7% interest rate?!

[RamblingMad]

Finally we agree on something. When they pivot are we going to have hyperinflation and currency collapse? Do we default and reset the currency? The inflation we are seeing now is a combination of increased money supply and supply shortages. You can't compare it to other recessions because the current debt is astronomical.

I research this to death and I haven't found one person that thinks there's an easy way out of this. It's a choice between inflation or implosion. In the long term will recover, but the short term it's going to be rough. There's also a war in Europe. There's China and Russia...there's just a lot right now and none of it's good.

They won't pivot any time soon. The economy is way too strong. Right now, the weakness is in zombie tech, home and home loans, and auto and auto loans. We had real GDP growth of 2.6% last quarter. That's over 10% nominal growth. That's huge.

2023 will be a rough year with the higher cost of borrowing, but 2024 should be okay. We're going to need a minor recession to slow down price increases.

The doom and gloom isn't there.

 

[barkley]

Every home is custom in my neighborhood and many are spec homes...like the 3 being built on my street right now..we literally have model rows over time depending on which section of the neighborhood had the most lots open at a given time. So far it's moved 3 times since we've been here.

Comps on our home are within a mile of my house (not always in my neighborhood but close by if they aren't) including what the appraiser did when we first did our refi part of the reason I asked that to the PP to get an idea if they disagreed with the appraiser. That does happen sometimes you feel they are looking at homes too far away from you or something that is not right around the size/layout, etc.

maybe it's different here b/c there would never be a custom or spec built on lots-here they are almost exclusively built on acreage of 10 or more acres. the lots that become available in or adjacent to existing neighborhoods are generally left to developers or construction firms that offer options and upgrades on their pre-set designs.

 

[tvguy]

That's what I thought. Regardless that wasn't even a point of my inquiry to the other poster. It was just asking if they disagreed with the appraisal and if that was why some issues cropped up for them.

That doesn't even make sense to say an interior inspection is to ensure you aren't trashing your home. What world do you live in that that makes sense? We're not talking about a foreclosure here where the bank may have more grounds to ensure the property they will soon be actually owning isn't being wrecked during the process. PMI isn't about the cleanliness of your home, it's because you put down less money down at the beginning.

You do realize there are two types of appraisals right? An appraisal where someone comes by and takes a look at the exterior of your home (drive-by appraisal often done when nothing inside has been done that could bump up the value), does comps of it, etc and then one that goes a step further and goes inside. We were never talking about does a lender require an inspection, we were talking about going inside your home.

My state law requires every house to be appraised at market value every January 1st. My state law also requires that a photo be taken of your home every 6 years (usually because of the timing it can be a tad shorter or a tad longer than that by the time they get to your house). On the first reappraisal to get rid of PMI an exterior check and a comp was run, no interior was ever requested or even mentioned. The second refinanced we were not required to get an appraisal and were given a waiver on that (high confidence that the home appreciated far away from what the loan balance would be).

Well, there have been marijuana grow houses here when people buy the house, take out all the walls and kitchen. So that is the real world here. But to be clear, most of the owners of those houses paid their mortgage on time, or paid cash for the houses.
PMI protects the Lender in cases where the homeowner defaults and has less than 20% equity. It totally makes sense to me that they would want to verify, by looking inside, that the house that appears to be worth $300,000, doesn't need $150,000 in repairs. IF......they had to foreclose, they would still still lose money.
This is my only experience with a PMI inspection. She was literally there 7 minutes, look pictures of all the rooms, the front yard and the backyard.
Yes, I am familiar with drive by appraisals. I was surprised when my neighbor refinanced this year that they sent an appraiser out and he did in fact go inside and took measurements of all the rooms. But I suspect that was because the house has been remodeled with walls removed and relocated, and a covered patio enclosed and incorporated into the living room.

 

[dvcgirl67]

Finally we agree on something. When they pivot are we going to have hyperinflation and currency collapse? Do we default and reset the currency? The inflation we are seeing now is a combination of increased money supply and supply shortages. You can't compare it to other recessions because the current debt is astronomical. I know I can be hyperbolic, but how else do you describe our debt?

I research this to death and I haven't found one person that thinks there's an easy way out of this. It's a choice between inflation or implosion. In the long term will recover, but the short term it's going to be rough. There's also a war in Europe. There's China and Russia...there's just a lot right now and none of it's good.

