Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 05-29-2009, 11:44 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
I hope everyone is re-amortizing their mortgages for NO LONGER than they had left before, right?
__________________

__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-29-2009, 02:12 PM   #22
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 223
Quote:
Originally Posted by randyman65 View Post
"
Hmmm, well. I disagree with that. I believe that the low rates are making a lot of real estate sales possible, which can only be a good thing IMO."

Not. An artificially low interest rate drives prices higher as most Americans buy the payment rather than the price. Any increase in interest rates will negatively correlate with housing prices. And artificially elevated housing prices make putting a reasonable amount of money down exceedingly difficult, which doesn't affect house traders nearly as much as those buying their first house. Consequently, we've seen no or low down payment mortgages go negative equity almost immediately with rate changes or bumps in localized markets.

You are right on the money Randy. This is a poor attempt by the feds to prop up a failing philosophy about mortgages. The housing prices must reset, but people buy payments, not caring what the cost of the house is. Wait till interestest rates jump to 8% or more (which is not unreasonable). Not too many people can qualify for a 500k house at an 8% mortgage on an average salary.
__________________

__________________
DAYDREAMER is offline   Reply With Quote
Old 05-29-2009, 02:43 PM   #23
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
For what it's worth, long Treasury yields are plummeting today. Could this be the fixed income equivalent of the Plunge Protection Team at work?
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 05-29-2009, 02:46 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
freebird5825's Avatar
 
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,017
Quote:
Originally Posted by Westernskies View Post
First home (1984) was at 10.25% with 2 points
A vast rate difference here for the same year...

First and only home (1984) was at 14.5% with 1 point (credit union).
Refianced within 2 years to 10%, shortened term to 15 years from 20 years.
Still living in that home.
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
freebird5825 is offline   Reply With Quote
Old 05-29-2009, 03:08 PM   #25
Recycles dryer sheets
 
Join Date: Jun 2008
Posts: 145
"You are right on the money Randy. This is a poor attempt by the feds to prop up a failing philosophy about mortgages. The housing prices must reset, but people buy payments, not caring what the cost of the house is. Wait till interestest rates jump to 8% or more (which is not unreasonable). Not too many people can qualify for a 500k house at an 8% mortgage on an average salary."

Locally, rates with 20% down, 30 year fixed are 4.75% with no points and a $1650 fee (credit union). Lets say our theoretical couple who earn $120k combined put 20% down on a $500k house today, and end up with a P&I payment of 2086.50 and a total PITI of about $2900/mo. In five years they want to sell the house and move out of state. Assuming prices, taxes, and wages have remained unchanged in that time (possible), but the interest rate the new buyer can obtain is now 7.5%. To this new buyer who can still only qualify for the same monthly payment as the original buyer, and who puts 20% down, the house would have to be priced at $375k to make any sense to the buyer. The seller would have to either find someone willing to pay more for the house or drop their price. The increase in interest rates, in the absence of a corresponding increase in real incomes, would essentially wipe out all of the seller's equity, and in this hypothetical case the seller could possibly be underwater five years out.

I applaud the return to normalcy in the mortgage market, but many, many people are going to be unhappy that they won't be getting what their houses are "worth". Their houses are worth precisely what someone is willing and able to pay for them, not a penny more.

I can't predict what the bottom of housing prices will look like. With so much theoretical wealth tied up in their primary residence, those who don't need to sell often take their houses off the market until it "comes back". Rather than a steep decline that marks to market housing prices with real incomes, prices may stagnate until real incomes catch up, essentially allowing inflation to catch up to the house price. On the other hand, in markets that were all fluff, and with a lot of lian loans and pay option ARMs, we would expect to even see an overcorrection as the flood of foreclosures and fire sales overwhelms the local market. That is already happening (and will continue to happen) in the worst four states for housing right now (CA, AZ, NV, FL).
__________________
randyman65 is offline   Reply With Quote
Old 05-29-2009, 03:38 PM   #26
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,822
Quote:
Originally Posted by randyman65 View Post
I can't predict what the bottom of housing prices will look like. With so much theoretical wealth tied up in their primary residence, those who don't need to sell often take their houses off the market until it "comes back". Rather than a steep decline that marks to market housing prices with real incomes, prices may stagnate until real incomes catch up, essentially allowing inflation to catch up to the house price. On the other hand, in markets that were all fluff, and with a lot of lian loans and pay option ARMs, we would expect to even see an overcorrection as the flood of foreclosures and fire sales overwhelms the local market. That is already happening (and will continue to happen) in the worst four states for housing right now (CA, AZ, NV, FL).
That is so true. Sellers have to be able to pay off their mortgage when they sell. If the sales price is significantly lower than their mortgage, they arent' going to get enough out of the house to pay off their mortgage and they are stuck. Moving could mean coming up with tens or hundreds of thousands of dollars that most people don't have just around the house in the cookie jar. So, they can't sell at a loss and are stuck between Scylla and Charybdis. What a mess.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 06-01-2009, 04:38 AM   #27
Recycles dryer sheets
Radiophilejapan's Avatar
 
