Those of you waiting for interest rates to drop...are you looking at right now as "dropped enough" or do you have a target in mind? I am sure it varies, but there has been a good amount of movement in the last week, and curious whether 6.5% is good enough, or if people will plan to wait for 6, or 5, or 4?
My opinion it doesn't matter. If you can afford it, you want to buy and it meets your needs, just do it.
If you wait for rates to drop to 4%, I look forward to seeing your “got the keys!” post here in 2045
21 years of saving better be a fat down payment
21 years of saving better be enough for an all cash purchase.
Nope. 21 years of appreciation will beat the savings pace. For example, we bought our starter home at early 2017. If we would have saved and waited to 2021, we could never afford it.
The avg household income easily can do that after 21 years. Also just put it into the s&p and you'll get appreciation and dividends over 21 years.
Also just put it into the s&p and you'll get appreciation and dividends over 21 years.
Then deduct capital gains tax, and the fact that it's unleveraged.
Let's say the house you want today is $1M, and your down payment is $200K. Let's say the S&P does 7%\year after taxes, and the house does 5%\year.
Your 200K is worth 828K 21 years later. The house is worth 2.78M 21 years later. So instead of an 800K mortgage, you now need almost a $2M mortgage!
Bro no one who wants a million dollar house today is waiting 21 years to buy it they already have that money. We can all run fictitious numbers sure but the s&p tends to beat inflation and often beats housing appreciation.
Again, before taxes and on the down payment. But there ARE taxes, and NO ONE is going to lend you 800K on your 200K to put in the market.
If you'll do the same calculation for someone who doesn't have a down payment (so, start with 120k as the initial money), the house will win even by a larger sum!
Nope this chart shows the s&p500 destroying the cs index in the long term https://www.afrugaldoctor.com/home/should-you-invest-in-real-estate
Wrong again!
Three wrong things actually: 1. He compares a mortgage to options. Same leverage, totally different risk factor.
He compares an investment property, not a principal residence, which is exempted from capital gains taxes.
Because it compares an investment property, he doesn't compare the price of rent increasing for the person not buying a house, vs a stable\decreasing mortgage.
Read my comments again, and stop repeating yourself. Show my a 20 year historical example of a renter paying rent (market price every year) and investing the down payment, vs someone buying the same property with average mortgage rate and average property appreciation.
Nope you've shown no sources refuting the chart going back 46 years much more than 20 showing the s&p500 outpacing real estate. These are just facts trying to cherry pick things doesn't really change that.
As harsh as it sounds this is our new normal/reality!
Most accurate comment I’ve seen on Reddit
What kind of parallel universe you live in?
🤣🤣🤣
If you find a house you love and can afford the monthly mortgage without over stretching, do it.
3 things may happen:
1) rate stay stable: you have a house you love
2) rate drop: you refinance: now you have the house you love and you have a lower payment
3) rate increase: you feel like a genius for buying a home when rates were « low »
So if you love the home, can afford it and think home ownership is for you, do it…
This is where I’m at right now. We locked in 7.1% and close in June. At the 7.1% our mortgage is still well within the range of what we can afford, but obviously would love to pay less if given the opportunity. We will see what rates are in early 2025 when we are eligible to refinance.
We will see what rates are in early 2025 when we are eligible to refinance.
I mean no offense, but this is a big part of the problem. People thinking rates will change so quickly. Refinancing 9mo's after purchasing? The numbers aren't going to be there for years, unfortunately.
I mean - did you not read the rest of my comment? I said our current mortgage is well within the range of what we can afford. We’re not banking on rates coming down quickly. We’re simply planning on checking when we’re eligible and monitoring from there. Why wouldn’t we check just in case?
We’re at that scary stage where we need to decide soon when to lock in our rate (closing on a new build around mid-July) and I don’t really understand what’s wrong with just refinancing if they drop. Is it expensive/time consuming to refinance if rates happen to drop more after close?
It will depend on the type of mortgage: « plain vanilla », costs will be similar than the cost (fees) of original loan and you can do it pretty much when you want (but verify that nothing unique is specified in your contract)
« Special » mortgage (FHA, VA, USDA…) have their own set of rules
Edit: because there is a cost associated to it, you may want to wait for the rate to substantially go down before refinancing (ie probably not 0.125%)
Let’s say’s refinancing cost you 1% (don’t quote me), and the rate drop by 0.125%, it will take 8 years to recoup the fee… if they drop by 0.5%, this become 2 years, if they drop by 1% 1 year…
With all options that you have, would you put your house back in the market. I’d assume a big No. Those who bought at less than 5% would never be in the market unless the house prices skyrocketed. So, the house prices would slowly creep up in this situation. In contrast, the rentals are gonna skyrocket as well as the cost to own a home have already skyrocketed. The current situation is like an avalanche with an endless bottom unless Fed gets everyone out of their job and forces a mega scale depression, which is what the Fed tried for the couple of years but now with election in the vicinity, they won’t risk it either.
