rates moving up fast

[peterb]

When this current euphoria blows out under the amazing weight of reality, rates will probably decline again. Growing unemployment, pay cuts and reduced spending have not gone away. People are not getting jobs and credit is still constricting.

[Reality]

I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?

[Reality]

I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?

[Reality]

I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?

[Reality]

I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?

[Reality]

I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?

[an]

[quote=JohnAlt91941]I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?
[/quote]
Mortgage rates in the mid 80s was around mid teens.

[an]

[quote=JohnAlt91941]I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?
[/quote]
Mortgage rates in the mid 80s was around mid teens.

[an]

[quote=JohnAlt91941]I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?
[/quote]
Mortgage rates in the mid 80s was around mid teens.

[an]

[quote=JohnAlt91941]I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?
[/quote]
Mortgage rates in the mid 80s was around mid teens.

[an]

[quote=JohnAlt91941]I understand that higher interest rates cause one to qualify for less. But the effect the higher rates have on demand also means that you NEED less.

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

Won’t a modest amount of cash for a down payment go farther with higher interest rates and lower prices? If a home costs $250,000 with an 8% mortgage and $350,000 with a 5% mortgage, won’t someone with $50,000 cash have 20% to put down in the former case but not the latter?

And folks who pay cash do save more on mortgage interest when rates are higher. But won’t there also be an opportunity cost? Couldn’t they put the $ in CD’s? Is the difference between what mortgage interest rates are and what you can earn in CD’s higher when rates are higher? I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?
[/quote]
Mortgage rates in the mid 80s was around mid teens.

[SDEngineer]

[quote=AN][quote=JohnAlt91941]

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?
[/quote]
Mortgage rates in the mid 80s was around mid teens.[/quote]

It’s important to note though that in past cycles, even when interest rates were sky-high, it didn’t lead to a significant deflationary effect on price.

I think the issue is that in a growing population (and our population continues to grow), housing needs to continually be built – and an inflationary environment makes new homes even more expensive to build, which can lead to a supply shortage. It’s the old supply vs. demand curve.

[SDEngineer]

[quote=AN][quote=JohnAlt91941]

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?
[/quote]
Mortgage rates in the mid 80s was around mid teens.[/quote]

It’s important to note though that in past cycles, even when interest rates were sky-high, it didn’t lead to a significant deflationary effect on price.

I think the issue is that in a growing population (and our population continues to grow), housing needs to continually be built – and an inflationary environment makes new homes even more expensive to build, which can lead to a supply shortage. It’s the old supply vs. demand curve.

[SDEngineer]

[quote=AN][quote=JohnAlt91941]

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?
[/quote]
Mortgage rates in the mid 80s was around mid teens.[/quote]

It’s important to note though that in past cycles, even when interest rates were sky-high, it didn’t lead to a significant deflationary effect on price.

I think the issue is that in a growing population (and our population continues to grow), housing needs to continually be built – and an inflationary environment makes new homes even more expensive to build, which can lead to a supply shortage. It’s the old supply vs. demand curve.

[SDEngineer]

[quote=AN][quote=JohnAlt91941]

Prices may take a few months to adjust to higher interest rates, but they will adjust. And lots of folks just on this blog have been waiting for years to buy, not just a few months.

I can remember earning close to 10% on a CD in the mid 1980’s. What were mortgage rates then?
[/quote]
Mortgage rates in the mid 80s was around mid teens.[/quote]

It’s important to note though that in past cycles, even when interest rates were sky-high, it didn’t lead to a significant deflationary effect on price.

I think the issue is that in a growing population (and our population continues to grow), housing needs to continually be built – and an inflationary environment makes new homes even more expensive to build, which can lead to a supply shortage. It’s the old supply vs. demand curve.

[Author]

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