Interest rates

[scaredyclassic]

it’s impossible to time interest rates, isn’t it? you’re just sort of at the mercy of this swirling sea of rates. the house price is something you can control, but you can only buy around the time when you’re comfortable with a rate. And it’ll never feel good, since if it’s falling, you’ll feel like, hell, if I only wait a while it’ll be lower, and if it’s rising, you’ll think goddamnit, it’s got to level off and fall soon. so basically it’s always going to be painful.

does it all come down to why interestr ates are rising in terms of its effect on housing prices?

why a re interest rates rising?

[DWCAP]

[quote]If this is the new reality with rates, how long until we can expect a downturn in prices that would result in a comparable monthly payment that one could have secured in October? i.e. What is that lag time between risen rates and the resulting decrease in home price? [/quote]

I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.

IF, and that is an IF, your theory actually holds, I would say that the effect will be next September. This increase will cause panic amongst the CURRENT buyers, increasing short term demand, and then we hit spring (only 3 months away) and the high demand months of April-Aug. Maybe this pulls some spring buyers out now in a panic, leaving fewer at the end of the season in Sept for the ‘didnt sells’ of the summer to compete for. But that is nearly a year away, and there are tons of variables that could override any effect this will produce.

Access to money is a much much better measure to cause price declines. If the FHA increased their costs/downs and/or the GSE’s went back to the pre-crisis limits, then you would see price declines following demand drying up. (That is why you will never see that.) Marginal changes in costs of the money, when historicallly very low, wont do much.

[DWCAP]

[quote]If this is the new reality with rates, how long until we can expect a downturn in prices that would result in a comparable monthly payment that one could have secured in October? i.e. What is that lag time between risen rates and the resulting decrease in home price? [/quote]

I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.

IF, and that is an IF, your theory actually holds, I would say that the effect will be next September. This increase will cause panic amongst the CURRENT buyers, increasing short term demand, and then we hit spring (only 3 months away) and the high demand months of April-Aug. Maybe this pulls some spring buyers out now in a panic, leaving fewer at the end of the season in Sept for the ‘didnt sells’ of the summer to compete for. But that is nearly a year away, and there are tons of variables that could override any effect this will produce.

Access to money is a much much better measure to cause price declines. If the FHA increased their costs/downs and/or the GSE’s went back to the pre-crisis limits, then you would see price declines following demand drying up. (That is why you will never see that.) Marginal changes in costs of the money, when historicallly very low, wont do much.

[DWCAP]

[quote]If this is the new reality with rates, how long until we can expect a downturn in prices that would result in a comparable monthly payment that one could have secured in October? i.e. What is that lag time between risen rates and the resulting decrease in home price? [/quote]

I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.

IF, and that is an IF, your theory actually holds, I would say that the effect will be next September. This increase will cause panic amongst the CURRENT buyers, increasing short term demand, and then we hit spring (only 3 months away) and the high demand months of April-Aug. Maybe this pulls some spring buyers out now in a panic, leaving fewer at the end of the season in Sept for the ‘didnt sells’ of the summer to compete for. But that is nearly a year away, and there are tons of variables that could override any effect this will produce.

Access to money is a much much better measure to cause price declines. If the FHA increased their costs/downs and/or the GSE’s went back to the pre-crisis limits, then you would see price declines following demand drying up. (That is why you will never see that.) Marginal changes in costs of the money, when historicallly very low, wont do much.

[DWCAP]

[quote]If this is the new reality with rates, how long until we can expect a downturn in prices that would result in a comparable monthly payment that one could have secured in October? i.e. What is that lag time between risen rates and the resulting decrease in home price? [/quote]

I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.

IF, and that is an IF, your theory actually holds, I would say that the effect will be next September. This increase will cause panic amongst the CURRENT buyers, increasing short term demand, and then we hit spring (only 3 months away) and the high demand months of April-Aug. Maybe this pulls some spring buyers out now in a panic, leaving fewer at the end of the season in Sept for the ‘didnt sells’ of the summer to compete for. But that is nearly a year away, and there are tons of variables that could override any effect this will produce.

Access to money is a much much better measure to cause price declines. If the FHA increased their costs/downs and/or the GSE’s went back to the pre-crisis limits, then you would see price declines following demand drying up. (That is why you will never see that.) Marginal changes in costs of the money, when historicallly very low, wont do much.

[DWCAP]

[quote]If this is the new reality with rates, how long until we can expect a downturn in prices that would result in a comparable monthly payment that one could have secured in October? i.e. What is that lag time between risen rates and the resulting decrease in home price? [/quote]

I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.

IF, and that is an IF, your theory actually holds, I would say that the effect will be next September. This increase will cause panic amongst the CURRENT buyers, increasing short term demand, and then we hit spring (only 3 months away) and the high demand months of April-Aug. Maybe this pulls some spring buyers out now in a panic, leaving fewer at the end of the season in Sept for the ‘didnt sells’ of the summer to compete for. But that is nearly a year away, and there are tons of variables that could override any effect this will produce.

Access to money is a much much better measure to cause price declines. If the FHA increased their costs/downs and/or the GSE’s went back to the pre-crisis limits, then you would see price declines following demand drying up. (That is why you will never see that.) Marginal changes in costs of the money, when historicallly very low, wont do much.

