Mortgage rates back to 7%

[Remote]

Eventually the collateral has to get valued appropriately and these over-leveraged banks will eat each other.

 

[Conjiggle]

That doesn’t make sense. Their future value is partly dependent on the interest rates. They are buying in bulk at a low rate so the future value is high.

Those investments do depend on interest rates. They want to rent those properties out. they aren’t trying to pay the taxes on these indefinitely.Why else would they have bought heavily in the biggest moving locales Vs just some random small town?

Rates have been under 4% for over a decade. There’s are entire generation of graduating business classes that don’t know what investing above 4% looks like.

I agree, they are just in a holding pattern. They haven’t unloaded those properties. Like I said, they are wait ing to see how far the fed takes its rate hikes.

The large investment firms/hedge funds were buying properties in cash… They weren’t out here financing these purchases. So no, their investments weren’t dependent on interest rates.

Investment purchases skyrocketed because investors believed it was a good opportunity to get in before values jumped up. They simply took their cash from their account and put it into properties in an effort to see a larger return.

Again, these hedge funds were responsible for 1 out of every 2 home purchases in Atlanta during that time period. Cash deals. We aren’t talking about some guy that claims to be an investor buying a home to rent out. We are talking entities with hundreds of millions, if not billions, at their disposal. They don’t finance, and therefore, do not operate based on mortgage interest rates.

Interest rates haven’t been under 4% for a decade. Not sure where you got that data from. But feel free to educate me on that.

That would mean that we have seen rates in the 3’s consistently which is simply not factual. If that is the case, then what exactly prompted the chaos in the real estate market between 2021-2022? If rates were already in the 3% range for the last 10 years then why did the market feel the need to buy then and not the 8 years prior when home values were lower? By all accounts, the market went crazy due to the historically low interest rates in the 3% range.

 

[Conjiggle]

Eventually the collateral has to get valued appropriately and these over-leveraged banks will eat each other.

I have to be honest, you lost me bro. You posted a graph regarding the drastic decrease in investor purchases in 2023 and now you are mentioning over-leveraged banks.

What do those investors have to do with the banks? How are the banks over-leveraged?

Is it that you think these hedge funds went out and applied for mortgages when they bought up all of these homes? Banks are not involved in all cash real estate transactions. There is no interest rate for a cash transaction.

And in regards to collateral getting valued appropriately - who says it already isn’t valued accurately? The market isn’t set by the seller, the market is set by buyers. A seller can ask whatever they want for a home, if no one is willing to pay it then it doesn’t sell…

The average real estate transaction also sees the buyer using some type of traditional financing (mortgage). So even if a buyer says “yes, I will over pay for your home”, if the appraisal (required by the bank providing the mortgage) doesn’t match the purchase price then there will be no loan approval.

My original point is that the decrease in investor purchases has nothing to do with a sign that the market is heading towards a crash. There is no correlation whatsoever.

 

[Payday23]

Imo the only way we see these firms offload these houses quickly is if they need cash fast due to some unforeseen collapse. Otherwise, housing prices are here to stay like this for a while due to lack of inventory

 

[Json]

Imo the only way we see these firms offload these houses quickly is if they need cash fast due to some unforeseen collapse. Otherwise, housing prices are here to stay like this for a while due to lack of inventory

They aren’t going to offload, the cities they bought in are still major movers. They can still artificially keep the value high.

They just won’t be buying in bulk.

 

[Json]

The large investment firms/hedge funds were buying properties in cash… They weren’t out here financing these purchases. So no, their investments weren’t dependent on interest rates.

Investment purchases skyrocketed because investors believed it was a good opportunity to get in before values jumped up. They simply took their cash from their account and put it into properties in an effort to see a larger return.

Again, these hedge funds were responsible for 1 out of every 2 home purchases in Atlanta during that time period. Cash deals. We aren’t talking about some guy that claims to be an investor buying a home to rent out. We are talking entities with hundreds of millions, if not billions, at their disposal. They don’t finance, and therefore, do not operate based on mortgage interest rates.

Interest rates haven’t been under 4% for a decade. Not sure where you got that data from. But feel free to educate me on that.

That would mean that we have seen rates in the 3’s consistently which is simply not factual. If that is the case, then what exactly prompted the chaos in the real estate market between 2021-2022? If rates were already in the 3% range for the last 10 years then why did the market feel the need to buy then and not the 8 years prior when home values were lower? By all accounts, the market went crazy due to the historically low interest rates in the 3% range.

I’m talking about federal interest rates not mortgage. investors invest to make money to keep investing. They don’t print their own money. making a mistake or being overly leveraged becomes more risky.


These properties are cost not just associated with the initial purchase. These locals have taxes and evaluations every year. It’s not like they pay 150,000 upfront in cash and then they are done. When interest rates are high less people are buying and the home values will either stagnant or go down.

 

[Absolut]

I have to be honest, you lost me bro. You posted a graph regarding the drastic decrease in investor purchases in 2023 and now you are mentioning over-leveraged banks.

