30 year mortgage rates hit 5%

[Rich Toscano]

sdr I hope you’re still alive and well? 😀

https://fred.stlouisfed.org/series/MORTGAGE30US

[Pbranding]

I think I know what sdr and deadzone will say but I’m curious about your thoughts Rich. Do you think we are in a bubble and do you see it deflating soon? Thanks

[Rich Toscano]

I am going to put up an update today(ish) but my thoughts on whether it’s a bubble are in this article: https://pcasd.com/whats-going-on-with-housing/

[moon]

[quote=Rich Toscano]I am going to put up an update today(ish) but my thoughts on whether it’s a bubble are in this article: https://pcasd.com/whats-going-on-with-housing/%5B/quote%5D
Hi Rich, I cannot wait to read your updates on this article. Things have changed a lot since last October when you published this article, such as housing price keeps going up in a crazy way, mortgage rage went to 5% already, and will go even higher in a faster way than we ever expect. What do you think the affordability of housing now? Do you think the Fed will do everything (actually I meant multiple rate hikes in a short term)to control the inflation?

[Rich Toscano]

[quote=moon]Hi Rich, I cannot wait to read your updates on this article. Things have changed a lot since last October when you published this article, such as housing price keeps going up in a crazy way, mortgage rage went to 5% already, and will go even higher in a faster way than we ever expect. What do you think the affordability of housing now? Do you think the Fed will do everything (actually I meant multiple rate hikes in a short term)to control the inflation?[/quote]

Hi – It is up in the main section here: https://www.piggington.com/monthly_housing_data_no_inventory_prices_rates_affordability

I agree things have changed a lot since then. In the original article, my argument was, “prices are really high but it’s possibly sustainable IF rates stay low.” Well… that didn’t happen. So affordability is absolutely terrible — as you can see in that article, the real monthly payment is now at the level it was at the bubble peak. It’s a pretty risky situation.

Yes, I do think the Fed is serious about trying to control inflation. How that actually plays out is unknowable though. It seems likely they will keep tightening until inflation backs off, or something breaks in financial markets. The big question is which of those happen first (and given extreme valuations in so many areas of the markets, unfortunately the latter is a real possibility).

So I guess I think the Fed currently intends to tighten a lot, but if they hit that second possibility (financial market problems with inflation still high) they could change course. And btw, I don’t think that necessarily would mean that they don’t care about inflation. I think the Fed sees financial markets as the main conduit for their policy… if markets sell off, then via the wealth effect that will probably reduce inflation. So, if markets decline enough, there’s a good chance they will pause, to see if the market does the work for them.

But I’m getting ahead of myself here. I do think it’s clear that the Fed very much cares about high inflation, they have acknowledged that they were wrong about the transitory thing, and they are serious about stopping it. But nobody on earth knows how that will play out in real life. I wouldn’t want to be in their shoes right now, that’s for sure.

[moon]

Rich

Thank you for your input. Before my friend introducing me to this website, I did a simple calculation about housing affordability in SD, and came out with the same conclusion as you: the SD market is very risky now because of high monthly payments, plus high inflation made everything so expensive, how much room left for housing price to continue going up? People need to by food, need to buy gasoline, but salary didn’t go up accordingly, then how people will live with that? You either stop putting money in high price homes or reducing your grocery bills. If inflation doesn’t get controlled, eventually that will lead to a recession, I think that’s why Fed is serious about inflation now, although they should done that a year ago. The stock market already reacted on Fed’s actions, time will tell what gonna happen.

I am trying to buy my first home now, even it is risky, I am still looking and fighting with myself everyday. It is very sad I put myself in such an awkward situation, but this is life.

