Feb262013
Future housing markets will be very interest rate sensitive
Economists who focus on larger trends, the so-called macro-economists, have rightly pointed out that housing markets in the past haven’t been very sensitive to fluctuations in interest rates. For example, during the 1970s, interest rates rose significantly, which should have caused house prices to drop, but instead California inflated a housing bubble. During the crash from the bubble in the 1990s, interest rates declined, and so did prices. The same has been true of the Great Housing Bubble.
With these significant periods when mortgage interest rates did not impact house prices the way the math would suggest, why would the housing market be more sensitive going forward? The new qualified mortgage rules take away the mechanisms lenders used to inflate prior bubbles. To understand how and why, we need to take a step back and evaluate how housing markets really work and what happened during previous periods.
What really determines market house prices?
Financing terms largely determine the equilibrium price for housing. Short term fluctuations in supply and demand cause gyrations, but over time the amount potential buyers can borrow will determine what houses cost. For example, the reason prices are going straight up right now is because potential buyers can borrow large sums due to very low interest rates. The activities of these buyers coupled with a depleted MLS inventory is causing prices to rise. Prices will continue to rise until potential buyers reach the limits of their borrowing power or new supply comes to the market. Banks are intent on the former outcome.
House prices rely on four things:
- Interest Rates
- Borrower Income
- Allowable-Debt-to-Income Ratios
- Amortization
Interest Rates
The impact of interest rates is obvious. The lower they are, the more someone can borrow, and the higher they are, the less someone can borrow. Mortgage balances are inversely related to mortgage interest rates.
One of the bad ideas utilized by lenders during the housing bubble was to provide a temporary “teaser” rate that was much lower than the market. This lower rate allowed them to underwrite much larger loans (with big fees), and everyone’s hope was that they could refinance before the rate reset higher and the payment recast to something the borrower could not afford. It didn’t work out. Fortunately, qualifying based on teaser rates was banned by the new regulations.
Debt-to-Income ratios
Borrower income and the allowable debt-to-income ratios work together to determine how much payment a borrower can afford. This assumes the borrower actually makes the amount stated on the loan application, and during the last bubble, this was often not verified. In order to calculate the maximum loan value someone could borrow, the lender needs an interest rate, borrower income, and the maximum DTI the bank will allow. For example, a borrower making $100,000 qualifying at a 31% allowable DTI can afford a $31,000 annual housing bill (includes interest, taxes, insurance, HOAs and other costs). That translates to a $2,583 monthly payment.
This assumes borrowers will max out their loan balances, and that isn’t always the case. Many areas of the country, but most notably in the Midwest, borrowers simply aren’t willing to leverage themselves to the max, and they accept lesser housing quality (and lower prices) as a consequence.
The new financial regulations capped back-end DTI ratios at 43% for all residential loans and banned low-doc and no-doc mortgages.
Amortization
The type of loan program matters. Amortizing loans make for the smallest loan balances because a portion of the payment goes toward paying down principal. If the loan does not amortize, the entire payment can go toward interest, and the loan balance can be much larger. At it’s ultimate extreme, if the loan negatively amortizes (the balance gets bigger rather than smaller), and lenders use teaser rates, truly prodigious loan balances can be underwritten on very small payments. Buyers on the margins using these methods inflated the Great Housing Bubble.
Many of my cartoons are just for fun, but there is often a serious point behind them. The cartoon about housing market drag racing below illustrates the credit cycle that inflates housing bubbles.
In a “normal” market, prices are determined by the interaction of interest rates, borrower income, and debt-to-income ratios applied to a 30-year fixed-rate amortizing mortgage. In normal markets, the friction that limits the number of transactions is generally affordability. Needing to borrow more money to get their dream homes, desperate borrowers sometimes respond by financing with adjustable-rate mortgages. The first sign of an overheating market is an increase in ARMs.
ARMs generally carry a lower initial interest rate than fixed-rate mortgages because the lender is passing the interest rate risk to the borrower. Many people over the last 30 years of declining interest rates have come to believe ARMs are a safe loan product that can save them money and allow them to buy a bigger house. In the rising interest rate environment likely to be with us for the next 30 years, people who finance with ARMs will get burned.
The same forces that compels people to use ARMs further compels them to abandon amortization altogether. There is a slow but inexorable migration from amortizing ARMs to interest-only ARMs and finally to negatively amortizing loans. Unfortunately, interest-only and negatively amortizing loans are Ponzi loans, and once they proliferate, its like an iron core of a large star leading to a supernova. The market implodes.
