Reply to Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.

Forum Index » Real Estate

Reply to "Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes."

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Yep we are the older people everyone likes to blame at the moment.  3000 sq ft house in a good school district, almost paid off.  more house than we need or want and we would love to downsize, but the way prices are, a smaller house would be more than we paid for our original house and with a mortgage would actually cost more than we are paying at the moment.  we don't want to stay put, but it doesn't make any sense to move. [/quote]

+1 this is us too. Real estate agent keeps pushing to sell house and take the cash but buying something now is more expensive. Renting a smaller place for more then our carrying costs to wait out the market also seems to not be a good move. [/quote]
Your real estate agent IS right (surprisingly!).

Assuming you sell your house today and net $500K (not unusual at all), you could put that in a HY savings account and get ~$2K/mo interest, [i]without[/i] touching your principal and without any carrying costs. You've just locked in your profit.

[img]https://i.ibb.co/cvBN3rn/Screenshot-2023-09-03-at-7-42-28-AM.png[/img]

I'm sure your argument is going to be, but we need a place to stay! You're right, you do. Now, do the math one more time in terms of hanging on to your house, vs realizing your profits today (assuming you [i]can[/i] sell, with today's market) and renting something lower cost (no, it won't be the same kind of house that you're selling, that's stupid) for a while. If you're not willing to do that, that's fine, others will be, because they can do the math as well.

Prices are set at the margin. A few sales in a neighborhood (up or down) set the prices for the whole neighborhood. You want to sell, when nobody's selling, not when everybody's heading for the exit.[/quote]

Actually, almost no one will be willing to do this, as it is quite risky for effectively no financial benefit.[/quote]
Explain.[/quote]
Can't explain, can you?[/quote]

So you make $25k yearly  on a 5% CD with 500K principal.
Simple math.
Uh Oh! Tax time arrives. 
Now you have to pay a high tax rate on your $25K interest earned.
Ever heard of something called inflation?[/quote]

That's why I said...math. I know it's hard, but...

You'd much rather let the value of your current home erode away (Hint: That's what high interest rates do) AND keep paying the carrying costs with ding ding...tax paid dollars. The SALT deduction is only $10K, ONLY your mortgage interest is deductible (unto $750K), not your property taxes, home owners insurance, HOA (if applicable) etc. All of those are paid with post-tax dollars.

You wanna do that? Be my guest.

There's a reason the residential RE market is at a standstill. That's what high interest rates do, they swing the pendulum in favor of savors, vs borrowers, who gain in a low interest rate environment.
[/quote]

You haven't even come close to doing all the math in support of your argument. And I mean all the math... and for a range of future scenarios. Take the most likely... that [b]home prices stagnate nominally for the next five years[/b]. Start with that.[/quote]
And there in lies the problem. If that's your base case...

No need to do any more math.[/quote]

Show me the breakeven. Do it. For a $1M house. How much does the value have to fall to break even?[/quote]
I don't even have to do the math.

Whatever your net is going to be on a $1M house (could be $1M), you could rent a very nice home for $4K/mo (after paying tax on the interest income) without touching your principal and zero carrying costs.

Wait for the market to normalize and buy again, if you want. For the foreseeable future interest rates will NOT go down (they can't), in fact they may go up even more. That makes cash even more valuable.

Again, home prices are set at the margin. You don't want to be at the end of the line to sell, you wanna be at the front.[/quote]

Haha. You’re so full of it. Do the math. What sort of price decline do u need to make your gamble pay off?[/quote]
Full of...what? Common sense? Sure.

I don't need to forecast a price decline, I can't. What I [i]can[/i] see is the value of cash at present, as we speak. And home prices and cash are inversely related. If you can get a higher rate of return by holding cash (which has zero carrying costs) vs housing, which has pretty much the highest carrying cost and the most illiquid market, I'll always prefer cash.

People have forgotten what holding cash looks like (through no fault of their own, the Fed's actions in the last decade and a half made it a non-viable option).[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics