7% interest rate?!

[tvguy]

You can always do an ARM and refinance if you think it will drop, although historically (prior to 2008 market manipulations) really around 7% is where it probably should be. I wouldn't expect much higher interest rates to be sustainable. If I was in your position I'd think I was in a good spot and would take fixed, if it dips a bunch I'd plan to refi in a few years.

I was researching recently and there are very few high risk loans being written (in contrast to 2005-8) so there is nothing I see to justify the push of rates upwards so today couldn't be less like prior market behaviors. Rates are going up because there really did need to be a market correction up from 0% interest, although what this has to do with inflation is bewildering. Seems the Fed is getting the hotfoot to manage "inflation" which naturally happens due to too much money supply but right now all the price jumps are more likely price fixing (evidenced by growing profits which actually shrink with inflation - so opposites day) even though Fed can't affect price fixing, but what the hay- let's see what happens.

This all strikes me as a strange hack, we are all hyper aware that this happens with computers and social media so I have no idea why people would be shocked it could easily happen with our markets, open as they are (although they are supposed to be monitored but not my circus and not my monkeys). All it takes is the key variables for inflation to be tapped to make things look a particular way and this can send people into tailspins which is very disturbing to me. Natural inflation severely slices into profits which trigger the layoffs of recession, but since there are no losses in profits best guess is cyclic employment will be the new prop to point at. If there is a dip after the holidays I suspect it will be in retail which is controlled by non US interests but not a real recession. Truly I'm just mystified at the spin & think we all need to just chill.

My wife and I often wonder how our parents juggled finances, because they paid cash for their houses. Of course my parents first house was really a one bedroom shack that cost a few months pay and they added on to it over 10 years until it was a 3 bedroom 2 bath home. They did all the labor.
My FIL was career Air Force and lived on base for 27 years so he had decades to save money for his first house.

 

[MillauFr]

The issue here is, rents are more un-affordable than housing prices. My daughter bought half a duplex in a subdivision of identical duplexes. Those duplexes rent for $2,000 a month, more than she can afford. Her payment with insurance and taxes is $1,100, which is within her budget.

Exactly correct. It maybe true that house values will fall. Continuing to pay rent when you could use that money to buy makes little sense.

 

[kdonnel]

Or people will start buying smaller, less luxurious housing. That happened during the economic downturn in the early 1980's here. A builder marketed several condo communities made up of condos that size of a two car garage, 400 square feet. The appliances were all half size of normal, and they all had Murphy beds to save space. I think they sold for like $25,000 and they sold out.

I think work from home has become entrenched enough that people are going to want dedicated work from home space for at least one if not two people.

I think housing had been trending smaller but I believe it will trend bigger if not already for that reason and for the next I list.

Multi generational homes may become popular as well as baby boomers age out of the ability to live on their own.

I have my baby boomer in laws living with me. They are in their own self contained 1200 sqft space. My wife and I are very close when care is needed so it is much less of a burden on us, they have said they feel safer knowing we are just one flight of stairs away. I would not be as happy with them living with us if our house was not large enough to give them their own separate space.

I have two friends who have combined households after seeing how well it has worked for us and the in laws have two friends who have moved in with their kids and a third who is asking.

Financially it makes a tremendous amount of sense for both households being combined.

 

[Colleen27]

Many of us bought at times when rates were 'normal' to be above 7 percent and we made it ok. We took out 30 year mortgages to keep monthly payments down.

After you close watch for times when rates go down and refinance at the lower rate and for a shorter term.

That's what we did.

Yeah, this. Our first mortgage was at 6.75%, and that was just normal for the time so we really didn't think anything of it. We didn't stay long enough to refinance, but I know my mom did twice over the years because her initial rate was 16%, then she refinanced to around 10% when she and my father divorced, then again around the time DH & I bought our house so I'd guess her final rate was in the 6% range. I certainly encouraged DS to think about the impact of rates when he bought, though - he talked about trying to wait out the hot market and delay buying, and my advice was to compare the higher price/low interest payment vs. a lower price/higher interest payment because I figured rate hikes would be the only thing that would cool the market. Rates of 2-3% really aren't "normal", historically speaking, and went quite a way toward compensating for the higher prices at least in the lower end of the market. Thankfully, he bought over a year ago on a fixed rate loan. I'm not sure we're quite at "worst time to buy" yet, but I think we're close - around me, at least, price growth has slowed/plateaued but prices are still high, houses are still selling fairly quickly, and now the loan is costing much more as well.

I hope you're able to find something reasonable before rates go too much higher.

 

[Christine]

Exactly correct. It maybe true that house values will fall. Continuing to pay rent when you could use that money to buy makes little sense.