[quote=Rich Toscano][quote=moon]Hi Rich, I cannot wait to read your updates on this article. Things have changed a lot since last October when you published this article, such as housing price keeps going up in a crazy way, mortgage rage went to 5% already, and will go even higher in a faster way than we ever expect. What do you think the affordability of housing now? Do you think the Fed will do everything (actually I meant multiple rate hikes in a short term)to control the inflation?[/quote]

Hi – It is up in the main section here: https://www.piggington.com/monthly_housing_data_no_inventory_prices_rates_affordability

I agree things have changed a lot since then. In the original article, my argument was, “prices are really high but it’s possibly sustainable IF rates stay low.” Well… that didn’t happen. So affordability is absolutely terrible — as you can see in that article, the real monthly payment is now at the level it was at the bubble peak. It’s a pretty risky situation.

Yes, I do think the Fed is serious about trying to control inflation. How that actually plays out is unknowable though. It seems likely they will keep tightening until inflation backs off, or something breaks in financial markets. The big question is which of those happen first (and given extreme valuations in so many areas of the markets, unfortunately the latter is a real possibility).

So I guess I think the Fed currently intends to tighten a lot, but if they hit that second possibility (financial market problems with inflation still high) they could change course. And btw, I don’t think that necessarily would mean that they don’t care about inflation. I think the Fed sees financial markets as the main conduit for their policy… if markets sell off, then via the wealth effect that will probably reduce inflation. So, if markets decline enough, there’s a good chance they will pause, to see if the market does the work for them.

But I’m getting ahead of myself here. I do think it’s clear that the Fed very much cares about high inflation, they have acknowledged that they were wrong about the transitory thing, and they are serious about stopping it. But nobody on earth knows how that will play out in real life. I wouldn’t want to be in their shoes right now, that’s for sure.[/quote]

[sdrealtor]

Not only did the stock market react to fed recent and expected actions but loan rates have also already priced that in. If the Fed raises short term rates 2% in the next several months that does not correlate to 2% higher mortgage rates. That’s not how it works

[sdrealtor]

Didn’t someone predict this here two months ago? I wonder who?

Adjustable-rate mortgage demand doubles
https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-demand-doubles-as-interest-rates-hit-the-highest-since-2009.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Message

It’s only just the beginning! Bring on the adjustables!

[limkotir]

[quote=sdrealtor]Didn’t someone predict this here two months ago? I wonder who?

Adjustable-rate mortgage demand doubles
https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-demand-doubles-as-interest-rates-hit-the-highest-since-2009.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Message

It’s only just the beginning! Bring on the adjustables![/quote]

For those starter SFH (or likely condos / townhouses) buyers expect to grow their earnings in the coming years, ARM might not be a bad way to go to get into the SD market, then sell the property 5/7/10 years down the road via 1031 exchange into a destination house / zip area.

[an]

[quote=limkotir][quote=sdrealtor]Didn’t someone predict this here two months ago? I wonder who?

Adjustable-rate mortgage demand doubles
https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-demand-doubles-as-interest-rates-hit-the-highest-since-2009.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Message

It’s only just the beginning! Bring on the adjustables![/quote]

For those starter SFH (or likely condos / townhouses) buyers expect to grow their earnings in the coming years, ARM might not be a bad way to go to get into the SD market, then sell the property 5/7/10 years down the road via 1031 exchange into a destination house / zip area.[/quote]
No need to 1031 if you’re using it as a primary residence. You have $500k in tax free gain to use (assuming you’re a couple)

[DataAgent]

We bought out current home in 2007. Interest rates were high for the time so we went with a 3/1 ARM. 3 years after we bought, interest rates were much lower. A few years later, we locked into a much lower rate. Although we are not gamblers, sometime it pays to take a little risk.

A few months ago (same house), we re-fi’d into a 10 year IO loan with cash out @ 2.6% rate. It’s hard to qualify for low-rate IO loans but we met all the requirements. We now have 9.5 years with a decent rate and a very low mortgage payment. A lot can happen in 9.5 years so we have lots of options.

[sdrealtor]

[quote=DataAgent]We bought out current home in 2007. Interest rates were high for the time so we went with a 3/1 ARM. 3 years after we bought, interest rates were much lower. A few years later, we locked into a much lower rate. Although we are not gamblers, sometime it pays to take a little risk.

