LOW Interest Rate VS LOW Purchase Price (Who LOSES In The End?)

One of the biggest arguments for people who bought homes at the top of the housing market is that affordability was still better with a much lower interest rate even though that had to pay higher sale prices. But how does the opposite scenario play out for someone who waited to buy when prices are lower but interest rates are higher?

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[graywilliams_.]

Great video! For 2023, it’s hard to nail down specific predictions for the housing market is because it’s not yet clear how quickly or how much the Federal Reserve can bring down inflation and borrowing costs without tanking buyer demand for everything from homes to cars.

[Bullardicus]

Truck driver here, I have lots of trucker friends and this guy is 100% right. A lot of my trucker friends work for LTL trucking companies that started out offering their drivers to volunteer for days off, then they started cutting over time, then regular hours, and now most of them are lucky to get 3-4 full 8 hour days in a row. Things are really slowing down and a few of them just bought their first homes in 2021 less than 2 years later they are all really struggling to make their mortgage payments and feed their families, an even more tragic reality is that things are only going to worse from here on out for quite some time, and on an even sadder note is they don’t even know it and when they do it’ll be far too late for them. Buckle up folks we haven’t seen nothing yet.

[williamjarvis]

Prices need to come down by 40 to 50% so that people can afford to purchase homes!

[jessicaschwartz]

I’m so thankful to have found someone in real estate who is actually living in the real world. So refreshing.

[sarahm]

I knew this was going to happen and so many told me it wouldn’t. The higher the interest rates climb, the lower the home prices will drop, just like the 80s. History tends to repeat itself.

[basha]

I think John should keep his house, meet Karla, fall in love, Karla sells her house, and marries John. Problem solved. Happy Valentines Day! 💝

[trlaird]

Mike, the amount of info you provide in your videos is unreal. l watch you, Scott, Dan and mindset and you absolutely crush it every vid. The amount of research it takes to provide all this content really shows the amount of devotion and hard work you put into every video. Thank you bro.

[overthehilldill]

I'm a trucker and i can verify that freight is showing down. Tonnage is down about 12% ytd. Expected to get worse. It's going to be a very bumpy ride. Let's get Michael to 1m subs!

[epuchildren]

I prefer a higher rate and low price vs low rate and high price. I could afford to pay off the loan sooner and refi when rates go down. With the latter you cannot do neither.

[rillesttalk]

It’s truly picking your poison. Today’s price cuts with higher interest allows for more future home equity earned; but that depends on one’s ability to maintain their income and credit status(es) to refinance for a lower interest rate. Yesterday’s higher prices with lower interest rates allowed for more square footage and lower payments; but equity growth is little to none because so many overpaid 20-40% above the homes’ true value. If they don’t get you on the front end with the price, they’ll get you on the backend with the interest rates. It’s a game.

[jameskostka]

Listings in Naples Florida are starting to pile up. Middle of summer it will be obvious to everybody the air is coming out of the bubble.

[Falconlibrary]

Interest rates were 7%-8% throughout the 1990s and early 2000s. 30 year rates didn't go below 5% for the first time ever until 2008. 2008-now is an anomaly and now we're resetting to more normal rates. Naturally, prices are going to have to come down and stay down, or houses won't sell.

[jamesdeininger]

Don’t forget that Carla could refinance! John would always owe more on the home.
You date the interest rate, but you marry the purchase price

[TrackedZ]

I disagree with lowering interest rates. Here's why. We will end up in the same situation of inflation again. Investor buyers will just come out of hiding and just begin purchasing again, driving up the cost of homes, and then rinse and repeat. Another wild housing market where homes hit the market and are bought after 1 day of being on the MLS.

We need more structure and policy before the rates do anything except continue climbing to prevent anyone from buying a home. In the 80's and 90's, a mortgage rate of 8+% was common. Totally fine because it kept home prices in check. Everyone who worked could afford something.

The ones who lose with low rates and low prices, will be the lower class. Low rates and low cost isn't sustainable.

[jamesdeininger]

Another note on the SF vacancy fine — 182 days is very specific.
They’re going after property owners who aren’t paying California income taxes.
This is their way of “getting even”

[pablo]

You're spot on that it's better to get a lower price than a lower rate/more expensive home. Flippers don't mind paying those high double digit hard money rates when they know that they are getting an amazingly low price before they begin their journey to flip that property. People who invest know this(except opendoor).

[fornos]

It is better to buy low with high interest, than a high price home with low interest rates. Js.

Great video as always Michael.

[askrealtypro]

Never sell a house! Buy and hold there are many ways to make money on a house without selling even with no equity.

[Hans_Peterson]

I think this issue is a lot more complicated. If John makes an extra $333 payment towards the principal every month so that his payments are the same as Carla then after 7 years johns loan balance is lower than Carla’s and thus has more equity in the home than Carla. If John puts his extra $333 of loose change that Carla doesn’t have into indexed mutual funds, ETFs, and bonds that return 7% annually instead putting that money towards an extra payment on a 2.98% interest loan then he can do even better. Carla only comes out ahead of John if John blows the $333 in mortgage payment savings on stupid things like a nicer car.

[toddygallent]

In 2010 my interest rate was 4%. In 2015 my interest rate was 2.67%. In 2020 my interest rate was 2.1%. I have been paying down my mortgage as much as possible. In 2025 I will pay off my mortgage. I live very frugally so I can be mortgage free in 2025