Investing 102 - Lateral-g Forums

Vegas69 · #1 03-06-2015, 07:20 AM

I agree that most are conditioned with super low rates. Folks think a 5% interest rate is high. ha I don't think it will take long for most to get past rate as with any installment situation, it's driven by monthly budget.

Here, affordability is still in the zone where it belongs. Buyer's can still afford what they want in most cases. I think we have room for higher rates, just not a drastic change. We are still a slightly seller's market which is one of the factors that backs me up. Depending on market dynamics, I do think a rate jump could result in a healthy adjustment in median price. Much like the stock market, it's a completely different picture than 10 years ago. Qualifying has been hard during the recovery and consumers have the dignity of choice due to the basic fundamentals that didn't exist last time around. Meaning, they can put timing on their side.

68Cuda · #2 03-06-2015, 09:02 PM

Quote:

Originally Posted by Vegas69

I agree that most are conditioned with super low rates. Folks think a 5% interest rate is high. ha I don't think it will take long for most to get past rate as with any installment situation, it's driven by monthly budget.

Here, affordability is still in the zone where it belongs. Buyer's can still afford what they want in most cases. I think we have room for higher rates, just not a drastic change. We are still a slightly seller's market which is one of the factors that backs me up. Depending on market dynamics, I do think a rate jump could result in a healthy adjustment in median price. Much like the stock market, it's a completely different picture than 10 years ago. Qualifying has been hard during the recovery and consumers have the dignity of choice due to the basic fundamentals that didn't exist last time around. Meaning, they can put timing on their side.

Go look at historical rates from the 80's!
http://www.freddiemac.com/pmms/pmms30.htm

I remember my folks getting into a house at just under 10%.

What is "dangerous" about people shopping at these low rates is they listen too much to the realtors and some buy every bit of house they can "afford". Eight years ago when we moved here my bank told me they would loan me up to a certain amount. When they did my pre-approval letter for the realtor I asked them to drop that number more than 1/2. At the end of the day you still have to heat / cool / and pay taxes on that property! We knew what we wanted and needed, and the number we gave the realtor fit that. And, wouldn't you know, every house she showed us was just at or over that number!

**GregWeld** · #3 03-07-2015, 06:42 AM

Quote:

Originally Posted by 68Cuda

Go look at historical rates from the 80's!
http://www.freddiemac.com/pmms/pmms30.htm

I remember my folks getting into a house at just under 10%.

What is "dangerous" about people shopping at these low rates is they listen too much to the realtors and some buy every bit of house they can "afford". Eight years ago when we moved here my bank told me they would loan me up to a certain amount. When they did my pre-approval letter for the realtor I asked them to drop that number more than 1/2. At the end of the day you still have to heat / cool / and pay taxes on that property! We knew what we wanted and needed, and the number we gave the realtor fit that. And, wouldn't you know, every house she showed us was just at or over that number!

Michael --- I think you are missing the point we were discussing. It's not that people will adjust to the rate at any given time. But what we were talking about is the fact that rates have been so historically low for such a long period of time.... that we're wondering what the consumer does when/if they begin going up. We've been in a period of years where 3 and 4% rates are the norm.... and while 5% is still quite good/low... will people be put off by what that does to their "affordability" and what they've become used to.

It takes the "move up" buyer to help a market along.... So now let's say the move up guy has a 3.5% mortgage.... His house is too small - he now has two kids -- his value is up... so he begins to shop... All the other houses in his area are also up in value... but now his new mortgage is going to be 5.25% and he needs to borrow 100K more to do the move up. Is this family mentally ready for such a large increase in their mortgage costs. So do they repulse and just stay in their current house... which is NOT helpful to the market for loans or for real estate sales and all the other things that come with that?!?! Sure 5.25% is still "low" --- but it's a large jump from where they were/are. That's the point.

BTW -- I had a mortgage at 15% back in 1980..... My business was a .75% above Prime borrower... in other words - a stellar account. I can tell you those were NOT good times. Inflation was off the charts. Sales sucked. The economy sucked.