I actually think we agree on a lot, meaning, we're seeing the same thing....it's just that you see me a pollyanna (I'm actually not), and I sometimes see you as a "Dr. Doom" (and that's not fair of me either). You take the trade all the way to its conclusion....the implosion and collapse of the debt market... which is essentially the armageddon trade....that it all falls apart. And for the record...(we were being facetious at each other in a thread a ways back on who saw the Great Recession and market timing).....I did have a pretty good understanding of what was happening during the Great Recession, but I did not try and time the market....we stayed in, and recovered. But....that was 15 years ago when we were 20 years away from retirement. Now, we're only 5 years out and took the opportunity to get out a few months back at 4,400....purely to preserve capital. We have essentially reached our "number" (providing it all doesn't fall apart ). And we're now piling up cash for our first 4-5 years of retirement so that we don't have to touch the rest of our portfolio for 9-10 years. The downside risks are building and that concerns us.

I don't think there's an easy way out of it....but I doubt we'll ever get all the way out of it. They will continue to kick the can down the road...putting off a huge systemic event as long as they can. I think in the short to medium term the choice will be inflation over implosion.....mostly because rate hikes aren't going to fix inflation....they have to massively shrink the 9 Trillion balance sheet, but if they go too fast with that and cause too much instability in the debt markets, they risk that whole ginormous house of cards falling down....ie....implosion. On the slightly positive side, the Fed is seeing some of what they want to see. The housing market is deflating. Ridiculous nonsense like NFTs and Bitcoin has had the snot whacked out of it. And the bond market has seen an historic decline. I just think there's more pain to come before they stop....there has to be, to even get up enough oomph to kick the can a bit down the road.

 

[Colleen27]

There are foursquares all over the place in the greater northeast, ya' know. Pennsylvania, in particular, has loads of them, as does Vermont. Not all of them are pretty, but the best Craftsman-influenced versions tend to be really lovely.

They are especially ubiquitous in areas developed around the turn of the 20th century, because quite a few of the most popular Sears Kit homes were foursquares.

BTW, IME, traditional layout homes didn't get that "dark" reputation until people started building post-War homes that had far fewer windows than previously. In our home, the kitchen has 3 windows, the dining room has 4, the living room has 5, and the foyer has 2 if you count the light in the door. (Our LR, DR, and foyer are open to one another, connected by 5 foot wide archways.) Upstairs, the main bedrooms have 3 windows each, and the smallest one has a double-window on a southfacing wall. Plenty of light.

That's my experience too. My house is really old, 140-odd years. You don't need electric lights in this house until the sun goes down. The standard windows in the house are 30 x 66, which made them expensive to replace and annoying when buying curtains but lets in lots of light. The living room has five windows facing in three directions, the kitchen has three. My mom discouraged us from choosing this house because she imagined that in a home this old the utility costs would be astronomical but between the excellent natural light and the fact that the house was built to capture the cross-ventilation from the prevailing wind direction, the summer bills are smaller than hers in her mid-century brick ranch with tiny windows that don't let in any real light or breeze. Sure, that's more efficient in heating season but it means needing electric lights 24/7 and going more or less straight from heating season into air conditioning season.

 

[Mackenzie Click-Mickelson]

maybe it's different here b/c there would never be a custom or spec built on lots-here they are almost exclusively built on acreage of 10 or more acres. the lots that become available in or adjacent to existing neighborhoods are generally left to developers or construction firms that offer options and upgrades on their pre-set designs.

New neighborhoods here are developer ones. Most times developers have a list of acceptable builders although this is the case with mine you can also request to bring in your own with approval from the developer. Some neighborhoods are just one builder. We found a lot and reserved it, got a buyers agent, met with 2 builders and selected one and did it that way. But spec homes are very common. We have what is called a Parade of Homes twice a year (fall and spring) and all the homes are really spec homes you could see hundreds that way if you go to all of them between both state lines. That's how we found our neighborhood actually. But it's also fun to see the trends and sometimes houses you'd never get to see otherwise like Loch Loyd a private gated neighborhood filled with custom very pricey homes with an extremely expensive membership fee plus golf membership fee.

