With the Feds raising interest rates...

[BCYL]

With the Feds raising interest rates consistently like this, mortgage payments are going higher and higher... sooner or later people won't be able to afford their payments (especially for those who took the mortgage out when the rates are low), and will have to sell...

Will this help cool off the housing market?

 

[dxkj]

Originally posted by: BCYL
With the Feds raising interest rates consistently like this, mortgage payments are going higher and higher... sooner or later people won't be able to afford their payments (especially for those who took the mortgage out when the rates are low), and will have to sell...

Will this help cool off the housing market?

 

[Kalbi]

No, not for that reason. Adjustables have rate caps.

 

[Vic]

Except for most Home Equity Lines of Credit (HELOCs), mortgage rates are not directly affected by Fed rates. Also, most borrowers take out fixed-rate (or fixed-rate hybrid) mortgages that either never adjust or won't adjust for some years to come. The issue with the potential so-called "housing bubble" is not so much that existing homeowners will need to sell, but that new homeowners will find it more difficult to buy.

 

[shekondar]

Originally posted by: Kalbi
No, not for that reason. Adjustables have rate caps.

And some of us were smart & got a fixed rate...😉

 

[CTrain]

Originally posted by: shekondar

Originally posted by: Kalbi
No, not for that reason. Adjustables have rate caps.

And some of us were smart & got a fixed rate...😉

Some of us are smarter knowing we won't keep the house for more than 5 yrs and got a rate thats 1% lower than fixed

 

[Vic]

Originally posted by: CTrain

Originally posted by: shekondar

Originally posted by: Kalbi
No, not for that reason. Adjustables have rate caps.

And some of us were smart & got a fixed rate...😉

Some of us are smarter knowing we won't keep the house for more than 5 yrs and got a rate thats 1% lower than fixed

Which is not the case anymore under the current market conditions. The yield curve is nearly inverted and rates for ARM's and shorter term FRM's are almost the same as a 30 fixed.

 

[dullard]

So far, the fed's increases have had little impact on mortgage rates. The two are not directly correlated. Note: historically whenever the fed increases rates and mortgage rates don't rise significantly, a recession come a bit later.

Originally posted by: CTrain
Some of us are smarter knowing we won't keep the house for more than 5 yrs and got a rate thats 1% lower than fixed

Exactly. When I got a house last year, you'd have to keep a house 8+ years to just break even with a 5 year ARM. And it would have to be 10+ years to be significantly better to get the fixed rate loan.

 

[DBL]

Originally posted by: CTrain

Originally posted by: shekondar

Originally posted by: Kalbi
No, not for that reason. Adjustables have rate caps.

And some of us were smart & got a fixed rate...😉

Some of us are smarter knowing we won't keep the house for more than 5 yrs and got a rate thats 1% lower than fixed

Yeah, well some of us are even smarter and secured a fixed rate knowing that we intend to rent out rather than sell in 5-8 years and use the built-up equity to upgrade. This also gives you a choice as to exactly when you sell, which can be huge depending on the mortgage rates at the time.

 

[Kalbi]

Originally posted by: DBL

Originally posted by: CTrain

Originally posted by: shekondar

Originally posted by: Kalbi
No, not for that reason. Adjustables have rate caps.

And some of us were smart & got a fixed rate...😉

Some of us are smarter knowing we won't keep the house for more than 5 yrs and got a rate thats 1% lower than fixed

Yeah, well some of us are even smarter and secured a fixed rate knowing that we intend to rent out rather than sell in 5-8 years and use the built-up equity to upgrade. This also gives you a choice as to exactly when you sell, which can be huge depending on the mortgage rates at the time.

everyone has different goals so no one is "correct"

 

[DBL]

Originally posted by: Kalbi

Originally posted by: DBL

Originally posted by: CTrain

Originally posted by: shekondar

Originally posted by: Kalbi
No, not for that reason. Adjustables have rate caps.

