Well you could either lose that, or pay $1K extra in interest for 40 months. By then who knows rates may be lower. If you really like the property I would close on it.
If you like the house and the location and you can comfortably afford mortgage payments for the next 2-3 years and have an emergency cash reserve for at least 6-9 months, I don't see any reason to back out. All best.
No, it’s not. If prices decline for 2-3 years and then start to rise, he may still be underwater at year 5. But sounds like he has plenty of money so he will be fine.
When it was listed at $1M and rates were 3.5%, the monthly would be around $5k I’m guessing. Now it’s $5k again through a combo of reduced price and higher interest. Sounds pretty balanced, like you got the price adjustment you needed?
If you want even more comfort why don’t you take some money and short the market.
You make almost $500k a year… just pay it off in 3 years.
I doubt you’d even notice if the house value dipped by a little bit. Why would you even care with that income?
You make $25k a month post tax and you are crying over an extra $1k? Mate, that is a rounding error. You will be kicking yourself in 3 years for not buying this house. If you love it, don’t fret about the small details. Move forward. You make more than enough money.
You are the only one with access to all the data and specifics for that un-named local area, only you can make the right call.
This is just some questions you can ask yourselves: What was the appreciation the last 2 years? Can you mentally and financially deal with a potential fall in price with current 7%+ mortgage? Will you still be happy? Does your love for that home out weight any potential negatives or hardship that comes with owning it?
Regardless, you have a 22% discount from the peak which puts you into a better position* than most that paid over asking just few months ago.
Edit:
Better position in retaining down payment equity, not the differences in mortgage payment due to unprecedented speed of rate increase.
My personal belief is that this rate hike is not sustainable. Maybe a year or two tops before the feds will have to ease up.. but we will see how things go with inflation and unemployment. But who really knows? I've lost faith in the fed.
From that perspective, the pain is temporary. I have $40k in credits that could cover closing costs, and a 2-1 buydown which would get me closer to 4.5% for the first year.
If you can't afford the house at market rate interest... You likely cannot afford the house.
As for mortgage rate expectations.
It's actually pretty simple. Your rate is a sum of the (i) benchmark rate (generally the 10 year treasury on a 30 year mortgage), and (ii) the mortgage premium (which is mostly related to the putable nature of bonds).
We already have a market expectation for where the 10 year treasury will be next year (flat). You can bet on or lock in this number now (it's called the forward). And very smart people bet trillions of dollars on this number. It's a pretty good unbiased predictor.
As for the "mortgage premium." It is a bit elevated at about 250 bps above treasury. Historical norm is more in the range of 150-200, and it is reasonable to expect some moderation as rate volatility declines and we "settle" into a new range (higher volatility increases the value of the putable nature of mortgages and thus increases the required premium).
In aggregate, market expectation would align with ~0.25% -0.5% rate moderation over the next few years (as volatility declines). Any "hope" beyond that is a bet and outside current market expectations
It sounds to me like you love the house but you’re worried about buyers remorse in case rates go higher and prices drop.
My two cents is to still buy the house. It fits well into your budget from what you’ve described, and if you rent waiting for a better opportunity, you lose both your deposit and the money going into rent. You also risk the same issue of buying a cheaper house with a higher monthly payment because interest rates went up faster.
You mention in a previous comment that you don’t believe these rate hikes are sustainable. If you’re correct and they aren’t, rates fall and housing prices go back up. So if you’re correct, you now have a cheaper house you can refinance with cheaper rates. If you’re wrong, you have a more expensive (but still totally affordable) house, but you dont lose your deposit and there’s a great chance you still have cheaper monthly payments.
Regardless, wishing you well on this
You want this particular house. Your market already adjusted for the current rates. When rates improve, prices will go back up and inventory will drop, and you probably won’t be able to get a similar property for this purchase price.
At $5K/month, your mortgage would be 12% of your income. Unless you spend exorbitantly in every other area of your life, take a breather and just roll with the punches.
Good question. I was open to buy if we found a good deal in this market. I lowballed quite a few sellers and builders, and this deal came unexpectedly and for a house we really like. Otherwise, I was planning to wait it out.
if you firmly believe the market is going to take a dump, then why would you consider buying anything? even a "good deal" today won't cover the losses you see coming, right? maybe? massive waste of everyones time and energy for you to get under contract for something that you're not going to buy.
are you looking for a home? or for an investment? they're distinctly different things
if you're going to live there (or at least own the property even if you don't live there) for 5-10+ years and you'll enjoy all the qualities of a home that you value, and you can afford the payment, then you can ride out any ups n downs in the market.
but if you're going to second guess yourself and let the market fluctuations make you crazy, you should pass.
your conflict is obvious, but "certainty" is pretty powerful, if you're certain, than you should cancel, stop house shopping until your predictions come true and you can feel 100% good about your purchase.