You'll still see a lot of similarity to homes even with custom because the builders pay architects for house plans but you can tweak those. Our builder was not know for allowing too many uber custom changes but we still changed things the biggest adding in the partial wall in the great room for separation, change door placements upstairs, etc. Had looked into making a jack and jill bathroom separated (which would have added a bathroom to the total numbers) but would have had to pay the architect to review if that was possible and so we opted to not even try. And you can go to a builder and hire them (some won't do it) to build your house with a plan you want (if you're in a newer neighborhood chances are you may have restrictions on parts of it).

Now an issue I do know has been affecting people's comps is more concentrated in a certain city where people purchase these small often 1 story homes that have been there for many decades tear it down and put up larger two story (something that is happening elsewhere in the country). People did get upset about the character of the city getting messed with as it was know for quaint homes so the city did put in some restrictions like how close to the property line, can't remember height was one of them. That does present an issue with a much more modern home amidst older homes.

 

[Mackenzie Click-Mickelson]

Well, there have been marijuana grow houses here when people buy the house, take out all the walls and kitchen. So that is the real world here. But to be clear, most of the owners of those houses paid their mortgage on time, or paid cash for the houses.
PMI protects the Lender in cases where the homeowner defaults and has less than 20% equity. It totally makes sense to me that they would want to verify, by looking inside, that the house that appears to be worth $300,000, doesn't need $150,000 in repairs. IF......they had to foreclose, they would still still lose money.
This is my only experience with a PMI inspection. She was literally there 7 minutes, look pictures of all the rooms, the front yard and the backyard.
Yes, I am familiar with drive by appraisals. I was surprised when my neighbor refinanced this year that they sent an appraiser out and he did in fact go inside and took measurements of all the rooms. But I suspect that was because the house has been remodeled with walls removed and relocated, and a covered patio enclosed and incorporated into the living room.

I think you need to reread how you presented the issue.

If a lender doesn't believe, with the comps or can't find any to support the numbers along with an exterior visual of a house, has increased in enough value to remove PMI it's quite understandable they may want to go inside but in the absence of the homeowner not doing  anything to potentially improve the value that makes less sense. The answer would be more likely your house hasn't increased enough in value in proportion to what the loan currently sits try again later or pay down the loan enough to where the difference is gone.

I'm not getting into weed houses that's an entirely different conversation but it does still get into my other point of it's discriminatory to insist a homeowner isn't trashing their house, like you said, in order to remove PMI as that is basically like saying people who end up having PMI are more likely to do so. Your daughter should have filed a complaint at least that's what I would do to someone coming into my home with an assumption it's trashed.

And again reread my comments if the homeowner has done improvements or altered the house which can affect the value (the whole point of an appraisal) yeah going inside would seem prudent although depending on what it is a permit may have been required and paperwork online available and potentially already updated on the county page for the house.

 

[DCLMP]

I actually think we agree on a lot, meaning, we're seeing the same thing....it's just that you see me a pollyanna (I'm actually not), and I sometimes see you as a "Dr. Doom" (and that's not fair of me either). You take the trade all the way to its conclusion....the implosion and collapse of the debt market... which is essentially the armageddon trade....that it all falls apart. And for the record...(we were being facetious at each other in a thread a ways back on who saw the Great Recession and market timing).....I did have a pretty good understanding of what was happening during the Great Recession, but I did not try and time the market....we stayed in, and recovered. But....that was 15 years ago when we were 20 years away from retirement. Now, we're only 5 years out and took the opportunity to get out a few months back at 4,400....purely to preserve capital. We have essentially reached our "number" (providing it all doesn't fall apart ). And we're now piling up cash for our first 4-5 years of retirement so that we don't have to touch the rest of our portfolio for 9-10 years. The downside risks are building and that concerns us.

I don't think there's an easy way out of it....but I doubt we'll ever get all the way out of it. They will continue to kick the can down the road...putting off a huge systemic event as long as they can. I think in the short to medium term the choice will be inflation over implosion.....mostly because rate hikes aren't going to fix inflation....they have to massively shrink the 9 Trillion balance sheet, but if they go too fast with that and cause too much instability in the debt markets, they risk that whole ginormous house of cards falling down....ie....implosion. On the slightly positive side, the Fed is seeing some of what they want to see. The housing market is deflating. Ridiculous nonsense like NFTs and Bitcoin has had the snot whacked out of it. And the bond market has seen an historic decline. I just think there's more pain to come before they stop....there has to be, to even get up enough oomph to kick the can a bit down the road.

I think the cans hit a wall.

