Anonymous
08/27/2023 16:44
Subject: Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
2.9 rate.
Lender begging me to refi or home equity. It’s like free money … got em by the shorthairs.
The FED will give in to inflation. 12 years of zero fund rates has the entire financial system misallocated and the current normal rates are unsustainable. The whole economy has been built over a long period of time on zero percent rates and now inflation plus the FED has kicked out the only leg it’s been standing on. It’s all a domino effect starting with the dot com recession thru 911 … the wars .. Covid hysteria . Here we are. What’s coming is not chill.
Anonymous
08/27/2023 16:31
Subject: Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
Don’t like my house or my neighborhood. Stuck because of insane rise in prices and high interest rates. It’s quite depressing.
Anonymous
08/27/2023 14:55
Subject: Re:Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
When we bought in the late 90s our interest rate was over 8%. We've refinanced several times since then. The last time was right before things started heading back up again thank goodness.
https://www.rocketmortgage.com/learn/historical-mortgage-rates-30-year-fixed
https://www.rocketmortgage.com/learn/historical-mortgage-rates-30-year-fixed
Anonymous
08/27/2023 12:10
Subject: Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
Anonymous wrote:Yes higher mortgage rates hurt, but not as much as some articles (or posts) would have you believe. You have to do the math for your own situation.
Household A: Locked in 2.5% on a $750K mortgage (monthly pmt $2963). That means interest expenses in the first five year of mortgage are roughly $18K / year. Adding the SALT deduction of $10K, they can deduct $28K come tax time (or just take the equivalent $27.7K standard deduction).
Household B: in current market, gets 7% rate on same $750K mortgage (monthly pmt $4989). That mean deducible yearly interest expense of roughly $51.5K. With SALT, that's $61.5K deductible, an increase of $33.5K in deductible expenses for tax savings of $13.4K (assuming 40% combined fed/state marginal tax rate), or $1117 per month. That reduces the effective after tax monthly payment to $3872 when compared to household A's mortgage. That's equivalent to a 4.66% mortgage rate (after tax).
So, relative to the 2.5% mortgage, still a big jump, but not as big as the hype would have you believe.
Per above poster claiming a $50K raise would be required: to handle that difference, you'd need an extra $3872 - $2963 = $909 per month, or $10908 annual after tax increase in income, which means a gross salary increase of roughly $18K before taxes are taken out (again assuming 40% combined marginal rate). Any price increase component should be ignored: it has presumably also increased the equity in your existing home. For someone making $300K, that's a roughly 6% raise, so it shouldn't be that big of a factor (assuming folks won't go through the trouble of a job change for small raises).
TLDR: do the math for your own situation, it may be a lot milder than the Sturm und Drang online would have you believe.
Yet the mortgage affordability calculator tells me I can afford a house that would be smaller, uglier and in a worse neighborhood than where I currently live. That’s in addition to raises and promotions since I last bought. Granted, my area has doubled in price since 2019.
Anonymous
08/27/2023 11:57
Subject: Re:Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
Anonymous wrote:Anonymous wrote:Anonymous wrote:
We are one minute away from 40- and 50-year loans. Just like car loans went from 3 to 5 to 7.
Mark my words.
aren't home loans sold/ refinanced every 10-15 years anyways? Who cares what the nominal term length is.
40 yr high interest mortgage only happens when you living paycheck to paycheck, which means you can't afford to sell and pay transaction costs.
A 40Y loan won’t qualify for GSE securitization. So that’s a big impediment to that market.
My guess is that if an entity wrote a 40Y fixed loan today, it would be at close to 9.5% interest rate to account for duration risk and no GSE guarantee.
Anonymous
08/26/2023 22:19
Subject: Re:Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
Anonymous wrote:Anonymous wrote:Anonymous wrote:
We are one minute away from 40- and 50-year loans. Just like car loans went from 3 to 5 to 7.
Mark my words.
aren't home loans sold/ refinanced every 10-15 years anyways? Who cares what the nominal term length is.
40 yr high interest mortgage only happens when you living paycheck to paycheck, which means you can't afford to sell and pay transaction costs.
or the borrower is "dating" the mortgage while waiting for interest rates to go down in 5-15 years.