My daughter is in this spot now. Paying tons of rent, but she does not have the large down payment required to get into a home. Home (and condo) prices are high here so the downpayment requirements are kind of staggering. She pays so much rent, she can barely save. Though she does save.

 

[luvsvacation]

As many have said 7-8 and higher are “normal”. The under 5 we’ve seen since 2008 is what wasn’t normal. I was recently watching an old episode of golden girls from the 80s and Blanch made reference to never leaving her home due to the amazing interest rate she had (of right around 7%). We lucked out buying when we did and getting to enjoy a 30 year rate at 2.75 but that was just the plain luck of when we bought, it was not normal.

 

[tvguy]

I think work from home has become entrenched enough that people are going to want dedicated work from home space for at least one if not two people.

I think housing had been trending smaller but I believe it will trend bigger if not already for that reason and for the next I list.

Multi generational homes may become popular as well as baby boomers age out of the ability to live on their own.

I have my baby boomer in laws living with me. They are in their own self contained 1200 sqft space. My wife and I are very close when care is needed so it is much less of a burden on us, they have said they feel safer knowing we are just one flight of stairs away. I would not be as happy with them living with us if our house was not large enough to give them their own separate space.

I have two friends who have combined households after seeing how well it has worked for us and the in laws have two friends who have moved in with their kids and a third who is asking.

Financially it makes a tremendous amount of sense for both households being combined.

I have heard home builders here comment since the pandemic that buyers want office space, or buying a house with an additional bedroom for that purpose. Personal preference I guess. I worked from home for 15 months of the pandemic and all I did was move my desktop keyboard out of the way, put my work laptop there, then close up the laptop and put the keyboard back at the end of the day, so I didn't need a dedicated space, I could work from my couch.

 

[Skippy918]

Our first mortgage on our house was around 5%. We refinanced 3 more times and now have a 15 year at 2%.
my parents are moving near us soon and they are wondering whether to pay cash or get a mortgage and pay it off early. They need to sell the current house to have liquidity though.

 

[MillauFr]

My daughter is in this spot now. Paying tons of rent, but she does not have the large down payment required to get into a home. Home (and condo) prices are high here so the downpayment requirements are kind of staggering. She pays so much rent, she can barely save. Though she does save.

Yes that is a tough spot to be in. May people are stuck in rentals for the exact same reason.

 

[TipsyTraveler]

I have heard home builders here comment since the pandemic that buyers want office space, or buying a house with an additional bedroom for that purpose. Personal preference I guess. I worked from home for 15 months of the pandemic and all I did was move my desktop keyboard out of the way, put my work laptop there, then close up the laptop and put the keyboard back at the end of the day, so I didn't need a dedicated space, I could work from my couch.

It’s one thing if you have a rather distraction-free home and your work just involves you and a computer. It’s different if you need a quiet space for making phone calls away from your kids, your barking dogs, the ringing doorbell… There’s no way my husband could do his job from one of the main areas of our home.

 

[Christine]

I have heard home builders here comment since the pandemic that buyers want office space, or buying a house with an additional bedroom for that purpose. Personal preference I guess. I worked from home for 15 months of the pandemic and all I did was move my desktop keyboard out of the way, put my work laptop there, then close up the laptop and put the keyboard back at the end of the day, so I didn't need a dedicated space, I could work from my couch.

My employer requires a "dedicated office space" if you are a teleworker. They have yet to do it, but they reserve the right to actually inspect your space if they want to. We must be in an area that is free from non-work related disturbances/distractions. It varies what people can manage. I mean if you live alone in an apartment, then sure, you can sit on your couch and use your laptop.

If you live in a residence with a partner and children, they do want you working and taking meetings in the middle of the kitchen while 3 kids get breakfast.

 

[FamilyGuy]

Home buying is one of the best ways for mainstream Americans to build net worth. As long as you can comfortably handle the payments at 7 or 8 percent, and the market pricing is reasonable (should be down a little from a year ago), I think home buying still makes sense. Refinancing is not complex or challenging at all as long as credit, income and outstanding debt are all in good shape... I can't pinpoint exactly why, but I think it may be many years before we see low rates again. Good Luck, do your research and find a very well rated and competent buyers agent to help you along the way.

 

[Praying Colonel]

Here's a chart showing the 30 year fixed rate since 1971:

https://www.freddiemac.com/pmms/pmms30

According to the chart, the first time the annual average dropped below 7% was 1998, and the first time the annual average dropped below 5% was 2010.

 

[tvguy]

My employer requires a "dedicated office space" if you are a teleworker. They have yet to do it, but they reserve the right to actually inspect your space if they want to. We must be in an area that is free from non-work related disturbances/distractions. It varies what people can manage. I mean if you live alone in an apartment, then sure, you can sit on your couch and use your laptop.

