Reply to Why do expert say: Buckle in for a brutal free-fall in home prices

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[quote=Anonymous][quote=Anonymous]Funny in 2021 everyone was selling only to cash buyers. So then why do mortgage rates matter?

Older folks might recall pre 2001 when rates high and HGTV generation not in full bloom people started small.

I started in a one bedroom coop with no parking and lived there 8 years, then when wife pregnant first kid bought a 1,500 sf split level fixer upper in a second tier neighborhood, then 18 years later bought my large trade up home on a first tier neighborhood.

Growing up on my old town most of rich homes were being bought by 45-60 year older olds with very large downpayment.

There is no god given right that 30 year old couples deserved 1.7 million dollar homes in Bethesda due to 3 percent mortgages. They can work their way up.

And guess what my two oldest basically grew up in my small 1,500 sf house in the more blue collar area and they have fond memories of backyard parties, play dates, Girl Scouts, trick or treating. Nearly all the wives were SAHM and no one could afford private school or sleep away camp or private tutors or second homes. All summer was fun. Kinda like 1950s. I recall after preschool all the moms would sometimes spur of moment extent 1/2 day preschool and do last minute play dates. Why not everyone home.

Not having the big trade up house at 30-40 only bruises the parents ego not the kids. My little kids still recall being in the back of the used Ford Taurus Station Wagon to get 99 cent McDonalds ice cream as the fun times.

Not stuffy old boring Bethesda, Chevy Chase or Potomac as fun times.

I am looking forward to kids having more normal childhoods [/quote]

I get DCUM is full of the 1.7m starter home people, but this is still how it is for most people. Even back when rates were low. I owned a tiny 1 bedroom apartment I bought for 200k out of grad school, and when I got married we upgraded to a 2 bedroom condo in a slightly better neighborhoods neighborhood for 450k, using  combo of sake proceeds and savings to make that an easy purchase. We are now looking to move to a SFH with good schools. Looking at fixer uppers around 600k so we can keep payments low. Most important thing is fantastic schools.

But the rate hike is hurting people like us, too. First off, we don’t know if we can sell our condo in this market. It’s not just a pricing issue. The rate hike has scared off a lot of people who normally buy condos (ft buyers, young people) and they aren’t moving fast at all. After watching units in our building sit in the market despite being priced very competitely, we’re taking 6 months to do some upgrades and get it looking extra nice to see if next summer is any better. And on the other side, prices really haven’t come down much at all on SFHs, even fixer uppers. At least not where we are looking. It’s not a huge deal because we’ve saved carefully and even if we sell our condo for what we paid we will get quite a bit of equity out of it (though not if we sell for less). But with the rate hike, every extra 10k in purchase price has a much bigger impact on monthly payments.

If either the market doesn’t warm up for condos, or prices come down by a lot on SFHs, or rates come back down at least a little, we may ultimately stay out and just figure it out with the schools. I think this rate hike is backfiring because new buyers are scared to lick in a rate so high, and sellers currently have such low rates locked in that they have much less incentive to sell, especially below what they think should be market price. I don’t think it’s having the intended effect, it’s just locking up the market and making everyone less mobile.[/quote]

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