Real estate thread
- Thread starter Roosh
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How are 20% rates feasible if the govt debt is 30T? It would mean the interest payments are bigger than the whole govt expenditure. And thats just interest.i wonder what the real interest rate ceiling is now given our tremendous debt?I wouldn't want an ARM right now. I'd be afraid of the rate jumping up to 20%. I think a 6.5% 30 mortgage is smart right now. Most of my life this was too good to be true. I remember in the 90s hearing about people who had bought homes in the 70s and had a 7% mortgage from that time, They seemed very lucky to me. Throughout the 80s rates were above 10%, and they were still in the mid 8s in the 90s. They only got down to 6% around 2002, which seemed like a dream when it happened.
Mortgage Rates
The 30-year fixed-rate mortgage averaged 6.39 percent this week, as economic crosscurrents have kept rates within a ten-basis point range over the last several weeks. After the substantial slowdown in growth last fall, home prices stabilized during the winter and began to modestly rise over the...www.freddiemac.com
I think we are going back to the rates we saw in the 80s and higher. A 7% fixed mortgage will be considered lucky in the years to come.
Rates were that high when I was in my early 20s, so it seems possible to me. However, you're right that the US government couldn't afford the interest on the national debt if rates go up.
I suppose they will just print money to try to keep interest rates down, and eventually it won't work anyone and the government will have to default on the loan payments.
Where is the breaking point or tipping point?
I think it is pretty low. Of course, I'm just some guy. However, I think if the US government was paying 7-8% on the national debt it would break the present system.
My best guess is that they want to somehow hold interest rates down artificially, while allowing inflation to cut the current value of the debt at least in half.
I think it will be very, very hard to achieve a soft landing like this. I think it would be very easy for the interest on the debt to get beyond their control, and break the budget. In this case, I would expect some kind of default, combined with a seizure of bank accounts, a so-called haircut. Anything like this would be very messy, I would think.
If the interest on the national debt starts to be a worrisome percentage of the current tax receipts, I'd look to minimize the amount of money I had in US banks.
For 2021, interest on the US debt was $394 billion, with $4.05 trillion tax revenue, and $6.8 trillion in spending.
$0.39 trillion interest on $30 trillion debt is very low, but it is still about 13% of the tax revenues. If the interest rate on the debt went up to 7%, that could be 60% of tax revenues. I think this would be bad.
Of course, if you've posted any wrong wrongthink on the internet (ever), you could also have your funds seized the way Canada did contributors to the truck strike, so it's a tricky business.
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Whilst this is all true and beyond dispute, there is another option. Just don't make payments at all. Who is going to take possession of a whole country? Especially one as large as the USA?
So from a logistical perspective, what would you do? Would you keep a checking account for everyday purposes but stack cash somewhere else?
It's fascinating with all of our reckless policies that the dollar is doing relatively well as a currency.
What portion of that $30 trillion of gov't debt is fixed versus variable?
On the first question, I do still have a checking account, and it is a practical necessity. However, I would avoid building up a large amount of cash savings. I'd keep my wealth in assets that will hopefully hold their value during inflationary times.
As for the portion of government debt that has fixed vs variable rates, I don't know the ratio there. I suspect a significant portion is held at fixed rates, and in the near term, interest rate increases will not immediately affect the government interest expense. If so, then we won't necessarily see the interest expense skyrocket if rates go from 1% to 5% in a short time.
However, I think if interest jumps like this, interest expenses in the federal budget will start climbing at a steady rate, and will become very serious in a few years. Also, once they come up from the 1% range, I don't think they'll go that low again for a very long time. One way or the other, I think the US government will face severe and unaffordable interest payments on the debt in the relatively near future, to the point where they take a major share of tax revenues.
I agree the dollar is still strong right now, considering the US seems to be destroying the Euro and the UK pound with the Russia sanctions and pipeline destruction. However, how long can this last if interest payments grow to a majority of federal tax receipts?
I think it's Brent Johnson that says the USD is still, and will be for some time, "the cleanest dirty shirt in the laundry". The more I think about it, the more it's the best explanation.