Fortunately, both interest-only and negatively amortizing loans were banned by the new regulations.
What caused the 1970s bubble?
During the 1970s, California inflated its first housing bubble. At the beginning of the decade, house prices were just as affordable in California as they were anywhere else — a truth forgotten by people who believe house prices have always been too high here. A growing number of development restrictions limited the ability of builders to respond to higher prices, the result was a sudden increase in prices that sparked a self-fueling rally that became a full-blown mania. As with any housing bubble, it wasn’t just the desire of homebuyers that pushed prices higher, their desires had to be enabled by foolish lenders.
With inflation running rampant in the 1970s, wages were also going up as the federal reserve kept interest rates too low for too long. Lenders realized that borrowers with rapidly inflating wages could handle larger debt-service burdens than during a period of tepid wage growth. For example, a 50% DTI becomes a 45% DTI if wages go up 10%. If they go up 10% every year for several years, even the most onerous DTIs become manageable as wage inflation bails the borrower out. Lenders responded to this reality of persistent inflation and permitted DTIs upward of 60% in the late 1970s. Of course, their response to inflation actually created more. Finally, it got so crazy that the US dollar collapsed, and Paul Volcker had to raise interest rates to 20% to save the dollar and get us out of the downward spiral. (Our distant future?)
What you need to take away from this history lesson is that the reason prices rose during a period of rising interest rates is because lenders allowed DTIs to grow even faster. If DTIs hadn’t gotten out of control, the housing bubble of the 1970s would not have occurred. With the new cap on overall DTIs at 43%, lenders won’t be able to inflate a bubble this way again.
Why did prices fall in a declining interest rate environment in the 90s and the 00s?
The last two housing bubbles were caused by the progression of riskier loans I outlined above. In each case, affordability products flourished, prices were driven up well beyond reasonable measures of affordability, and these toxic loans destabilized the market leading to a crash. Since the peak of the bubble was a point of disconnect between what people could afford and what prices actually were, a decline in prices was necessary for the market to rebalanced itself. In response, the federal reserve lowered interest rates to raise the point of market equilibrium so its member banks could recover their capital and minimize losses. In the 1990s, interest rates dropped nearly 30% while in the 00s, interest rates were cut in half.
(on a logarithmic scale, the bubbles are nearly proportional)
Why will the market be interest rate sensitive going forward?
When you look at the mechanisms used to inflate previous bubbles — using teaser rates, allowing excessive DTIs, and abandoning amortization — these were banned by the new residential mortgage rules. Lenders won’t be able to use these tools to soften the impact of interest rate fluctuations or provide “affordability” when the market reaches its friction point. This will be the cause of much weeping and gnashing of teeth in the real estate community. Most mortgage brokers and real estate agents are accustomed to a constant influx of affordability products to help save their deals. Since most of the tools they used in the past are now banned, everyone who depends on more transactions will constantly complain about tight lending standards and these “onerous” rules. The NAr will lobby incessantly to relax these new regulations. Fortunately, since these rules are established by a bureaucracy somewhat insulated from political pressure, the NAr’s shrill cries will largely be ignored.
Without affordability products, the four variables I described above will work their magic in determining market prices. And since interest rates are by far the largest and most volatile component of the four, the housing market will be very interest rate sensitive going forward.
“Finally, it got so crazy that the US dollar collapsed, and Paul Volcker had to raise interest rates to 20% to save the dollar and get us out of the downward spiral. (Our distant future?)”
It’s long term suppression of home values and the trade up market for years. People will be greatly disappointed when they see no appreciation in their 2012 purchase for 10 years. Rates will have to go up.
Disappointed indeed, and even more-so once they fully comprehend that their home values and coveted equity that may build-up over time will be fully exposed to the mercy of market sentiment.
Beyond issues of sentiment, people should be concerned about the impact of rising interest rates.
“…It’s long term suppression of home values and the trade up market for years…”
Indeed. It’s a currently a no-win situation.
If interest rates increase, then highly leverage assets (such as Real Estate) will decline.
If the Fed holds interest rates below market then we will have inflation. (Maybe even uncontrollable hyper-inflation). The problem is that Real Estate as an asset class has a very high carry cost (i.e. Taxes, insurance, maintenance, etc.)
Those carry costs will rise in tandem with inflation. At what point do carry costs become an unmanageable burden?
