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Mortgage rates have risen past 5%. Now what?

Real Estate for Social Good

Recently in the LA Times.

“The reason home prices declined as much as they did when the early 2000s housing bubble popped was because a wave of forced selling — through foreclosures and short sales — brought down the entire market. 

This time around, loan underwriting has been far stricter, with less-exotic debt structures, leaving owners less vulnerable to changes in personal or macroeconomic conditions such as job loss or rising rates. 

That means even in the case of a recession, there would be fewer forced sales and smaller price declines, said Ralph McLaughlin, chief economist with real estate data firm Kukun. 

In today’s environment, price declines would probably need to follow at least two years of rising inventory and falling sales, according to Logan Mohtashami, lead analyst for the trade publication HousingWire. 

That’s a long ways off.

Southern California home prices might fall 1% or 2% on an annual basis if rates rose to 7% or 8%, McLaughlin said. But for prices to fall meaningfully — 4% or more — he said it may take not only 7% rates at a minimum but also an economic downturn and a restrained government response in which Washington doesn’t step in quickly to help homeowners avoid foreclosures, as it did throughout the pandemic.”

https://enewspaper.latimes.com/infinity/article_share.aspx?guid=9d4f15ae-60ef-4dd0-887e-960829eaa024

But then you are buying a house that may have fallen 4% in price, but you’re paying 7-8% interest. Your monthly payment might stay the same (or higher) than if you just bought now.

This is why I think trying to time the market and wait for prices or rates to change could end up backfiring. If you are able to buy and hold long term, it makes sense to lock in today’s home prices.

#buyahouseinLA #realestate #realtor #realtorsofinstagram #homebuying #equity #losangeles #losangelesrealestate #realestateagent #FIRE #financialfreedom #investing #househack #househacking 

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