Join Date: May 2009
Location: Tokyo
Posts: 67
Quote:
Originally Posted by Bestwifeever View Post
Any thoughts on whether there will be a corresponding increase in CD interest rates?
I think not, unfortunately. Mortgage rates are long term, and CD's typically short.
Long term rates have been going up as an indication of market fear of future inflation as a result of the government's economic rescue package.
In the short term, the rates will only go up with higher demand for credit for comsumption. My wife has been doing her part but it needs a collective effort.
I'm waiting for the right time to buy CD's also. Around mid next year is my SWAG.
__________________
Radiophilejapan is offline   Reply With Quote
Old 06-01-2009, 08:18 AM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,615
Quote:
Originally Posted by randyman65 View Post
Locally, rates with 20% down, 30 year fixed are 4.75% with no points and a $1650 fee (credit union). Lets say our theoretical couple who earn $120k combined put 20% down on a $500k house today, and end up with a P&I payment of 2086.50 and a total PITI of about $2900/mo. In five years they want to sell the house and move out of state. Assuming prices, taxes, and wages have remained unchanged in that time (possible), but the interest rate the new buyer can obtain is now 7.5%. To this new buyer who can still only qualify for the same monthly payment as the original buyer, and who puts 20% down, the house would have to be priced at $375k to make any sense to the buyer. The seller would have to either find someone willing to pay more for the house or drop their price. The increase in interest rates, in the absence of a corresponding increase in real incomes, would essentially wipe out all of the seller's equity, and in this hypothetical case the seller could possibly be underwater five years out.
Excellent synopsis! Home values are really affected by what the monthly payment will be. Interest rates go down: house prices go up. Interest rates go up: house prices go down.
__________________
LOL! is offline   Reply With Quote
Old 06-01-2009, 05:00 PM   #29
Dryer sheet wannabe
 
Join Date: May 2009
Posts: 24
Another brutal day today for the long end of the curve.
__________________
bsmup is offline   Reply With Quote
Old 06-01-2009, 05:06 PM   #30
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,068
Quote:
Originally Posted by bsmup View Post
Another brutal day today for the long end of the curve.
Translation please...
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 06-01-2009, 05:31 PM   #31
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by REWahoo View Post
Translation please...
The yield curve steepened sharply again today. Mortgage rates spiked again while short term rates on savings are as pathetic as ever.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 06-01-2009, 05:48 PM   #32
Dryer sheet wannabe
 
Join Date: May 2009
Posts: 24
The Chinese (and others) don't trust our ability to pay back our 10 year bonds (or any long term bond) so they are selling them and getting into anything less than 1 year duration.

Bernanke has done all he can on the short end by lowering the feds fund rate to 0%. Bernanke is trying to keep rates low on the long end by buying long term bonds. But too many people want out of the long end and Bernanke can't possibly buy up the entire market.

Demand for long term debt is going down as the trust in the ability to pay back the principle erodes. Interest rates go up. The ability for homeowners to refi, for businesses to obtain new financing and for the government to borrow goes kaput.
__________________
bsmup is offline   Reply With Quote
Old 06-01-2009, 06:13 PM   #33
Recycles dryer sheets
Radiophilejapan's Avatar
 
Join Date: May 2009
Location: Tokyo
Posts: 67
Quote:
Originally Posted by bsmup View Post
The Chinese (and others) don't trust our ability to pay back our 10 year bonds (or any long term bond) so they are selling them and getting into anything less than 1 year duration.
IMHO the Chinese (and everyone else) is concerned about future inflation and devaluation of US$ more than any possibility of default by the US Treasury. With 3/4 Trillion US$ of Treasury bonds, they are a substantial part of the bond vigilantes, but they can't dump the bonds to punish the Treasury. Instead, they resort to verbal warnings, including a potential threat of moving to other forms of foreign reserves. They won't to do it anytime soon as their economy depends a lot on the US market and they can't afford the yuan appreciating over the US$.
__________________
Radiophilejapan is offline   Reply With Quote
Old 06-01-2009, 06:48 PM   #34
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by bsmup View Post
The Chinese (and others) don't trust our ability to pay back our 10 year bonds (or any long term bond) so they are selling them and getting into anything less than 1 year duration.
For better or for worse (probably both), the fates of the U.S. and Chinese economies are intertwined. Right now we need their credit and they need our demand for their goods.