A few months ago (same house), we re-fi’d into a 10 year IO loan with cash out @ 2.6% rate. It’s hard to qualify for low-rate IO loans but we met all the requirements. We now have 9.5 years with a decent rate and a very low mortgage payment. A lot can happen in 9.5 years so we have lots of options.[/quote]

I bought mine in 99 with a 5/1 ARM at 7.125%. Over the years as rates went down I got into 30 year loans at ever lower rates until grabbing one near the bottom in December 2020.

I have a friend that bought around the same time and got a straight adjustable he never refinanced. He always had the lowest rate until he sold it about 5 years ago.

My best friend for years did I/O 5/1 arms until I convinced to lock into a 30 yr fixed.

This is all well and nice with rates going down all that time but it works in other cases also. Rates have risen quickly but in the next 5 to 10 years there should be opportunities to refi around the same or lower either in fixed or in another adjustable. Combine that with a lower loan balance then and higher income and there is a good case to be made for adjustable hybrid fixed loans like 5, 7 and 10/1 arms.

[sdrealtor]

[quote=limkotir][quote=sdrealtor]Didn’t someone predict this here two months ago? I wonder who?

Adjustable-rate mortgage demand doubles
https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-demand-doubles-as-interest-rates-hit-the-highest-since-2009.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Message

It’s only just the beginning! Bring on the adjustables![/quote]

For those starter SFH (or likely condos / townhouses) buyers expect to grow their earnings in the coming years, ARM might not be a bad way to go to get into the SD market, then sell the property 5/7/10 years down the road via 1031 exchange into a destination house / zip area.[/quote]

Yes for a variety of reasons people rarely hold onto mortgages longer than 5 to 10 years. Now the low rates of the last few years may make that less common but most people sell or refi within 5 to 10 years at least once.

[JPJones]

[quote=sdrealtor]Didn’t someone predict this here two months ago? I wonder who?

Adjustable-rate mortgage demand doubles
https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-demand-doubles-as-interest-rates-hit-the-highest-since-2009.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Message

It’s only just the beginning! Bring on the adjustables![/quote]
Damn…I didn’t think you’d be wrong, but I didn’t want you to be right.

“Oh no, not again.”

[Coronita]

[quote=JPJones][quote=sdrealtor]Didn’t someone predict this here two months ago? I wonder who?

Adjustable-rate mortgage demand doubles
https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-demand-doubles-as-interest-rates-hit-the-highest-since-2009.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Message

It’s only just the beginning! Bring on the adjustables![/quote]
Damn…I didn’t think you’d be wrong, but I didn’t want you to be right.

“Oh no, not again.”[/quote]

Well, adjustable rate mortgages are probably not bad by themselves, so that probably isn’t alone enough to cause alarm…

It’s when the banks stop dropping lending standards and anyone that can qualify for a loan that is barely breathing, then that’s a problem.

But we aren’t there….yet…..

I look at it another way….ARMs probably are a short to mid term way to allow some buyers to keep buying. It’s not an end all be all for everyone, but probably away to get around it. 7/1 or 5/1….. not deal with it for another 5-7 years. A lot of things can happen 5-7 years later. Maybe good, maybe bad. dont’ know. most people probably don’t think that far in advance.

And if banks are stupid enough to bring back liar loans, well then we have an entire new generation of stupid buyers that pay way above their means that will end up in a short sales/ REO for the rest of us buy at a discount, just like before…

Not that I wish that to happen… But if it were to happen, it is what it is.

[sdrealtor]

[quote=JPJones][quote=sdrealtor]Didn’t someone predict this here two months ago? I wonder who?

Adjustable-rate mortgage demand doubles
https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-demand-doubles-as-interest-rates-hit-the-highest-since-2009.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Message

It’s only just the beginning! Bring on the adjustables![/quote]
Damn…I didn’t think you’d be wrong, but I didn’t want you to be right.

“Oh no, not again.”[/quote]

lol and only just the beginning

[sdrealtor]

Rates

Mission Federal 10/1 ARM fixed for 10 years at 2.75%

Operators are standing by

[gzz]

Wow that 10-year 2.75 sounds a ton better than 5% 30 year.

