on the way up (by 6x6 [TN]) Mar 31, 2021 10:49 AM|
on the way up (by Robert J [CA]) Mar 31, 2021 11:04 AM
on the way up (by 6x6 [TN]) Mar 31, 2021 11:10 AM
on the way up (by S i d [MO]) Mar 31, 2021 11:30 AM
on the way up (by 6x6 [TN]) Mar 31, 2021 11:57 AM
on the way up (by JB [OR]) Mar 31, 2021 12:03 PM
on the way up (by 6x6 [TN]) Mar 31, 2021 12:12 PM
on the way up (by Moshe [CA]) Mar 31, 2021 2:17 PM
on the way up (by Bill [KY]) Mar 31, 2021 4:11 PM
on the way up (by Ray-N-Pa [PA]) Mar 31, 2021 4:19 PM
on the way up (by S i d [MO]) Apr 1, 2021 9:22 AM
on the way up (by MikeA [TX]) Apr 1, 2021 11:16 AM
on the way up (by WMH [NC]) Apr 1, 2021 11:58 AM
on the way up (by Hoosier [IN]) Apr 1, 2021 3:00 PM
on the way up (by Landlord ofthe Flies [TX]) Apr 1, 2021 3:58 PM
on the way up (by 6x6 [TN]) Apr 1, 2021 4:06 PM
on the way up (by Busy [WI]) Apr 1, 2021 6:03 PM
on the way up (by 6x6 [TN]) Apr 1, 2021 6:43 PM
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on the way up (by 6x6 [TN]) Posted on: Mar 31, 2021 10:49 AM
Just heard from a realtor that interest rates are starting to go up by about a 1/4%.
What will this mean for us? --73.120.xx.xxx
on the way up (by Robert J [CA]) Posted on: Mar 31, 2021 11:04 AM
As rates go up, at some point when they affect people qualifying for a mortgage, then property values will decline. --47.155.xx.xxx
on the way up (by 6x6 [TN]) Posted on: Mar 31, 2021 11:10 AM
Thank you Robert J. --73.120.xx.xxx
on the way up (by S i d [MO]) Posted on: Mar 31, 2021 11:30 AM
From a practical perspective, not much. 1/4% is a $12.63 per month payment difference per $100,000 balance on a 30-year note. That's the price of two burger meals at a fast food restaurant. Buyers won't think twice, nor will investors.
The Government has very little incentive to see rates rise presently. The economy is still fragile and recovering from the shut downs. Govt debt is massive, and every uptick in rates increases the cost for new Govt borrowing and to refinance maturing Govt debt. Granted, the T-bill rates are not directly tied to mortgage rates, but they often trend the same way as investors decide where to put their money, which impacts demand for T-bills vs. mortgages. --107.216.xxx.xxx
on the way up (by 6x6 [TN]) Posted on: Mar 31, 2021 11:57 AM
Thank you Sid, what are T-bills? --73.120.xx.xxx
on the way up (by JB [OR]) Posted on: Mar 31, 2021 12:03 PM
Well in my entire lifetime, I NEVER, ever expected rates to be anywhere near this low. I see next to no impact.
If anything, as rates begin to rise, potential buyers will become even more frenzied trying to purchase for fear of "missing out." --73.25.xx.xxx
on the way up (by 6x6 [TN]) Posted on: Mar 31, 2021 12:12 PM
Thank you JB. The realtor did mention that she just had a lady buyer who got locked in yesterday because the rates are going up. --73.120.xx.xxx
on the way up (by Moshe [CA]) Posted on: Mar 31, 2021 2:17 PM
The government presently is interested in RAISING interest rates in order to stimulate the economy to recover from the pandemic recession. They want to RAISE inflation (target is 2%, February 2021 rate was 1.68%) to stimulate economy. As a result, investment vehicles are down, interest rates are (slowly) rising and the entire economy is hesitant until the recovery picture becomes more clear.
Home interest rates are still relatively low, the home market is limited by lack of inventory rather than interest costs. Ultimately, interest rates will HAVE TO go up to dampen inflation. It is a classical bubble phenomenon.
on the way up (by Bill [KY]) Posted on: Mar 31, 2021 4:11 PM
Itís all going up...wsj article today discussing pricing going up for many household products (general mills, diapers, TP, hormel foods, etc). Corporations arenít stupid.
on the way up (by Ray-N-Pa [PA]) Posted on: Mar 31, 2021 4:19 PM
Typically when interest rates increase, so do Cap Rates on the commercial side of the market place.
Having properties in a trust will allow you buy and sell subject to with ease. When you are selling you are able to "add value" because the of the existing financing package in place was based when rates were super low.
on the way up (by S i d [MO]) Posted on: Apr 1, 2021 9:22 AM
I'm a bit late responding to you but here goes.