If you live in a residence with a partner and children, they do want you working and taking meetings in the middle of the kitchen while 3 kids get breakfast.

The best part of most folks working from home is seeing their pets, kids and spouses wander through the Zoom shot!
My work from home experience was only due to the pandemic, so no restrictions were placed on us, other than we could not come into the office. They were just happy we could work from home. My company did have to buy a number of laptops, since most of us did not want to use our personal computers. And they bought several MiFis for internet connections because they found some folks had no internet connection at home.

 

[tvguy]

It’s one thing if you have a rather distraction-free home and your work just involves you and a computer. It’s different if you need a quiet space for making phone calls away from your kids, your barking dogs, the ringing doorbell… There’s no way my husband could do his job from one of the main areas of our home.

My wife's job did not go remote so four days a week I was the only one home as our kids are grown and no pets. Her place had everyone in her job stay home with full pay "on call" to keep the head count down in the building. On days my wife was home, she was known to offer snarky comments in the background of my Zoom meetings. Did I mention my wife and I work for competing TV stations? And did I mention our daughter worked at the same station as I did and was on the Zoom calls too, so they had a few brief mother-daughter chats during meetings.

 

[Robbie Cottam]

I was recently looking to purchase a rental home as an investment….

It quickly became clear to me that waiting 18 to 24 months would provided better value because:

Prices became Artificially inflated when people were running to get out of the cities….at-least near me.

We have a diesel fuel storage in this county that is going to exploded into a huge crisis with the first cold snap. This will add further upward pressure to the price of Necessities.

Raising interest rates are going to force seller to have to except “normal” prices again.

People that “won” their bidding wars to buy their dream houses, are going to realize they can afford them, and this house will either be sold for “normal” prices or end up in the foreclosed market again….

When all of this happens I will buy a rental house or two…..

Maybe I’ll get lucky and be able to buy the house from someone that is about to lose it then rent it back to them…

 

[elgerber]

My daughter is in this spot now. Paying tons of rent, but she does not have the large down payment required to get into a home. Home (and condo) prices are high here so the downpayment requirements are kind of staggering. She pays so much rent, she can barely save. Though she does save.

I know it's not the greatest option right now, but if she can afford a payment, there are many zero down programs available. The payment is high without a down payment, but it's an option. In our region we have down payment assistance programs, with zero payment assistance loans.

 

[barkley]

I think work from home has become entrenched enough that people are going to want dedicated work from home space for at least one if not two people.

i see that people are opting for more 'flexible spaces'. rather than dedicating a room to being purely a bedroom OR an office they are combining the 2 which likely accounts for the resurgence in popularity of murphy beds-sales have gone up 50% each year for the last couple of years. it's nice to have an office in a home but the downside is if it cuts into the number of bedrooms re-sale wise it's always better to have a bedroom that can be used as an office vs. an office which can't be listed (and in some places legally used) as a bedroom (ingress/egress/closet and other building specs of an office vs. a bedroom is an issue where we live and can bring insurance coverage in as another factor).

 

[kdonnel]

i see that people are opting for more 'flexible spaces'. rather than dedicating a room to being purely a bedroom OR an office they are combining the 2 which likely accounts for the resurgence in popularity of murphy beds-sales have gone up 50% each year for the last couple of years. it's nice to have an office in a home but the downside is if it cuts into the number of bedrooms re-sale wise it's always better to have a bedroom that can be used as an office vs. an office which can't be listed (and in some places legally used) as a bedroom (ingress/egress/closet and other building specs of an office vs. a bedroom is an issue where we live and can bring insurance coverage in as another factor).

I wasn't saying people wanted a 200 sq ft room with no closet, just that they might buy a 4 bedroom or 5 bedroom house instead of a 3 bedroom so that a room or two could be dedicated to an office.

In my case the single downstairs bedroom is a dedicated office for my wife, and what would be a formal living room is my dedicated office.

Prior to Covid the average size of new single family homes had been declining for about 5 years.



https://eyeonhousing.org/2022/05/new-single-family-home-size-trends-2/#:~:text=Since Great Recession lows (and,higher at 2,318 square feet.

Going forward we expect home size to continue to increase modestly, given a shift in consumer preferences for more space due to the increased use and roles of homes (for work among other purposes) in the post-Covid-19 environment.

 

[mom2rtk]

My wife's job did not go remote so four days a week I was the only one home as our kids are grown and no pets. Her place had everyone in her job stay home with full pay "on call" to keep the head count down in the building. On days my wife was home, she was known to offer snarky comments in the background of my Zoom meetings. Did I mention my wife and I work for competing TV stations? And did I mention our daughter worked at the same station as I did and was on the Zoom calls too, so they had a few brief mother-daughter chats during meetings.

I assume you know that everyone's circumstances are different?