Author Topic: How high will mortgage rates climb in the next 36 months?  (Read 5878 times)

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Offline OCtoSV

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #45 on: September 22, 2022, 12:45:20 PM »
I see  7.125 rate/ 7.398 APR terms for a 20% down investment condo purchase - roughly 4.625 Loan Level Price Adjustments being applied (Condo/LTV/Non Owner). The final points to get that rate - about 1.75 to 2.0.

One could infer that a zero point rate would be close to 8 percent - but no MBS investor wants an 8 percent rate in their pool of mortgages because the lifespan of that loan is measured in months, not years.

Rates may stay in the 7's generally, but I believe we will see the return of points being required to obtain a rare and zero point loans becoming a rarity. Odds are in 2023 or 2024 we'll see another rate drop allowing all of these 7 percent loans will get refinanced into the 4s.
The Fed doesn't want MBS on their balance sheet and with no sellers and refi market frozen they're going to have to conduct open market sales which will drive rates up further.

USC - please offer some data or a thesis that supports your assertion that rates won't hit 9-10%. You and everyone else need to start focusing on real rates, with 6% still a negative real rate. With food prices up the most last month since 1979 and rent inflation very sticky inflation will persist above 7% for some time, which implies at least a 9% mortgage rate.

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Offline Ready2Downsize

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #46 on: September 22, 2022, 02:56:54 PM »
Obviously I am not USC but houses will be back to where they were in January soon enough. Some areas already are. Oil is back to January levels. In fact back to where it was in October 2021 (prices went down and then back up between Oct 21 and Jan 22.

Come January, what inflation is there in home prices? Zero. Oil? Zero. Rents? Some areas are already dropping. Raising rates should tamp down spending which will reduce the uptick in prices and demand.

Raising rates this go round added over $16K per taxpayer to the national debt. Next increase will do the same. There is only so far rates are going and 9% mortgages aren't it, imo.


Offline Ready2Downsize

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #47 on: September 22, 2022, 03:13:23 PM »
In the 70's the government laid off a lot of people and cut spending. They cut space programs, aerospace and lots of social programs.

If the government is serious about cutting inflation it's time THEY cut spending and laid off people. Have we heard of one single person being cut in the government? Programs cut? Nope. Just more spending and sending money to the Ukraine.

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Offline zovall

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #48 on: September 22, 2022, 06:20:31 PM »
Raising rates this go round added over $16K per taxpayer to the national debt. Next increase will do the same. There is only so far rates are going and 9% mortgages aren't it, imo.

I agree, there is only so far they can go. They will go as far as people will bear it but when there are signs of social unrest, they'll reverse course and get back to inflating everything away.

Offline Ready2Downsize

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #49 on: September 22, 2022, 09:04:24 PM »
I don't believe a 7% mortgage is enough to get people not to buy where I am. As long as there is not excessive other payments, a couple earning $100K (between both of them which is not that difficult here) can qualify for a 2000 sq foot new 4 bedroom single story home in a nice neighborhood (assuming they can come up with the down payment which is $100K or less at 20%). Two story homes are much cheaper. I really think the issue in this area is fear of job loss and redo of 2008.

Builders here are offering closing cost buy downs but nothing additional for cash buyers. There are lots of homes on the mls from builders but not many are built yet. Come early next year.... that is another story. I plan on sniffing around then if they have homes built to see if I can get something nicely upgraded for base pricing.

Offline USCTrojanCPA

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #50 on: September 22, 2022, 09:34:21 PM »
I see  7.125 rate/ 7.398 APR terms for a 20% down investment condo purchase - roughly 4.625 Loan Level Price Adjustments being applied (Condo/LTV/Non Owner). The final points to get that rate - about 1.75 to 2.0.

One could infer that a zero point rate would be close to 8 percent - but no MBS investor wants an 8 percent rate in their pool of mortgages because the lifespan of that loan is measured in months, not years.

Rates may stay in the 7's generally, but I believe we will see the return of points being required to obtain a rare and zero point loans becoming a rarity. Odds are in 2023 or 2024 we'll see another rate drop allowing all of these 7 percent loans will get refinanced into the 4s.
The Fed doesn't want MBS on their balance sheet and with no sellers and refi market frozen they're going to have to conduct open market sales which will drive rates up further.

USC - please offer some data or a thesis that supports your assertion that rates won't hit 9-10%. You and everyone else need to start focusing on real rates, with 6% still a negative real rate. With food prices up the most last month since 1979 and rent inflation very sticky inflation will persist above 7% for some time, which implies at least a 9% mortgage rate.

For interest rates to head to 9% you'll need the 10-year bond rate around 6.50-7% which means that Fed Funds will need to go to that level or higher.  The economy is already slowing which means that inflation will also begin to cool but it'll take at least 6-9 months before we see it come down significantly due to the housing cost component staying high.  So I believe that the Fed will stop around 5% and then after 9-12 months once they see inflation coming down they'll start cutting rates.  I hope they don't start doing QE all over again because that's what got use into this pickle in the first place.  There are still excesses that need to be rung out of the market...contractor costs, new cars, Bitcoin, and yes real estate prices.  What needs to happen is the gov't needs to stop with all the free gov't cheese whether it's checks or student loan forgiveness....stop already.
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Offline freedomcm

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #51 on: September 23, 2022, 07:00:26 AM »
Just raise taxes to slow the economy:

Without Congressional action, 23 different provisions of the 2017 Republican tax law are set to expire after 2025.