To me, purchasing residential Real Estate now is not unlike buying a truck load of over priced fly-paper. Either you live in a location with an awful lot of flies or you are going to end up with a sticky mess. Not a pleasant outcome irregardless of which way the wind blows.
LPS: December Prices Climb 5.8% from Year Ago
Home prices in December were mostly flat from the month before, according to the latest Home Price Index (HPI) released by Lender Processing Services (LPS).
LPS’ index shows prices climbed 0.1 percent in December, staying at a rounded-off $207,000. November’s HPI was also reported at $207,000.
While December’s index was little changed from the prior month, it was up 5.8 percent from $196,000 in December 2011. January 2012’s index was also an estimated $196,000, meaning the year-to-date change throughout 2012 was also 5.8 percent.
According to LPS, prices are still down 21.9 percent from their peak of $265,000 in July 2006.
Nevada saw the largest upward movement in prices in December; the Silver State reported a 1.3 percent gain month-over-month.
What was the quote. The Bears will be right but housing prices will still go up. And Bernanke just pledged his commitment to QE.
The fed needs to convince people rates will stay low forever, but there is still a great deal of uncertainty. Bernanke might be replaced with someone who is more concerned about inflation, and with dissension at the policy making level, the fed could easily change its mind.
You have a point. Never bet on the weather or the government. It’s funny your quote came true.
Looking at how the administration is dealing with DeMacro and his possible replacement, I think we will get a Bernanke clone. But I’m really hope not.
Bernanke clone indeed. The fed and gov cant let interest rates rise. When the market finally forces them to, it will be too little, too late.
Single-Family Renters Have Similar Characteristics to Owners
The fast-growing population of single-family renters is more likely to dwell in their home for longer periods of time compared to multifamily occupants, which suggests demand for single-family rentals offers greater stability than the multifamily market, according to a new survey from Premier Property Management Group.
In a survey of renters conducted by ORC International, 26 percent of single-family renters said they were more likely to stay in their current home five or more years compared to 22 percent of apartment dwellers. …
Single-family renters were also characterized as earning more income, but are more likely to have a bigger household.
The survey found the median income for single-family renters is $75,000-$100,000 compared to $50,000-$75,000 for multifamily tenants. When it comes to household size, 65 percent of single-family renters have three or more members compared to 32 percent for apartment households.
Single-family renters also placed greater importance on schools and parks in the area, with 84 percent and 71 percent, respectively, stating those factors are important. Among apartment renters, 71 percent said good schools were important and 61 percent said parks were important.
Single family rentals can be found in virtually every community today and more and more families are choosing single family rentals either as a temporary stop on the road to becoming homeowners or as a permanent solution to their housing needs,” he said.
The political left is starting to wake up to reality.
What Mortgage Relief?
A year ago, when the nation’s biggest banks settled with state and federal officials over claims of foreclosure abuses, the public was led to believe that the deal would allow millions of hard-pressed borrowers to escape the threat of foreclosure. It still hasn’t happened.
A third progress report was issued last Thursday by the monitor of the settlement, which, among its terms, required the banks to grant $25 billion worth of mortgage relief, much of it by reducing the principal balances on troubled loans. The report showed that through the end of 2012, 71,000 borrowers had their primary mortgages modified, versus 170,000 who received help on their second mortgages, including home equity loans.
Both types of assistance can help struggling borrowers — to a point. But as Jessica Silver-Greenberg reported in The Times, housing advocates say that in many cases, banks are not helping with troubled primary mortgages, which often leaves the homeowners facing foreclosure. Instead, the banks are forgiving the second mortgages, which allows them to say that they have met their obligations under the settlement.
In other words, banks are structuring the debt relief in ways designed to tidy up their balance sheets, rather than to keep as many people from losing their homes as possible. Banks often do not own the primary mortgages; they only service them for investors who own them. But they do often hold second liens on their books. In general, the holder of a second lien gets nothing when a home is worth less than the mortgage balance or is sold in foreclosure. But by forgiving the second liens, the bank at least gets credit for “helping” the borrower.
In the report, the settlement monitor, Joseph Smith, said the banks still had much work to do on the borrowers’ behalf. We’ll believe it when we see it.
And they won’t see it because it isn’t going to happen.
Homebuilders Lobby for Rubber-Stamp Appraisals
As regulatory institutions begin to provide some clarity to the mortgage market, the National Association of Home Builders insists the market still lacks confidence and is badly in need of a sound and functional appraisal system.
