Whats Up With Mortgages and Real Estate


Well, it's been a crazy year pandemic thousands of businesses closed millions of Americans, unemployed. The stock market is still up for the year at least so far your portfolio may not be your only acid or even your biggest asset fact according to Edward Wolff nyu economist. For the bottom eighty percent of Americans in terms of assets. Their number one asset is their home about sixty percent of their net worth is in their house. So, how has residential real estate fair during the virus crisis and how might that change in the future here to help us answer those questions is Jeff Strauss, key senior writer and analyst at Bankrate Jeff welcomed the Motley fool answers. Hey, bro thanks for having me. So let's start with the current state of the house in the housing market. Let's get to the numbers. How have prices been holding out during the recession was surprisingly really well, prices are still going up and I. Think I like a lot of people that fill victim to the whole recency bias flaw. That the last time we had a recession home prices just absolutely collapsed. We had fifty percent drops and values in many parts of the country and so back in March when we started going into recession again I think I know a lot weather's thought. Oh, here we go. Again in terms of home prices and that really hasn't happened home prices have held up home sales are down but if you were people have put their houses on the market and so the supply and demand curve has just shifted. So we've got basically more buyers than there are houses for sale. So we're seeing a lot of bidding wars I keep hearing these tales of a nondescript. House getting thirty and forty, and even fifty bids over a weekend. So home prices have held up surprisingly well, they're still going up part of that is because we've got record low mortgage rates and people have more buying power and then part of it also is just that the pandemic has really changed. Qui Bowls thinking about housing I mean if you're going to work earned, your kids are going to school in your house very much. You can make do with less space but now the that were crammed into to one space and people are working from home and taking classes from home it's You suddenly start to think, Hey, I could use a bigger house. You got a couple of interesting points that I. Let's start with mortgage rates. Crazy low. Thirty year mortgage thirty year fixed is around three percent little bit above little bit below dependent where you look. Fifteen year bit below that. One interesting thing I've noticed though is normally the adjustable rate mortgages are the lowest. But from what I've seen there at the same as a thirty year fixed or even a little higher what's going on with fat? Yeah. That is a weird situation and it's funny that you mentioned arms because it seems like nobody really pays much attention to arms anymore with with fixed rate mortgages being so low for. So long at as you said, they're in the the three percent range or even below for thirty year fixed but they've they haven't been much above that the past decade I am I think they briefly spiked up to around five percent but. When fixed rate mortgages are so low it's in they've stayed consistently low. People just sort of You know lose interest in arms. So it's that's part of it. Part of it is a just that there. There aren't as many lenders offering arms, and so there's there's less. Less apply less widely available so that that probably has something to do some of it also is that the without geeking out here too much but the rates were were based on Libor the London interbank offered rate for a long time in libraries going away at a new indexes coming in so that that might have something to do with it. and then in in times of economic uncertainty, we we do see this this pattern where arms suddenly get more expensive than fixed rate mortgages but you know it's intriguing. I talked to a lot of consumers a lot of. Lending officers lot at mortgage brokers. Nobody's talking about arms they're all talking about. The thirty year fixed and they're they're talking about how many points should you pay? Should you do a thirty or fifteen ten? What's? What are the advantages of different types of of fixed rate mortgages and? That just seems like an arms have been sort of forgotten. They were hot thing fifteen years ago but I almost never hear anyone recommending God's

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