All of these central banks are destroying their currencies. The Ruble is up but I think that's about it.
As more and more previously friendly nations continue seeing that the empire is dying and also how it treats it's so-called allies, they'll continue to form parallel systems outside of the 'old world'. BRICS is an example of this.
USD has been the de facto reserve currency since 1945 so it won't transition in a matter of days or even weeks. There's a lot of inflexibility and impediments built up in these global systems.
Asset prices across the board are inflated. Having cash on-hand is good to swoop up deals. Otherwise keeping wealth in the form of liquid assets is another good idea.
All of these central banks are destroying their currencies. The Ruble is up but I think that's about it.
As more and more previously friendly nations continue seeing that the empire is dying and also how it treats it's so-called allies, they'll continue to form parallel systems outside of the 'old world'. BRICS is an example of this.
USD has been the de facto reserve currency since 1945 so it won't transition in a matter of days or even weeks. There's a lot of inflexibility and impediments built up in these global systems.
Asset prices across the board are inflated. Having cash on-hand is good to swoop up deals. Otherwise keeping wealth in the form of liquid assets is another good idea.
The dollar will likely continue strengthening relative to other fiat currencies despite the US’s disastrous policies. Other countries are just as poorly managed but they don’t have the luxury of running the world’s currency. Other counties have to acquire dollars in order to buy the goods they need on the global market and even more importantly, the world’s debt is overwhelmingly denominated in USD through the Eurodollar system. Debts between countries that have nothing to do with the US are usually denominated in USD. Everyone is scrambling to get dollars now because of this. They’ll starve and default on their debt if they don’t.
The US can continue to print and run up new debt for a while but this will lead to ruin eventually. Their debt to GDP ratio ia beyond saving. High interest rates will kill them and force them to massively inflate away the debt. Hello Weimar Germany. If they try to tax away the debt, hello civil war and/or revolution.
I’m sticking my money in Bitcoin and precious metals for now and possibly real estate if the market comes down a bit. It may not make me rich but like Kiyosaki says, this period is about not ending up poor.
The US can continue to print and run up new debt for a while but this will lead to ruin eventually. Their debt to GDP ratio ia beyond saving. High interest rates will kill them and force them to massively inflate away the debt. Hello Weimar Germany. If they try to tax away the debt, hello civil war and/or revolution.
I’m sticking my money in Bitcoin and precious metals for now and possibly real estate if the market comes down a bit. It may not make me rich but like Kiyosaki says, this period is about not ending up poor.
Despite all the headlines about prices cratering I'm not seeing any easing in the lower (cheaper) segment of the housing market, on homes with land.
Stuff is getting listed at even crazier prices and livable homes go pending within a day.
I guess this part of the market will get hit, eventually, but it might take a couple of years for it to get there.
Right now it's just past the peak of the real estate cycle - which often lasts 18 years - means possibly 9 more years to the rock bottom, and truly noticeable effects on the price curve may take years to develop.
I think right now the buyers who are priced out of more expensive homes, which are often located closer to cities and towns, with shorter drives to everything, are moving down the price ladder settling down for cheaper homes they would have previoulsy passed by.
Which keeps propping that part of the market.
I think I might be priced out of this country for good (early retirement due to health reasons) and will be heading out of the US, I didn't grow up here anyway and never really fit in.
It's really brutal what's happening in the housing market. I had realtors lie to me and outright cheat me just so that I couldn't even put an offer and get ahead of their preferred "local" buyers.
If it comes to the point where these homes are sitting on the market for months and years, like they should, and sellers are willing to sell them for half of what they want now, may be I come back here and revisit these sheds.
After seeing so many homes that went up 2, 3 and even 4 times in price in the course of 2-4 years (with no repairs done) - this is not justifiable and more like a tulip mania, this is higher than actual dollar inflation and I think whoever buys into this will miss on a price collapse, but what do I know... I could be wrong, of course.
But I do know that in the same markets just 3-4 years ago people could not sell their homes for a long time, and that after doing all kinds of upgrades and repairs, homes in mint condition - and how literal shacks with land sell for insane price with fierce competition. The US population did not increase that much to justify that "demand".