“At the center of this ongoing crisis in confidence is an appraisal system that remains dysfunctional and is a major impediment to reestablishing a vibrant and stable housing finance framework,” NAHB stated in a white paper released last week, titled A Comprehensive Blueprint for Residential Appraisal Reform.
Appraisal reform “must be a principal element of efforts to rebuild the nation’s housing finance system,” NAHB stated.
Regulatory reform is a key issue in constructing a reliable appraisal system, according to NAHB. Uniformity and
streamlining are two major themes in NAHB’s proposed solutions.
New regulation should establish a set of best practices and uniform standards for the industry, set in place standard licensing and certification requirements, and create a group to oversee data and technology standards for the industry, according to NAHB.
Currently, appraisal oversight is generally left to the states. While NAHB suggests “states should retain primary responsibility for certifying and overseeing appraisers and the quality of their work,” the association suggests federal regulatory bodies “should dictate that disciplinary actions are meted out in a consistent manner.”
In order to ensure transparency and consistency in the industry, NAHB suggests creating a “real estate data superhighway,” which would include a mandatory registry of all “real property” as well as data pertaining to mortgage-backed securities.
As another step in ensuring transparency, NAHB suggests the creation of a website that would explain the appraisal process and inform people about how to decipher appraisal reports.
Additionally, the industry should create a new appraisal report format that is “simpler and easier to read,” according to NAHB.
Lastly, the NAHB stated the importance of setting up a standard appeals process for inaccurate appraisals.
Yes, by all means shoot the messenger – or force him or her to come up with the “right” number. The appraisal business is in trouble because of the HVCC that was negotiated by now NY Governor Andrew Cuomo. Appraisal Management firms pick the appraiser,s on the basis of fees. Since the AMF is getting a cut of the fee, the appraiser’s share has declined. How would you like it if someone cut your pay 30-50%? Some appraisers just won’t work for those fees…the ones that will are often rookies with little knowledge of the specific market in which a property is located.
I’ve never understood why appraisers get blamed for the bad times but get no credit for the good times. When times are good appraisers should get the credit for the market condition…but we only get blamed when times are bad.
Appraisers are in the unenviable position of saying no. When they hit the number, they approve an existing transaction, nothing is added. But when they don’t hit the number, they say no, so they subtract from the situation. So if they do what everyone wants, nobody notices, but if they don’t everyone blames them.
Pooof!
JPMorgan Mortgage, Community Units to Lose Up to 19,000 Jobs
* will cut 13,000 to 15,000 jobs in its mortgage unit and 3,000 to 4,000 in community banking excluding home lending through 2014, the company said today.
http://www.bloomberg.com/news/2013-02-26/jpmorgan-expects-headcount-to-fall-by-about-4-000-this-year-1-.html
The financial sector has been able to delay its necessary downsizing for quite a while. There should be more layoffs of this kind, particularly in mortgage if rates go up and the refi business shuts down.
It might be more accurate to say that QM and other CFPB rules have “effectively banned” all of the dangerous products used to inflate the last bubble. It remains to be seen if anyone will make non-QM mortgages. It’s similar to “High Cost” mortgages. They’re not banned, they just require more disclosures and come with more risk. The big banks don’t make them, but smaller niche lenders were making them pre-2008.
Some lenders may test the waters, but without the safe harbor protections, I doubt any of the big players will step up.
In California, Don’t Bash the ‘Burbs
by Joel Kotkin 02/25/2013
For the past century, California, particularly Southern California, nurtured and invented the suburban dream. The sun-drenched single-family house, often with a pool, on a tree-lined street was an image lovingly projected by television and the movies. Places like the San Fernando Valley – actual home to the “Brady Bunch” and scores of other TV family sitcoms – became, in author Kevin Roderick’s phrase, “America’s suburb.”
This dream, even a modernized, multicultural version of it, now is passé to California’s governing class. Even in his first administration, 1975-83, Gov. Jerry Brown disdained suburbs, promoting a city-first, pro-density policy. His feelings hardened during eight years (1999-2007) as mayor of Oakland, a city that, since he left, has fallen on hard times, although it has been treated with some love recently in the blue media.
As state attorney general (2007-11) Brown took advantage of the state’s 2006 climate change legislation to move against suburban growth everywhere from Pleasanton to San Bernardino. Now back as governor, he can give full rein to his determination to limit access to the old California dream, curbing suburbia and forcing more of us and, even more so our successors, into small apartments nearby bus and rail stops. His successor as attorney general, former San Francisco D.A. Kamala Harris, is, if anything, more theologically committed to curbing suburban growth…..