What do those investors have to do with the banks? How are the banks over-leveraged?

Is it that you think these hedge funds went out and applied for mortgages when they bought up all of these homes? Banks are not involved in all cash real estate transactions. There is no interest rate for a cash transaction.

And in regards to collateral getting valued appropriately - who says it already isn’t valued accurately? The market isn’t set by the seller, the market is set by buyers. A seller can ask whatever they want for a home, if no one is willing to pay it then it doesn’t sell…

The average real estate transaction also sees the buyer using some type of traditional financing (mortgage). So even if a buyer says “yes, I will over pay for your home”, if the appraisal (required by the bank providing the mortgage) doesn’t match the purchase price then there will be no loan approval.

My original point is that the decrease in investor purchases has nothing to do with a sign that the market is heading towards a crash. There is no correlation whatsoever.

He sees the graph as confirmation bias. Simple as that

 

[Conjiggle]

I’m talking about federal interest rates not mortgage. investors invest to make money to keep investing. They don’t print their own money. making a mistake or being overly leveraged becomes more risky.


These properties are cost not just associated with the initial purchase. These locals have taxes and evaluations every year. It’s not like they pay 150,000 upfront in cash and then they are done. When interest rates are high less people are buying and the home values will either stagnant or go down.

Ok I follow you now bro. My apologies for misinterpreting your original post.

You make a very valid point. I would still argue that the primary investor’s strategy is a long term buy & hold. They are banking on 1) home values continuing to trend upwards and 2) rental rates continuing to climb upwards.

I would say these funds have enough liquid cash to comfortably push through a downturn in 1 or both of those areas.

 

[Remote]

He sees the graph as confirmation bias. Simple as that

No.

 

[Absolut]

No.

You just thought the rate they would buy at would just continue to climb exponentially?

 

[the bossman]

Otherwise, housing prices are here to stay like this for a while due to lack of inventory

Exactly. That's why I be scratching my head at all these 'expert analysts' who been 'predicting' a big crash for the last 3 years

At the end of the day. Ain't nobody trying to sell their sub 3% mortgaged home to go out there and have to deal with 7%. Inventory gonna be shytty for a good while


The answer always comes down to the Fed hikes

 

[Mensch Fontana]

The entire global market is oversold to about 8 trillion dollars. The housing market is just one market that is about to crash.

#ff1987

 

[Conjiggle]

Exactly. That's why I be scratching my head at all these 'expert analysts' who been 'predicting' a big crash for the last 3 years

At the end of the day. Ain't nobody trying to sell their sub 3% mortgaged home to go out there and have to deal with 7%. Inventory gonna be shytty for a good while


The answer always comes down to the Fed hikes

Excellent point. That is one of the primary reasons inventory isn’t increasing. Homeowners have great equity but would likely need all of it just to get into another home due to the increase in home values.

 

[NegaDuck]

Why do you believe the market will absolutely crash? What is this based on?

I think the “doom and gloom” belief is over exaggerated. The market will dip for sure, but crash? Not likely.

- Less than 5% of the mortgages in the market are considered “high risk”.
- Compare this to 2006/07 where that number was closer to 50%.
- Contrary to popular belief, banks/lien holders have little desire to foreclose on properties. That isn’t their business model and how they make profit. They do not want the properties. They want the interest from the mortgage payments. That’s how banks get paid.
- In fact, a lot of banks suffered when the market crashed the last time due to the large number of properties they had to hold. That costs banks money.
- The percentage of foreclosures across the country has not seen a significant increase for almost a decade.
- In GA, where I am, the foreclosure market has been more or less nonexistent for 7+ years.
- There is also a huge misconception that if the percentage of foreclosures increases that will lead to cut price deals.
- The reality is that the few foreclosures you find in the market currently are selling for at/around market value.
- This is due to low inventory nationwide. Simple supply and demand principles.
- There are not enough homes/inventory on the market to meet the current demand.
- In Atlanta, currently, there is about a 2.5 month supply of inventory.
- For context, a balanced market would be roughly 6-7 months worth of inventory. Buyers market would be 9+ months of inventory.
- the shift required to lead to a buyers market and a subsequent crash would require hundreds of thousands of homeowners to sell at one time (willingly or by force). It simply isn’t going to happen.

Current interest rates are in line with what they were in the early 2000’s. There was a day and time where rates in this country were comfortably over 10% (few decades ago).

6-7% isn’t as astronomical as some make it out to be. 4-5% rates have never been the norm or standard. The 2-3% rates could prove to be a once in a lifetime occurrence. That’s why the market went crazy. Buyers realized that was the time to buy more house for less money. That ship has now sailed.

Anyone sitting on the sidelines waiting for those rates to return or for the market to crash so that they can get a $1 million dollar house for $250k will be dreaming for a long time.

All facts

 

[beenz]

highest rates in 23 years as of today

Mortgage demand shrinks as interest rates hit the highest level in nearly 23 years

Applications for a mortgage to purchase a home fell 2% for the week and were 27% lower than the same week one year ago.

www.cnbc.com