At first, sellers should hold the prices steady, for a while, until the well of buyers dries up. I can not explain all the rabid buying in remote and rural areas right now, of all the crappy, old homes in the state of disrepair... this is more like a tulip mania and don't see how it can keep going for much longer.
Stuff is getting listed at even crazier prices and livable homes go pending within a day.
I guess this part of the market will get hit, eventually, but it might take a couple of years for it to get there.
Right now it's just past the peak of the real estate cycle - which often lasts 18 years - means possibly 9 more years to the rock bottom, and truly noticeable effects on the price curve may take years to develop.
I think right now the buyers who are priced out of more expensive homes, which are often located closer to cities and towns, with shorter drives to everything, are moving down the price ladder settling down for cheaper homes they would have previoulsy passed by.
Which keeps propping that part of the market.
I think I might be priced out of this country for good (early retirement due to health reasons) and will be heading out of the US, I didn't grow up here anyway and never really fit in.
It's really brutal what's happening in the housing market. I had realtors lie to me and outright cheat me just so that I couldn't even put an offer and get ahead of their preferred "local" buyers.
If it comes to the point where these homes are sitting on the market for months and years, like they should, and sellers are willing to sell them for half of what they want now, may be I come back here and revisit these sheds.
After seeing so many homes that went up 2, 3 and even 4 times in price in the course of 2-4 years (with no repairs done) - this is not justifiable and more like a tulip mania, this is higher than actual dollar inflation and I think whoever buys into this will miss on a price collapse, but what do I know... I could be wrong, of course.
But I do know that in the same markets just 3-4 years ago people could not sell their homes for a long time, and that after doing all kinds of upgrades and repairs, homes in mint condition - and how literal shacks with land sell for insane price with fierce competition. The US population did not increase that much to justify that "demand".
At first, sellers should hold the prices steady, for a while, until the well of buyers dries up. I can not explain all the rabid buying in remote and rural areas right now, of all the crappy, old homes in the state of disrepair... this is more like a tulip mania and don't see how it can keep going for much longer.
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Around Philadelphia (within a 50-60 mile radius), you aren’t seeing a big decline in house prices. Even with high interest rates, prices haven’t moved. I am hearing it’s completely different in places like Boise, Austin, Phoenix, etc.
I believe this is for a few reasons. Lack of affordable housing compared to other areas. Not a lot of places left to build and building is very expensive as is. Additionally, long time residents of Philadelphia are leaving in droves as a result of the city descending into a lawless hell. Even the old school Philly die hards are moving out as far as they can. Of course, crime is spreading into the outer suburbs now.
I believe this is for a few reasons. Lack of affordable housing compared to other areas. Not a lot of places left to build and building is very expensive as is. Additionally, long time residents of Philadelphia are leaving in droves as a result of the city descending into a lawless hell. Even the old school Philly die hards are moving out as far as they can. Of course, crime is spreading into the outer suburbs now.
Thinking more on the broader situation with real estate and recession. I've been thinking that they will jack rates up to 7%. I couldn't see anything like 10%. But it seems to me that rates at 7% would push mortgages up to about 10%, at which point I'd imagine there would be a real estate crash, snowballing into the rest of the economy. So my guess is they will be keeping rates at no more than 5%. That's the only way I see them being able to hold up the economy for another year. But even at 4-5%, I expect to see US foreclosures head to around 1 million next year.
Article in The Telegraph -
Proxy - https://archive.is/1DXJv
At least 365,000 ‘timebomb properties’ will become loss-making by the end of 2023
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I've been told that cost to build new homes has gone through the roof. Unprofitable. And no doubt a slew of new green new deal legislation to grow Our Economy soon.
Proxy - https://archive.is/1DXJv
Buy-to-let crisis to trigger property fire sale as landlords suffer losses
At least 365,000 ‘timebomb properties’ will become loss-making by the end of 2023
Clips:
I've been told that cost to build new homes has gone through the roof. Unprofitable. And no doubt a slew of new green new deal legislation to grow Our Economy soon.