Mortgage interest rates at 12 year high > 5%

[White.Beard.Doc]

As a point of reference:

[Tangler]

As a point of reference:

Would love to see the ratio of monthly payment / take home pay.

My guess is that that has been relatively constant despite the interst rates but that is a wild guess.

I wonder what 8% interest would / will do?

Selfishly, I might be able to pay cash for a vacation house if the market cools down.

[StateOfMyHead]

Because I was self employed my first mortgage was a No-Doc loan, anyone remember them? The rate was 7.5% for 15 years through a little neighborhood bank. As I've said before a friend who was real estate broker had some of their best years in the 80s when the rates were in the teens so while I'm sure things will cool I suspect it will be more about supply vs demand than people avoiding purchasing due to interest rates.

[xraygoggles]

As someone who is finally looking to buy a primary home by summer 2023, I'm actually looking forward to rates increasing - in hopes of home prices dropping. I don't anticipate much of a drop in San Diego, but hopefully enough for me to find a good one.

[Tim]

Because I was self employed my first mortgage was a No-Doc loan, anyone remember them? The rate was 7.5% for 15 years through a little neighborhood bank. As I've said before a friend who was real estate broker had some of their best years in the 80s when the rates were in the teens so while I'm sure things will cool I suspect it will be more about supply vs demand than people avoiding purchasing due to interest rates.

No-Doc loan made everything affordable. Rate didn't matter. Might have been why so many houses were sold.

[StateOfMyHead]

No-Doc loan made everything affordable. Rate didn't matter. Might have been why so many houses were sold.

Probably not as it was only a small segment that were going no-doc, technically low-doc, due to the hefty down payment required to get the proof of income waived. I can speak only for myself but the rate mattered in the sense that I still had to be able to afford the monthly payment.

[pierre]

Because I was self employed my first mortgage was a No-Doc loan, anyone remember them? The rate was 7.5% for 15 years through a little neighborhood bank. As I've said before a friend who was real estate broker had some of their best years in the 80s when the rates were in the teens so while I'm sure things will cool I suspect it will be more about supply vs demand than people avoiding purchasing due to interest rates.

Was that anything like a NINJA loan?

https://youtu.be/a5uyw2HeLPU

[Tim]

Probably not as it was only a small segment that were going no-doc, technically low-doc, due to the hefty down payment required to get the proof of income waived. I can speak only for myself but the rate mattered in the sense that I still had to be able to afford the monthly payment.

I was referring to your realtor friend. Business was booming. I do believe some elements were “waiving” hefty down payments. The name of the game was volume. What could go wrong? Realtor friend, “good times”.

[StateOfMyHead]

Was that anything like a NINJA loan?

https://youtu.be/a5uyw2HeLPU

That is hilarious and not as I recall but my experience was in early 80s not 90s. The bank required similar documentation but without some of the extremes that are now common. Depending on the situation approval was not dependent on documented income or having good credit scores. Down payment was 30% or more and rates were generally a couple of points higher.

[Tim]

That is hilarious and not as I recall but my experience was in early 80s not 90s. The bank required similar documentation but without some of the extremes that are now common. Depending on the situation approval was not dependent on documented income or having good credit scores. Down payment was 30% or more and rates were generally a couple of points higher.

The 80’s and 90’s had Savings & Loans besides banks and mortgage companies. MBS’ existed since 70’s. Self employed has always been an issue with mortgages. Please note, none of the anecdotes here are “subprime”, the cause of the 2008 crap, GFC. Different cesspool.

[FIREshrink]

We have underinvested in housing stock for fifteen years, we are now short millions of units compared to household formation. Trillions of dollars of liquidity plus millions of missing homes is going to lead to high housing prices. Now if interest rates rise to astronomical levels at some point the music will stop but I don't think 5% is high enough and we won't get to 8% soon, the economy simply will collapse. So I think the best days of housing are behind it but in no way do I see a near term collapse in prices.

[pit.alumni]

The FED has two mandates, control inflation and support full employment. Right now there are more jobs then people looking to work and less goods then people want to buy. I think the supply chains are F***cked for a while still. There’s just so many things that go into new construction and a few items in short supply grind things to a halt. The fed will keep selling bonds and raising rates until demand cools. They don’t know what that number is and only time will tell. They always try for a soft landing but usually miss that mark. So rates will rise until demand cools. But while the price of houses may plateau rents will have upward pressure that mirrors interest rates. And so it goes.

[Hatton]

My first house was bought in 1987 with a physician loan of 11% but it only cost $110k.