I had two houses at that interest rate in the 2000’s. The wage to house price was still reasonable then. Made $40k, paid $88k for a 3/2 in middle class suburban Tampa. I’m making 30% more now but houses are 400% more.
We bought in 2020 and have a 2.875% rate on our mortgage. We only put 10% down and had PMI but the broker was all, “you can refinance to get rid of that”.
I asked him when in the world we’d ever be able to refinance at or below that rate? He had nothing to say to that.
While true, I would point out that the low mortgage rates that increased housing prices — low mortgage rates permit people to borrow more and tends to drive up prices — in the decade-and-a-half before 2022 was unusual for the US. Prior to about 2008, interest rates were at or higher than they are today.
Here’s a graph of the 30-year fixed-rate mortgage rate:
Here’s the Case-Shiller Home Price Index. This measures same-home prices — that it, it attempts to factor out changes in types of home being built, so new homes being larger won’t drive it up.
Between about 2011 and 2022, the real price of a given house rose rapidly in a low mortgage rate environment. In 2022, mortgage rates returned to something that’s more historically-normal.
I expect that to sell a house in this environment, a homeowner will probably have to cut what they’re asking.
A 7% interest rate doesn’t help
I had two houses at that interest rate in the 2000’s. The wage to house price was still reasonable then. Made $40k, paid $88k for a 3/2 in middle class suburban Tampa. I’m making 30% more now but houses are 400% more.
Not on top of the wild overvaluation.
We bought in 2020 and have a 2.875% rate on our mortgage. We only put 10% down and had PMI but the broker was all, “you can refinance to get rid of that”.
I asked him when in the world we’d ever be able to refinance at or below that rate? He had nothing to say to that.
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You are incorrect.
As the house value increases with the market you can refinance to a new lender with greater equity eliminating the need for PMI.
You can wait for PMI to cancel automatically, request early cancellation, get a reappraisal or refinance the mortgage to get rid of it.
While true, I would point out that the low mortgage rates that increased housing prices — low mortgage rates permit people to borrow more and tends to drive up prices — in the decade-and-a-half before 2022 was unusual for the US. Prior to about 2008, interest rates were at or higher than they are today.
Here’s a graph of the 30-year fixed-rate mortgage rate:
https://fred.stlouisfed.org/series/MORTGAGE30US
Here’s the Case-Shiller Home Price Index. This measures same-home prices — that it, it attempts to factor out changes in types of home being built, so new homes being larger won’t drive it up.
https://fred.stlouisfed.org/series/CSUSHPISA
It’s not adjusted for inflation, though.
Here’s an inflation-adjusted graph:
https://www.longtermtrends.net/home-price-vs-inflation/
Between about 2011 and 2022, the real price of a given house rose rapidly in a low mortgage rate environment. In 2022, mortgage rates returned to something that’s more historically-normal.
I expect that to sell a house in this environment, a homeowner will probably have to cut what they’re asking.
Now combine them both and do average monthly payment.
Even with higher prices, lower interest rates mean lower monthly costs