What Happnes when we see 9 or 10 percent mortgage rates
- Thread starter lasner
- Start date
a 200k home at 5% interest rates has the same payment as a 100k home at 10% interest rates.
So expect a 50% drop in real estate prices should this happen.
This is why the government needs to get inflation going and get everything inflated so that real estate prices dont drop 50%. I think its going to play out like this...As soon as real estate prices start to rise a bit, the fed will raise interest rates a bit. They will align it so that everytime real estate prices go up, interest rate will too. Of course they will have to see wages go up at the same time to keep those real estate prices up. This way by the time we get to 10% interest rates, a 200k home will still cost 200k. It will have actually invisibly have gone down 50% in value but because it has the same number, nobody will notice.
So expect a 50% drop in real estate prices should this happen.
This is why the government needs to get inflation going and get everything inflated so that real estate prices dont drop 50%. I think its going to play out like this...As soon as real estate prices start to rise a bit, the fed will raise interest rates a bit. They will align it so that everytime real estate prices go up, interest rate will too. Of course they will have to see wages go up at the same time to keep those real estate prices up. This way by the time we get to 10% interest rates, a 200k home will still cost 200k. It will have actually invisibly have gone down 50% in value but because it has the same number, nobody will notice.
You will be at least 5 years older before this happens...if then.
There will still be a housing glut...
Do you ever backtest ANYTHING you post?
Assuming a 30yr fixed conventional mortgage where you don't pay PMI by putting the minimum 20% down you're looking at a $160K vs. $80K mortgage.
$160K @ 5% = $858.91
$80K @ 10% = $702.06
It's not until you hit 12.5% where the monthly nut is equivalent and even that is misleading due to the higher interest tax deduction.
You obviously aren't old enough to remember the early 80's when mortgage rates were well above 15% and peaked at over 20%.
Real estate prices didn't plummet then...
Quote from makloda:
What happens if mortgage rates goto 2%?
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The govt. imposition 0f 0 to 25 basis pts....is certainly the direction.....
The max value force majure would be a 30 yr 0% int. rate....
and with a $15k tax credit....and an avergage of $220k per unit
valuation....the 0% LT mortgage comes into closer proximity....
Certainly not a natural place to be....
Partly financed by the interest rate opportunity "hidden tax" of what the normal rates would be....
ie if 7% would be normal....then a saver with $200k pays an effective tax of $14,000 per anum....
So taxes are being imposed quite heavily already to savers....those who did a lot of things right....
Now mistakes of others are ponied on the savers....
And the govt. imposition hereby wishes the savers to be suckered into false and forced higher valuations....just to lose in the very near term.....being asked to do things in the wrong way....
And when VAT happens...the savers will catch it yet again....
Enough said....
There is only one place to steal money....and that is from those who have it....
The US govt. is employing heavily flawed policies....
And its public will pay the price....
Make no mistake....
Quote from makloda:
20 year mortgage ad from Japan, 20 years after their real estate bubble popped:
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And the retireds were basically sacrificed in Japan for the good of the country....after all .....the future does not lie with the elders....but the youth alone....who else....
This has got to be the US pathway....
Why ?
Take out the bond calculator....
Plug in a 3% LT bond at par....now plug in 7....8....9% rates....
What happens to the value of the bond....?
The same applies to the US....
The policy decisions have already been made....
There have to be valuation impostions by govt....this is the current govt. policy decision....
The path of market driven rates was simply not acceptable to the govt. polys....
True market rates would drive down prices substantially lower....no question....
The cards have been dealt....
And 20 years is nothing....
Even if the boomers had money...which they do not.....there would be no earnings....
"No interest" forces a "traders market"....there is no other way to make $....
Everyone has to become a trader....EVERYONE....
and the govt. is even thinking about taxing each transaction....
Not a pretty picture....for those who want some $....
Everyone HAS to become a trader.....