[quote author="Mcdonna1980" date=1243571403][quote author="IrvineRenter" date=1243508615][quote author="financeguy" date=1243507326][quote author="usctrojanman29" date=1243506547][quote author="financeguy" date=1243505945][quote author="Mcdonna1980" date=1243504640]I'll take the $300,000 price scenario and pay all cash. I hope interest rates go to the mooooon........</blockquote>
It's the exact opposite case with me, and anyone else doing the standard 20/80 mortgage I beleive. Let's say I have 100K and want to buy a SFR in Irvine for 500K. If I were to buy a house last month for 500K at 4.5%, and interest rates go up to 6.5% in the next year (everyone on these forums are saying give it another year for the wave of foreclusures to hit), then I would need that house to drop by at least 20% to be comparable, no?
I highly doubt SFRs in Irvine will drop 20% in one year, especially with all this gov't intervention, put it is highly probable that interest rates will go to 6.5% within a year.</blockquote>
Then unless incomes rise, how the hell will people qualify for those larger monthly loan payments if the home prices don't drop more? Why the hell won't SFR home prices in Irvine drop 20%+ if rates rise by a significant amount? </blockquote>
Because I beleive that there are a lot of people in Irvine that are not doing the standard 20/80 mortgage, and can put a lot more down, like Mcdonna1980, who apparently has 300K cash.
Rising interest rates benefit those putting a lot down, but not those who are putting 20%.</blockquote>
I seriously doubt there are many people in Irvine with that much cash. People are not borrowing out of choice, it is out of need.</blockquote>
In his scenario buying a house for $600,000 would require a $120,000 down payment at 20%. Let's say it takes 3 years to drop to $300,000. If someone now has $120,000, waits 3 years, continues savings says $1,500-$2,000 per month, you'll get pretty close to that $300,000 especially with such high interest rates. But let's just say you can only put $200,000 on the $300,000. If you choose to only do 20% at that point, well that is just dumb.
$100,000 30 yr mortgage @15%
$1264.44 per month
$455,198 total amount to be repaid to lender
$100,000 15yr mortgage @15%
$1,399.59 per month
$251,926 total to be repaid to lender
Yep! $300,000 house at 15% is still the better deal.</blockquote>
Not only that, but you have a lower property tax on top of all that. As IR stated, you can always refi out of a high mortgage rate but you can reduce the loan balance or the property tax basis.