Hmm, 6-7% would be the new normal and people are gonna try to bottom fish with 6% as baseline.
If interest rates drop to the 4’s you are definitely looking at way more competition. I have a 6.125 interest rate which I think isn’t bad 🤷🏻♀️
In other words, 6.5 is good. You may be able to shop around and have lenders compete with each other to get it lower. You can also buy it down to get it to around 6 which is what I did.
I just purchased my house and haven’t moved in yet. It’s a massive purchase and I’m insanely stressed out. 😬 but.. do whatever makes you comfortable. 👍
Or interest rates don't drop in a vacuum. They drop because unemployment is up and there are fewer eligible buyers.
If they drop to 4s the market will go crazy again and homes will be worth even more then they are now
I swear to God this is the most common nonsense take that is being spewed everywhere right now. How can you claim this? What do you think would happen for mortgage rates to drop into the 4s?
Cheap money means more buying. Rate will drop if we get into a deep recession which people seem to be starting to feel in their pockets
I, along with thousands of investors will scoop as many houses as we possibly can. You need to understand this… what do you think this is
People that buy a bunch of houses for investment are ruining the housing market. Stop ruining the world for your own gain.
I am buying houses to rehab and rent out to nice families. I am making neighborhoods better.. what are you doing at your 9-5?
You’re buying houses to rent. You’re preventing people from owning their own properties so they can pay your mortgage for you. It creates a shortage of housing so the prices increase. You’re not helping people, you’re just making money. I’m sure you’re not a bad person. But you need to look into the ramifications of your actions. The world is so much worse now that people buy multiple houses to rent.
This is why you have to show up to your city council meetings.
I’m interested. How will that help?
Two ways nimbys go to city council meetings and demand zoning restrictions and cancellations of housing being built showing up makes your voice heard and shows they're not the majority also Airbnb bans have shown to decrease the cost of living for residents which is something people also petition their communities for. Also working with affordable housing charities that build can help create more homes like habitat for humanity.
Some people can’t buy. Where are they supposed to live ? You have to look outside of your narrow brain to understand it’s the only way life works. Some people absolutely need to rent for many factors. You suggest every house to be owned by owner occupants?
I suggest the apartments that exist be apartments, and the single family homes be single family homes. If we need more apartments we can make more apartments, not ruin the housing market
I’ve never meet an investor who wastes their time arguing for no reason with strangers… you are a construction worker that wants to be like his boss… no shame on that. But I’d recommend you to get a life if you ever want to make real money.
I own 6 properties
It is true that investors and corporations have put a lot of stress on the current housing situation. There should be a cap to how many properties you can purchase for this purpose.
The fact of the matter is our population will continue to grow and the more properties that are purchased for profit will prevent more and more people from owning their own property and having the security of equity.
It sounds like what you think you’re doing is charitable but I wouldn’t really call it that. The truth is you’re in it for the profit.
It’s one thing to own one or two investment properties but if you have multiple, that’s already 2+ families that can’t own their own home. 🤷🏻♀️
A lot of people truly can’t afford a home. Some people stretch their budget and go for it because it’s doable. Many people can afford it but the shortage is undeniable.
Do it now then, get ahead of it. Best of luck brrrro
I complained about 6.49 and now I'm thankful I just went ahead with it... Btw rent doubled in the year I've owned after it tripled in the years prior. It would have been very bad to keep renting in my area.
Which area if you don't mind me asking?
KC area. When looking to move rent was 1000- 1300 (2019) when we were able to move (2022) rent was 1800- 2200, rent now is 2400-3000 so maybe I'm a bit dramatic with the numbers but it feels like that when youve been paying 1000 for years. 4 bed 3 bath finished basement 2 car garage for context of rent. You could probably get cheaper in south KC or hood hood. Not worth it though.
In KC too. You used to be able to get a decent 2 bedroom apartment for like $1,100 a few years ago. That same apartment would now be like $1,800-1,900 here. It’s wild to see
If it drops to 4% there is a severe recession occurring and if you are fortunate enough to still have a job you won't have much competition.