Offline Soylent Green Is People

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #52 on: September 23, 2022, 08:21:58 AM »
@OCtoSV is on the right track. The Fed is unwinding their Agency MBS positions and few buyers are to be found. As MBS terms deteriorate - not in line with the 10y T - Agency rates will continue higher. There is  also a general psychological overlap to all this. I'm seeing lots of "wait and see" buyers, even more "I will wait for a 3% rate before I buy..." mind set. Good luck with that BTW. 

I was doing some comparisons of OpenDoor and other iBuyer/iSeller holdings yesterday via my Title company access and MLS data. What I found interesting was most of their August  to present listings were $1m purchases in May, $1.1 listings in June, $900k closings in September. Now I'm seeing $1m purchases by OpenDoor being listed ALREADY at $900k and on the market for 30 days so far. To me this is an indicator that iSelling will quiet down soon and exit with their tail between their legs, but also that the iSellers have come to realize it's time to not just re-sell at market, but below market to get ahead of the continuing price deterioration.

It will be an interesting few months ahead in Real Estate for certain.
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Offline morekaos

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #53 on: September 23, 2022, 08:34:43 AM »
It kills me that I looked at shorting that stock at the end of last year in the mid $20s. Oh well, money to be made elsewhere.

Offline Ready2Downsize

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #54 on: September 23, 2022, 08:56:48 AM »
It kills me that I looked at shorting that stock at the end of last year in the mid $20s. Oh well, money to be made elsewhere.

Someone could buy them out I guess for the properties they own. Interesting that redfin is the agent selling some of their properties.

This is what they own in JUST maricopa county:

https://mcassessor.maricopa.gov/mcs/?q=opendoor

I just don't understand why they didn't learn from zillow. They just kept buying until very recently.

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Offline Ready2Downsize

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #55 on: September 23, 2022, 09:42:04 AM »
I see  7.125 rate/ 7.398 APR terms for a 20% down investment condo purchase - roughly 4.625 Loan Level Price Adjustments being applied (Condo/LTV/Non Owner). The final points to get that rate - about 1.75 to 2.0.

One could infer that a zero point rate would be close to 8 percent - but no MBS investor wants an 8 percent rate in their pool of mortgages because the lifespan of that loan is measured in months, not years.

Rates may stay in the 7's generally, but I believe we will see the return of points being required to obtain a rare and zero point loans becoming a rarity. Odds are in 2023 or 2024 we'll see another rate drop allowing all of these 7 percent loans will get refinanced into the 4s.
The Fed doesn't want MBS on their balance sheet and with no sellers and refi market frozen they're going to have to conduct open market sales which will drive rates up further.

USC - please offer some data or a thesis that supports your assertion that rates won't hit 9-10%. You and everyone else need to start focusing on real rates, with 6% still a negative real rate. With food prices up the most last month since 1979 and rent inflation very sticky inflation will persist above 7% for some time, which implies at least a 9% mortgage rate.

For interest rates to head to 9% you'll need the 10-year bond rate around 6.50-7% which means that Fed Funds will need to go to that level or higher.  The economy is already slowing which means that inflation will also begin to cool but it'll take at least 6-9 months before we see it come down significantly due to the housing cost component staying high.  So I believe that the Fed will stop around 5% and then after 9-12 months once they see inflation coming down they'll start cutting rates.  I hope they don't start doing QE all over again because that's what got use into this pickle in the first place.  There are still excesses that need to be rung out of the market...contractor costs, new cars, Bitcoin, and yes real estate prices.  What needs to happen is the gov't needs to stop with all the free gov't cheese whether it's checks or student loan forgiveness....stop already.
There is the problem.

If they cut, then you will see buying again and once again they will be in the same situation we were in back in the 70's. It took THREE recessions and over a decade to get things under control. Then of course they cut from that mega rate they had and that led to the stock market crash of 87 (when they tried raising rates to tame THAT bubble) which led to the savings/loan bust bubble.

Just find a place and keep it there.

25 years ago you could buy a Taylor Woodrow (now Tay Mo) 4000+ sq foot home with pool sized lots in the newly built Northwood Pointe area for $500K. Doctors, lawyers, business owners and people with money bought there. Gorgeous homes. Architecture was changing to include open floorplans and not completely rectangular boxes. That was toward the beginning of the recovery after the OC BK.

Today u can get a TayMo 2000 sq foot house in Peoria AZ for that price.

FOR THE SAME PAYMENT!  :o Salaries have gone up but so have car payments, college, health care. So utterly sad how the dollar has eroded in 25 years and how far away a house is from so many people now.

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Offline USCTrojanCPA

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #56 on: September 23, 2022, 09:43:14 AM »
It kills me that I looked at shorting that stock at the end of last year in the mid $20s. Oh well, money to be made elsewhere.

