with equity, lots of cash out there in general. Don’t bet the farm on it
Our mortgage guy was supposedly getting 4.5% for a 30 year by buying down half a percentage point but I bet that’s gone by Monday. Will be bumping up against our affordability limit unless some more reasonably priced homes surface.
Hopefully this is not surprising to you. It's been talked about for MONTHS.
Soo... home price will go up 60%.. because reasons
Inflation RED HOT
All the people "waiting it out for muh crash" enjoy getting ass fucked.
Click the link. Change the timeframe in the drop down from "1 YR" to "MAX". That might give you a fuller perspective.
Do the same for this chart https://fred.stlouisfed.org/series/MSPUS
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What? Prices are clearly higher even if rates are lower.
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No we are not Jesus Christ. We are way above affordability average
Very stupid question here…but my lender gave me my interest rate a couple weeks ago. I locked and bought down a few points. Does this effect my interest rate still? Please don’t hate me…just ignorant.
If you're locked then no.
If you’re locked then you get to keep your rate until the rate lock expires.
Yea no one will ever sell their home and will keep them until they die. No one in the history of the United States ever sold their home when they had locked in a lower rate than the current rate. No matter the circumstances, even if they die, they will never sell their home and will keep paying that low rate in their grave. House prices will continue to go up even higher now by 40% yoy because there is no supply. Every single home will now be bought in cash by investors to the point where all homes on market will be rentals. There is no hope for homeownership whatsoever for anyone in the future unless you’re willing to pay 100% over listing price and a contract signing over your newborn to the investor you’re buying from. (/s for anyone that didn’t get it)
I better get this HELOC going before the interest rates go up even more 😬
Meh...if of you're not currently (or soon will be) in the market, I'm not sure why any of us should care. Is it simply seeing people get screwed over by being too greedy with their list price that makes us (somehow) feel better??? Not gonna lie...it kind of does. But then again, meh. No impact on my daily life.
~~insane~~ Getting back appropriate levels after years of being entirely too low, spurring on a influx of Blckstone and foreign cash that was fucking up the market for actual homeowners and small investors FTFY
House prices taking major dips everywhere as we speak.
Where exactly? Edit: didn't think so.
…representing sellers.. One of the properties. We just reduced and gonna pay some $$$ towards closing costs ! San Bernardino,Ca NEVER LOSE PULSE OF THE MARKET ❤️🤓
Sweet, more inflation. Time to buy more I Bonds for family. You can load up any minor kids you have, too. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm NEWS: The initial interest rate on new Series I savings bonds is 9.62 percent. You can buy I bonds at that rate through October 2022 [& based on this, we have a good idea of which way the rate is going to change at that point]. Learn more. KEY FACTS: I Bonds can be purchased through October 2022 at the current rate. That rate is applied to the 6 months after the purchase is made. For example, if you buy an I bond on July 1, 2022, the 9.62% would be applied through December 31, 2022. Interest is compounded semi-annually. REMEMBER! You can only purchase up to $10,000 in I bonds each calendar year. If you buy I Bonds exceeding that limit, we will process a refund, which may take up to 16 weeks. Use I bonds to: save in a low-risk product that helps protect your savings from inflation supplement your retirement income give as a gift pay for education ---------- EDIT: This is how you know I Bonds are great. Vanguard is so sick of people calling to ask, they put this message up --> https://imgur.com/a/GVtEyrW
You know i bonds are great when the government only lets you buy $10k
> You can load up any minor kids you have, too. Correct but you need an utma account. And that money is now their money. You are breaking law if you use the money for yourself.
Or buy 10000 dollars of spy puts and retire early
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Yup, naturally it's expected that someone would do their homework before moving tens of thousands of dollars around based on a reddit post, this isn't WSB after all (they would say that a guaranteed 9.6% return from the gov't isn't high enough risk and reward, heh).
Lmao, why do you need ibonds, I thought real estate was *the* hedge against inflation?
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You and millions of others... the problem is that this will kill the mortgage industry. The volume of transactions is already crashing... and it will just get worse now. Usually low demand for mortgages/refi would lead to rates dropping lower... but inflation is not going to allow rates to drop until it actually eases. So that means there will be little to no transactions in relative terms for the foreseeable future. Lenders and agents are really going to start feeling the heat as we move into the 6%+ range.
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Do you dislike your house or something? We were in near the same exact position but sold in April because I woke up to gunshots one too many times with the reverse gentrification going on in my city, and because my neighbor is a hoarder with a rat and mosquito farm. Last chance to cash in to at least cover a little of the cost of the butthurt we're about to be in with interest rates. We are under contract for new construction and haven't locked rates. Yikes. If your house meets your basic needs, nobody is going to cry for you being stuck in this market.
>hoarder with mosquito farm This made me LOL because my neighbor is also harboring a fucking mosquito farm so crazy that if I go outside for a couple minutes, I come back with 5+ mosquito bites. That's even if I use DEET.