How high will mortgage rates climb in the next 36 months?

An average Irvine home at $1M with 20% down at a 5% rate has a loan only payment of $4,294.

If a 10% rate hits, theoretically the $1M priced home would need to come down to about $610k with 20% down to get near that same $4,294 payment.

If Irvine area homes once priced at $1M fall to $850k, pretty much anyone interested in selling will take their home off the market and wait, strangling inventory and sales to a standstill. Prices then would be "frozen", not falling. Granted, if there is an employment wipeout for some reason (other than all the FIRE jobs lost in a 10% rate market) there might be a rush to sell, but I can't see it being so great a collapse as to reach a 30+ percent price drop - here, or nationwide.
 
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sgip said:
An average Irvine home at $1M with 20% down at a 5% rate has a loan only payment of $4,294.

If a 10% rate hits, theoretically the $1M priced home would need to come down to about $610k with 20% down to get near that same $4,294 payment.

If Irvine area homes once priced at $1M fall to $850k, pretty much anyone interested in selling will take their home off the market and wait, strangling inventory and sales to a standstill. Prices then would be "frozen", not falling. Granted, if there is an employment wipeout for some reason (other than all the FIRE jobs lost in a 10% rate market) there might be a rush to sell, but I can't see it being so great a collapse as to reach a 30+ percent price drop - here, or nationwide.
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I think it depends on the time horizon; give it 5 years we could see 30% drop in the nominal price.
 
one interesting observation is that while South OC listings are way down Irvine inventory for sale has slighlty increased - 430 today. Closings from the prior 1 week are holding steady at mid-high $600s/sq ft.
 
sgip said:
30 percent would be 1978-1982 kinda havoc and that was with 18% rate ranges. Yes, all things are possible. Are all things likely? Not so sure. Time will tell!
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I closed on a house on November 2nd 1981 (pretty much peak interest rates and 41 years ago tomorrow). Prices maybe came down A LITTLE but who knows because houses didn't really sell a whole lot. Lots of whining and complaining at that time that sellers weren't putting houses on the market any more and buyers had little selection.

Didn't take long before buyers finally came to Jesus and bought smaller so they could afford the mortgage. In fact all thru rising rates people kept buying. They just bought smaller or drove farther.

Anyone with a 3-4% loan for a primary residence is going to keep that place. They don't just say well, I'm under water so I'll take a loss and pay rent and hope I can get the cash together to buy later. Of course if they lose their job, get very ill, etc they might be forced to sell but most everyone is going to keep their house. We all saw what happened to those who decided to sell for a loss last go round. Houses went even higher.

If we see low enough prices I'm buying houses for my grandkids.
 
Ready2Downsize said:
I closed on a house on November 2nd 1981 (pretty much peak interest rates and 41 years ago tomorrow). Prices maybe came down A LITTLE but who knows because houses didn't really sell a whole lot. Lots of whining and complaining at that time that sellers weren't putting houses on the market any more and buyers had little selection.

Didn't take long before buyers finally came to Jesus and bought smaller so they could afford the mortgage. In fact all thru rising rates people kept buying. They just bought smaller or drove farther.

Anyone with a 3-4% loan for a primary residence is going to keep that place. They don't just say well, I'm under water so I'll take a loss and pay rent and hope I can get the cash together to buy later. Of course if they lose their job, get very ill, etc they might be forced to sell but most everyone is going to keep their house. We all saw what happened to those who decided to sell for a loss last go round. Houses went even higher.

If we see low enough prices I'm buying houses for my grandkids.
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I think in Irvine there are a lot of people like you that raised there kids there, are retired and want to cash out and move to AZ or somewhere else, and don't want the hassle of being a landlord, or maybe need the proceeds to fund retirement. I predict this demographic will be a key supplier of inventory that will reset comps lower as these transactions close at what look to be pretty high mortgage rates for the foreseable future. Lots of them like my parents aren't so hot on 2 story living as well as they get old and feeble and most SFRs in Irvine are 2 story.
 