Anonymous
08/26/2023 21:00
Subject: Re:Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
Anonymous wrote:Anonymous wrote:
We are one minute away from 40- and 50-year loans. Just like car loans went from 3 to 5 to 7.
Mark my words.
aren't home loans sold/ refinanced every 10-15 years anyways? Who cares what the nominal term length is.
40 yr high interest mortgage only happens when you living paycheck to paycheck, which means you can't afford to sell and pay transaction costs.
Anonymous
08/26/2023 20:58
Subject: Re:Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
Bought at 2.75. Sorry I didn't stretch more but didn't have the appetite for the risk. Current house is only 1500 Sq ft plus basement and I'd like closer to 3000, but everything else is perfect re location, schools, housing quality. Guess we will put up with living in 1500 for a while. It only makes sense to move if we pay cash.
Anonymous
08/26/2023 20:13
Subject: Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
Anonymous wrote:We don’t love our house but we have 2.75% mortgage rate. Going to do some remodeling and stay put
Yup. We just dumped $90k into redoing the basement to make the house last until the kids are gone.
Anonymous
08/26/2023 20:10
Subject: Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
We don’t love our house but we have 2.75% mortgage rate. Going to do some remodeling and stay put
Anonymous
08/26/2023 19:57
Subject: Re:Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
Anonymous wrote:
We are one minute away from 40- and 50-year loans. Just like car loans went from 3 to 5 to 7.
Mark my words.
aren't home loans sold/ refinanced every 10-15 years anyways? Who cares what the nominal term length is.
Anonymous
08/26/2023 19:55
Subject: Re:Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
We are one minute away from 40- and 50-year loans. Just like car loans went from 3 to 5 to 7.
Mark my words.
Anonymous
08/26/2023 19:41
Subject: Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
*^^ I mean the premise is correct
Anonymous
08/26/2023 19:37
Subject: Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.
Anonymous wrote:Yes higher mortgage rates hurt, but not as much as some articles (or posts) would have you believe. You have to do the math for your own situation.
Household A: Locked in 2.5% on a $750K mortgage (monthly pmt $2963). That means interest expenses in the first five year of mortgage are roughly $18K / year. Adding the SALT deduction of $10K, they can deduct $28K come tax time (or just take the equivalent $27.7K standard deduction).
Household B: in current market, gets 7% rate on same $750K mortgage (monthly pmt $4989). That mean deducible yearly interest expense of roughly $51.5K. With SALT, that's $61.5K deductible, an increase of $33.5K in deductible expenses for tax savings of $13.4K (assuming 40% combined fed/state marginal tax rate), or $1117 per month. That reduces the effective after tax monthly payment to $3872 when compared to household A's mortgage. That's equivalent to a 4.66% mortgage rate (after tax).
So, relative to the 2.5% mortgage, still a big jump, but not as big as the hype would have you believe.
Per above poster claiming a $50K raise would be required: to handle that difference, you'd need an extra $3872 - $2963 = $909 per month, or $10908 annual after tax increase in income, which means a gross salary increase of roughly $18K before taxes are taken out (again assuming 40% combined marginal rate). Any price increase component should be ignored: it has presumably also increased the equity in your existing home. For someone making $300K, that's a roughly 6% raise, so it shouldn't be that big of a factor (assuming folks won't go through the trouble of a job change for small raises).
TLDR: do the math for your own situation, it may be a lot milder than the Sturm und Drang online would have you believe.
Except most people in your scenario aren’t looking to make a lateral move. Although maybe they dump their equity into their upgrade? If that’s the case though, property taxes will be higher as will homeowners insurance so those factors need to be considered. As would starting a new 30-year mortgage.
Also, most people would balk psychologically at a $1,000/month higher housing payment.
But your fundamental premise that lower interest rates neutered the value of the mortgage interest deduction. One thing I could see happening, however, is a movement to convert the deduction to a credit to help first-time homebuyers; it would have to be capped for budget reasons, which would completely scramble the math.
Anonymous
08/25/2023 16:21
Subject: Re:Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.