Yippee, higher interest rates!

[Silent Warrior]

How the eff am I going to buy a house with interest rates going up like this?

Talk to a boomer. Back in the 70s RE rates were often 12% and higher, yet houses were bought and sold constantly. Of course at that time simple passbook savings accounts carried a rate of 5%.

 

[Toro]

I'm looking at annuities as well. Some A rated companies are offering 4 percent now.

Edit: Annuity rates on this chart are lower than last week. Maybe they've borrowed all they need and are cutting rates back.

Today's Best Multi-Year Guaranteed Annuities (MYGAs) — ImmediateAnnuities.com

Multi-Year Guaranteed Annuities (MYGAs) - What they are and how they work, plus use the online Multi-Year Guaranteed Annuity Rate Table to get Instant Annuity Rates.

www.immediateannuities.com

Don't go into annuities. They're a rip-off.

 

[Toro]

Have a good credit score, put down at least 20% and you will be fine

The amount of square footage per dollar of mortgage expense has fallen by ~25%. This will have a dramatic effect on the housing market.

I'm not sure if it will effect actual demand, since there is a shortage of houses. What might happen instead is that people could start looking for smaller houses.

 

[Woodznutz]

Don't go into annuities. They're a rip-off.

MYGA's are similar to CD's except they're not FDIC insured, and offer higher interest rates.

 

[Toro]

MYGA's are similar to CD's except they're not FDIC insured, and offer higher interest rates.

I work in investments but on the institutional side. Mac works in retail.

Mac1958

What do you think of annuities?

 

[Mac1958]

I work in investments but on the institutional side. Mac works in retail.

Mac1958

What do you think of annuities?

MYGAs may do very well here for a while. Right now you can get around 3.75% for a five year. But they're like a CD, where you're locked in.

There's the fixed indexed kind, but your surrender period is 7-10 years and you're only going to average around 4% to 5%, maybe. Bleh.

These things REALLY depend on the individual and what they need. I can see them as a substitute or partial substitute for fixed income, and only if the investor is risk averse. And also, if bond yields are peaking soon, regular bond mutual funds will do VERY well, and they're fully liquid.

 

[Harpy Eagle]

What might happen instead is that people could start looking for smaller houses.

I thought this was the trend a while ago but then they keep building these huge houses around here. No idea who is buying them.

We looked for an existing house when decided it was time to downsize with the kids out of the house and smaller homes that are not really old and terrible styles are hard to come by.

While looking at a different house we drove by this street with a couple of houses being built and about 12 already done. They were just what we were looking for, everything we need on the main level and then a walkout basement that is open enough to have 4 windows plus the door to the patio. The slab was already down and we got to pick all the inside details. And now we just have to wait for it to be done.

 

[Toro]

MYGAs may do very well here for a while. Right now you can get around 3.75% for a five year. But they're like a CD, where you're locked in.

There's the fixed indexed kind, but your surrender period is 7-10 years and you're only going to average around 4% to 5%, maybe. Bleh.

These things REALLY depend on the individual and what they need. I can see them as a substitute or partial substitute for fixed income, and only if the investor is risk averse. And also, if bond yields are peaking soon, regular bond mutual funds will do VERY well, and they're fully liquid.

Personally, I would avoid fixed income mutual funds. I've told people that for most of my career because of what's happening here. I would own actual bonds however.

Prices of FI mutual funds and ETFs are pools of capital that never expire, unlike a bond. In theory, if rates kept rising, you would never be made whole.

 

[Mac1958]

Personally, I would avoid fixed income mutual funds. I've told people that for most of my career because of what's happening here. I would own actual bonds however.

Prices of FI mutual funds and ETFs are pools of capital that never expire, unlike a bond. In theory, if rates kept rising, you would never be made whole.

It depends on the sophistication level of the client. I have a weird fascination with fixed income funds and all their flavors. Obviously you can't time anything, but I've had some success with minor timing. But you don't need home runs on that side, just mitigation.

Strangely enough, my models are comparatively static on the equities and more flexible on fixed income as a result.

 

[AzogtheDefiler]

When I bought my house back in 1982, I assumed the sellers mortgage at 9.5% and took a second to cover the difference at 16%.

You’re old

 

[Woodznutz]

MYGAs may do very well here for a while. Right now you can get around 3.75% for a five year. But they're like a CD, where you're locked in.

You can withdraw 10 percent each year without penalty if needed. However, the way the annual interest rates of the MYGAs are structured this may reduce the overall rate of return.

 

[Mac1958]

You can withdraw 10 percent each year without penalty if needed. However, the way the annual interest rates of the MYGAs are structured this may reduce the overall rate of return.

Yeah, it decreases income on the fixed indexed annuities, for example.

They have their place, since everyone is different. The fixed indexed flavor has been badly oversold, though. They don't require a securities license to sell, just an insurance license. So the insurance guys try to cram everyone into them, overpromising on performance.

If you understand what you're getting, they can be fine in their place.

 

[HenryBHough]

Holy shit, where do you live? I am paying a bit over $160 a sqft. and that was with us upgrading the master bathroom

The hunting camp I was thinking to build is in a very remote location accessible only by small barges. There is an airstrip but not long enough to land anything heavy. I won't say exactly wear because the most recent to build here are extreme liberals from Oregon. They didn't balk at the price so I'm guessing they're on the public payroll and used to overpaying. But I do fear their identifying me because they, despite their anti-gun rants, are well armed and given to emotional outbursts in which they fire at random moving objects.

 

[Harpy Eagle]

The hunting camp I was thinking to build is in a very remote location accessible only by small barges. There is an airstrip but not long enough to land anything heavy. I won't say exactly wear because the most recent to build here are extreme liberals from Oregon. They didn't balk at the price so I'm guessing they're on the public payroll and used to overpaying. But I do fear their identifying me because they, despite their anti-gun rants, are well armed and given to emotional outbursts in which they fire at random moving objects.

I fully understand, was just wondering the general location. But that does makes sense being so remote that cost would be far greater.

 

[JohnDB]

They need to be very very careful...
Raising interest rates to counter inflation is not always going to work...if anyone remembers the Carter Years...it was a disaster we seem to be heading back into.

It took a decade to recover from his presidency. (Of course Clinton took credit for it)

An overly strong currency causes deflation which is a precursor to hyperinflation. Like triple digit inflation.

Sure it's helping the current inflation...but it can only do so much. Otherwise it's a disaster.