Mortgage rates are set to stay elevated

[Anonymous]

No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

[Anonymous]

Anonymous wrote:No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

? Literally everyone is talking about this. It will take years to unwind like a decade or more as the boomers downsize and die, but even then those houses will transfer with a stepped up basis to their unbelievably wealthy kids. American class mobility is OVER.

[Anonymous]

The Fed likes to have a lot of “dry powder” or ammo available to stimulate the economy in case of a steep recession, using 100-basis-point rate reductions if necessary. Not having ammo was a big concern when rates were at their lowest, since they couldn’t realistically go to negative interest rates. Now the Fed is probably thrilled to have put themselves back in position to ride to the rescue in a downturn but will be waiting to see real distress (“don’t shoot until you can see the whites of their eyes”) before marching rates down.

So if you’re waiting for lower rates before buying a home, be aware that those lower rates will probably be accompanied by sharply increased layoff risks from an oncoming recession.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Elevated? These aren’t elevated. We just returned to normal.

its higher than its been for 20 years but yes -- over 20 years ago it was considered "normal"

And dramatically lower than 40 years ago.

The last 20 years have been an economic anomaly in so many ways. It was an outlier in the history of mortgage rates.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

? Literally everyone is talking about this. It will take years to unwind like a decade or more as the boomers downsize and die, but even then those houses will transfer with a stepped up basis to their unbelievably wealthy kids. American class mobility is OVER.

Its not the boomers with the low interest rates. It’s the Gen-X and millennials.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

? Literally everyone is talking about this. It will take years to unwind like a decade or more as the boomers downsize and die, but even then those houses will transfer with a stepped up basis to their unbelievably wealthy kids. American class mobility is OVER.

Its not the boomers with the low interest rates. It’s the Gen-X and millennials.

They're saying boomers will flood the housing market and interest rates will somehow lower. Can't really see that happening...no one sold during Covid and they were dying then?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Elevated? These aren’t elevated. We just returned to normal.

its higher than its been for 20 years but yes -- over 20 years ago it was considered "normal"

And dramatically lower than 40 years ago.

The last 20 years have been an economic anomaly in so many ways. It was an outlier in the history of mortgage rates.

there's honestly no way to know that there won't be another "economic anomaly" in the future.

[Anonymous]

Anonymous wrote:No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

I don't know about anyone else, but we have a 3% rate and we want to move. But since we don't want to switch from a 3% rate to an 8% rate, especially since we really need to move to a slightly larger home (currently live in a 1000 square foot row home), we are currently saving aggressively and once we hit our target savings, we'll list our home and use savings+equity to pay cash for a house. At most we'll take out a mortgage for 100k or less, if that's necessary to get a home we can stay in long term.

Barring any emergencies, we should hit our target number in early 2025. No idea where rates will be then and we do have to keep an eye on them since it will impact what we sell our house for (we'd be okay if they stay the same, if they go up we might have issues getting as much equity out and have to save a bit longer).

When we have mentioned this plan to others, we've been surprised at how many other people are also working on plans to be able to buy for cash. Though some intend to hold onto their homes with low rates as investment properties, not all can do that.

I think we will see a lot of people shift to cash purchases if they can in order to avoid higher mortgage rates. Even if it means moving to a lower cost of living area.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

? Literally everyone is talking about this. It will take years to unwind like a decade or more as the boomers downsize and die, but even then those houses will transfer with a stepped up basis to their unbelievably wealthy kids. American class mobility is OVER.

Its not the boomers with the low interest rates. It’s the Gen-X and millennials.

They're saying boomers will flood the housing market and interest rates will somehow lower. Can't really see that happening...no one sold during Covid and they were dying then?

This is a silly comment. Boomers aging is a much different and larger demographic trend than the loss of life during Covid (which sadly hit people in poorer countries, where home ownership is far less common, than in wealthier counties). I'm sorry Covid didn't flood the market with cheap homes I guess? Don't be a ghoul.

