Old farts of ATOT - how did you buy homes with 8-10%+ mortgage rates?

Zeze

Lifer
Mar 4, 2011
10,180
447
126
This seems ridiculous to me. 10% is like a moderate credit card APR rate. Was housing actually cheaper to offset it?

How low can we go? 30-year mortgage rates chart tells the story ...


Historical median home value in the US, nominal and real
 

BoomerD

No Lifer
Feb 26, 2006
54,896
3,427
126
House prices WERE a lot lower back in the early 80's...but so were wages. Those sky-high interest rates were hard as hell to stomach. Lots of people who were in the market to buy, just kept renting.
 

purbeast0

Lifer
Sep 13, 2001
49,378
2,352
126
Serious question OP - did you grow up in the USA?

It's pretty obvious if you did. My parents house that I grew up in was like 150k and my mom still lives there.

My parents built a "vacation house" that was on a country club on the #10 hole that was right by water when I was like 4 for like 180k. It was one of the first homes in the development and the address is #12.

Now my mom could sell her house for over 400k easily and the "vacation house" ended up being my dads house when they divorced and after he died it sold for like 700k.

Things were way cheaper back in the day.
 
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dasherHampton

Golden Member
Jan 19, 2018
1,805
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As everyone has stated correctly: the price of houses was far cheaper. You don't have to go back to the early 80's.

I remember the parents of one of my best friends getting divorced around 1990-91, necessitating the sale of their house. It was a really nice middle class home that would easily go for anywhere from $200,000 to $250,000 today (or $800,000 in SF).

The price they decided on is still stuck in my head: they listed it at $69,000.
 

MtnMan

Diamond Member
Jul 27, 2004
3,084
1,117
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My first house I bought, which I still own but rent out was 1400 sq ft, 3 bedroom 1.5 bath. $2OK.

Probably get $350K or more today.

However my payment was less than 25% of my take home, today peoples housing cost is 35 - 37% of their take home. A weekly trip to the grocery store that will fill the trunk was $20 - $25, gas was 30 cents/gallon
 

ponyo

Lifer
Feb 14, 2002
17,501
1,456
126
Man, people are addicted to low rates. We had crazy low rates for so long now that even 5 or 6% mortgage rates seem absurdly high now.
 

ponyo

Lifer
Feb 14, 2002
17,501
1,456
126
My sister is refinancing her home at 2.825% for 30 years. I told her to take the money even though she only has 3 years left on her current 15 year mortgage.
 

Red Squirrel

No Lifer
May 24, 2003
56,230
7,586
126
www.uovalor.com
Almost everything was cheaper back then so it kind of made up for it. The houses themselves were cheaper but so were the bills, taxes, groceries etc. Technology was more expensive, but it also lasted very long. Things like TVs, radios, fridges etc when they first came out were not cheaper than now but they were also luxeries.
 

BarkingGhostar

Diamond Member
Nov 20, 2009
6,717
498
126
Actually, I was paying >10% on a new mortgage at the end of 2000. My credit was in the toilet and I got a No Doc[umentation] mortgage for two year. In the time I cleaned up my credit, did several things to pay off stuff early, got my defaulted student loans resolved and when the time came got a regular mortgage at 5% with great credit. Still, the wife and I proved we could pay an outlandish amount of money to get into a home but then again we weren't buying $50K trucks and SUVs like some folks around Atlanta at that time.
 

dullard

Elite Member
May 21, 2001
22,325
690
126
Your graph answered your question.

Lets take 1986 for example. Median house price: ~$75,000, interest rate ~10%. 30 year mortgage monthly payment: $658.18 plus escrow.

Lets take now for example: Median house price: ~$270,000, interest rate ~3%. 30 year mortgage monthly payment: $1138.33 plus escrow.

The median house payment is almost double now, even though interest rates are lower. The houses are bigger but we are paying for it. The problem with using your inflation adjusted graph is that only works if wages went up with inflation. Income went up, but barely in the last few decades. Income has not increased with inflation. Housing prices have increased far more than wages.


1596228044571.png
 
Nov 8, 2012
16,124
2,838
126
Your graph answered your question.

Lets take 1986 for example. Median house price: ~$75,000, interest rate ~10%. 30 year mortgage monthly payment: $658.18 plus escrow.

Lets take now for example: Median house price: ~$270,000, interest rate ~3%. 30 year mortgage monthly payment: $1138.33 plus escrow.

The median house payment is almost double now, even though interest rates are lower. The houses are bigger but we are paying for it. The problem with using your inflation adjusted graph is that only works if wages went up with inflation. Income went up, but barely in the last few decades. Income has not increased with inflation. Housing prices have increased far more than wages.


View attachment 27287
This is one of the reasons that I've been advised to ALWAYS get a 30 year mortgage.

