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Answers (9)
- Pasadenan
- Contributions:21466
So, if less than 2% are "affected", it appears that no "buyers" are "lost"; they just make some minor adjustments.
Besides, with all the work congress and the FED has been doing to offer artificially low interest rates, it does not seem to produce any new buyers... it only causes some of those that were buying anyway to buy earlier, meaning even fewer future sales.
As to whether it will lower Richard's commission income? That is a different issue, and really not of concern to anyone.
Besides, with all the work congress and the FED has been doing to offer artificially low interest rates, it does not seem to produce any new buyers... it only causes some of those that were buying anyway to buy earlier, meaning even fewer future sales.
As to whether it will lower Richard's commission income? That is a different issue, and really not of concern to anyone.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
There is not a 1 point difference even if you went to a $4,000,000 loan amount.
For folks that were at $729,750 and now $625,500 they still may be able to secure 90% financing.
Nationwide all the major sources on real estate and mortgages believe this will affect less than 2% of folks that wish to purchase or refinance.
Happy funding, Rudi
For folks that were at $729,750 and now $625,500 they still may be able to secure 90% financing.
Nationwide all the major sources on real estate and mortgages believe this will affect less than 2% of folks that wish to purchase or refinance.
Happy funding, Rudi
- Dan, "the_country_hick"
- Contributions:4700
Richard, you just answered your own question.
"Not only is there a major cash out of pocket issue, but almost a 1 percent difference in the jumbo interest rate which needs to be accounted for as well?"
Each additional 1% interest rate will cause around a 11% decrease in price to meet the buying power available to buyers (barring massive wage growth). If people do not have the money to buy they will not buy at a given price. When the price drops to a point that people can afford to buy then they will. That is simple enough.
"How many people could still afford the home for $880k with the extra 15% down and the extra point in interest on what is now a jumbo loan?"
The whole point is that the $800k+ price tag will be changed with a sale tag saying price drop. An interest rate increase to a realistic level (not 4%) would drop house prices by at least 25% if not more.
"Home prices in my area will not come down enough to make up that difference!"
I have heard that before. Then house prices did drop in that area. Your area is not immune to economic laws. House prices will drop when supply exceeds demand at a given price.
"That would increase the demand for the lower price points and the demand for 700,000-1,000,000 would slow down considerably."
The monthly payment will remain about the same. What that payment will buy will determine selling prices.
"In addition people would be pushed out of buying in Greenwich and would start looking in other bordering towns like Stamford where you could still buy a house for 575k."
To save almost $1/2 million on a house I would gladly drive an extra 10 miles to work. People will follow the (lack of available) money. When the money does not exist for something they want they work with what they can afford and buy it instead.
"Not only is there a major cash out of pocket issue, but almost a 1 percent difference in the jumbo interest rate which needs to be accounted for as well?"
Each additional 1% interest rate will cause around a 11% decrease in price to meet the buying power available to buyers (barring massive wage growth). If people do not have the money to buy they will not buy at a given price. When the price drops to a point that people can afford to buy then they will. That is simple enough.
"How many people could still afford the home for $880k with the extra 15% down and the extra point in interest on what is now a jumbo loan?"
The whole point is that the $800k+ price tag will be changed with a sale tag saying price drop. An interest rate increase to a realistic level (not 4%) would drop house prices by at least 25% if not more.
"Home prices in my area will not come down enough to make up that difference!"
I have heard that before. Then house prices did drop in that area. Your area is not immune to economic laws. House prices will drop when supply exceeds demand at a given price.
"That would increase the demand for the lower price points and the demand for 700,000-1,000,000 would slow down considerably."
The monthly payment will remain about the same. What that payment will buy will determine selling prices.
"In addition people would be pushed out of buying in Greenwich and would start looking in other bordering towns like Stamford where you could still buy a house for 575k."
To save almost $1/2 million on a house I would gladly drive an extra 10 miles to work. People will follow the (lack of available) money. When the money does not exist for something they want they work with what they can afford and buy it instead.
- Richard Breglia, "Richard Breglia"
- Contributions:52
I agree with supply and demand. I should have been more specific in my question. If the super conforming loan amount was 709k and is now 575k. That's a difference of $134k. Buy a great house where? That doesn't even get you a great 2BD condo here in Greenwich?
Take the hottest selling price point in Greenwich CT just under 1 million
709k limit (funding prior to Oct1st)
e.g. purchase price $880,000
20% down $176,000
loan amount $704,000
My last client got 3.875% 30 year fixed
the new limit is 575k
purchase price $880,000
35% down $308,000
loan amount $572,000
Not only is there a major cash out of pocket issue, but almost a 1 percent difference in the jumbo interest rate which needs to be accounted for as well?
