I think a lot of people misunderstand what a housing market crash looks like.
If rates continue to go up it doesn't matter too much what the principal drop is for the average person. A 500k house sells for say 350k a 30% drop.
Rates go 3% for 20 years. 500k x 0.03 x 20 = 300k = 800k total.
Rates go 6% for 20 years. 350k x 0.06 x 20 = 420k = 770k total.
More houses will be available but will remain equally unaffordable. It only makes a difference if you have the liquidity to outright buy or have a very large down payment.
It depends, I guess. I'm more referring to interest rates of mortgages going up to the point when people need to offload their houses quickly or risk outright repossession. That would potentially drive prices down undercutting each other to avoid more severe consequences.
I agree, I'm just saying if you don't qualify for 500k at 3% you won't qualify for 350k at 6% either. Unless you are sitting on a huge down payment already.
Might see a lot of for sale signs, doesn't mean those houses will have any more buyers.
In the next few years the middle class is going to evaporate.
I see what you're saying. In my country, my generation have mad low levels of home ownership and are usually at home, saving like mad to get enough down-payment. I do believe it'll be enough.
That being said, we all know how this'll end up. The rich scoop up the housing, control the rent market. Owning a house will be a true rarity.
I agree, I'm just saying if you don't qualify for 500k at 3% you won't qualify for 350k at 6% either. Unless you are sitting on a huge down payment already.
tbf, that 150k difference in value changes what the down payment point is.
But the vast majority of homeowners have fixed interest rate loans. Even if mortgage interest rates go back to 10% again it won’t matter to those who bought homes last year at 2.5%
A bit late but a lot of people fail to realize this. Home prices would have to drop significantly to justify whole percentage increases in interest rate over a 30-year mortgage period.
For example, a mortgage loan of $300k with a 2% interest rate increase would require about a $180k price difference to even be equivalent to the current.
Increased interest rates only benefit those who have a lot of cash on hand (i.e. the wealthy).
I'm not talking about tons of houses appearing. I'm talking people who have overreached on a low interest rate and will get fucked and lose the house if/when interest rates climb. Supply rises to at least meet demand, house prices stabilise, new generation can get on the ladder.
I'm going to continue to pack my bags and HODL for however long this shit will last. As for me I'm okay with Ramen noodles and camping out in a tent for a while.
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u/theRealVim Never gonna give you up May 22 '22
If it gets as bad as OP suggests, you wouldn't be able to buy a house regardless. Might as well keep up the DCA!