Housing would explode again if rates get that low. Fed can’t let it until we get many more houses built
I mean 2% in 2020. Fml
I had a 2.35 it was amazing. Sold that house and still have a 3% so won’t complain
Fed can’t let it until we get many more houses built
And we won't if rates stay this high. Multifamily has pretty much come to a standstill. The numbers don't pencil anymore and in 2-3 years we will have rent explosion again. It's a great time to be alive!
I got in at 3.3% back in January of 2022, I looked at 20+ houses, finally picked one, made an offer and got it the next day. The houses with the greatest competition at that time were the ones that were in pristine, perfect condition as well as updated for the times. This was just north of Austin in Cedar Park I went to a few open houses. One had like 5 groups of people outside waiting to go in as we were coming out. I think it was listed around the low $400s and it sold for like $40,000 or $50,000 over that. The one I picked was one that I just couldn’t leave, we literally just sat there hanging out for 2 hours at a time the two times we went to see it, one with the realtor and one without. It’s a 30 year mortgage, with taxes and all fees yadda yadda I am paying $2,500/month on a $360,000 loan for a $402,000 home. Just in case anyone was wondering, I always wondered what people were paying etc. This includes a pretty steep property tax as well.
Anything in the 6s right now is really good, I just locked in at 7.1%. We won’t see 5 or 4% again for quite some time
If you a well qualified buyer, it might be worth it to call your broker and see about a relock. National average now is just below 7, so, you may get a bit better. If you locked prior to Wednesday, it's worth it. If you locked Thursday or Friday it's probably not.
What if you lock your doors everyday before you leave?
I've said it before and I'll say it again, The right time to buy a house is when you find one you like that you can afford. Rates will go up and down, refinancing down the road is always available. When the rates do drop to 5 the flood gates will open and prices will likely go up even more.
Think that's the magic number 5%? Or are these people really thinking about affordability?
I like 5. If I had to choose a specific number 5.75 would be very persuasive.
Different people probably have different numbers in mind.
I waited enough so I’m looking now. If rates drop, home prices will rise. There’s already so much competition in some areas even with high rates.
Buy as soon as you can afford the monthly payment I think. Refinancing is a bonus down the line. The rate can stay 7 percent or even rise for 10 years. It can be 20 yrs before we see 4 pct. No one knows!!! Anyone who thinks the rate will be 4 or 5 percent in a yr or two has no clue. It's like trying to time the stock market, you can be insanely wrong easily
What if you put 50% down and the monthly payment for interest, taxes, insurance, and hoa is still more than the monthly payment to rent a similar place in the same area? Would you still buy?
Is the area good that the prices have been increasing for past 20 yrs? Are you staying there for a long time and if you lose your job you can find similar in the area? The idea is that the house price will grow while you live in it and you are also building equity instead of paying someone. You also can have pets and you can't get kicked out if your landlord sells the place or decides to live in it. If so then yes, but I personally would never agree to an hoa either, the Township is enough for me to tell what I can and can't do with my house.
I used to lease car for $300 a month and then bought one for $300 a month. My cars been paid off for 5 yrs and I had no payments and it's still worth like 7k. If I had only leased I would've lost so much money. The house is even better, cause, the house next to mine in nj was bought for 66k in 1994 and is now worth 800k. I think they put more money into it but they're still winning, even paying taxes all those yrs doesn't set them back much.
I’d be really happy with 6%or under. I’m definitely not waiting at this point but there ain’t shit on the market that is affordable at these interest rates that I want to buy. There is no sign of interest rates coming down significantly anytime soon.
The crash has been coming any day now....for the past 5 years.
Locked in 7.1. What matters to me is the payment is well within my budget. If someday I refinance for much lower payment, then icing on the cake.
I can't afford a mortgage with current interest rates plus current prices in my location. So I'm waiting for something to change, whether that be rates, prices, availability, job pay, or relocation. With everything as is, it's out of my reach. Not purposely waiting, that's just how it is.
How come no one ever asks about those of us predicting interest rate increases?
I've never heard someone say they're waiting to buy a house for interrest rates to increase, though historically, that would have been the play!
It was exactly my motto in 2020 and 2021. I was not the only one. I’m still saying it. The Asset is the Note.
We bought our house with a 7.3 a few weeks ago. I’ll refinance when it hits 5.5 or lower but right now we can afford it and I really love our new house and we didn’t want to have to wait 900 years or wait and try to buy a house when it’s really competitive and cut throat.