**GregWeld** · #4 03-07-2015, 07:39 AM

Interesting - if only from a historical perspective.... We absolutely know the FED will hike rates... that's a given. What happens when they do... is the unknown. Seeing what's happened historically helps us "understand" the markets reactions.

http://www.marketwatch.com/story/her...ike-2015-03-06

68Cuda · #5 03-07-2015, 11:22 PM

Quote:

Originally Posted by GregWeld

Michael --- I think you are missing the point we were discussing.

No - I get it, just not as eloquent as some in expressing myself. Just remarking on where rates were and how different it is now.

Quote:

Originally Posted by GregWeld

It takes the "move up" buyer to help a market along.... So now let's say the move up guy has a 3.5% mortgage.... His house is too small - he now has two kids -- his value is up... so he begins to shop... All the other houses in his area are also up in value... but now his new mortgage is going to be 5.25% and he needs to borrow 100K more to do the move up. Is this family mentally ready for such a large increase in their mortgage costs. So do they repulse and just stay in their current house...

It will be a large barrier - that is for sure, the monthly budget is the driver.

Vegas69 · #6 03-07-2015, 10:33 AM

Quote:

Originally Posted by 68Cuda

Go look at historical rates from the 80's!
http://www.freddiemac.com/pmms/pmms30.htm

I remember my folks getting into a house at just under 10%.

What is "dangerous" about people shopping at these low rates is they listen too much to the realtors and some buy every bit of house they can "afford". Eight years ago when we moved here my bank told me they would loan me up to a certain amount. When they did my pre-approval letter for the realtor I asked them to drop that number more than 1/2. At the end of the day you still have to heat / cool / and pay taxes on that property! We knew what we wanted and needed, and the number we gave the realtor fit that. And, wouldn't you know, every house she showed us was just at or over that number!

That's like blaming the bar for an alcoholic. I've been in the business for nearly 15 years. Many American's are wired to buy as much of everything as they can afford. I can tell you that today, buyer's are more economical with their decisions as many have been burned and learned a lesson or in position by being conservative in the first place.

I believe in representing my clients best interest. We go over the loan worksheet, I discuss the real costs of ownership, new vs old systems, not utilizing retirement funds, locations, crime statistics, and on an on. I know if I do my best at representing my clients, there will be plenty of money. Money is far from my primary focus. As with any business, there is a wide range of professionalism, experience, and integrity.

**GregWeld** · #7 03-07-2015, 04:26 PM

Quote:

Originally Posted by Vegas69

That's like blaming the bar for an alcoholic. I've been in the business for nearly 15 years. Many American's are wired to buy as much of everything as they can afford. I can tell you that today, buyer's are more economical with their decisions as many have been burned and learned a lesson or in position by being conservative in the first place.

I believe in representing my clients best interest. We go over the loan worksheet, I discuss the real costs of ownership, new vs old systems, not utilizing retirement funds, locations, crime statistics, and on an on. I know if I do my best at representing my clients, there will be plenty of money. Money is far from my primary focus. As with any business, there is a wide range of professionalism, experience, and integrity.

Good post Dad!!

Vegas69 · #8 03-07-2015, 07:12 PM

Thank you sir.. My kid will be way faster than Gordon's. His car will probably run, too.

**Flash68** · #9 03-07-2015, 11:33 PM

Quote:

Originally Posted by Vegas69

Thank you sir.. My kid will be way faster than Gordon's. His car will probably run, too.

Faster at installing an accusump maybe. But not faster at driving.

68Cuda · #10 03-07-2015, 11:35 PM

Quote:

Originally Posted by Vegas69

That's like blaming the bar for an alcoholic. I've been in the business for nearly 15 years. Many American's are wired to buy as much of everything as they can afford. I can tell you that today, buyer's are more economical with their decisions as many have been burned and learned a lesson or in position by being conservative in the first place.

I believe in representing my clients best interest. We go over the loan worksheet, I discuss the real costs of ownership, new vs old systems, not utilizing retirement funds, locations, crime statistics, and on an on. I know if I do my best at representing my clients, there will be plenty of money. Money is far from my primary focus. As with any business, there is a wide range of professionalism, experience, and integrity.

OK, the broad general statement was unfair. Yes, there are many who are ethical. But, I have met plenty that are focused on their own bottom line and are more than willing to facilitate.

I am afraid it is like many commission sales based occupations. There are good, bad, and some that are just plain mercenary.