And some of us were smart & got a fixed rate...😉

Some of us are smarter knowing we won't keep the house for more than 5 yrs and got a rate thats 1% lower than fixed

Yeah, well some of us are even smarter and secured a fixed rate knowing that we intend to rent out rather than sell in 5-8 years and use the built-up equity to upgrade. This also gives you a choice as to exactly when you sell, which can be huge depending on the mortgage rates at the time.

everyone has different goals so no one is "correct"

Obviously, I was just returning the favor. 😉

 

[BCYL]

Damn, I was hoping the housing market would cool off soon cuz I'm planning to buy a place in 1-2 years

 

[BoberFett]

Originally posted by: Vic
Except for most Home Equity Lines of Credit (HELOCs), mortgage rates are not directly affected by Fed rates. Also, most borrowers take out fixed-rate (or fixed-rate hybrid) mortgages that either never adjust or won't adjust for some years to come. The issue with the potential so-called "housing bubble" is not so much that existing homeowners will need to sell, but that new homeowners will find it more difficult to buy.

As I've said all along, the average homeowner won't feel a thing if the market cools. Most people own homes to live in them. If the market cools and even if there's a price drop, most people can ride it out and stay in that house until they own it if need be.

The person who's going to take it up the rear is the one who has borrowed every cent they could to purchase investment property in the hopes of turning a quick buck in the current hot markets. It's like a game of musical chairs. There are a lot of people buying and selling properties purely speculatorily (is that a word? 😛) When the music stops, someone is going to be without a chair, and they're going to lose in a big way.

 

[dullard]

Originally posted by: BoberFett
The person who's going to take it up the rear is the one who has borrowed every cent they could to purchase investment property in the hopes of turning a quick buck in the current hot markets. It's like a game of musical chairs. There are a lot of people buying and selling properties purely speculatorily (is that a word? 😛) When the music stops, someone is going to be without a chair, and they're going to lose in a big way.

Money isn't magically created. For every dollar someone made in the housing market, someone lost a dollar. Same goes when housing prices fall. It is difficult but not impossible to be on the winning end of both markets. Similarly, you could be on the losing end of both.

 

[jlee]

Hopefully it'll cool off just after we sell our house..and just before we buy another one. 😛

 

[BoberFett]

Originally posted by: dullard

Originally posted by: BoberFett
The person who's going to take it up the rear is the one who has borrowed every cent they could to purchase investment property in the hopes of turning a quick buck in the current hot markets. It's like a game of musical chairs. There are a lot of people buying and selling properties purely speculatorily (is that a word? 😛) When the music stops, someone is going to be without a chair, and they're going to lose in a big way.

Money isn't magically created. For every dollar someone made in the housing market, someone lost a dollar. Same goes when housing prices fall. It is difficult but not impossible to be on the winning end of both markets. Similarly, you could be on the losing end of both.

Actually money is magically created. It's done by the Federal Reserve and the symptom of money creation is inflation. Long term it's certainly possible that every dollar made does not correspond to a dollar lost. Short term investors - flippers, if you will - are playing a risky game in the current housing bubble.

 

[Kalbi]

Originally posted by: BoberFett

Originally posted by: dullard

Originally posted by: BoberFett
The person who's going to take it up the rear is the one who has borrowed every cent they could to purchase investment property in the hopes of turning a quick buck in the current hot markets. It's like a game of musical chairs. There are a lot of people buying and selling properties purely speculatorily (is that a word? 😛) When the music stops, someone is going to be without a chair, and they're going to lose in a big way.

Money isn't magically created. For every dollar someone made in the housing market, someone lost a dollar. Same goes when housing prices fall. It is difficult but not impossible to be on the winning end of both markets. Similarly, you could be on the losing end of both.

Actually money is magically created. It's done by the Federal Reserve and the symptom of money creation is inflation. Long term it's certainly possible that every dollar made does not correspond to a dollar lost. Short term investors - flippers, if you will - are playing a risky game in the current housing bubble.