Maybe my plan for a cashout refi isn’t as dead as I thought.

[Coronita]

[quote=gzz]Wow that 10-year 2.75 sounds a ton better than 5% 30 year.

Maybe my plan for a cashout refi isn’t as dead as I thought.[/quote]

I don’t know. Personally, I wouldn’t do a 10/1 cash out for a rental that I’d be planning to keep indefinitely.

Call me conservative who likes to play it safe(r).

[gzz]

I’d buy California PIMCO muni bond funds that yield 5.4% tax free. Not much risk holding both to maturity. For $200k worth that’s about an arbitrage gain of 4800 a year tax free for 10 years.

Now that was my plan last year that fell through because the overwhelmed IRS couldn’t find my corporate tax return that had been filed months prior. (The IRS is an understaffed mess, I filed my personal taxes and Cal corporate taxes the same day and they all arrived fine).

If I had done it then, I’d have cash locked in at 1.8 or 2% for 15 years invested at more like 4%, but would have suffered an unrealized loss as the funds dropped.

So certainly there is risk. But it seems pretty small overall. I think the muni tax adjusted yield spread over federal bonds is just insanely high and will eventually drop, especially as supply comes down, which is rapidly happening. The unleveraged and conservative vanguard long muni fund yields 2.8% free of state and federal taxes!

[Escoguy]

[quote=gzz]Wow that 10-year 2.75 sounds a ton better than 5% 30 year.

Maybe my plan for a cash-out refi isn’t as dead as I thought.[/quote]

A colleague recently got a 30 yr fixed at 3.6% (April).
I think he has over 50% equity.
The loan isn’t being sold and is kept on the banks books.

First Republic is the bank. They can be picky but I’ve found it’s often worth jumping through their hoops.

[sdrealtor]

That’s called a portfolio loan. They hold onto it. The big brokerage banks also do pledged asset loans for customers with good size accounts. Basically your investment account is a backstop that lowers lenders risk

[sdrealtor]

FWIW I looked at what would happen if instead of taking a 30 year rate around 5% someone took the 10/1arm at 2.75% and added the difference in the payment amount each month to the payment. On a $600,000 loan in 10 years the balance is about $150,000 lower. That sure seems to make a lot more sense than taking the higher rate for a 30 year fixed if one is able to

[sdrealtor]

Ran into an old friend yesterday who bought in 2014 but couldnt refi because his ratios were out of line due to support payments. His oldest just turned 18 putting him back into compliance to refi.

He was stuck at 4.125% and thought he had missed the boat. His LTV is around only 30% and he figured he’d just ride it out. I told him about Mission Fed. He went over this morning and was able to lock into a 10/1 ARM at 2.625%.

Between the lower rate and his recently improved cash flow he’ll have it paid off in less than 10 years.

[moon]

…

[Anonymous]

MBS market dropping like a rock again today, we may see closer to 5.5% 30 year by the end of the day.

[an]

The rate of increase is pretty amazing. Hopefully, we’ll see 7% mortgage and 5% CD soon. Would love to see a massive crash in the next 6 months. Especially in the home construction industry and material cost goes back to where it was in 2010.

[scaredyclassic]

I doubt there will be a crash but I fantasize about buying a condo in downtown SD for 339,000 cash.

[sdrealtor]

Why thank you Rich! I’m out running around buying wine for the warm spring and summer nights as well as picking up tickets for a couple of shows I want to go catch. Lots of exciting things going on out there and definitely seeing the beginnings of fairly significant changes in the velocity of the market. It’ll take a few months before anything shows up in the data but I think we can pretty safely say that the completely insane sellers market is over. More to follow after I get done with the truly important things in my life But I would be remiss if I didn’t point out that 4.75% is the widely available and operators are standing by

[sdrealtor]

Ok got a little time before weekly SoCal economist call I follow every week. Two weeks ago I noticed the start of it on my NCC monitor but I always want to see a follow on for a few weeks because we have had plenty of false flags. IN the 3 submarkets I follow 2 are still roaring along but in one (NCC SFR) we are starting to bring on homes faster than they sell for the first time in about 2 years.

