We visited Costco to fill up our two cars, this was the smaller of the two fill ups, the other one was $124. Prices for gas are really sitting in the record territory about a month ahead of the midterm elections.
Normally this would be a pretty bad situation for the incumbent party, however I am not sure that the gas or the increased prices on everyday items are going to make any difference this time around.
We also did some shopping at Costco itself and we didn't even fill up the cart and it was four hundred eighty dollars. It used to be that Costco was called a hundred dollar store, because you could not leave it without spending at least a hundred dollars.
These days I feel that it has become a two hundred fifty dollar store. And it is like that with almost everything else with the exception of the real estate.
The real estate in Seattle area seems to be down about twenty percent from the top. And the reason in my mind is the interest rates on mortgages. The rates bottomed out at about 2.75% for the fixed thirty year mortgage. I used to pay around three and a half thousand dollars every month for my six hundred thousand dollar mortgage.
These low rates caused a huge run up in the real estate prices in our area with a house that cost eight hundred thousand dollars in 2012 being worth around two and a half million dollars in 2024.
With the dramatic rise in real estate values the cost of property taxes was just as dramatic. The homes that were around five thousand dollars in property taxes in 2012 are now being taxed at around twenty thousand dollars in real estate property taxes.
Home insurance costs are up dramatically as well. So with higher monthly mortgage payment due to mortgage rates more than doubling and property taxes and insurance the home prices became simply un affordable to everyone except those with a lot of equity.
But even if you have equity you still probably cary a mortgage on your house so if you sell a home with a mortgage on it you are going to more than double your mortgage on an equivalent priced home because you are going to loose your old 3% rate and your new rate is going to be over six percent.
And then there are transaction costs for selling your home of around ten percent. And moving costs so no wonder prices are falling and inventory is increasing. Real estate is dead until we get four percent or lower rates or house values drop enough to account for higher mortgage rates.
Mortgage rates are unlikely to fall any time soon with federal reserve raising rates, so the more likely adjustment is a further downward correction in house values.
Housing is a major driver of American economy, so it is unlikely that we are going to feel good about the economy until house prices start growing again...
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