OCtoSV said:
I think in Irvine there are a lot of people like you that raised there kids there, are retired and want to cash out and move to AZ or somewhere else, and don't want the hassle of being a landlord, or maybe need the proceeds to fund retirement. I predict this demographic will be a key supplier of inventory that will reset comps lower as these transactions close at what look to be pretty high mortgage rates for the foreseable future. Lots of them like my parents aren't so hot on 2 story living as well as they get old and feeble and most SFRs in Irvine are 2 story.
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Why would they be selling next year instead of six months ago? Your prediction makes no sense. Certainly, in the case of people who wanted to cash out, they would have taken LL's advise and cash in at the top of the market and started renting. We all saw this "crash" coming from a mile away.
 
CalBears96 said:
Why would they be selling next year instead of six months ago? Your prediction makes no sense. Certainly, in the case of people who wanted to cash out, they would have taken LL's advise and cash in at the top of the market and started renting. We all saw this "crash" coming from a mile away.
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timing - that generation of buyers is old and many want out of CA - if the house is paid off it doesn't matter what they sell it for. Many are also white and don't want to live in a heavily Asian Irvine.
 
OCtoSV said:
timing - that generation of buyers is old and many want out of CA - if the house is paid off it doesn't matter what they sell it for. Many are also white and don't want to live in a heavily Asian Irvine.
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migration out of CA has been happening for years, do you think we will see an uptick in the trend?
 
The Motor Court Company said:
migration out of CA has been happening for years, do you think we will see an uptick in the trend
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I see it here in the Bay area - Nevada side of Tahoe is what everyone shoots for but I know a couple people that left for Scottsdale - $6K property tax on a $1M build in a full golf resort community that you pay cash for after getting $4M for the Los Gatos or Menlo Park pad they bought in the 80s.
 
OCtoSV said:
one interesting observation is that while South OC listings are way down Irvine inventory for sale has slighlty increased - 430 today. Closings from the prior 1 week are holding steady at mid-high $600s/sq ft.
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OCtoSV said:
one interesting observation is that while South OC listings are way down Irvine inventory for sale has slighlty increased - 430 today. Closings from the prior 1 week are holding steady at mid-high $600s/sq ft.
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Irvine has 2 things that most all of South OC doesn't have....1) new home inventory on MLS and 2) Non-motivated cash owners who have stupid listing prices that are lingering on the market like a bad habit.
 
usctrojancpa said:
Mid 5%s
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With $20K in fees/points or requires moving assets to the bank?

Jerome got pretty hawkish today talking about the risks of not tightening enough. 9% here we come! He wants Irvine sub-$500/sq ft and the FCBs will be shut out through legislation i predict in the next 2 years.
 
Quite a few lenders had mid day price changes after the Fed announcement. Banks are generally at 5.75% assuming a $1,500,000 priced home, 25% down, and a 781 FICO (traditional profile of an Irvine area buyer). Those terms can be reduced with money being moved.

A note of caution on the thinking "Just take an ARM, it has a lower rate, and you can refinance later!". Not so fast.... 7 and 10/1 ARM loans qualify at either the start rate (good) or the index plus margin (bad), whichever is higher. Today unfortunately ARM indexes plus their margin are higher than start rates which means a 5x ARM will qualify at a 6-7 percent rate. As with everything - YMMV - so if you are considering an ARM loan, be sure to get the qualifying underwriting of an ARM in writing from the lender, not the loan officer, to ensure you aren't starting down a difficult pathway to approval.
 
OCtoSV said:
With $20K in fees/points or requires moving assets to the bank?

Jerome got pretty hawkish today talking about the risks of not tightening enough. 9% here we come! He wants Irvine sub-$500/sq ft and the FCBs will be shut out through legislation i predict in the next 2 years.
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That was at 0pts with no cash moving over.
 
Expect more inventory coming in 3-6 months in Irvine due to Chinese FCBs are cashing out on their rentals. The realtors who helped them purchased the homes are urging their buyers to sell NOW before market crash. They also suggested their clients should put money on a CD to earn 4% interest.
 
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