Yea dude the economy isn't a zero sum game....like boberfett said, money is "magically" created by the feds.

Boberfett: Don't you love it people think they are economists without knowing a damn thing about economics? haha "money isn't magically created"...."ummmm....actually it is..."

 

[dullard]

Originally posted by: BoberFett
Actually money is magically created. It's done by the Federal Reserve and the symptom of money creation is inflation. Long term it's certainly possible that every dollar made does not correspond to a dollar lost. Short term investors - flippers, if you will - are playing a risky game in the current housing bubble.

Yes the feds create money. But a house seller and a house buyer are not the feds. In that specific deal, or any house purchase, money isn't created. I'm sad that you and Kalbi can't see the difference.

 

[Kalbi]

Originally posted by: dullard

Originally posted by: BoberFett
Actually money is magically created. It's done by the Federal Reserve and the symptom of money creation is inflation. Long term it's certainly possible that every dollar made does not correspond to a dollar lost. Short term investors - flippers, if you will - are playing a risky game in the current housing bubble.

Yes the feds create money. But a house seller and a house buyer are not the feds. In that specific deal, or any house purchase, money isn't created. I'm sad that you and Kalbi can't see the difference.

how can you say the housing market is zero sum? how is someone "losing" a dollar when someone gains one...

 

[dullard]

Originally posted by: Kalbi
how can you say the housing market is zero sum? how is someone "losing" a dollar when someone gains one...

Um, lets simplify this for you. Suppose I buy a 1 cent piece of gum from you. I lose 1 cent, you gain 1 cent. Net sum is zero. The fact that feds can create money has nothing to do with that transaction.

 

[Spike]

Originally posted by: Vic

Originally posted by: CTrain

Originally posted by: shekondar

Originally posted by: Kalbi
No, not for that reason. Adjustables have rate caps.

And some of us were smart & got a fixed rate...😉

Some of us are smarter knowing we won't keep the house for more than 5 yrs and got a rate thats 1% lower than fixed

Which is not the case anymore under the current market conditions. The yield curve is nearly inverted and rates for ARM's and shorter term FRM's are almost the same as a 30 fixed.

Not in my case, I got over a 1% drop by going with a 5/1 ARM. I will probably refinance in three years and take the higher fixed rate but the lower rate allowed us to get a house in a very expensive market (Seattle)

-spike

 

[Kalbi]

Originally posted by: dullard

Originally posted by: Kalbi
how can you say the housing market is zero sum? how is someone "losing" a dollar when someone gains one...

Um, lets simplify this for you. Suppose I buy a 1 cent piece of gum from you. I lose 1 cent, you gain 1 cent. Net sum is zero. The fact that feds can create money has nothing to do with that transaction.

dude...you exchanged for 1 cent worth of gum. you didn't lose sht

 

[Noirish]

Originally posted by: Kalbi
No, not for that reason. Adjustables have rate caps.

yes, i believe they can raise as much as 2% on you in one year.
people with arm will get burned pretty bad once rates start moving north fast.
fixed rate ppl are safe though.

 

[dullard]

Originally posted by: Kalbi
dude...you exchanged for 1 cent worth of gum. you didn't lose sht

Yes, I did gain 1 cent of gum. But you lost 1 cent of gum. It is still net zero.

Me:
[*]-$0.01
[*]+$0.01 worth of gum
[*]net: $0.00

You:
[*]+$0.01
[*]-$0.01 worth of gum
[*]net: $0.00

Overall: Net $0.00. Since the gum was neither created nor distroyed, it doesn't have to be considered in the overall net sum calculations.

 

[JulesMaximus]

Originally posted by: CTrain

Originally posted by: shekondar

Originally posted by: Kalbi
No, not for that reason. Adjustables have rate caps.

And some of us were smart & got a fixed rate...😉

Some of us are smarter knowing we won't keep the house for more than 5 yrs and got a rate thats 1% lower than fixed

I've been in my house for 6 years now. 5.371% on a 30 year fixed.