Someone could buy them out I guess for the properties they own. Interesting that redfin is the agent selling some of their properties.

This is what they own in JUST maricopa county:

https://mcassessor.maricopa.gov/mcs/?q=opendoor

I just don't understand why they didn't learn from zillow. They just kept buying until very recently.


Because ALGO!  They are going bankrupt just like Zillow's iBuyer division.  I saw 4 price drops of their Irvine owned homes yesterday and they are already down 5-10% from their purchase price.
Martin Mania, CPA
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Have license, will travel!

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Offline Ready2Downsize

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #57 on: September 23, 2022, 09:49:25 AM »
It kills me that I looked at shorting that stock at the end of last year in the mid $20s. Oh well, money to be made elsewhere.

Someone could buy them out I guess for the properties they own. Interesting that redfin is the agent selling some of their properties.

This is what they own in JUST maricopa county:

https://mcassessor.maricopa.gov/mcs/?q=opendoor

I just don't understand why they didn't learn from zillow. They just kept buying until very recently.


Because ALGO!  They are going bankrupt just like Zillow's iBuyer division.  I saw 4 price drops of their Irvine owned homes yesterday and they are already down 5-10% from their purchase price.

I think they have big fees when they buy something. (more than if you just went to a regular agent and then there is the commish they makes selling). Still losing on every property and having carrying costs seems to be not such a good thing. LOL! At least in AZ their carrying costs are MUCH lower than Irvine. I just paid my property taxes............. less than $700 for the entire year. Next year they will probably be full value so less than $2000. Since they just bought all these properties, they are probably paying even less than I did (lots of lower cost homes in lower cost areas).

I tried to buy a house from open door in December. We couldn't get in to see it! I met the realtor at the house, she had to CALL to get a code to get in and there was only a recording saying they are closed on weekends! Told the realtor, this is ridiculous. There is a spec home from the builder. Lets go get that.

Tay Mo is their own worst enemy, imo. I get emails from them several times a week and not a week goes by they don't have another opening for another neighborhood. So I went to the sales office here, WHY!? They said they can't stop building because it becomes a supply issue later. LOL! I said well it is a supply issue NOW! LOL! They don't seem worried.
« Last Edit: September 23, 2022, 09:56:08 AM by Ready2Downsize »

Offline USCTrojanCPA

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #58 on: September 23, 2022, 10:27:06 AM »
It kills me that I looked at shorting that stock at the end of last year in the mid $20s. Oh well, money to be made elsewhere.

Someone could buy them out I guess for the properties they own. Interesting that redfin is the agent selling some of their properties.

This is what they own in JUST maricopa county:

https://mcassessor.maricopa.gov/mcs/?q=opendoor

I just don't understand why they didn't learn from zillow. They just kept buying until very recently.


Because ALGO!  They are going bankrupt just like Zillow's iBuyer division.  I saw 4 price drops of their Irvine owned homes yesterday and they are already down 5-10% from their purchase price.

I think they have big fees when they buy something. (more than if you just went to a regular agent and then there is the commish they makes selling). Still losing on every property and having carrying costs seems to be not such a good thing. LOL! At least in AZ their carrying costs are MUCH lower than Irvine. I just paid my property taxes............. less than $700 for the entire year. Next year they will probably be full value so less than $2000. Since they just bought all these properties, they are probably paying even less than I did (lots of lower cost homes in lower cost areas).

I tried to buy a house from open door in December. We couldn't get in to see it! I met the realtor at the house, she had to CALL to get a code to get in and there was only a recording saying they are closed on weekends! Told the realtor, this is ridiculous. There is a spec home from the builder. Lets go get that.

Tay Mo is their own worst enemy, imo. I get emails from them several times a week and not a week goes by they don't have another opening for another neighborhood. So I went to the sales office here, WHY!? They said they can't stop building because it becomes a supply issue later. LOL! I said well it is a supply issue NOW! LOL! They don't seem worried.

I've gotten several quotes from Opendoor when I was purchasing my clients' homes as a mini iBuyer and the total fees that they were charging were 7-8%.  So figure they have to pay 2% for a buyer agent to flip it, at least another 1% for closing costs (that's be conservative), and they have about 5% left to play with.  All 4 homes that I saw lowering the price in Irvine were down 5-10% from their purchase price so they'll lose money on all of the homes. 
Martin Mania, CPA
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714-747-3884 cell

Often imitated....Never duplicated!
Have license, will travel!

Offline Liar Loan

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Re: How high will mortgage rates climb in the next 36 months?
« Reply #59 on: September 23, 2022, 10:44:45 AM »
Anyone hold fixed or long term adjustable rate  at or below 4% is a winner. The real asset is the notes in this environment  :) :) :).

Indeed, now I can't sell my Tustin Ranch home with a 2.375% 30-year fixed mortgage so I'll be contributing to keep inventory off the market.

It makes no sense to leverage this depreciating investment.  Even if your rate were 0%, you're losing on this deal.  The leverage only multiplies your losses.

If you truly think rates are headed back to 3%, the smart thing would be to sell now, take the 250k tax exemption, and buy later at nearly the same rate.

 

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