I agree they’ll choose inflation over implosion, but you’ve seen what happens in other countries when the inflation train really takes off the currency collapses. Either option will eventually have the same result.
It’s not just us. Europe will be first.
Is it the end the world of course not In the long run it might be a better world.. no one knows.

 

[dvcgirl67]

I think the cans hit a wall.

I agree they’ll choose inflation over implosion, but you’ve seen what happens in other countries when the inflation train really takes off the currency collapses. Either option will eventually have the same result.
It’s not just us. Europe will be first.
Is it the end the world of course not In the long run it might be a better world.. no one knows.

Agree...eventually the can hits the wall. When... I'm not sure any of us knows. It's hard for me to live in a headspace where the deck is cleared....because it would be beyond anything we've experienced in a very long time...never in my lifetime.

The Fed isn't going to be able to "Volcker" their way out of this. They'll break way too many things before that. And it's not the 1970s when massive deregulation/union busting and globalization also greatly helped to bring inflation down. If anything, we're moving in the opposite direction. What I am reading may happen is that the Fed will have to bail on its "2%" mandate and at least say that we'll get to somewhere between 3-4% (but we won't get that low in the short to medium term). And yes...I'm not convinced that inflation doesn't really get away from them.

 

[Cogswel_Cogs]

I bought house when rate was close to 8%. Luckily houses were at almost lowest levels they had been in many years so I was able to swing on modest salary. I did not refinance right away because drop was not big enough to warrant it for a long time, they fell very slow. The problem with refinancing is in the beginning of your mortgage you mainly pay interest not prinicipal, so alll the payments you are making don't do a dent by time you refinance. So if you are looking to refinance early (IMO) on your probably better off renting if renting would be much cheaper than the mortgage payments. Of course if rates go to 10 then your stuck renting till they come down. But in the same case you would be stuck with the larger payment if you had bought the house. And more than likely if rates go up house values go down.
Oddly enough had I been reckless and not gone with a fixed mortgage I would have saved many tens of thouand as the interest rate fell every year after I bought my house.

 

[dvcgirl67]

They won't pivot any time soon. The economy is way too strong. Right now, the weakness is in zombie tech, home and home loans, and auto and auto loans. We had real GDP growth of 2.6% last quarter. That's over 10% nominal growth. That's huge.

2023 will be a rough year with the higher cost of borrowing, but 2024 should be okay. We're going to need a minor recession to slow down price increases.

The doom and gloom isn't there.

I think what that DCLMP and I are talking about more implicitly is that the Fed will pivot before they *want* to pivot....because they will *have* to pivot in a similar way as what recently occurred in the U.K. (who is actually in worse shape than we are). It's less about the economy rolling over than it is about market liquidity and its ability to function, so the "plumbing" of the market if you will. Buyers have to show up for the auctions...and when they don't, things can go sideways. These types of events are bubbling right under the surface, and are in the news if you look for them. And if they pivot before they need to....we're looking at elevated inflation for a longer period of time.

 

[RamblingMad]

I think what that DCLMP and I are talking about more implicitly is that the Fed will pivot before they *want* to pivot....because they will *have* to pivot in a similar way as what recently occurred in the U.K. (who is actually in worse shape than we are). It's less about the economy rolling over than it is about market liquidity and its ability to function, so the "plumbing" of the market if you will. Buyers have to show up for the auctions...and when they don't, things can go sideways. These types of events are bubbling right under the surface, and are in the news if you look for them. And if they pivot before they need to....we're looking at elevated inflation for a longer period of time.

I'm not worried about liquidity as the Fed balance sheet has only returned to its level since the beginning of this year. And rates aren't high when looking at historical levels. They need to at least go over the PCE numbers that the Fed tracks before we start to see any meaningful decline in inflation.

https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

I wouldn't expect a pivot any time soon. The labor market is strong. And GDP remains resilient.

 

[DCLMP]

Agree...eventually the can hits the wall. When... I'm not sure any of us knows. It's hard for me to live in a headspace where the deck is cleared....because it would be beyond anything we've experienced in a very long time...never in my lifetime.

The Fed isn't going to be able to "Volcker" their way out of this. They'll break way too many things before that. And it's not the 1970s when massive deregulation/union busting and globalization also greatly helped to bring inflation down. If anything, we're moving in the opposite direction. What I am reading may happen is that the Fed will have to bail on its "2%" mandate and at least say that we'll get to somewhere between 3-4% (but we won't get that low in the short to medium term). And yes...I'm not convinced that inflation doesn't really get away from them.