Yes prices will come down. Simple supply and demand I agree. How many people could still afford the home for $880k with the extra 15% down and the extra point in interest on what is now a jumbo loan? Home prices in my area will not come down enough to make up that difference! Yes some of those buyers will be forced to buy at lower price points so we won't lose them entirely. But anyone going FHA with 3.5%, 5%, and even 10% is not likely to come up with 35% down. What percentage of buyers will be forced to buy less? That would increase the demand for the lower price points and the demand for 700,000-1,000,000 would slow down considerably. In addition people would be pushed out of buying in Greenwich and would start looking in other bordering towns like Stamford where you could still buy a house for 575k.
Take the hottest selling price point in Greenwich CT just under 1 million
709k limit (funding prior to Oct1st)
e.g. purchase price $880,000
20% down $176,000
loan amount $704,000
My last client got 3.875% 30 year fixed
the new limit is 575k
purchase price $880,000
35% down $308,000
loan amount $572,000
Not only is there a major cash out of pocket issue, but almost a 1 percent difference in the jumbo interest rate which needs to be accounted for as well?
Yes prices will come down. Simple supply and demand I agree. How many people could still afford the home for $880k with the extra 15% down and the extra point in interest on what is now a jumbo loan? Home prices in my area will not come down enough to make up that difference! Yes some of those buyers will be forced to buy at lower price points so we won't lose them entirely. But anyone going FHA with 3.5%, 5%, and even 10% is not likely to come up with 35% down. What percentage of buyers will be forced to buy less? That would increase the demand for the lower price points and the demand for 700,000-1,000,000 would slow down considerably. In addition people would be pushed out of buying in Greenwich and would start looking in other bordering towns like Stamford where you could still buy a house for 575k.
- Dan, "the_country_hick"
- Contributions:4700
Richard, The loan levels being dropped will only cause an increase in interest rates. That will put pressure on prices driving them lower.
As an example
My $1,000 a month payment can buy a
$200,000 mortgage at 4.25% paying $983.88 monthly or
$110,000 mortgage at 10% paying $965.33 monthly or
$_47,000 mortgage at 25% paying $979.75 monthly
Lets look at this the other way.
A 30 year $100,000 mortgage costs $491.94 a month at 4.25%.
A 30 year $80,000 mortgage costs $492.57 a month at 6.25%
A 30 year $69,000 mortgage costs $494.32 a month at 7.75%
This clearly shows that as interest rates increase prices must decrease unless incomes drastically increase at the same time. Increased interest rates do not take buyers away. Prices will get forced down to meet the real life buying ability that is left.
Yes, you can increase those numbers to meet the much higher numbers you mentioned. This is simply to show that interest rates affect house prices and buyers will simply pay less instead of being unable to buy a house.
As an example
My $1,000 a month payment can buy a
$200,000 mortgage at 4.25% paying $983.88 monthly or
$110,000 mortgage at 10% paying $965.33 monthly or
$_47,000 mortgage at 25% paying $979.75 monthly
Lets look at this the other way.
A 30 year $100,000 mortgage costs $491.94 a month at 4.25%.
A 30 year $80,000 mortgage costs $492.57 a month at 6.25%
A 30 year $69,000 mortgage costs $494.32 a month at 7.75%
This clearly shows that as interest rates increase prices must decrease unless incomes drastically increase at the same time. Increased interest rates do not take buyers away. Prices will get forced down to meet the real life buying ability that is left.
Yes, you can increase those numbers to meet the much higher numbers you mentioned. This is simply to show that interest rates affect house prices and buyers will simply pay less instead of being unable to buy a house.
zero buyers will be lost. If Richard knew even the least bit about economics, he would know this. What will happen, is the equilibrium price will drop to reflect this lowering of aggregate demand.
Funny, I kind of believe in capitalism, so I'm with sunnyview on this one...
Funny, I kind of believe in capitalism, so I'm with sunnyview on this one...
- Richard Breglia, "Richard Breglia"
- Contributions:52
I don't think your political views have anything to do with my question sunnyview?
- Dan, "the_country_hick"
- Contributions:4700
No buyers will be lost. Only selling prices will be changed to reflect reality.
- sunnyview
- Contributions:25139
I think it's great. In most markets, that 575 target is sufficient to buy a great house. The government should be spending their money supporting the middle class down not the million dollar buyers with no down and an ARM.
If lenders want that business, they have the option to court those people with programs and higher fees like they courted the low end buyers during the bubble.
If lenders want that business, they have the option to court those people with programs and higher fees like they courted the low end buyers during the bubble.
loan amounts dropped from 709k to 575k Oct 1st. Statistics for how many buyers will be lost anyone?
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- 5.0/5.0
- (7 reviews)
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