I have been reading the finance forum a tiny bit and while I understand almost none of it, the consensus there is that rates will never be 4% again, or at least not any time in the near future.
No one knows anything and if there is a general consensus on a reddit forum about anything finances or economic related, it's a good bet to think it could be wrong 😂
What a great comment. Thanks for your opinion as someone who doesn’t even understand a finance forum. Very insightful
When it comes to interest rates, look at historical data for the past 30-40 years. You may not see 4% interest rates in decades. Buy when you can afford and enjoy the place. Life is too short to keep waiting.
I was shopping in 21 @ a 2.9% rate quote.
My loser father kept telling me not to buy. That big crash was coming.
I told him who cares, I still need a place to live and I can afford it now. He kept talking me out of it. He kept telling me I would lose my job and end up in foreclosure. Wouldn’t help me look. Wouldn’t answer my questions.
House prices are up 60% here since then. My rate is now 7%. I can no longer afford it.
At this point I’m just waiting for anything.
6.5% is good in this climate.
Yep.
There is some lack of understanding of macro and micro economics from the people waiting for the drop… that shows how they are not really potential home buyers. That’s good news, less competition there.
Low rates in recent memory makes folks think it’s a common occurrence and will return. I don’t know any more than the next guy, but you can refinance if rates drop, if they double and stay high for a long time you have no good recourse.
Yeah like not wanting to throw away a shit ton of money on interest worse case scenario is they have more money towards principal
Yeah. Cause renting is the best investment ever… why would you want to throw away thousands of dollars in interests when you can throw away all of your dollars on rent.
Having shelter isn't throwing away money. Especially when it's vastly cheaper than overpaying on interest rates. Homes only make money when you sell or rent them out lots of investments pay you immediately no first time buyers should be buying to make money a home is only an investment in the long term.
“Having shelter isn’t throwing away money.” And what do you think you pay when you pay interest? It is actually simple math. And yes interest rates are higher than what they were, but where I am located, on a medium home price, you put 10% down… and the interest that you pay is about 70% of what you need to rent that same place. So… you are right, paying for shelter is not throwing away money, specially when that place is yours and you have the chance to refinance if the interest rates ever go down.
It's cheaper to rent than buy in almost all major metros by a lot.
https://www.newsnationnow.com/business/your-money/cheaper-to-rent-than-buy-us-metros/
Yes. I am not saying it’s not. I am saying that what you pay of interests it’s not enough to rent a descent place. And there are a few more things to keep in mind… people believe that “all this madness will end eventually and you’ll be able to buy with better conditions”, I don’t believe that’s the case. About 35% of all real estate transactions last year were cash, and those properties usually show up as rentals the day after they closed. The truth is that companies understood that there are not enough houses for the people who need a roof so they are buying and putting up for rent everything they can. In a few years rents will be insanely high, I predict as high as anyone can afford, killing that way any capacity of saving money. And that’s it. The US will be a country where you lease your car, you lease your house, you go into debt to study… don’t get sick, you pay for expensive terrible food and good luck with retirement. “Overpaying” a little on interest (because you might be able to refinance), in my opinion is worth it if you can gain some certainty. But… that’s my opinion, for others it’s fine to rent… and complain about terrible landlords. Anyways…
Where I live, in SoCal, rent is 3600 for a run down house in a not safe neighborhood. The landlord lives in another state and has been raising the rent by 300 each year. Doesn’t do any maintenance or upkeep to the home.
The home I’m currently in escrow for, albeit about an hour away from where I’m renting, will have a mortgage of 3750. Add utilities, and it’ll come out to about 4 grand a month.
I’d rather pay that towards something that is mine, then continue to rent, knowing each year the amount is going to go up by a few hundred.
Specially? Lmao. It’s Especially…
That’s all you have? Me matan estos pseudo-críticos que se regodean en corregir una letra. Patético :D
Learn English
I did. It’s not that hard, pretty basic language to be honest.
Well your comments are one long sentence that doesn’t make sense. Especially when we are talking about financial assets. I don’t understand you.. lmao
Not waiting for anything. I was at 7.250%, bought it down to 6.750%. Close next week.
Congratulations!
Rates only seem high relative to the last few years. The reality is rates are right now just below their historical average.
Problem being house prices are climbing like crazy every year. With the average price being astronomical compared to 1983 when the rates were at 18%. The average income to price of home ratio is much worse off now. Apples and oranges.
A few years ago people thought rates would stop rising and would lower again soon... some of those people have 6.5% loans now.