….Much the same can be said of Asian immigrants, who are now driving much of the new-home sales, particularly in desirable places like Orange County or Silicon Valley. Nationwide, over the past decade, the Asian population in suburbs grew by almost 2.8 million, or 53 percent, while the Asian population of core cities grew 770,000, 28 percent. In greater Los Angeles, there are now three times as many Asian suburbanites as their inner-city counterparts.
If California is not willing to meet the needs of its own emerging middle class, there’s no doubt that other states, from Arizona and Texas to Tennessee – although not as fundamentally alluring – will be, and are already, more than happy to oblige.
Rather than seeking to destroy our suburbs, California leaders should expend their energy figuring out how to make them better. Rather than some retro-1900s urbanist vision, they need to embrace the multipolarity of our urban agglomerations. They could look to preserve open space nearby, when possible, or cultivate natural areas, parks, walking and biking trails that would appeal to families as well as to singles…….
It’s very difficult to contain suburban sprawl. People would rather live in a house in the suburbs than a condo downtown. It’s human nature. Politicians can fight it all they want, but the economics will continue to favor suburban development because that’s how people want to live.
This post makes a good point. Interest rates are the new affordability product. As long as the Fed is in control, don’t expect any major price disruptions.
In the short term, you’re correct, but just as the tax-credit stimulus was removed in 2010, the interest rate stimulus will eventually be removed as well. We will need to be weaned off low rates because if they go up too far too fast, that market will seize up, and it might come crashing down again.
Affordability product? Ha! The product is financial repression, but lemmings won’t buy houses if presented in that manner. 😉
As far as expectations go, the fed’s models are based-on case studies and is administered by a cadre of wonks armed with reactive inputs, so loss of control is a given.
Enjoy!
Jim Rickards poses the question to Ivy League professors and 5 year olds…
Which One of These is Not Like the Others?
http://jimrickards.blogspot.com/2013/02/which-one-of-these-is-not-like-others.html
That about sums up everything.
5 year olds have yet to be counter-educated.
Yes sir, or counter-medicated. Sad really.
Has anyone thought about how the still-alive proposal to transform the MID into a non-refundable tax credit might work? Simpson-Bowles proposes a 12% non-refundable tax credit on $500k of owner-occupied mortgage indebtedness while another proposal floating around current negotiations is a 15% non-refundable tax credit on $300k of owner-occupied mortgage indebtedness.
e.g. If your mortgage debt exceeded $300k for the entire year, do you just take $300k multiplied by your current mortgage rate, and then multiply that amount by 15%? What if your rate changed multiple times in that year? What if your mortgage debt started the year above $300k and ended below it? This sounds like a complicated calculation servicers would have to provide every borrower who started the year with owner-occupied mortgage debt exceeding $300k.
Am I missing something?
The tax code is pretty complicated already, but accountants find a way to figure it out. I imagine servicers would be required to develop computer algorithms to calculate the appropriate credit. These would be circulated on some disclosure form.
A tax credit with a low cap is a far better way to administer the subsidy. It benefits low and middle income borrowers the most, which is ostensibly who these subsidies are supposed to help. Implementing the change would stimulate first-time buyers at the expense of move-up buyers in places like Orange County.
Just eliminate it altogether. There’s no need to come-up with some complicated calculation because it will never be fair to all taxpayers.
I’d rather see it eliminated too, but the government is obsessed with encouraging home ownership. Plus, despite its low utilization, the tax credit is popular with voters.
Stimulate first time buyers with subidy. That’s a great idea. Not.
What is the chance of this getting past? A snow ball chance?
Brown’s school funding plan draws mixed reactions
By Teresa Watanabe, Los Angeles Times
In the Anaheim City School District, where most students are low-income and struggling to learn English, teachers need special training, extra tutoring time and lots of visual materials to help their pupils achieve at grade level.
In the well-heeled Palos Verdes Peninsula Unified School District, poverty and limited English are not widespread problems. But officials there say their student needs include more expensive Advanced Placement classes to challenge them with college-level material in high school
Who should get more state educational dollars? Last week, school districts got their first glimpse of how that question would be answered under Gov. Jerry Brown’s proposed new funding formula: Anaheim would receive an estimated $11,656 per student annually; Palos Verdes would get $8,429 by the time the plan is fully implemented in seven years.
And that disparity draws distinctly different reactions.
