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Homebuying activity is falling off a cliff (On a yearly basis, pending transactions were down by 18.7%) (finance.yahoo.com)

submitted 1 year ago by [email protected] to c/[email protected]

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[–] [email protected] 14 points 1 year ago (3 children)

They keep blaming it on rising interest rates...

But the truth is the decline in buying is because there's nothing to buy. A person eventually sells their house for any number of reasons. A corporation using rental as long term investments never will, and the biggest don't care about interest rates because they're making cash purchases anyways.

I'm not saying high mortgage rates aren't a problem, I'm saying they only are for people buying housing to live in, and those people can't afford to buy regardless of interest

[–] [email protected] 23 points 1 year ago (2 children)

Interest rates are a big part of it because people who have a mortgage who would consider moving otherwise won't. I'd consider moving, but there's no way I'd trade my sub 3% fixed for nearly 8%.

My house is about 600k. At today's rates I'd pay nearly 1.4 million over the life of the loan. 4k per month. At my current rate I'm paying about half that. For the same house.

This is the reason no one is selling. Everyone who had a mortgage when the rates hit record lows is never going to sell. Why would they. I'd literally be better of keeping this house and renting it out if I wanted to move. Nobody with 2.9% loans is better off walking away from it, it's free money. Inflation is shrinking the value of what I owe, this mortgage is better than cash, and I get a house.

[–] [email protected] -2 points 1 year ago (2 children)

Not to be rude, but are you saying you have no equity and you want to sell your house?

Because when you sell your house, what's not paid off goes to the bank, and you keep everything you paid off which in this case would go to the new house offsetting your future mortgage.

People flipping houses and moving before building equity was only a thing for a brief window

[–] [email protected] 11 points 1 year ago (2 children)

I have significant equity mostly from appreciation. There's no reason I couldn't sell, except that it makes zero sense to give up my current mortgage or to get a new one at today's rates.

[–] [email protected] 4 points 1 year ago

This is the problem I have as well. My house is worth 3x what I paid for it, and my monthly payments are… let’s just say I can’t rent a 1br shithole for what I pay monthly for 1500 sqft 3bd 2bath.. (which is also a shithole but it’s mine.)

Even if I sell for the 3x, everything else went up proportionally -and- interest is much higher than the 3.18% rate I got, so I’d be much further behind, and it would be a lateral move, to boot, not an upgrade. Trading the problems I’m aware of for problems I’m not aware of, and paying exorbitantly for the privilege.

Instead, I’m stuck here. Either convince my friend to move in with me, which she’s nearly sold on already, or buying a second property and renting this one out to cover the difference, which I’d rather not do. I hope she takes me up on moving in, not because I need help with the bills, I don’t and don’t really want a roommate, but because she does (she makes barely more than I do, but pays almost 5x as much every month for a quarter of the space in a major metro area rental - she could make half her current wage here and still come out well ahead, but she’d probably make almost the same amount).

It’s being willed to her if I die before her (single, no kids, no plan to change either of those), so anything she puts into improvement she benefits from now and later, even if she moves out. Win-win, and really the only way I’ve found to make this whole thing work decently.

[–] [email protected] -1 points 1 year ago (1 children)

But like, let's say you paid 200k, paid off 50k, and now it's worth 600k.

You sell, pay 150k to the bank, and use 450k to pay on another 600k house.

You're new mortgage is for 150k.

I just don't get where this came from:

At today’s rates I’d pay nearly 1.4 million over the life of the loan

Because you're talking about a whole 600k loan. Which makes zero sense given what you're saying

[–] [email protected] 2 points 1 year ago

Over the 30 years of the loan if I got a new 30 year mortgage today, for 600k I would pay back about 1.4 million over 30 years.

[–] [email protected] 3 points 1 year ago

From 1960 till 2022 the historical inflation rate has been 3.8% per year. If they have a loan for 2.9%, they are inflating away their debt, so the longer it takes to pay, the “cheaper” it gets while they are still getting all the appreciation.

[–] [email protected] 10 points 1 year ago

It's a few things, at least in my experience house hunting.

High prices
High interest rates
Limited availability due to people being locked into low-rate mortgages

Those three items, in combination, are a death sentence for anyone wanting to enter the market. Hell, my 800 sq ft condo is going for over 650k now, which is a great litmus test for how absurd prices are right now in my area.

[–] [email protected] 7 points 1 year ago

Big rental corps will absolutely sell buildings when they think rents are too low. They'll sell them in bulk to some other big rental corp, though, not piecemeal, one-by-one, to owner residents. Too much overhead and time in a couple hundred individual transactions when you can just do one deal.

[–] [email protected] 12 points 1 year ago

Can only speak for me, and the people I talk to, but the rates are less the issue. It certainly factors in, but the high total costs with no adjustments to wages means we've fallen into a gray zone where we really don't want to rent, but are forced to. I work in a hospital, and the people over ~40 are in houses that they are deathly afraid to get out of, and those of us under ~40 are renting, hoping something changes, or an asteroid strikes. Either one would be good, now.