There’s plenty in escrow with much lower rates locked that will close in next 30 to 45 days. Then that takes another 30 to 60 days to get reported. We wont see any change in reported data until perhaps July.

There are two things coming at us also with opposite forces. Things always slow down mid April as its tax season. I think what Im seeing is more than that but its not out of the question that things pick up in a couple weeks. Which brings us to May. There is no stronger market here than May. Its the annual impact of relo buyers showing up in throngs to secure a new home to move into over the Summer while schools are out. Will this be muted by the higher rates? I think it has to be but how much is a complete unknown and if its enough to have any impact equally unkown. Unless we keep getting more and more inventory it will all go quickly.

Bottom line we are in a wait and see point as to what happens? Surely we have a slower market coming at us in the future. But if and how much that impacts pricing is a complete unknown right now. As always, I love my front row seat. I’ll be watching and reporting back.

I will also add that the mortgage market typically moves up quickly in big overshoot movements then settles back slowly. I think we needed to have higher rates but to have any real impact they need to stay high and for a longer time than guys like DZ think. I think the big jumps are past and while they could creep up a little more I dont expect rates to be much higher the rest of the year. Not saying its impossible but I just dont see 6% anytime soon. The movements we’ve had are enough to slow things down we just need them to stay here for a couple years.

Lastly nothing indicates large price declines anytime soon. There is ZERO chance we go back to prepandemic pricing and the betting window remains open

[Anonymous]

The Fed giveth, the Fed taketh away

[flyer]

With all of the crises in the world, something has to give eventually, and the winds of change do seem to be in the air.

Barring WW3, whatever happens, we’re all good, but it is going to be very interesting to see how it all plays out.

[Rich Toscano]

sdr — Good color, thank you — I especially like the point about May… I will be very interested to see how May looks.

I’m going to quibble with your forecasts though — not the forecasts themselves, but your confidence levels.

“There is ZERO chance we go back to prepandemic pricing and the betting window remains open”. — Really… zero? First of all that’s not a bet I can take unless you’re willing to offer infinite odds. But more to the point… of course it’s not ZERO chance. Prices in any market can go back to what they were a few years prior — this has happened multiple times in SD housing and it could happen again. I’m not saying it’s probable, but to say it’s IMPOSSIBLE is wildly overconfident.

And also, re your interest rate prediction. Your last rate prediction that I remember, not too long ago, was that mortgage rates wouldn’t reach 5% in your lifetime. That probably wasn’t even a year ago — and here we are at 5% already. (Hence my little joke in the OP). Given that you are a young, virile stud with decades left to go — this was a very bad prediction! But now you are making more rate predictions! I will admit that this latest one was pretty circumspect… but still, would it not make more sense to just consider that you don’t have an edge on predicting where rates will go? (I will admit here that this is the route I’ve chosen to take, but ONLY after making many terrible rate predictions in my past).

BTW I’m busting your chops you here because you have claimed to have the best predictive track record on piggington. That may actually be true, for all I know! But either way — if you are going to brag about that… I’m going to give you a hard time when you whiff one, ha ha. Heavy is the head that wears the crown! >:-)

[sdrealtor]

[quote=Rich Toscano]sdr — Good color, thank you — I especially like the point about May… I will be very interested to see how May looks.

I’m going to quibble with your forecasts though — not the forecasts themselves, but your confidence levels.

“There is ZERO chance we go back to prepandemic pricing and the betting window remains open”. — Really… zero? First of all that’s not a bet I can take unless you’re willing to offer infinite odds. But more to the point… of course it’s not ZERO chance. Prices in any market can go back to what they were a few years prior — this has happened multiple times in SD housing and it could happen again. I’m not saying it’s probable, but to say it’s IMPOSSIBLE is wildly overconfident.

