Mortgage Rates Lowest on Record.
Is anyone else seeing a shortage of rentals? I think in Northern Virginia we are now seeing that mortgage payments are lower per month than renting, at least for single-family houses.
Case in point:
Warrenton, VA $2,500 asking in rent, which is close to going rents for this type of home.
In this neighborhood, the asking price is $450K for this house, although that is about 50K higher than some comparable listings. With a 4% mortgage, the price is close to renting.
Thursday, June 24, 2010
Mortgage Rates -- Lowest on Record
Posted by Harriet at 11:03 AM
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16 comments:
Harriet-
I agree I have made a couple of comments in the past about how comparatively there is very little inventory in the further out suburbs (because the price point has been met.) So in these areas renting vs. buying is comparable. For most of the areas closer into the city renting is still substantially (~20%+)cheaper than buying.
Are you friends able to buy? In areas that have been ravaged by the housing downturn it is probably a good time to buy.
I'm going to have to agree with housebuyer. Rent on a two bedroom apartment in Tysons Corner is a much better deal than the mortgage & condo fees on a two bedroom condo here. I don't think there is much housing stock with a reasonable commute that is at rental parity. Reasonable to me is 30 minutes because you know it will get a couple minutes longer every year you live there.
Warrenton?
Anyone on this blog looking this far out?
I thought I was the "outcast" one looking in Loudoun & Northern PWC...
Ever wonder what happened to the foreclosures from the last two years?
Fannie Mae has a delaying tactic. They have a deed for lease program where you can rent back your property from them at the current market rental rate. Here is a Link. So, instead of a walk away home that gets stripped, you have a home that is being lived in by the previous owner. The lease is for one year and that could extend for many more if you read the tea leaves.
This program delays real estate from hitting the market in the form of a foreclosure. The inventory is eased into the market gradually instead of all at once. This is the hidden inventory that everyone talks about.
I'm surprised no one has commented yet on the new record low mortgage rate story: Mortgage interest rates fall to record lows
Maybe the article is right when it states
interest rates have no effect on buyer psychology anymore.
We're so used to it that no one cares anymore.
Contrarian-
I agree with the article inventory is being held of the market and will continue to be held off the market for a very long time. This way the fact that houses are being made slower than households can slowly eat up the excess inventory over 5-10 years.
Jeremy-
I thought about posting the article and giving Robert props since he was the one who claimed rates could continue to fall (although I think Robert is no longer posting, because he was wrong about prices). The article has a good point that rates are low and will be low sure its a little exciting that its a new low, but is there really that much of a difference between 4.75% and 5%? If we can get rates way lower I will be interested aka 3.75% rates, otherwise its just a continuation of ~5% rates we have seen for 18 months
will the reverse be true? will rising interests rate also have no effect on buyer psychology anymore?
Even if rising rates didn't affect buyer psychology, they certainly would affect the size of a loan that many buyers would actually qualify for.
MM & Jeremy-
As long as rates stay between ~4%-6% I don't see it having a huge impact. This is obviously a huge range of mortgage rates, and I expect we will stay in this range for several years. If we break out of the ranges I think it may have a change in psychology
Housebuyer,
My friends are not able to buy - their last house foreclosed two years ago.
Thanks for the input about the closer-in areas regarding renting. I haven't compared those as much. They are looking for SFHs because there are six in their family and they would like a yard for their kids if possible.
interesting-we pay $2400 to rent a house worth maybe 675ish (in Arlington), so that's definitely not even close.
Harriet-
I agree with VA that there are a lot of people who will want to move as the school year ends, so they should just keep at it hopefully they can find a good house to rent :)
Meshell,
There is always a trade-off between location and cash-flow and many renting out the more expensive, close-in locations are counting on appreciation.
If you have a great location, you expect greater appreciation. Some have owned long enough that the numbers are ok with them. Others bought at the peak and are getting what they can for rent. While the negative CF is painful, they believe it a bad time to sell and actually realize the loss.
As an investor, I would not buy expensive properties to lease out. A good number of LL's in new condo's are there by default - a planned flip did not work because the market tanked quickly. It was almost like a light switch on many of those condo's. I'm sure many, many regret the fact that they actually closed rather than "walk" on their deposit.
That said, it's never (IMO and experience) made financial sense to lease out relatively expensive properties. For example, a 600K property may rent for 3K while a 200K property may rent for $1,500+. I've seen <150K TH's go for $1,400 and I'm not talking about old stuff in marginal areas.
Rental demand is good now, but it's impossible to get a decent return on pricey rentals.
Re interest rates, I'm a potential first-time buyer who is holding out for a couple of months. For one, I tend to agree with housebuyer re difference between 4.75% and 5%.
I know that I'm naive (one of the reasons I'm here -- trying to learn!), but I've been thinking that loss in buying power from any potential increase in rates might be offset by lower prices a lot of commenters seem to be thinking are on the horizon. Am I way off base?
Act Boldly-
I agree that house prices will likely trend lower in the near term. I personally think the economy is starter to look a lot weaker recently. Europe is starting to cut back on the easy money policies to quickly, which is starting to cause some weakness in the here. Obviously the 8k credit pulled forward a lot of buyers so now that it is gone I think we will see less competition as buyers, which should pressure prices lower. I don't think we will see 20+% drops like we saw over the last 3 years, but I think 5% is extremely likely and 10% is very possible.
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------------------------hollowman
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