“It’s great news,” said Darren Dang, Anaheim’s assistant superintendent of administrative services. “Given our demographics, we’ll be getting much-needed resources for our students.”
But Lydia Cano, Palos Verdes’ deputy superintendent of business services, said she believed the new scheme would shortchange her students. Disadvantaged students already receive a bigger share of state and federal dollars, she said.
“It’s not fair,” she said. “It will make the divide even bigger.”
In the most significant change in four decades in how school dollars would be distributed, Brown is proposing to give all districts a base grant, then add an extra 35% of that for each student who is low-income, struggling with English or in foster care. If such students make up more than 50% of a district’s population, another 35% supplement would be given.
The formula is part of Brown’s proposed budget, which requires the Legislature’s approval.
Under the proposal, the state would do away with most so-called categorical funding — which was earmarked for such specific uses as textbooks, remediation and low-income student aid. Instead, the money would be given directly to districts with no strings attached, to promote Brown’s goal of greater local control.
The plan is aimed at reforming what most educators agree is an inequitable, burdensome and overly complex funding system. It is grounded in a 2008 report coauthored by state Board of Education President Michael Kirst that compiled research showing that parental income and English language ability are two critical factors in academic achievement.
Kirst argued that it was more important to help needy students gain grade-level skills than it is to provide college-level work for top-achieving high schoolers. “These are judgments about political priorities,” he said.
About 20 states currently distribute extra dollars to needier students, including Rhode Island and New York, according to Margaret Weston of the Public Policy Institute of California. Poor districts in California already receive about 20% more in state and federal dollars than do affluent ones, but Brown’s formula would increase that share, she said.
After four years of crippling budget cuts, the Los Angeles Unified School District is expected to receive an estimated boost of $820 more per student over the next two years under Brown’s proposal. By 2020, funding is expected to grow to $11,993 per student from $7,509 last year.
L.A. Supt. John Deasy hailed the governor’s proposal. “It’s morally the right thing to do and educationally the sound thing to do,” he said.
Race is a protected class, and I’d guess these disperate funding decisions disproportionately affect certain racial groups.
I would also guess they disproportionately favor Democratic voting districts.
“Under the proposal, the state would do away with most so-called categorical funding — which was earmarked for such specific uses as textbooks, remediation and low-income student aid. Instead, the money would be given directly to districts with no strings attached, to promote Brown’s goal of greater local control.”
The teacher’s unions are licking their chops at this.
The administrators will wind up making a bunch too. The bloated bureaucracies will get even more bloated.
MR,
You have first hand knowledge of people’s buying behavior. You see it everyday in your industry. One of the major factors why people purchase homes is the school district. I think they are going to flip out if they see their tax dollars leave the district they are live in to another school district. Liberal or Conservative homeowners paying property taxes usually don’t want to give away their tax money or not to utilize it for themselves.
Irvine 6th worse place to drive in the whole country
The Orange County metroplex has a low average driving speed which means lots of traffic. But that hasn’t hurt the growth in the number of attorneys who identify themselves as speeding/traffic lawyers. Good reason. The National Speed Trap Exchange identifies 66 speed traps in Irvine.
I don’t know about that one. I find traffic moves pretty well in Irvine. It’s when you leave Irvine that you generally hit a huge traffic jam.
I think they are basing it off the traffic tickets.
Is this what it all boils down to in SoCal?… Nobody should buy a house in SoCal unless they plan with very high certainty to live there for 20+ years. If you buy a house in a decent neighborhood, unless you’re wealthy or have a really high salary, you can forget about retirement savings, living credit card-free, etc. Interest rates may at some point go up, but it’s impossible to know when, and how fast. If you’re sitting on the sidelines, get comfortable, as it’s going to be for a very long time…
And even if you have that high income with two married professionals earning six-plus figures each, how long can you count on that? Assuming you’re in a high-demand area for the next 20+ years and therefore “safe,” do both spouses want to work hectic 10+ hour days just to have a nice house and be able to save?
Has the HOA fee gone down to $875 or they based on unit size at the NKT? On vacant units are the paying members making up the difference for the non-paying members?
How long can interest remain this low in light of inflation? I would consider the NKT except for the high HOA and possible liability for the non-paying unit.
Democrats seem to have more staying power for an economic plan — right or wrong plan. The game usually bust when just after the Republican takes office and leaves the little guy holding the bag.
All this guarantees is another 10-20 years of sub 4% interest rates.
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