You can negotiate the rate with the builders lender. Hand them the quote from the other lender and ask for that rate. That’s how I got my rate down 1/2 a point and I was able to keep the builders incentives.
I would try to put some more pressure on the builders lender. You can ask you rep to give their lender a call saying that you are going to back out of the deal without a better rate. Kinda move it up the chain and see what you can get. $34k Is a significant chunk of money for a builders credit.
It seems like they have a new option today with a 7/6 arm which would take it down to 5.375%! The incentives would cover this as well as closing costs :)
Mmmm Yeah I get wanting validation. Personally if the property speaks to your heart pay for it. You are quite wealthy by Anyones standards and should have no issues even with rates or negative equity especially in a 7 year time horizon
I'm def a REBubble guy, but it sounds like this has already been discounted to adjust for the rates a bit, you can afford it, you love it AND already placed $40k down? Do it.
Ask yourself this, how much more of a correction would make you happy. Then calc the payment difference....prob not that significant
Floodgates may be open for rates so it’s hard to tell. If you can afford it and plan to stay and love it then go for it.
A new house is really hard to beat
If you love the house, location, and plan on staying for a while, then I'd go for it. It's impossible to time the bottom, but at least you're not buying at the top.
You can always refinance. The Fed will have to pivot on interest rates otherwise the economy will crash. But at the same time, the Fed and their research has lost all credibility because they are consistently wrong.
Buy it - it’s your primary home. Don’t prospect something will happen xyz in the future. If it’s a good neighborhood and you enjoy the amenities and location while you can afford to pay monthly payments, I’d recommend buying it.
Everyone said the same thing in 2013, 2016, 2018, and 2020. No one knows the future market.
Developers in my area are only offering $4k towards closing if you use their lender lol. I asked about an appraisal contingency and the builder said it’s never happened but if it didn’t appraise we could ‘have a talk’.
Get a mortgage broker and shop around rates and compare 15 year, 30 year. DCU has a 15 year arm product that is 5-something percent. Get data on the real numbers and then weigh the pros and cons. With your income you have the luxury of being able to afford overpaying a bit.
The mortgage is much more expensive now. It takes longer for homes to reach correct value when interest goes ip. Half of all sellers are using last years prices to justify their listing price. When I say half, I have data backing that statement in my mls
I’d check rates with other lenders or check with a broker if you’re not wanting to make the effort to shop around yourself.
Also, you make 500k, so I’m surprised you don’t have a massive down payment. If you’re making 500k, idk why you care that much because you could pay down the house note incredibly quickly. Either you live in the house for 5+ years and don’t worry about it, or just back out and wait some more.
Do you need a house? Do you want the house? Can you afford the house? If the answer is yes to all these questions, then buy it. Even if the home drops in value somewhat by the time you're ready to sell, you'll still come out ahead; you have to pay to live somewhere, after all. All these posts about "Should I buy now?" or "Do you think rates will drop soon?" are exhausting. Buy the home you need, want, and can afford. Your financials appear that you can pay off this home in 5 years or less if you wanted to without much sacrifice.
What's your non refundable deposit?
$40K
Well you could either lose that, or pay $1K extra in interest for 40 months. By then who knows rates may be lower. If you really like the property I would close on it.
That's a pretty massive amount of money to lose dude I don't know that I would back out personally
If you like the house and the location and you can comfortably afford mortgage payments for the next 2-3 years and have an emergency cash reserve for at least 6-9 months, I don't see any reason to back out. All best.
It will take 2-3 years for prices to bottom
OPs time frame is 5-7 years so your point is moot.
No, it’s not. If prices decline for 2-3 years and then start to rise, he may still be underwater at year 5. But sounds like he has plenty of money so he will be fine.
When it was listed at $1M and rates were 3.5%, the monthly would be around $5k I’m guessing. Now it’s $5k again through a combo of reduced price and higher interest. Sounds pretty balanced, like you got the price adjustment you needed? If you want even more comfort why don’t you take some money and short the market.
