Posted on 04/27/2022 4:36:12 AM PDT by Browns Ultra Fan
Thanks to The Federal Reserve helping to raise mortgage rates through the roof, mortgage applications are going down.
From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey. Mortgage applications decreased 8.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 22, 2022.
The Refinance Index decreased 9 percent from the previous week and was 71 percent lower than the same week one year ago.
The seasonally adjusted Purchase Index decreased 8 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 17 percent lower than the same week one year ago.
The percentage of adjustable-rate mortgages (ARMs) increase 9.4% from previous week.
“You’re Going Down” by Jerome Powell and The Constitution Avenue band. President Joe Biden conducting.
(Excerpt) Read more at confoundedinterest.net ...
ARM mortgages are a better bet when interest rates are high and falling, rather than when they are low and rising, unless you plan to substantially pay them down during the initial low-rate period.
WoW!
And “Good Cause” eviction legislation looms which will put the final nail in the property investment coffin.
What is that?
Everything from that site seems to be promoting runaway inflation instead of raising interest rates to combat it.
Who actually gets ARMs?
Even though interest rates stayed relatively low for quite a long time, they always seemed risky to me.
I remember after 2008 crash hearing the term “balloon payments” for the first time.
I have a suspicion foreclosures are going to go up bigtime here soon
Thank you.
On the bright side, it’s better than the eviction moratorium…
Except that with covid, many people learned that all they really needed was a computer and Internet access.
Wow!, mortgage rates SKYROCKET.
Are they all the way up to 5.5 % ??
Back in 1984 my Economics Professor at SU used to brag how he had a 30 year fixed rate a2 6.5%. He said he was not going to pay that off until the very last day. Now, keep in mind a couple years earlier banks were giving you a free household appliance when you opened a money market account. In 1981 I opened a money market account at Buffalo Savings Bank paying 16%. If I had put it into a Merrill Lynch account they would have paid me 18%.
The point is we have seen probably the cheapest mortgage rates of our lifetime in the last ten years. I just paid off my 15 year mortgage(after 9 years) that was 2.375%. Interest rates have to go up.
Usually an ARM comes with a period during which the initial “teaser” rate holds. IIRC, a couple of years used to be standard. And then, instead of a balloon-payment, you get a rate adjustment every year until you are at market rates. But also IIRC, since I bought my house some time ago, the rate of increase is limited to so many percentage points per year. So the “shock” is gradual.
Terms may have changed over the last generation!
It is awesome feeling of having locked in a rate of half the current rates and shutting down real estate speculation of the coasties at the same time. Real estate wealth has vaporized for a good number of properties in the “better” liberal zip codes. This joe biden character has given me some real joy, and pinned some real economic misery on democrats for a really long time. Next they are going to blame the orange man for letting them cheat themselves into office during an economic crisis.
Ultimately a property is as only as good as the roof and the HVAC, the utility in housing is keeping comfortable and dry while supporting oneself in a healthy and safe lifestyle. As the rich flee the coasts for lower tax havens, the neighborhoods will go very bad very quick.
What are the costs of housing relative to income now vs 1984?
How about the costs of goods and necessary items? (Internet, phone, etc)
You might be fine, but many younger people are not.
Mortgage rates were so cheap from 2009 until 2020 that in most places in the country it was cheaper to buy a house than it was to rent a 2 bedroom apartment. IF you had the money for the down payment.
That is not normal. Necessary items are a relative term. You do not need to have the latest I Phone costing over a thousand dollars. You do not need the internet/cable TV package costing over $200/month. Yet many people(including me) have that.
Also, going back to the 1960s the average family of four only had one automobile. They lived in a 1400 square foot house with one full bath. Only rich people had inground swimming pools and houses with three or four bathrooms. Multiple ovens in the kitchen. Even dishwashers.
I know all this because I grew up in a ranch house built in
1967 with three bedrooms, one full bath, no dishwasher, a one car garage. Six people lived in this house. Four boys shared two bedrooms.
We also hardly ever went out to eat. It was a special occasion thing to do. My daughter and son in law eat out at least three times per week. Yet they just spent ten of thousands of dollars redoing their kitchen. My daughter does not cook.
One of the guys in my office is building a house for him and his pregnant wife. Their first single family house. They live in a condo now. They are in their 30s. It is a 3800 sq ft house in a very expensive town in NH right on the MA border.
My wife and I are on our third house. They were in order 1800 sq ft, 2100 sq ft and 2700 sq ft. Even the one we live in now is a lot more space than two people need.
Do you see my point? People choose to spend a lot more on what they consider neccessities than they did 50 years ago.
I concede your point that people are pushing their lifestyles further than necessary.
I also think that many young adults can’t afford a home and rent, in conjunction with ridiculous college costs, will keep them renting for a very long time. I’m in electrical distribution design, so the young adults I know are EEs. It’s still hard for them for a decade or more with a valid/important degree.
I’m not sure what a proper solution would be, but our country is not “progressing” in a good direction in multiple areas.
Another change is the money people now spend on vacations.
I can recall two family vacations that my family went on when I was a kid. Both involved the travel trailer. We never fly on an airplane anywhere. We were not poor either. We were a middle class family.
We were in a suburb south of Buffalo. Every house had a vegetable garden in the summer. We all had fruit trees. We went and picked strawberries in June and blueberries in August every year. My mom made jam. The blueberries went into the chest freezer. Maybe it was because my father went through the Depression as a child. So did a lot of the parents in the neighborhood.
We are becoming Japan. I have twenty something women in my office that spend at least $40-50/week at Starbucks. Guys that either go out to lunch every day or order lunch every day. I bring my lunch almost everyday. I started during the Great Recession. Now, I mostly do it to control my dietary intake. Again, my point is we have gotten accustomed to spending money on things that our parents would have called extravagant.
I agree with your assessment.
I am a remote worker now, but I always brought my own lunch.
For monetary and health reasons.
No matter how much you work out, discipline in the kitchen is key for body fat percentage.
In many places houses are still selling fast.
A 5% mortgage in a 10% inflation environment is a far better deal than a 3% mortgage in a 3% inflation environment, if you can make the monthly payments.
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