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What will break the 'lock in" effect?

2,072 Views | 7 Replies | Last: 2 yr ago by Red Pear Realty
JobSecurity
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10:18a, 7/17/23
AG
With the vast majority of homeowners with a mortgage locked under 3%, what do you think it will take to break the lock in effect?

Is a declining rate market the only solution? What rate do you think we need to drop to before supply and demand begin to balance?

I'm struggling with this as I think if rates drop to say 5% the market will be flooded but home values will start to skyrocket again. I would prefer to buy today but we aren't quite ready yet. In a year or two I'm worried that houses that are in our price range today will be priced out, even if rates drop a couple percent, because of another market rush.
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SoTheySay
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In reply to JobSecurity • 11:37a, 7/17/23
S
This is why we dropped our home budget and are purchasing now in hopes to refi later. We don't want to buy at the top of our range at current rates and I don't have the time or energy to chance waiting. So basically compromised to get the space we need.
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Red Pear Realty
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In reply to JobSecurity • 11:40a, 7/17/23
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AG
Mass unemployment. Therefore, your username doesn't quite check out.
Sponsor Message: We Split Commissions. Full Service Agents in Austin, Bryan-College Station, Dallas-Fort Worth, Houston and San Antonio. Red Pear Realty
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JobSecurity
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In reply to Red Pear Realty • 3:57p, 7/17/23
AG
Red Pear Realty said:
Mass unemployment. Therefore, your username doesn't quite check out.
But I'm not even sure that would change anything. If you have a mortgage from 2+ years ago, your house today has appreciated probably 30+% and comparable rent and/or smaller home's mortgage is probably equal to your current payment with a sub 3 rate. It isn't like people are underwater on their homes, they just can't upgrade.
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Average Joe
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In reply to SoTheySay • 7:30p, 7/17/23
AG
SoTheySay said:
This is why we dropped our home budget and are purchasing now in hopes to refi later. We don't want to buy at the top of our range at current rates and I don't have the time or energy to chance waiting. So basically compromised to get the space we need.
We did the same. I hate our rate, but it won't be forever. Staying in our last house was not an option any longer, and we got a lot of incentives on the front end that lessened the sting of the interest rate some.
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MS08
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In reply to JobSecurity • 11:18p, 7/17/23
AG
JobSecurity said:
Red Pear Realty said:
Mass unemployment. Therefore, your username doesn't quite check out.
But I'm not even sure that would change anything. If you have a mortgage from 2+ years ago, your house today has appreciated probably 30+% and comparable rent and/or smaller home's mortgage is probably equal to your current payment with a sub 3 rate. It isn't like people are underwater on their homes, they just can't upgrade.


A swath of the market overreached because of their "affordable mortgage payment." Looking at interest rate and mortgage payment is only half the picture: inflation, insurance rate and property tax increases, not to mention most of them upgraded home sizes, so those two categories are more than they previously were, more utilities costs, more maintenance, etc, etc. Factoring in any somewhat significant unemployment only adds fuel to that fire.
In summary, a certain tranche of the home buyers from 2020-2022 overextended themselves on the type/size house they purchased. Increased holding costs compared to their previous norm and inflation are going to catch up to them in next 6 months. My thoughts.
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evestor1
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In reply to JobSecurity • 9:48a, 7/18/23
JobSecurity said:
With the vast majority of homeowners with a mortgage locked under 3%, what do you think it will take to break the lock in effect?

Is a declining rate market the only solution? What rate do you think we need to drop to before supply and demand begin to balance?

I'm struggling with this as I think if rates drop to say 5% the market will be flooded but home values will start to skyrocket again. I would prefer to buy today but we aren't quite ready yet. In a year or two I'm worried that houses that are in our price range today will be priced out, even if rates drop a couple percent, because of another market rush.
it goes away in 25-29 years !



but in reality i belive it will take 30 year fixed rates in the 4.5 - 5 range for anything to really change.
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Red Pear Realty
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In reply to JobSecurity • 10:29a, 7/18/23
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AG
If enough people lose their jobs and cannot pay their mortgages, they will sell voluntarily or involuntarily. Either way, those sub-3% mortgages go away.

The Fed has two directives from congressmaintain price stability and maximum employment. Right now, employment is at near all time lows, but inflation is running rampant, so the Fed is doing everything they can to sacrifice jobs to try and get that inflation down. There will be no soft landing. The beast must be fed with our jobs.
Sponsor Message: We Split Commissions. Full Service Agents in Austin, Bryan-College Station, Dallas-Fort Worth, Houston and San Antonio. Red Pear Realty
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