Alarm! US 30-year Mortgage Rates UP 100 Basis Points Since Jan 4, 2021, REAL 30-year Rate Is Now -3.2% (And UP 57 BPS Since Dec 31, 2021)

Confounded Interest ^ | 02/04/2022 | Anthony B. Sanders

[Browns Ultra Fan]

Alarm!

US 30-year mortgage rates are up 100 basis points and climbing since January 4, 2021. Most of the increase has occurred since the turn of the year into 2022. According to the Bankrate 30-year mortgage rate index, the 30-year rate is up 57 basis points just since December 31, 2021 as the benchmark 10-year Treasury yield rises.

Bear in mind that the REAL 30-year mortgage rate is now -3.2%. Get it while you can!!

Given today’s surprise jobs report, The Fed now has a green light to raise rates.

To quote Van Morrison and Them, “Here Comes The Night” for the housing and mortgage market.

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[Browns Ultra Fan]

Here comes the night ... for housing and mortgages.

[Tell It Right]

If you own a house sell it while it's high, rent a house or apartment for two or so years while the housing market crashes, then buy a nice house at a bargain price (perhaps even the one you were in before).

Everything you need to know in life you get from reading the Bible and FR.

[walkingdead]

Rent? I don’t know about your area, but rent around me is more than my mortgage payment. If I didn’t have a family I would live in an trailer and rent my place out, and have someone else pay for my house.

[Brian Griffin]

Help->buyer payments could be placed to a second escrow account.

Let’s say the mortgage rate becomes 4% from 3%.

On a $300,000 mortgage that’s an extra $3,000 a year over a 3% mortgage.

Over five years, the total would come to a whopping $15,000.

On a $320,000 house sale, a 3% sales commission would be $9,600.

The seller would walk away with $295,400 instead of $310,400.

The amount of seller walk away money would be about 20% more than if the house was sold two years before.

A payback clause could be added that if the house is resold for over $450,000 in less than 10 years time, which is quite likely, the 2022 seller would get a $20,000 top-up payment.

[bboise]

Housing market will crash but not sure is inflation will let it come down much, I am hoping it crashes as housing is ridiculously high, too high for most young people

[Tell It Right]

Around here housing prices dropped about 40% during the last housing “crisis” (really a deflation back to normal levels, not a crisis).

[Brian Griffin]

Walmart has raised the price of my favorite crackers by about 20% in the past year ($2.68->$2.88->$3.18).

It has raised the price of many landscape plants by about 30% in the past few weeks.

Retired people need their savings to draw interest rates comparable to store and tradesperson per annum price increases.

[gloryblaze]

... A payback clause could be added...

"Shirley" you jest.

[Obadiah]

Been looking to sell for a bit now. Lot of equity, but no homes to buy for any sane price. For me, I might become seriously mentally unstable if I had to live in an apartment for two or more years, or at least a lot more unstable than I already am. But yeah, that’s been my plan but with nothing really on the market my nightmare is that I’d get stuck for an extended time in an apartment or condo. I need my shop and my yard...

[Dilbert San Diego]

But, how do you know when the market has hit its peak, and that it’s time to sell?

And how do you know when the market has bottomed out, and that it’s time to buy?

[Tell It Right]

Around here rent is a hair higher than a mortgage payment too. But selling a house you're in means putting cash into savings while the market is high. Renting means spending some of that cash (at least some more above mortgage payment) but not much in the big picture if you're renting for just a year or two. Particularly if you have a lot of equity in your existing house (read -- lots of money to put into savings when you sell it) and you buy another house in a couple of years when they're cheaper (particularly if the housing values drop 30%-40% like they did the last time).

So if you're in a $400K home with a $280K mortgage and sell it, you'll put $120K into savings. Let's say you rent for two years and your rent is $150 higher than a mortgage payment and each month you pull that $150 from the savings account: that's $3,600 more you spent those two years by renting vs. a mortgage payment (on a house that's overinflated in price). Then when the housing market drops by 30% if you buy a house like your old one for $280K (70% of the $400K) and put all the cash you had leftover ($110K+) into the down payment, you'd then have a mortgage of less than $170K (as opposed to the $280K mortgage you had before).

[sten]

know any conservative banks?

[Tell It Right]

IMHO the Powell version of the Fed has done a good job of getting the word out ahead of time what they intend to do: scaling back QE (or "not QE" if you like poking fun at the Fed's past soft "speak") and cutting on rates. They've been saying it loud and clear -- unlike the Yellin Fed or Bernanke Fed when changes would surprise you like surprise visit from the mother-in-law.

In other words, now we're at the housing peak. If I'm wrong it's hard to imagine being wrong by much -- not much more upside left in this housing market.

As far as when to buy back in I'd buy a house that's at least down 30%. If you're wrong by some and it goes down another 10%, so what? This is especially a good idea if you're looking at moving anyway (i.e. you're retired and your kids are grown and moved out and you'll be downsizing anyway in the next 5 to 10 years).