The demographic shift over the next 20 years, where Boomers make decisions about what to do with their homes, will have a massive impact on both purchase and rental inventory, and thus on housing prices. Will Boomers sell and downsize to help pay for elder care? Will they buy condos to live in and rent out their paid off houses for extra income? As Boomers pass, will they pass on real estate to Gen X and Millenial kids, or will that wealth get eaten up by the high cost of retirement homes and end-of-life care? Will Gen X and Millenial buyers want to buy all the Boomer homes or will preferences about where they wish to live (which will be driven in part by trends like WFH, smaller families, and more people choosing not to have kids) and what impact will those preferences have on home prices in suburbs, small towns, urban areas, etc.?

I honestly don't have answer for any of these questions and I don't know what is going to happen, but the one thing I feel confident about is that we will see shifts in the real estate market as a direct result of the Boomer generation retiring, aging, and yes, dying. It's inevitable.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Elevated? These aren’t elevated. We just returned to normal.

its higher than its been for 20 years but yes -- over 20 years ago it was considered "normal"

And dramatically lower than 40 years ago.

The last 20 years have been an economic anomaly in so many ways. It was an outlier in the history of mortgage rates.

there's honestly no way to know that there won't be another "economic anomaly" in the future.

Maybe look up the definition of "anomaly" and consider editing your idiotic comment.

[Anonymous]

Anonymous wrote:No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

This is us- stuck forever in our current house because it would be idiotic to lose a 2.75% rate

[Anonymous]

Anonymous wrote:

Anonymous wrote:Elevated? These aren’t elevated. We just returned to normal.

Mortgage rates have been ridiculously depressed since the Great Recession. People just thought that was some version of normal.

This is what amazes me. Who, prior to 2012, had a 2.75% interest rate? I bought my house in 1999 and my interest rate was 7%. My parents bought a house in 1975 and the rate was 9%. (some historical data: https://www.bankrate.com/mortgages/historical-mortgage-rates/)

The problem is the relatively normal interest rate applied to very high house costs. Although that too has happened several times in my adult life time. The price of the house that I bought in 1999 was $150K. I sold it 6 years later in 2005 for over $300K.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

I don't know about anyone else, but we have a 3% rate and we want to move. But since we don't want to switch from a 3% rate to an 8% rate, especially since we really need to move to a slightly larger home (currently live in a 1000 square foot row home), we are currently saving aggressively and once we hit our target savings, we'll list our home and use savings+equity to pay cash for a house. At most we'll take out a mortgage for 100k or less, if that's necessary to get a home we can stay in long term.

Barring any emergencies, we should hit our target number in early 2025. No idea where rates will be then and we do have to keep an eye on them since it will impact what we sell our house for (we'd be okay if they stay the same, if they go up we might have issues getting as much equity out and have to save a bit longer).

When we have mentioned this plan to others, we've been surprised at how many other people are also working on plans to be able to buy for cash. Though some intend to hold onto their homes with low rates as investment properties, not all can do that.

I think we will see a lot of people shift to cash purchases if they can in order to avoid higher mortgage rates. Even if it means moving to a lower cost of living area.

This is our plan too. We don't want to move soon, but maybe 5-10 years, so we will have built up pretty good equity and savings.

[Anonymous]

Anonymous wrote:No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

Everyone is talking about it. Lots of people are stuck. It can be cost prohibitive to trade up and wouldn't yield much if any savings to downsize - for those who need a mortgage. But some people will still trade up or downsize or relocate because they can afford the mortgage or they're paying a large chunk of it in cash. Plus people divorcing or aging and moving into elder care facilities or dying. First time buyers will still want to purchase a home, even if it's harder to attain. There will still be some market movement, even if the market is slower.

We recently sold and paid cash for our new home. We weren't going to tie ourselves to our prior house just because we had a low rate and we have no desire to be landlords, even though we could have afforded to keep it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No one is talking about the people locked into 2.75% rates are *never* going to sell their homes.

? Literally everyone is talking about this. It will take years to unwind like a decade or more as the boomers downsize and die, but even then those houses will transfer with a stepped up basis to their unbelievably wealthy kids. American class mobility is OVER.

Its not the boomers with the low interest rates. It’s the Gen-X and millennials.

It’s 96% of homeowners generally. But the boomers are the ones next in line to downsize or die.