[Ren]

[quote=DWCAP]I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.[/quote]

Agreed. The people for whom the interest rate is paramount are also likely the ones who either know they’re paying too much for the property to being with, or who don’t really know what they’re doing at all. The price of the property is far more important. For me, getting a low interest rate was just icing on the cake. I’d pay 8 or 10% (or whatever) if I was comfortable with the price, but I wouldn’t pay 3% if I wasn’t comfortable with the price.

[Ren]

[quote=DWCAP]I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.[/quote]

Agreed. The people for whom the interest rate is paramount are also likely the ones who either know they’re paying too much for the property to being with, or who don’t really know what they’re doing at all. The price of the property is far more important. For me, getting a low interest rate was just icing on the cake. I’d pay 8 or 10% (or whatever) if I was comfortable with the price, but I wouldn’t pay 3% if I wasn’t comfortable with the price.

[Ren]

[quote=DWCAP]I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.[/quote]

Agreed. The people for whom the interest rate is paramount are also likely the ones who either know they’re paying too much for the property to being with, or who don’t really know what they’re doing at all. The price of the property is far more important. For me, getting a low interest rate was just icing on the cake. I’d pay 8 or 10% (or whatever) if I was comfortable with the price, but I wouldn’t pay 3% if I wasn’t comfortable with the price.

[Ren]

[quote=DWCAP]I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.[/quote]

Agreed. The people for whom the interest rate is paramount are also likely the ones who either know they’re paying too much for the property to being with, or who don’t really know what they’re doing at all. The price of the property is far more important. For me, getting a low interest rate was just icing on the cake. I’d pay 8 or 10% (or whatever) if I was comfortable with the price, but I wouldn’t pay 3% if I wasn’t comfortable with the price.

[Ren]

[quote=DWCAP]I dont know there is one. Interest rates are a very small part of the overall demand equation of housing. Basically, most people only care about interest rates once they are already about to buy.[/quote]

Agreed. The people for whom the interest rate is paramount are also likely the ones who either know they’re paying too much for the property to being with, or who don’t really know what they’re doing at all. The price of the property is far more important. For me, getting a low interest rate was just icing on the cake. I’d pay 8 or 10% (or whatever) if I was comfortable with the price, but I wouldn’t pay 3% if I wasn’t comfortable with the price.

[briansd1]

[quote=FormerSanDiegan][quote=Huckleberry]

We all know that rising interest rates means lower home prices as it knocks more potential buyers (demand) out of the market.

[/quote]

I don’t think we all agree rising interest rates automatically mean lower home prices.

If rising interest rates occur during an economic recovery (which has happend many times in the past) the opposite has occurred. (look at prices from 1965 to 2000)

Conversely, declining rates do not always translate into higher prices (look at rates and prices from 2006 to 2009).[/quote]

Hard to look to recent history for guidance.

I remember people claiming that real estate prices would never drop without an employment downturn.

But, surprise, surprise, we had a real estate crash that caused general unemployment, which then caused more more unemployment.

I think that rising rates will cause stagnation and more choices for buyers.

[briansd1]

[quote=FormerSanDiegan][quote=Huckleberry]

We all know that rising interest rates means lower home prices as it knocks more potential buyers (demand) out of the market.

[/quote]

I don’t think we all agree rising interest rates automatically mean lower home prices.

If rising interest rates occur during an economic recovery (which has happend many times in the past) the opposite has occurred. (look at prices from 1965 to 2000)

Conversely, declining rates do not always translate into higher prices (look at rates and prices from 2006 to 2009).[/quote]

Hard to look to recent history for guidance.

I remember people claiming that real estate prices would never drop without an employment downturn.

But, surprise, surprise, we had a real estate crash that caused general unemployment, which then caused more more unemployment.

I think that rising rates will cause stagnation and more choices for buyers.

[briansd1]

[quote=FormerSanDiegan][quote=Huckleberry]

We all know that rising interest rates means lower home prices as it knocks more potential buyers (demand) out of the market.

[/quote]

I don’t think we all agree rising interest rates automatically mean lower home prices.

If rising interest rates occur during an economic recovery (which has happend many times in the past) the opposite has occurred. (look at prices from 1965 to 2000)

Conversely, declining rates do not always translate into higher prices (look at rates and prices from 2006 to 2009).[/quote]

Hard to look to recent history for guidance.

I remember people claiming that real estate prices would never drop without an employment downturn.

But, surprise, surprise, we had a real estate crash that caused general unemployment, which then caused more more unemployment.

I think that rising rates will cause stagnation and more choices for buyers.

[briansd1]

[quote=FormerSanDiegan][quote=Huckleberry]

We all know that rising interest rates means lower home prices as it knocks more potential buyers (demand) out of the market.

[/quote]

I don’t think we all agree rising interest rates automatically mean lower home prices.

If rising interest rates occur during an economic recovery (which has happend many times in the past) the opposite has occurred. (look at prices from 1965 to 2000)

Conversely, declining rates do not always translate into higher prices (look at rates and prices from 2006 to 2009).[/quote]

Hard to look to recent history for guidance.

I remember people claiming that real estate prices would never drop without an employment downturn.

But, surprise, surprise, we had a real estate crash that caused general unemployment, which then caused more more unemployment.

I think that rising rates will cause stagnation and more choices for buyers.

[Author]

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