Investing 102 - Page 483 - Lateral-g Forums

**GregWeld** · #**4821** 03-07-2015, 09:42 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** · #**4822** 03-07-2015, 10:39 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

Vegas69 · #**4823** 03-07-2015, 01:33 PM

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** · #**4824** 03-07-2015, 07:26 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 · #**4825** 03-07-2015, 10:12 PM

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

68Cuda · #**4826** 03-08-2015, 03:22 AM

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.

**Flash68** · #**4827** 03-08-2015, 03:33 AM

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 · #**4828** 03-08-2015, 03:35 AM

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.

**Flash68** · #**4829** 03-08-2015, 03:41 AM

Quote:

Originally Posted by 68Cuda

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.

If someone can't take some personal responsibility for what is most likely the largest purchase of their life, maybe they shouldn't be buying the house in the first place if they need to listen to the realtor so much. The math is simple.

68Cuda · #**4830** 03-08-2015, 04:41 AM

Quote:

Originally Posted by Flash68

If someone can't take some personal responsibility for what is most likely the largest purchase of their life, maybe they shouldn't be buying the house in the first place if they need to listen to the realtor so much. The math is simple.

If personal responsibility was in vogue the housing crisis would not have happened. Consumers would not have gotten into > 100% home loans, taken HELOCs on the houses, or pulled equity to finance their toys. Loan companies were allowing loans that should not have occurred.

Remember half the people out there, by definition, are below average. And wisdom usually comes at the expense of time and age.

And, as far as math and finance is concerned, a lot of people I know starting out and who are young are very optimistic about their finances and their future income. They assume that the job will always be there, that both spouses will continue work, and that their incomes will go up. For example, I met a young lady eight years ago when I started this job who sat next to me in my orientation class. She and her husband were newlywed and new college graduates with Engineering degrees. They bought a five bedroom house in the suburbs for the two of them to live in. It was at the limit of what they could afford and she was telling me what a great investment it was. Wow!

Whenever a situation exists where one person can take advantage of others with impunity, there will exist such people who will do so.

On one hand I agree with you. Caveat Emptor, and etcetera. I am the kind of person that has a Libertarian mindset towards government, less is better. But, on the other hand how do we make sure things are fair and people do not get taken advantage of. This is not a question I know the answer to, I am not that smart.