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IPFS News Link • Housing

Rate-Hikes Jeopardize Much More Than Just American Home Ownership

• https://www.zerohedge.com, by J.G.Collins

That's largely true. The price and "value" of homes for the overwhelming majority of homeowners is a function of home buyers' ability to make payments.

And with the Federal Reserve signaling further interest rate hikes, home buyers and sellers—and assorted others who use credit—will incur knock-on effects from those increases.

The low rates of the last several years, together with additional money creation from the Fed and other reckless fiscal and monetary policy, have led to an extraordinary increase in home prices, particularly as a consequence of the CCP Virus becoming pandemic.

In just 18 months, median home prices surged 26.5 percent, from $322,600 at the end of the second quarter of 2020 (or "2020Q2") to $408,100 in 2021Q4.

That price surge, together with the higher interest rates the Fed promises now, makes a huge difference in buyers' options and their monthly payments.

Let's compare mortgage payments for the $322,600 in 2020Q2 and the $408,100 in 2021Q4 using a 20 percent down-payment and the 30-year conventional mortgage national average interest rate, and take no account of points or property taxes.

If one bought the property at the end of 2020Q2, the mortgage carry charge on that loan using the national average 30 year 3.07 percent interest rate that was in effect at the end of 2020Q2, buyers would make a $64,520 down payment and make required monthly payments of  $1,097.84.

If one bought the property at the end of 2021Q4, the mortgage carry charge on that loan using the national average 30 year 3.11 percent interest rate that was in effect at the end of 2020Q2, buyers would make a $81,620 down payment and make required monthly payments of  $1,395.90, or 27 percent more than in 2020Q2. 


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