This is what I was trying to say 6 months ago. The ten year was like at 2 now its 4.2. Which is fine as long as its stable If it ever starts a climbing rapidly that's not a good sign. The biggest difference between now and the 70's is the amount of debt. You can't keep spending and inflating. Now we have an asset bubble and a debt bubble.

Inflation is being driven by supply issues and raising rates has done nothing but make it worse. All they are doing is increasing the cost to produce anything. Then there's is China, Russia and Saudi... I won't even attempt to go there it makes my head hurt.

I've been telling people over the last year to stock up on food it's not going to get any cheaper I don't know what other advice to give.

As far as buying a house right now I don't know. When the Fed pivots are prices going to shoot up again 40000 dow? Of course that means nothing when the purchasing power of the dollar keeps declining. I've read a lot of different theories on how this could shake out. Of course none of them paint an easy road ahead.

 

[DCLMP]

I'm not worried about liquidity as the Fed balance sheet has only returned to its level since the beginning of this year. And rates aren't high when looking at historical levels. They need to at least go over the PCE numbers that the Fed tracks before we start to see any meaningful decline in inflation.

https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

I wouldn't expect a pivot any time soon. The labor market is strong. And GDP remains resilient.

You are ignoring a lot.

 

[RamblingMad]

You are ignoring a lot.

Provide me with data, and I'll look it over.

 

[DCLMP]

I think what that DCLMP and I are talking about more implicitly is that the Fed will pivot before they *want* to pivot....because they will *have* to pivot in a similar way as what recently occurred in the U.K. (who is actually in worse shape than we are). It's less about the economy rolling over than it is about market liquidity and its ability to function, so the "plumbing" of the market if you will. Buyers have to show up for the auctions...and when they don't, things can go sideways. These types of events are bubbling right under the surface, and are in the news if you look for them. And if they pivot before they need to....we're looking at elevated inflation for a longer period of time.

The only one buying our debt right now is the Fed. Corporate debt has doubled in the last 10 years and personal debt is at an all time high. There is a lot to break and yes a liquidity crisis is looming. They will pivot.

 

[RamblingMad]

The only one buying our debt right now is the Fed. Corporate debt has doubled in the last 10 years and personal debt is at an all time high. There is a lot to break and yes a liquidity crisis is looming. They will pivot.

Give our current rates and strong currency, lots of foreign monies are buying dollars to buy our debt.

And consumer debt isn't terrible. Sure, we're starting to see delinquencies go up. But that's to be expected with higher inflation. Consumers are being stretched. There are definitely go to be more bankruptcies over the next two years.

https://www.newyorkfed.org/microeconomics/hhdc.html

 

[mrodgers]

Rent is a temporary expense if you are in the market to buy a home. At 7% with current home prices, buying is more expensive almost everywhere right now. This is why rents are also going up.

For rich people it's a temporary expense. It's not a temporary expense when you don't have $100k lying around to put down on a house. It's the actual living expense of many many people.

I'm getting miserable nasty group emails from my new owner about rent not being paid. They are giving 5 days and state they will start the eviction process and once started that's it. You can't catch up and stop it. My neighborhood is mostly 70 year olds on limited incomes, many of them still working, disabled people, and fathers trying not to need to move to San Francisco where they can survive living in a cardboard box. The 40% increase in rent by being bought out by a faceless corporation is killing them. A trailer is the cheapest option and last step above before becoming homeless.

 

[mrodgers]

meh. I like my one story home. Lower ac bills.

Watching my mother deal with 2 flights of steps in her house, I definitely don't want a 2 story house with laundry in the basement. No big deal when I was growing up in that house at a young age, but I owned a single story and no way would I want a 2 story looking forward into "retirement" years.

 

[Lumpy1106]

Was your issue what the appraised value came back as? Did you look at the comps they said they were using? Were they close enough to what your county was using for their value?

We refinanced 2 1/2 years in to get rid of PMI (which was $160/month) but it really wasn't a hassle, I can relate to your situation although I didn't have quite the same experience you did.

No. The problem was the bank had to order the appraisal - and they refused to do it. We actually had an appraisal that showed we were well above 20% but they wouldn't accept it. It was the same appraiser we used when we bought the house. Banking in the 90's was a different thing than it is now.