Hope no one is waiting based on interest rate metrics.
I just locked in 6% a few days ago lol
State?
Buying in NJ
I bought last year with a 5.9 rate. But I'll refinance if it gets to 5.0 or something in the fours which it looks like may not happen for a long time.
I locked in 6.99% earlier this month. I think I probably could have done better with my excellent credit and no other debt but it is a very big loan amount (not Jumbo) so maybe not. I was inexperienced and had a fast closing so I didn’t play this right. Hopefully I can refi at some point.
Right now… the Fed is considering 2 rate cuts .. first one in September. Back in January, 6 cuts were considered possible. Inflation is still about 3.5% and that is the reason. If it doesn’t go below 3%, the Fed will keep it where it is now.
If you can save enough to put 20% down (to avoid PMI) .. it is actually better to get in before the cut. The cut will attract buyers and raise prices. Once rates do decline, refi is really not difficult
I think how much it costs to refi at the lower rate should also be taken into consideration.
Certainly. We did this at the same time that we got PMI removed. This required an appraisal. The bank actually refunded 3 months of PMI premiums which more than paid for it.
Generally, refi closing costs should be quite reasonable, and the lender should provide a fairly accurate good faith estimate.. So you will know what to expect
Appreciation will beat the APR. buy now if you can…you can refinance out of the high APR.
I like to ask the question of "What was the rate at when you started waiting for the rates to drop?". I have family to put their search on hold after 5.5%.
Thank god we bought because it was necessary and made sense to us. We were lucky to lock in a decent rate and we brushed off the “Let’s wait for rates to drop” talk. lol. Buy what you can afford and start small if you have to. We had a little one on the way and the living space did not make sense for us.
If you can afford the house, buy it. Or try and eliminate some other costs, to be ready for the increased mortgage costs for a few years. For example, I paid off my cars early. That saved us 700 alone.
While rates going down to 4-5% would be great, you would face a ton more competition in your market.
Target is around 6%. Anything lower than that would change my life.
We were quoted 7.12% from my fiancé's credit union. Due to the amount we are putting down and the rates fluctuating a little the last 2 weeks we got it down to 6.6%. I'm not expecting it to go too much lower in the recent future. So best case we refinance sooner than expected.
We got locked in at 6.990% last week. Considering rates were 8% when we first started really thinking about buying, I’ll take this for now! We plan on refinancing when/if rates get in the 4-5 range again. It sucks, sure, but we have to be willing and able to pay this amount.
If you can’t afford the house at 6.5, you can’t afford it at 6
There’s also terrible advice like “you’ll just refinance”. No. Don’t EVER count on that. Even if you can wait years. It could not only never happen rate-wise, it could be wrecked by a dozen other variables.
It’s pretty simple: it’s fun to brag about rates, but no matter how good you get, you’ll ALWAYS think you could have done better. At least for a little while.
The trick is buying what you can afford, and not getting into a position you regret because you were scared of “missing out”.
I was an LO for a decade, and even when rates were crazy low people still lamented them not being lower.
Only you know what you can really “afford” and how stable your income and savings situation is. Buy if it works, don’t if it doesn’t. The rate, while important, doesn’t really make or break a home purchase IMO
Yes, wait until rates drop to 4%. Any day now...
My interest rate locked in is at 6.6%. I am hoping to refinance at either 5.6% or 6.0%. That’s if the interest rates will ever come down.
Candidly, you might call your broker and see about a repock post cpi. Mortgages reacted very strongly to the report....but either way, congrats on the house and thank you for your service!
I bought a home for $250,000 and 6.8% interest. Over the course of the loan, I will have paid back $450,000.
If I waited for interest rates to be 3% again, the housing prices would've raised enough that the house itself would've cost $400,000 anyway.
How many points are being paid to get to a 6.5% today?
Shouldn't have to pay any with good credit and 20%, but your location and lender matter.
3 weeks ago I got 7.1 at a small bank. For a conv with perfect credit and 20 down it's like 7.1%, for everyone else conv it's 7.5%
The jobs report and the cpi report drove a lot of action this week. 7.1 was pretty damn good 3 weeks ago though! Think you got it right from your other post though
I pre-approved someone at 6.5 on Friday. It can happen.
My wife and I locked in 6.6 last week. One point would have had us at 6.3, but we decided to save that money at closing to put into renovation.
Our lender guaranteed us a no cost refi if we go through them, so it seems like a win-win.
None. I locked at 6.375 with a tiny lender credit last week. Large dp and perfect credit though.
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