And also, re your interest rate prediction. Your last rate prediction that I remember, not too long ago, was that mortgage rates wouldn’t reach 5% in your lifetime. That probably wasn’t even a year ago — and here we are at 5% already. (Hence my little joke in the OP). Given that you are a young, virile stud with decades left to go — this was a very bad prediction! But now you are making more rate predictions! I will admit that this latest one was pretty circumspect… but still, would it not make more sense to just consider that you don’t have an edge on predicting where rates will go? (I will admit here that this is the route I’ve chosen to take, but ONLY after making many terrible rate predictions in my past).

BTW I’m busting your chops you here because you have claimed to have the best predictive track record on piggington. That may actually be true, for all I know! But either way — if you are going to brag about that… I’m going to give you a hard time when you whiff one, ha ha. Heavy is the head that wears the crown! >:-)[/quote]

Honestly I don’t ever remember predicting anything about rates ever before. It’s just not something I really ever gave a thought to before. I might have said I don’t expect them to get that high again in passing but do not recall making what I would consider a firm prediction. Also rates aren’t really my wheelhouse. I don’t expect to see them hit 6% but if they did it’s not like I’d fall off my horse. On the other hand I stand by my zero chance of pre pandemic pricing around me. Not to say it couldn’t happen somewhere in SD or that someone won’t find a one off sale but the general pricing level just isn’t going back where I live. No problem with the busting of the chops either. I take none of this personally. I have spent decades positioning myself to keep doing what I love in the manner I love no matter what the future brings baring a zombie attack for which I have no response but to run 🙂

And the bet is easy. Even money we do not see pricing levels here back at prepandemic levels which DZ said that would at least return to. The bet was for him but anyone is welcome to take it

[flyer]

With all of my wife’s projects in the entertainment industry, when not Zooming business meetings, we’re in the Los Angeles area once in awhile, and we’re hearing real estate may be cooling off a bit up there as well. Our daughter and her husband live in Malibu, and they are also seeing a slight decline in demand, so, things do seem to be changing in various SoCal and other areas.

[sdrealtor]

[quote=flyer]With all of my wife’s projects in the entertainment industry, when not Zooming business meetings, we’re in the Los Angeles area once in awhile, and we’re hearing real estate may be cooling off a bit up there as well. Our daughter and her husband live in Malibu, and they are also seeing a slight decline in demand, so, things do seem to be changing in various SoCal and other areas.[/quote]

It’s literally been only the last week and in a small way. If you are hearing things I’d suggest an exorcism or at least a good shrink

[flyer]

[quote=sdrealtor][quote=flyer]With all of my wife’s projects in the entertainment industry, when not Zooming business meetings, we’re in the Los Angeles area once in awhile, and we’re hearing real estate may be cooling off a bit up there as well. Our daughter and her husband live in Malibu, and they are also seeing a slight decline in demand, so, things do seem to be changing in various SoCal and other areas.[/quote]

It’s literally been only the last week and in a small way. If you are hearing things I’d suggest an exorcism or at least a good shrink[/quote]

We were just up there this week, and it came up in conversation, so it will be interesting to see if it actually becomes a “thing.” It will be fun to see how it all goes.

[Rich Toscano]

[quote=sdrealtor]No problem with the busting of the chops either.[/quote]

Glad to hear it… it’s all meant to be in good fun. 🙂

[scaredyclassic]

[quote=Rich Toscano]sdr — Good color, thank you — I especially like the point about May… I will be very interested to see how May looks.

I’m going to quibble with your forecasts though — not the forecasts themselves, but your confidence levels.

“There is ZERO chance we go back to prepandemic pricing and the betting window remains open”. — Really… zero? First of all that’s not a bet I can take unless you’re willing to offer infinite odds. But more to the point… of course it’s not ZERO chance. Prices in any market can go back to what they were a few years prior — this has happened multiple times in SD housing and it could happen again. I’m not saying it’s probable, but to say it’s IMPOSSIBLE is wildly overconfident.

