Holy cow on the 800k reserve!!! Geez if I had that, I’d be flipping houses. Sheesh.
That said, who cares about the rate hike? Just means that you should get a house at a lower price, and if you pay it off faster, you’ll save money in the long run. I see high interest rates as a means to a faster payoff.
Not sure if I understood what you meant by “Higher rates -> faster payoff”. For first time home buyers, 4.2% rate doesn’t feel all that high, compared to us who locked in at 3%. It’s all relative
The rate hikes impact where you can afford though. These guys are already maxing out on their DTI. If the difference between MV and Sunnyvale is 200k, that’s ~$843 difference at 3%, which “feels” not that much (not as bad as HOA in SF condo! ). With 4+%, that’s >$1000, which “feels” much more.
I agree on your reaction to 800k reserve. What troubles me is that there are some uneducated financially illiterates who left their entire net worth in RSU. Bad quarter at Apple, there goes 10% of their net worth. Sheesh…
No risk no gain. At one time, AAPL represents 90% of my net worth for many years, suffers through a few crashes of 50%-90% decline in value. 10% decline is nothing. If you’re worried about 10% decline, then you shouldn’t invest in stocks. Btw, I’m in AAPLs since 1997 upon return of SJ, basis of the stock bought in 1997 is a few pennies.
Slightly different scenario but I accept what you’re saying. But I still wouldn’t hold all my net worth in 1 rsu while 1) looking to buy a home in next few yrs, 2) while renting, 3) and all my paycheck is coming from the very same company I’m holding my RSUs from.
My guess is this one.
The description was “newly remodeled Eichler home near highway and school (not desirable location according to OP)”.
Base on the description, this one matches well.
I noticed that this area is more like Los Altos than Sunnyvale although it is technically in Sunnyvale.
Very large lot and spacious house.
However, isn’t this neighborhood too close to highway?
I theory (a theory which I grant could apply everywhere except in the Bay Area where RE is a magical creature seen nowhere else), a higher interest rate simply means a lower house price because buyers (if they’re not paying all cash), only have a certain amount to spend. The higher the interest rate, the lower the house price they can afford for the same amount of dollars.
If that is the case, then the overall $$ amount that needs to be paid off will be lower, and if you can aggressively pay off the house, you can do it faster.
For example, I’d far rather buy a $700K house with a 20% interest rate (which btw would be more tax-deductible), than the comparably higher house $1m? $1.2M? at a 3.5% interest rate.
Only that has NEVER happened. That’s because rates are a lagging indicator of inflation. You can’t get inflation without wage growth. Wage growth means people can afford a higher monthly payment. Plus, inflation means home replacement costs are going up, so home prices go up. People that don’t buy because they think prices will go down when rates increase are just pricing themselves out of the market.
This has been the case for a long time but… still work? Fed rate has been kept artificially low i.e. lower than inflation rate, for a long time, presumably the reason is to reduce the debt load of USG. This causes an asset (especially RE) inflation. In layman’s perspective, fast appreciating residential property’s prices and low 30-year fixed interest mortgage. Now that Fed and mortgage rate is creeping to what it should be, would the effect the same as what you said? Frankly, I still can’t get it clear in my mind.