Even if the Chinese lose some faith in the long term prospects of the dollar and the U.S. debt, the bottom line is that if they tried to make a major move out of dollars and out of longer Treasuries, they could well be contributing to a serious economic problem that would KILL their export industry (and possibly fuel a backlash against Chinese goods).

I wouldn't be surprised if they make some modest adjustments to their holdings and continue to "warn" the U.S. about the debt and the spending, but in the end, if China used the "economic nuclear option" in terms of their holdings in dollar-denominated debt it would be the financial version of mutual assured destruction. And I suspect they are rational enough to realize that.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 06-02-2009, 02:21 AM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by ziggy29 View Post
For better or for worse (probably both), the fates of the U.S. and Chinese economies are intertwined. Right now we need their credit and they need our demand for their goods.

...

I wouldn't be surprised if they make some modest adjustments to their holdings and continue to "warn" the U.S. about the debt and the spending, but in the end, if China used the "economic nuclear option" in terms of their holdings in dollar-denominated debt it would be the financial version of mutual assured destruction. And I suspect they are rational enough to realize that.

It just struck me that we have a case of role reversal here. The US is playing the role of economic North Korea, doing stuff that our trading partners hate. But all options stink for China and the other countries that hold our debt. So all they can do is issue increasingly sharp criticisms, threaten us with meaningless sanctions, while gritting their teeth and buying our debt.

It is fun to be the bad boy, knowing that if daddy or mommy spanks you, it truly is going to hurt them a lot more than it hurts you.
__________________
clifp is offline   Reply With Quote
Old 06-04-2009, 04:46 PM   #36
Dryer sheet wannabe
 
Join Date: May 2009
Posts: 24
Up, up and away!
__________________
bsmup is offline   Reply With Quote
Old 06-05-2009, 12:12 PM   #37
Recycles dryer sheets
 
Join Date: Jul 2006
Posts: 214
[quote=ziggy29;820938]For better or for worse (probably both), the fates of the U.S. and Chinese economies are intertwined. Right now we need their credit and they need our demand for their goods.

This Chinese need our demand for their goods thing always puzzles me. Why?

Basically Chinese give us credit to buy their goods, why they have to do that? Or put in another way, why they have to that in dollor?
__________________
semtex is offline   Reply With Quote
Old 06-05-2009, 04:05 PM   #38
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by semtex View Post
This Chinese need our demand for their goods thing always puzzles me. Why?
The reason China is flush with all this cash is because their economy is driven by exported manufactured goods. The continued health of their economy is likely very dependent on continued exports. In order to have a market, you have to have customers with money to buy your goods. Dumping Treasuries and trashing the dollar would be a good way to lose your best customer.

Did you see that up to 50% of Chinese toy manufacturing plants were closed at the depth of the recession early this year? And the shocks we've experienced which led to that is nothing compared to what would happen if China stopped buying dollars and Treasuries.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 06-05-2009, 09:16 PM   #39
Recycles dryer sheets
 
Join Date: Jul 2006
Posts: 214
ziggy29, Chinese is an exported oriented economy, which is a fairy created by media. Recently, the "economist" article finally admits some fact, import/export only influences about 9% of chinese population.

here is basic fact, nearly all manufacture products, or consumption, china is number one, except electric and oil. Why US's GDP is 14T and china is only 4.5T.

Now china is biggest car markets, why we say china is a export oriented country?
__________________
semtex is offline   Reply With Quote
Old 06-08-2009, 09:08 PM   #40
Dryer sheet wannabe
 
Join Date: May 2009
Posts: 24
Do I hear 6?
__________________

__________________
bsmup is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
NFCU mortgage rates wrigley FIRE and Money 0 03-20-2009 05:49 AM
Mortgage Rates Moving Up JPatrick FIRE and Money 36 01-28-2009 04:33 PM
Mortgage rates again brewer12345 FIRE and Money 27 12-19-2008 09:02 PM
Mortgage Rates runnerr FIRE and Money 1 12-02-2007 03:49 PM
Mortgage Rates Arc FIRE and Money 37 03-26-2007 09:21 PM

 

 
All times are GMT -6. The time now is 10:03 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.