And also, re your interest rate prediction. Your last rate prediction that I remember, not too long ago, was that mortgage rates wouldn’t reach 5% in your lifetime. That probably wasn’t even a year ago — and here we are at 5% already. (Hence my little joke in the OP). Given that you are a young, virile stud with decades left to go — this was a very bad prediction! But now you are making more rate predictions! I will admit that this latest one was pretty circumspect… but still, would it not make more sense to just consider that you don’t have an edge on predicting where rates will go? (I will admit here that this is the route I’ve chosen to take, but ONLY after making many terrible rate predictions in my past).

BTW I’m busting your chops you here because you have claimed to have the best predictive track record on piggington. That may actually be true, for all I know! But either way — if you are going to brag about that… I’m going to give you a hard time when you whiff one, ha ha. Heavy is the head that wears the crown! >:-)[/quote]

Funny you should mention certainty. I’ve been studying Wittgenstein’s unpublished notes called ON CERTAINTY. It’s actually a pretty fun read, for philosophy. We probably all need to read this to intelligently define our terms.

The book is free online, a pdf. It’s in the form of short numbered fortune cookie like aphorisms.

[observer]

The other issue is that second home mortgage rates are now similar to investment loan rates, very close to 6%! Just a few months ago they were under 3%. In some markets some of the price appreciation has been due to increased numbers of second home buyers.

[Anonymous]

So far the Fed has done very little except jawbone. Balance sheet has not moved down (i.e. no sign of tightening) and they’ve only raised fed funds rate a paltry .25.

So yes the future of this bubble depends entirely on the Fed’s actions (or in-actions). Personally I think they will actually carry through with their tough talk this time because not only is inflation out of control for the first time in 40 years, but there needs to be a crash in order for them to re-inflate the next bubble. That is the cycle of things in a completely artificial, debt based bubble economy that we live in. The only question is how big of a crash will they try to engineer, and will they be able to keep it under control once it starts?

[flyer]

For many of us who purchased our primary and investment properties well in the past, the accelerating rate environment is not really a concern, but, along with the great info from Rich, here are some other interesting and opposing takes on the situation that may or may not play out. Also, there are still many all cash buyers out there, with a particular interest in CA, so only time will tell.

https://www.cnbc.com/2022/04/07/rising-mortgage-rates-cause-more-home-sellers-to-lower-asking-prices.html

https://fortune.com/2022/03/28/mortgage-rate-hike-could-slow-the-housing-market/

[gzz]

3.5 months later, rates are at 5% again on the way down.

Zillow shows several 4.5% rates for LTV>50%.

So the punchbowl’s restocked with Red Bull and Captain Morgan, party’s back on! Risk on! BTFD!

[spdrun]

Up 0.25% *day-over-day* today.

DOW down 400+ points.

[gzz]

1. Talking about dow points rather than sp500 percentage change is a bad look.

2. Conventional mortgage rates are behaving strangely lately. They did indeed rise 0.5 even while jumbo and treasuries only went up 0.10 and .15 from recent lows. Their blowout way above jumbo rates is back to about 0.9.

3. I predict conventional rates will trend back towards normal spreads soon.

[The-Shoveler]

The rate on the 30-year fixed mortgage slipped to 4.99% from 5.3% the week prior, according to Freddie Mac, sinking below the 5% level for the first time since the week of April 7.

https://www.yahoo.com/money/mortgage-rates-fall-140143053.html

[gzz]

If you find mortgage and bond pricing interesting, this is a great article:

https://www.mortgagenewsdaily.com/markets/mortgage-rates-07292022

Short version is the market thinks rates will drop, so the rate decrease you get for paying points up front is much much higher than normal. The article says the break-even point on a point is only 17 months right now. It was always more like 50-60 months whenever I applied before, too long so I always did 0 or negative points.

So…BULLISH. 5% average rate with the ability to pay a small fee to turn it into a 4.375% is a better environment for buyers than 5% without this option.

[XBoxBoy]

The employment report came out this morning and it was pretty strong. In a strange twist, the stock market is dropping because strong employment means the economy isn’t on the verge of collapse, thus interest rates will have to be higher to slow inflation. Meanwhile rates on the 10yr jump this morning as well. It will be interesting to see where Mortgage News Daily ends up reporting today’s mortgage rate. Strange times indeed!

[Author]

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