T-bills (Treasury Bills) are the form the US Federal Govt uses to borrow money. They are sold at auctions periodically, or when special needs arise...like creating $1.9 Trillion of funny money to throw at a give-away program.
You can find the rates offered on T-bills just by Googling "T-bill rates". They range anywhere from very short term like 3 months out to 10 years (maybe further).
The rates are usually very low because they are considered one of the most secure investments on Earth. This is where you hear the phrase, "The US debt is backed by the full faith and trust of the US Govt." Theoretically, the US Govt doesn't default on t-bills, but in practice they can by allowing inflation and/or interest rates to shoot up.
Think of it like this: if you are an institutional investor like an insurance company with $10 Billion (with a B) cash to put somewhere, what do you want more than anything: security or the highest possible return? A lot of times "security" is the answer. However, if you check current t-bill rates, they stink. Anywhere between 0.06% to 1.87% So how can you get a better return while still maintaining a very high level of security? Bundles of mortgages! These pay anywhere from 2% and up depending on how the bundles are structures. Riskier mortgages pay more. Low risk mortgages pay less, but they still pay more than t-bills.
So, back to our main topic: if the Govt raises interest rates on t-bills, what does that do to the mortgages? They have to also raise rates, or investors will go with the t-bills which are (theoretically) much more secure. To pay better returns, mortgages must generate more interest income. Thus, mortgage rates also tend to go up.
Bottom line: T-bills are sort of the investment with the highest security but in exchange you get the lowest returns. Any other investment must compete in terms of risk and reward. --107.216.xxx.xxx
on the way up (by MikeA [TX]) Posted on: Apr 1, 2021 11:16 AM
1/4% isn't bad in the short term, at most it will create a little frenzy by people trying to lock in a purchase. The real problem is when it raises 1/4% in 2 weeks and does this every 2 weeks for a few months. Interest rate are like a big ship, it takes a while to change direction. Every time it rises, the mortgage goes up a little. It doesn't take long before less and less people can afford it. While the house value might remain the same for a while with higher interest, the payment goes up. The result, people either have to buy cheaper houses or just continue renting. This in-turn slows the housing sales which then creates more inventory which puts pressure on owners to lower their asking price.
On the reverse side, higher interest creates higher inflation. Everything gets more expensive. Those living on the edge now can't afford things like replacing the roof of a house, things fall into disrepair. This has a contracting effect on the economy meaning less spending, increased unemployment until it drives interest rates back down and the up/down cycle continue.
This is basic macro economics. Where the T-bill discussion Sid is referring to comes in is when the Fed, acting as the Captain of that big ship, tries to adjust course using their tools to more of a straight line rather than the wild swings that can happen on their own.
So, what does this mean to us investors? There are different problems at different points in the cycle. On one end, deals are hard to find because everyone is buying, on the other end money to buy is hard to find because of the high interest rates.
on the way up (by WMH [NC]) Posted on: Apr 1, 2021 11:58 AM
No one has mentioned the 2.75% fee that is being attached to second and investment properties by Freddie Mac and Fannie Mae. --50.82.xxx.xxx
on the way up (by Hoosier [IN]) Posted on: Apr 1, 2021 3:00 PM
There are T-bills, notes, and bonds. Bills are a security issued by the Federal gov't that matures in less than a year, sort of like a CD, but backed by the gov't. Notes are the same but are for 2-10 years, and Bonds are anything longer than 10 years...often they are for 30 years.
Rates likely will rise, they have been historically low for several years now. For us it probably doesn't mean much....yet.
What would be more concerning to me is if inflation increases to a high number...this will impact the buying power of our tenants. If everything they pay for increases by 4-5%, they will struggle to continue making rent payments. --99.92.xxx.xxx
on the way up (by Landlord ofthe Flies [TX]) Posted on: Apr 1, 2021 3:58 PM
In the short term, the housing market should increase with the slight raise of interest rates. It's a clear signal that low interest rates have bottomed out and are starting to rise so hurry up and buy before rates go higher. --108.69.xxx.xxx
on the way up (by 6x6 [TN]) Posted on: Apr 1, 2021 4:06 PM
Thank you everyone for the replies. --73.120.xx.xxx
on the way up (by Busy [WI]) Posted on: Apr 1, 2021 6:03 PM
It means, dear 6 x 6, that it is time for you to expand your empire, and double your holdings of rentals.
That is going to be my answer to you on most everything now on. Time for number two, my young friend. ( ps, there is never a perfect time to by another property. But, I would bet, and have read, that most successful landlords just wished they had started sooner, no matter when they started. So, find a deal, add to your herd!) --70.92.xxx.xxx
on the way up (by 6x6 [TN]) Posted on: Apr 1, 2021 6:43 PM
Thank you Busy for the nudge. --73.120.xx.xxx
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