Why don’t people understand that low rates work against them?

Anonymous
Anonymous wrote:If you could buy a $1,000,000 million house at 4%, with a monthly payment of about $4,700 per month, when the rates hit 3% the price goes promptly to 1,250,000, with a monthly payment of roughly $5,300.

So your principal is higher, and your payment, all in the name of lower rates.

https://www.calculator.net/payment-calculator.html



LOL, just lol.
Anonymous
OP is probably the same poster who has an economist DH that says prices will drop 15-30% in the next year. lol
Anonymous
Anonymous wrote:OP is probably the same poster who has an economist DH that says prices will drop 15-30% in the next year. lol


No. But I’d love for that to happen.
Anonymous
Anonymous wrote:
Anonymous wrote:Interesting microecon problem, kid


Interest rates are a macroeconomic issue, adult!


The behavior of one hypothetical individual is not macroeconomics.
Anonymous
OP is far off with her assessment as my DC neighborhood as seen appreciation since I moved in in 2008.

We paid $300k and my next door neighbor paid $626k ( house was listed at $550k) in early 2019 for the same identical house, layout no upgrades etc.

It’s called inflation.

Anonymous
Depends. Low interest rates hurt high downpayment folks double. Meaning as saving up can’t get any safe CD or money market to keep downpayment that pays a decent interest rate AND since you are putting a large downpayment higher rates effect you less and price is main issue.

I bought my first home December 1999. We had a triple whammy that month of Christmas slowdown, Y2K and 8 percent mortgages.

I put 120k down on a 280k house. I refinanced in in 2002 when rates fell. Rates fell again on 2009 a lot but by then I just paid off loan. It was only 160k to start with.

Today I don’t own that home it goes for $620,000. I sold it 2-3 years ago but did notice buyers were offering to put down way less and with rates low harder to refinance to a lower rate down the road.

My block was very stable. I lived there almost 20 years and vast majority of block was there 20-50 years

My neighbor bought his house in 1978 when rates were sky high. Said had to put down 25 percent. Paid 40k and put down 10k. His mortgage was like 14 percent!! Him and wife ate Ramon noodles, pinched every Penny and aggressively prepaid mortgage in next few years. By 30 was mortgage free.

Yes the low rates are great, but I am seeing an explosion of 50 something trade up buyers on my block with 30 year mortgages. There is no incentive to prepay. Plus with costs so high how can you.

Housing still makes sense as Biden will cause inflation and a home is a housing hedge, mortgage rates still low and stock market doing great.

That three legged stool can fall over easy. Not this year or next.
Anonymous
Anonymous wrote:OP is far off with her assessment as my DC neighborhood as seen appreciation since I moved in in 2008.

We paid $300k and my next door neighbor paid $626k ( house was listed at $550k) in early 2019 for the same identical house, layout no upgrades etc.

It’s called inflation.



Your scenario is all over the place. My sssesment is not off at all, and vague data isn’t making your point. There are condos and other types of homes in the Dc area that still haven’t recovered from the highs of 2005-2006. So your numbers say nothing. However, the numbers you show, assuming that the entire picture is correct, show a 6% per year growth in the home price, while inflation has been at 2.5%. At least they show one thing: it isn’t inflation.
Anonymous
You aren’t the sharpest tool.
Anonymous
Anonymous wrote:You aren’t the sharpest tool.


When others resort to insults, then I know I’ve made the point!
Anonymous
Lol. I think many people understand this. But there is absolutely nothing any of us can do to affect interest rates... so what is your point?
Anonymous
Anonymous wrote:Lol. I think many people understand this. But there is absolutely nothing any of us can do to affect interest rates... so what is your point?


The point is that it is a psychological effect to low rates. We think we’re getting a deal, realtors push saying that ‘it’s a great time to buy’ and it reinforces our idea that we’re getting a deal, and we go all in thinking that’s it’s better for us.

This whole low rate environment b.s. it’s never explained to people, and it’s time they figure it out.
Anonymous
Anonymous wrote:
Anonymous wrote:You aren’t the sharpest tool.


When others resort to insults, then I know I’ve made the point!


I bet this happens to you a lot. Seriously, you are not taking into account, such as the actual economic factors for the rise in prices. Have you contemplated how much money has recently been infused into the economy and the amount of growth in the stock market. Housing prices have a long way to catch up.
Anonymous
Pp. Written on my phone. You haven’t taken into account other economic factors.
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:You aren’t the sharpest tool.


When others resort to insults, then I know I’ve made the point!


I bet this happens to you a lot. Seriously, you are not taking into account, such as the actual economic factors for the rise in prices. Have you contemplated how much money has recently been infused into the economy and the amount of growth in the stock market. Housing prices have a long way to catch up.


You have no point to make other than insults. Feel free to show your true self.

Anonymous
I share this perspective.

Low rates lead to a higher listing price. You think you have more purchase power because you pay less in monthly interest, but this is offset by the higher principal balance from the higher listing price.

Once rates rise and the monthly interest payment increases, the listing price will go down unless wages and purchase power have increased proportionally to the higher interest rates. If listing prices go down, home values go down. You might have a 30-yr mortgage for a $1.5M home at 3% that suddenly you can't sell at $1.5M because the interest rates on new 30-yr loans is 5%-6%.

"Historically low" interest rates are unsustainable and will eventually revert higher, as we are already seeing. To be clear, this is very different than a market crash.

In other threads, where this concern was raised, I noticed a lot of insulting posts as well. The insults were not very detailed and failed to explain convincingly why this was a dumb concern. I find it interesting. Almost as if there are a lot of people on DCUM who want to vigorously quell suggestions that home values might go down if economic and fiscal policy conditions change.
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