$400k today is not worth $400k 30 years from now, so the more you delay payments the less you effectively are paying.
 

ponyo

Lifer
Feb 14, 2002
17,501
1,456
126
This is one of the reasons that I've been advised to ALWAYS get a 30 year mortgage.

$400k today is not worth $400k 30 years from now, so the more you delay payments the less you effectively are paying.
I recommend 15 year if you can swing it. But I like cash in full if you have the money.
 

BoomerD

No Lifer
Feb 26, 2006
54,896
3,427
126
My sister is refinancing her home at 2.825% for 30 years. I told her to take the money even though she only has 3 years left on her current 15 year mortgage.
Why? for the minimal tax write-off? She's paying about 97% principal and 3% interest with her payments by now.
 

RLGL

Golden Member
Jan 8, 2013
1,680
187
106
In 1977 I bought a 46K loan with nothing down GI. Still it was not that hard to pay on even with student loans.
 

ponyo

Lifer
Feb 14, 2002
17,501
1,456
126
Why? for the minimal tax write-off? She's paying about 97% principal and 3% interest with her payments by now.
She has some large credit card debt she wants to get rid of and couple expensive home renovations she wants to do. She's doing way larger cash out refi than she probably needs but will redeposit most of the money and pay down the new mortgage when she's sure she doesn't need the extra money. And she'll make extra monthly payments equaling what she was paying on her previous 15 year on this new loan. So my guess is she'll probably pay off this new 30 year loan in about 6 years. About double the 3 years she had left on her previous 15 year old loan. I think her previous 15 year loan was at 4.675% or little higher.

She's in pretty good financial shape. After this refi, her only debt will be the mortgage and one car note. Both should be paid off in 5-6 years. Just in time for her kids to start college. lol. But she's super happy I convinced her to go with 15 year mortgage instead of 30 year when she refinanced the previous time. She would still have 18 years left instead of the 3 years she has left on her current 15 year. And much smaller home equity.
 
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PowerEngineer

Diamond Member
Oct 22, 2001
3,130
180
106
The focus for home buyers is always on the size of their monthly payments, and that is obviously a function of both the home price and the mortgage interest rate. Prequalified buyers generally cap the prices of homes they can look at based on the size of the mortgage they can get. Lower mortgage rates allow for larger mortgages for the same monthly payments, which in turn encourages increases in home prices. If they ever return, double digit mortgage rates would certainly pressure home prices down. (The only silver lining was that a bigger portion of the monthly payments were tax deductible interest costs.)
 

Red Squirrel

No Lifer
May 24, 2003
56,230
7,586
126
www.uovalor.com
I recommend 15 year if you can swing it. But I like cash in full if you have the money.
I sometimes wonder if I should have gotten a 15 year myself. At the rate I'm paying it will be paid off in about 5 years, which is almost 15 years total. I think with a 15 you get a way lower interest rate right?

As a first time buyer it's hard to gauge what all the living expenses will be though so it's also good to leave breathing room. I'm also in a situation where I may need to reduce my payments soon so at least I have that option with the extra payments I'm doing. Just trying to avoid doing it if I can. Right now my pay cheque and living expenses is about on par but once living expenses go up again I'll probably have to reduce mortgage payment. When I first bought I had more money left over at the end of the month but I bought stuff more often like my current servers, when I probably should have been making even higher payments which would mean the house would be paid off by now possibly. Live and learn.
 

Scarpozzi

Lifer
Jun 13, 2000
24,052
482
126
My first home purchase was in 2004. 30 year fixed rate was 6.5% then....I jumped on a 5/1 ARM for 5%.

To answer your question. Houses that went for $190k in the Bay Area(SF) were selling for $1.2M by 2009....other examples, but yes....every time the economy drops and recovers, housing gets inflated.

Right now, my neighborhood is booming and prices are rising fast. It's pretty crazy, but I suppose everyone is jumping on low interest, location, and the moderate prices here (which are climbing rapidly).
 
Nov 8, 2012
16,124
2,838
126
My first home purchase was in 2004. 30 year fixed rate was 6.5% then....I jumped on a 5/1 ARM for 5%.

To answer your question. Houses that went for $190k in the Bay Area(SF) were selling for $1.2M by 2009....other examples, but yes....every time the economy drops and recovers, housing gets inflated.

Right now, my neighborhood is booming and prices are rising fast. It's pretty crazy, but I suppose everyone is jumping on low interest, location, and the moderate prices here (which are climbing rapidly).
I can only hope after all this COVID shit that both Companies... and ESPECIALLY PEOPLE... Realize that you don't need to live in the middle of a fucking shithole metro-area in order to work a job that earns 6+ figs.


To be honest though, I think stuff like that mainly comes from people that apply for jobs with high skill levels that say "Yeah, nah.... I'll work remotely. I'm not moving and working in an office".
 

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