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Why higher mortgage rates will help the housing market

Why higher mortgage rates will help the housing market

John Richards1
March 28, 2013
I don`t understand this statement: "the Great Recession has proven that mortgage rates have almost no influence over home prices". On the contrary, I expect that lower mortgage rates prevented a more severe crash in home prices than we actually saw... but if there is something I`m missing I`d really like to know it... I just don`t understand how anyone can make that statement with any kind of certainty, and the word `proven` really throws me for a loop. In economics, virtually nothing is `proven`! 22 Reply

Just Need It For Dev John Richards1
March 28, 2013
I`m building a new house now instead of waiting or possibly never because of the low interest rates. I can pay the same amount a month that I`m paying on my current house by buying or building another house that cost 40% more (excluding taxes of course). Yes I could refi my current mortgage and pay a lot less but I`m taking advantage of a once in a lifetime chance to basically upgrade for free and without increasing my monthly debt load. I honestly would hate to see what the housing market would look like if rates were still 6+%. Not to mention if things go back to the way they were we are just setting ourselves up for a repeat of 2008. 2 1 Reply

bluechunder Just Need It For Dev1
March 28, 2013
Your monthly debt load did increase, you have more debt. Your monthly cash flow did not change, you are servicing the higher debt with a lower interest rate. 2 Reply

Just Need It For Dev bluechunder1
March 30, 2013
yep, that was a typo, I meant monthly cash flow not debt load. 0 Reply

porky63 Just Need It For Dev1
March 29, 2013
I wouldn`t worry; rates ALWAYS rise with the prime April/June market for homes. It GETs the brain-dead off their butts into PANIC!!!! mode, to finally squeeze the trigger. Bought 4-5 homes over 4 decades = ALWAYS the same! Personally, WHY COMPETE with other bozos over 1 house? Wait till Oct/Nov with NO competition and rates BACK INTO the BASEMENT. Why in the basement? Because like mindless sheep, they all rush into the abbatoir in the Spring, pushing up DEMAND for loans. In the late Fall, NO ONE is buying. 1 Reply

ConstructionEng Just Need It For Dev1
March 30, 2013
Even though it`s less costly for new construction, you`re going to regret it over the coming years has housing prices continue to erode. 0 1 Reply

Just Need It For Dev ConstructionEng1
March 30, 2013
who cares, I don`t plan on moving again for at least 20 years or so (not until the kids are out of the house). I have never ever looked at buying a house that I`m going to live in as an investment. I`m just looking to get something back for my monthly payments. If it appreciates great if not no big deal because I didn`t expect it to anyway. 0 Reply

n8r0n John Richards1
March 28, 2013
Economics is a sick joke of a science. It`s really more like a set of religions. Instead of Christians, Hindus, or Muslims, you have Keynesians, monetarists, or Austrians. Virtually all of these clowns simply try to convince us that their economic world view is true by yelling louder, since it`s virtually impossible to prove any of their ideas via real-world experiments, or derivation from first principles. Simply look at the tone economists take when talking, compared to real scientists. It`s the economists that, like priests, are 100% convinced of their own ideas, despite a lack of conclusive evidence. Real scientists understand that there is quantifiable uncertainty in almost everything, and our knowledge base is continually evolving. This lack of intellectual rigor, of course, carries over to financial journalists, too, who deliver the public a terrible product. This greatly benefits the financial services industry, who are able to keep fleecing the public, who are kept ignorant by the inept media and economic academics. 1 Reply

seanickson1
March 28, 2013
I understand what you`re saying but am unsure. It makes a big difference in what price of home a given income can afford. Lets say I make 50k and can qualify for a house payment no bigger than 28% of my income. at a 3.5% 30 year mortgage thats approximately a $260k house (this example excludes downpayments), however at a 4% 30 year mortgage that number goes to 245k and at 4.5% 230k 12 Reply

Sean Worthington1
March 28, 2013
Anyone that believes that the housing market is rebounding has been drinking the cool-aid. 98% of all mortgages written are sold to either fannie mae or freddie mac, at which point they are bundled together and sold to the federal reserve. Since 2008 the federal reserve has been the only buyer. They federal reserve buys the mortgage backed securities by printing more money, thus the 40-45 billion a month in quantitative easing. This is one of the reasons that interest rates are low. If the federal reserve stopped buying the mortgage backed securities then the real estate market would freeze. Investors still do not have confidence in the real estate market. The main stream media fails to mention that the reason home values are declining is due to simple supply and demand - the more difficult it is to obtain mortgage financing, the fewer potential buyers for any given property and fewer buyers means lower pricing. Investors would need a better return to be enticed back into the market, but higher rates will also have a negative effect on home values. A real catch 22. Enjoy the inflation. The federal reserve, whose participants are confidential, will now hold title to the majority of US properties. 9 1 Reply

Bryan West Sean Worthington1
March 28, 2013
true but it is attracting investors to the other end of the market, i have purchased 5 residential rental properties since the big drop in prices, they rent well, and i will likely sell them when the prices recover because at that point the amount i can get in rent will not be as attractive as what i can get if i sell. and to michael menzel, none of those were the sub par stuff of which there are plenty around here. the maintenance costs of those are too high. they were actually building stuff intended to be sub par in order to be cheaper, i have seen where someone drunk fell through a wall because the studs were just slats and could not support him. so i agree with you on that. 0 Reply

ConstructionEng Bryan West1
March 30, 2013
If you think prices are going to magically stop falling and even more magically start rising, you`re in for the shock of your life over the next 20 years. 0 Reply

