[quote=The-Shoveler][quote=spdrun]bearishgurl — Because many buyers wouldn’t be able to afford the payments at 7-8%. They can make the 7% loans, but the principal amount will be lower.

Better to keep the loan on their books, paying something, than have to resort to the bureaucracy of a short sale or foreclosure.[/quote]

So we are on average going to be making the same (pay) amount 10-15 years. good lord people there will be wage inflation.[/quote]

Maybe, Shoveler. But if the mtg rates go up significantly, the biggest impact for buyers taking out mortgages is that they won’t be able to buy newer econoboxes and mcmansions in close-in areas for their first and second homes … as they are doing today and have been for a decade.

The FTB and STB will have to “settle” for older, smaller homes situated between (gasp!) a hairdresser-heir and an HVAC specialist in SD County’s more established areas . . . OR high-tail it out to the IE (Temecula, Murrieta and points beyond) and drive into SD County everyday.

This is what we boomers had to do when we were in the family-forming stage …. except there was NOTHING in the (southern) IE back then (except for ONE gas/fast food pit stop on the Rancho CA Rd exit of I-15, lol). We as young parents were stuck with what was present in SD County at the time, which didn’t have the square footage (inside the house) as today’s newer construction does. We had to buy it, move in and worry about how to update it later …. room by room.

A more likely scenario if mtg rates go up significantly in the coming years is that SD Gen Y/millenial would-be buyers will have to drastically lower their housing expectations….or take a job in KS City or OKC instead.

1st and 2nd time buyers in CA coastal counties have traditionally always bought their first home in the lower price rungs and that is as it should be. They’re only able to buy in the higher price rungs today because of the artificially low mortgage rates.