US Housing Market: will it ever correct?

[Usury]

For reference,
using a 3.5% interest on $300,000 mortgage

A 30 then 40 then 50 yr amort

from a 30 to 40, saves a couple hundred a month

from a 40 to 50, saves a hundred a month,
but from the current std 30 to a 50 changes the pymt about 300/month

very very roughly
one would need $57k annual income to qualify for that $300k mort with normal down payment

for the 40 year, $49k annual income

for the 50 year, $45k

and of course, all the add ons are not factored in to the calcs,
prop taxes, HOA's, utilities, other debt, change in rates and so on



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Rates will not be the same though. Longer term = more risk and therefore higher rates. Just like 20 yr is lower than 30 and 15 is lower than 20, so will 40/50 be much higher than 30. Years ago when they offered a 40 yr term, the rate was enough higher that the payment savings was almost nothing…like 20 or 30 per month for most. So little difference that it should be criminal to offer them IMO.

 

[Voodoo]

I think you might be approaching the question backwards.... You ask will home prices go down in FRN's? Then will demand continue, ie causing the rise?
Our market has reached a really interesting intersection, prices continuing to rise but not as much as goods and services. They had been leading G & S for the two prior years. This is due to the biggest obstacle which is who is going to pay to push prices to the next level? Look at your home, check recent closed comps near you on similar florrplan and condition, if you're not sure use brillo but assume it is not accurate. Then pull up a mortgage calculator and put that value as the loan amount, add in yearly taxes and insurance, also add in PMI as 100% loans require it. This gives you an accurate estimate of rental monthly comparison. Then check what a similar size home in your area rents for, then you'll be able to see if your market has topped. Once the cost to buy 100% with PMI gets near rental rates the market freezes for all but the chosen few and the dregs... the chosen few push the market top but are long since past the lower levels....

So will prices fall? not sure but the market is definitely slowing and qualified buyers are getting frustrated and tapped out....while cost of all other goods are eating up their excess cash. Something has to bend or break.... my money is on break

An odd approach to getting rental values. Around here, Rents are far higher than the market value of the homes. Lots of older bungalows that were selling for $40-$60k that rent for $500-$600 / month

 

[Voodoo]

Scorp laid it all out.... extending terms might give it a boost. But a couple hundred saving will be eaten up by the end of the year in goods and services. Never in my lifetime have we needed the next big thing like we do now....... Flying cars, teleportation, end of disease, magnetic home power sources, mysterious ways to renew the oceans and sky... Something to be the backbone and leader into worldwide growth. That'll kick the whole thing to new levels

Let me propose doing away with Governments...

 

[BackwardsEngineeer]

An odd approach to getting rental values. Around here, Rents are far higher than the market value of the homes. Lots of older bungalows that were selling for $40-$60k that rent for $500-$600 / month

Hey VD,
Thats how we work the numbers here, not sure how else to get house payment vs rental comparison. Our market is slowing getting stuck, even though we continue to see extremely high interest from out of state clients... Where are you still seeing 60k properties? Showed some in the low 300's and they honestly were 5 gallons of gas and a pack of matches homes.....

 

[Fiat Metaler]

You make it sound like all these entities are independent of each other, just because they're made to appear that way.

To the contrary; I agree with you. Just because the banks sell the loans quickly to Fannie and Freddie does not mean that they don't all have aligned interests. Its usually the front line banks that service the loans for Fannie and Freddie too. Its one big integrated system.

 

[Hivemindgammahydra7]

My sincere thanks to all of the members who took the time to vote and post the very insightful replies. Both are much appreciated!