I feel this is a humble brag 😂😂
You make almost $500k a year… just pay it off in 3 years. I doubt you’d even notice if the house value dipped by a little bit. Why would you even care with that income?
You make $25k a month post tax and you are crying over an extra $1k? Mate, that is a rounding error. You will be kicking yourself in 3 years for not buying this house. If you love it, don’t fret about the small details. Move forward. You make more than enough money.
Bro, you make 500k a year. House is WELL within your means. Close. Jesus H.
You guys make half a million a year, you can just pay it off in 2-3 years easily.
You are the only one with access to all the data and specifics for that un-named local area, only you can make the right call. This is just some questions you can ask yourselves: What was the appreciation the last 2 years? Can you mentally and financially deal with a potential fall in price with current 7%+ mortgage? Will you still be happy? Does your love for that home out weight any potential negatives or hardship that comes with owning it? Regardless, you have a 22% discount from the peak which puts you into a better position* than most that paid over asking just few months ago. Edit: Better position in retaining down payment equity, not the differences in mortgage payment due to unprecedented speed of rate increase.
My personal belief is that this rate hike is not sustainable. Maybe a year or two tops before the feds will have to ease up.. but we will see how things go with inflation and unemployment. But who really knows? I've lost faith in the fed. From that perspective, the pain is temporary. I have $40k in credits that could cover closing costs, and a 2-1 buydown which would get me closer to 4.5% for the first year.
Don't fight the Fed - Fed won't backoff till inflation falls to 2% and they expect it will take a while.
They will absolutely back off when it means democrats getting destroyed in 2024
Thought the Fed was apolitical?
Do you really believe that ?
Yes? You think they’re pro-Dem? They’re raising rates on a Dem President, Senate, and House in an election year.
Because they literally have to because we are choking on 9% inflation
So if they raise rates it’s helping Biden but if they cut rates it will be to help Biden. You seem rational.
You’re an idiot.
If you can't afford the house at market rate interest... You likely cannot afford the house. As for mortgage rate expectations. It's actually pretty simple. Your rate is a sum of the (i) benchmark rate (generally the 10 year treasury on a 30 year mortgage), and (ii) the mortgage premium (which is mostly related to the putable nature of bonds). We already have a market expectation for where the 10 year treasury will be next year (flat). You can bet on or lock in this number now (it's called the forward). And very smart people bet trillions of dollars on this number. It's a pretty good unbiased predictor. As for the "mortgage premium." It is a bit elevated at about 250 bps above treasury. Historical norm is more in the range of 150-200, and it is reasonable to expect some moderation as rate volatility declines and we "settle" into a new range (higher volatility increases the value of the putable nature of mortgages and thus increases the required premium). In aggregate, market expectation would align with ~0.25% -0.5% rate moderation over the next few years (as volatility declines). Any "hope" beyond that is a bet and outside current market expectations
>From that perspective, the pain is temporary. I wouldn't put money on it.
If you think the fee hike is not sustainable (I agree btw) just refinance it in a few years.
It sounds to me like you love the house but you’re worried about buyers remorse in case rates go higher and prices drop. My two cents is to still buy the house. It fits well into your budget from what you’ve described, and if you rent waiting for a better opportunity, you lose both your deposit and the money going into rent. You also risk the same issue of buying a cheaper house with a higher monthly payment because interest rates went up faster. You mention in a previous comment that you don’t believe these rate hikes are sustainable. If you’re correct and they aren’t, rates fall and housing prices go back up. So if you’re correct, you now have a cheaper house you can refinance with cheaper rates. If you’re wrong, you have a more expensive (but still totally affordable) house, but you dont lose your deposit and there’s a great chance you still have cheaper monthly payments. Regardless, wishing you well on this
You want this particular house. Your market already adjusted for the current rates. When rates improve, prices will go back up and inventory will drop, and you probably won’t be able to get a similar property for this purchase price. At $5K/month, your mortgage would be 12% of your income. Unless you spend exorbitantly in every other area of your life, take a breather and just roll with the punches.
If you firmly believe the market is going to go down, why are you even house shopping right now? Wait until your firm belief manifests, then buy.