Bryan West ConstructionEng1
March 30, 2013
unless u think people are going to start living on the streets or that our population is going to magically shrink... yes i do. the price of housing will always return to just above what it costs to produce that housing unless one of those things happen. besides im quite happy with the rent im getting so im not in any big rush. 0 Reply

ConstructionEng Bryan West1
March 30, 2013
Clearly you don`t know what it costs to produce. Secondly, population growth is the lowest in US history. Third, there is a 20-30 million excess housing inventory. 1 Reply

Bryan West ConstructionEng1
April 2, 2013
the reason there is so much excess housing is because places like detroit where all the businesses have gone bust. the houses are needed. just not where they are. hopefully the housing prices in places that were charging for the name will not fully recover but the fact is that most of the us is not like that. prices where i am have already started to recover. 0 Reply

Michael Menzel1
March 28, 2013
The only reason why we have price "increase" in this market - we have low supply of good quality and up-to-date houses on this market. Market saturated with outdated houses that need substantial repairs. So, prices maybe are increasing, but if you think that your own old house has the same price as your neighbor`s house who spent 100k to repair it and sold it for 200k, you are mistaken. 3 Reply

Oakspar77777 Michael Menzel1
March 28, 2013
Agreed. Until the middle class is restored and the surplus of sub-par housing is absorbed and rennovated or demolished, there cannto be any depth to recovery. 6 Reply

JFCanton Michael Menzel1
March 28, 2013
True. Whether that`s the standard that one should expect seems questionable though. You`re not going to make dollar-for-dollar on renovations unless you`re actually starting with a dump. 2 Reply

Hard Little Machine1
March 28, 2013
9 out of 10 buyers aren`t looking at rates they`re looking at prices. 8 3 Reply

bei pervim Hard Little Machine1
March 28, 2013
Most buyers are looking at monthly payment. It will go up with interest rate. 18 2 Reply

David R Priest1
March 28, 2013
I have been saying this for years. The bottom feeders only jump in when they are convinced that they have missed the bottom. People rush in and make moves when rates are going up. 5 2 Reply

BongoFury David R Priest1
March 28, 2013
Exactly correct. It`s the psychology of "missing out on a deal" as oppsed to "I`m going to hold off to see if things go lower". 1 Reply

David R Priest BongoFury1
March 29, 2013
People waited and were rewarded with lower and lower rates for years. That is ending. 1 Reply

n8r0n1
March 28, 2013
"To be sure, the Great Recession has proven that mortgage rates have almost no influence over home prices.". Uh, no. In fact, the Great Recession was a result of a housing bubble (bursting). A housing bubble that built up largely because Alan Greenspan kept rates so low during the 2000s. I`m not sure how the author missed out on that. Have low rates over the last 5 years made for a hot housing market? No, but that doesn`t mean mortgage rates have almost no influence over home prices. It means that sometimes in a complicated world, outcomes are affected by more than one factor. Shocker. Had mortgage rates been higher over the last 5 years, we would likely have seen home prices fall even further. This is the same brain-dead logic tea baggers use when they claim the 2009 stimulus "created no jobs". Actually, it created a couple million. But, it did so at a time when other factors were destroying a couple million jobs, so you see no net effect. That`s not the same as having no influence. This country is literally choc full of mental midgets. 3 1 Reply

bluechunder n8r0n1
March 28, 2013
I have to disagree and I am not some brain-dead tea bagger. "This is the same brain-dead logic tea baggers use when they claim the 2009 stimulus "created no jobs". Actually, it created a couple million. But, it did so at a time when other factors were destroying a couple million jobs, so you see no net effect. That`s not the same as having no influence." The majority of the stimulus went to shore up state budgets. So at best, the stimulus prevented (or saved) some state worker from being laid off. There were no "new jobs" created. I will make it easy for you. You say 2 million jobs created. Please list 200,000 jobs that were created. 6 Reply

Ami bluechunder1
March 29, 2013
Excellent counter! 3 Reply

ssimo1
March 28, 2013
Two comments: 1. If higher mortgage rates will help housing market, someone should tell the Fed since it has been keeping mortgage rates low for the last 5 years. 2. Yes, there may be a bit of a bounce when the mortgage rates start trending higher as a few more buyers may jump into the market. However, such a bounce will be very brief - and more importantly, it will be followed by a huge drop-off. This is precisely why the Fed wil continue to hold mortgage rates low for a long time to come. 2 1 Reply

Raviv Wolfe ssimo1
March 28, 2013
+1 Higher rates may push the odd buyer into the market, however employment and job security are why people feel confident to purchase. And face it folks, you can`t fake confidence, although the gov`t has tried the last couple years. Gonna be a long slow slog bag to consumer confidence. The only spending going on right now is to keep from crying. LOL 4 1 Reply

Yen Whit1
March 28, 2013
What or how does this help a brother with a 99 gees mortgage that is worth 21 gees in the city of Detroit? 2 1 Reply

Hard Little Machine Yen Whit1
March 28, 2013
Flip mo rock. 4 Reply

Oakspar77777 Yen Whit1
March 28, 2013
It doesn`t, but that is because the brother chose to buy high in a dying urban area. He can hold it until he owns it, after all, it was worth that much to him when he got it or he can shortsale/walk away and try to get it off his back. Either way, what he needs to do is get himself out of the hood and find a job someplace rural where he can work hard and make something of himself. You don`t earn anything by being the last rat clinging to a sinking ship. 3 Reply

Happy Guy1
March 28, 2013
− Ludicrous argument, purely speculative, with zero basis in research or expertise. These are all "what if" conjectures. This is not an informative article at all, and misrepresents how the market responds. Worse yet, the headline implies that it`s a certainty rather than a hypothesis like "How higher mortgage rates could help the housing market."






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