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Do all those ARM's blow up the economy?

Do house prices fall, lowering taxes, which fucks City/County/State budgets?

ELI5, what would a 1-2% raise in the interest rates do to US housing?

Do all those ARM's blow up the economy? Do house prices fall, lowering taxes, which fucks City/County/State budgets? ELI5, what would a 1-2% raise in the interest rates do to US housing?

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[–] • 1 pt (edited )

Unless you have cash you're not in any better position. Sure, the purchase price is lower but the savings all go to the bank in the form of interest. Your payments are the same for either price. You will also have to wait longer to enjoy some equity because interest rates will be weighing down housing prices. At 10% interest real estate prices have to increase at more than 10% just for you to break even when you sell your house.

[–] • 2 pts

Yes, in this scenario you can assume cash flush waiting to pounce.

[–] • 1 pt

If inflation hits like the 1980's your money will lose half its value in 5 years.

[–] • 1 pt

If you're buying a house cash for half price, does it matter if the cash you no longer have is half value in 5 years?

[–] • 0 pt

Of course you're in a better position. The fed will eventually have to lower rates then you refi with a smaller payment, then wait for prices to rise again because interest is lower.

[–] • 0 pt

Until the crash of 2008 mortgage rates of 6.5% were considered good. That means you're probably looking at rates in that range for a couple of decades after having them above 10%.