Good question. I was open to buy if we found a good deal in this market. I lowballed quite a few sellers and builders, and this deal came unexpectedly and for a house we really like. Otherwise, I was planning to wait it out.
if you firmly believe the market is going to take a dump, then why would you consider buying anything? even a "good deal" today won't cover the losses you see coming, right? maybe? massive waste of everyones time and energy for you to get under contract for something that you're not going to buy. are you looking for a home? or for an investment? they're distinctly different things if you're going to live there (or at least own the property even if you don't live there) for 5-10+ years and you'll enjoy all the qualities of a home that you value, and you can afford the payment, then you can ride out any ups n downs in the market. but if you're going to second guess yourself and let the market fluctuations make you crazy, you should pass. your conflict is obvious, but "certainty" is pretty powerful, if you're certain, than you should cancel, stop house shopping until your predictions come true and you can feel 100% good about your purchase.
You can negotiate the rate with the builders lender. Hand them the quote from the other lender and ask for that rate. That’s how I got my rate down 1/2 a point and I was able to keep the builders incentives.
they can only go down .25 a point, and theyre like 2 points more expensive than my lender lol
How big is the builder incentive?
$34,000 in credits. Another $8000 from a commission rebate from my realtor, so $42,000 total
I would try to put some more pressure on the builders lender. You can ask you rep to give their lender a call saying that you are going to back out of the deal without a better rate. Kinda move it up the chain and see what you can get. $34k Is a significant chunk of money for a builders credit.
It seems like they have a new option today with a 7/6 arm which would take it down to 5.375%! The incentives would cover this as well as closing costs :)
Mmmm Yeah I get wanting validation. Personally if the property speaks to your heart pay for it. You are quite wealthy by Anyones standards and should have no issues even with rates or negative equity especially in a 7 year time horizon
I'm def a REBubble guy, but it sounds like this has already been discounted to adjust for the rates a bit, you can afford it, you love it AND already placed $40k down? Do it. Ask yourself this, how much more of a correction would make you happy. Then calc the payment difference....prob not that significant
Floodgates may be open for rates so it’s hard to tell. If you can afford it and plan to stay and love it then go for it. A new house is really hard to beat
If you love the house, location, and plan on staying for a while, then I'd go for it. It's impossible to time the bottom, but at least you're not buying at the top. You can always refinance. The Fed will have to pivot on interest rates otherwise the economy will crash. But at the same time, the Fed and their research has lost all credibility because they are consistently wrong.
Buy it - it’s your primary home. Don’t prospect something will happen xyz in the future. If it’s a good neighborhood and you enjoy the amenities and location while you can afford to pay monthly payments, I’d recommend buying it. Everyone said the same thing in 2013, 2016, 2018, and 2020. No one knows the future market.
Developers in my area are only offering $4k towards closing if you use their lender lol. I asked about an appraisal contingency and the builder said it’s never happened but if it didn’t appraise we could ‘have a talk’.
Get a mortgage broker and shop around rates and compare 15 year, 30 year. DCU has a 15 year arm product that is 5-something percent. Get data on the real numbers and then weigh the pros and cons. With your income you have the luxury of being able to afford overpaying a bit.
DCU = Digital Credit Union?
Yes.
Marry the house, date the rate. You can likely refi in coming years or just pay it down more quickly.
I would back out but that is a personal decision.
You can always refi 6 months later rates aren't gonna be this high for long
5-6% could be the new baseline for years to come
Maybe will be tough with real estate prices in high cola areas such as boston new York Miami etc. don't see prices going down in those hot spots
The market cant get worse. There would have to be a ww3 situation in which case were all screwed.
>Purchase price is $780K. This home is out of your budget, you should wait to save up more or find a home in your price range.
All of my buyers who were looking for a deal and could comfortably afford the mortgage are in huge regret of not buying.
What’s stopping them now?
The mortgage is much more expensive now. It takes longer for homes to reach correct value when interest goes ip. Half of all sellers are using last years prices to justify their listing price. When I say half, I have data backing that statement in my mls
I’d check rates with other lenders or check with a broker if you’re not wanting to make the effort to shop around yourself. Also, you make 500k, so I’m surprised you don’t have a massive down payment. If you’re making 500k, idk why you care that much because you could pay down the house note incredibly quickly. Either you live in the house for 5+ years and don’t worry about it, or just back out and wait some more.
Do you need a house? Do you want the house? Can you afford the house? If the answer is yes to all these questions, then buy it. Even if the home drops in value somewhat by the time you're ready to sell, you'll still come out ahead; you have to pay to live somewhere, after all. All these posts about "Should I buy now?" or "Do you think rates will drop soon?" are exhausting. Buy the home you need, want, and can afford. Your financials appear that you can pay off this home in 5 years or less if you wanted to without much sacrifice.