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Mortgage rates go up again
Old 05-28-2009, 04:17 PM   #1
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Mortgage rates go up again

Apparently, the mortgage market locked up yesterday with rates going up. Lots of refinancers are apparently out of luck unless the rates go down again.

Mish's Global Economic Trend Analysis
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Old 05-28-2009, 04:23 PM   #2
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I tend to read Mish's blog and I find it enjoyable, thought-provoking and often spot-on, but I think he tends to be overly gloomy and he finds a way to spin every positive piece of economic news into a negative.
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Old 05-28-2009, 04:36 PM   #3
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Yesterday was a very bad omen. Artificially low mortgage rates have come to an end. No one wants the long bonds and everyone wants the safety of the short end. This is the weed-killer for all those green shoots.
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Old 05-28-2009, 04:44 PM   #4
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I got mine already.... and moved into the new house...

Now, my sister is still hanging out with only two days left on her lock... and they have been stalling for the last week... hope it closed today...
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Old 05-28-2009, 04:56 PM   #5
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Originally Posted by bsmup View Post
Yesterday was a very bad omen. Artificially low mortgage rates have come to an end. No one wants the long bonds and everyone wants the safety of the short end. This is the weed-killer for all those green shoots.
Yes, it does look worrisome. I'm trying to figure out what the consequences might be but I'm just spinning my mental wheels. I hope that the stock market doesn't tank again.

Here's more analysis
http://www.nakedcapitalism.com/2009/...-thinking.html
"The move up in yields isn't simply a problem for companies that might have wanted to raise longer-term funding in the newly optimistic environment; it's a huge spanner in the works for the Fed's efforts to keep mortgage rates artificially low. Recall that while the Fed has been intervening in the markets, it has gone to great lengths to stress that it not doing quantitative easing, but influencing spreads. But with the long bond at 4.65%,, it can't keep yields on mortgages as low as it wants them to be (not much north of 5%). "
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Old 05-28-2009, 05:04 PM   #6
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I've learned that trying to figure out long term trends from all the short-term volatility just gives me a headache. My "defense" is to try to diversify to survive as many possible economic trends as possible and hope for the best. It won't provide me world-beating returns, but it's also less likely to ruin me utterly.
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Old 05-28-2009, 05:12 PM   #7
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I'm supposed to sign my refi papers tonight. The rate lock is long gone. No idea what the rates and points will be now. This should be interesting. I signed up for 4.375% with about 1.7 points on 3/26/09 with a 30 day lock. That offer has been pretty stable up until yesterday (5/27/09). 5/26/09 they offered 4.375% for 1.8 points. Yesterday they wanted 3.963 points for 4.375%, or my original 1.7 points were good for about a 5% rate. This morning 4.75% was the lowest rate showing and they want 1.7 points for that. A little less than that right now.

So, depending on when they finalized the papers, my rate could be anywhere. If it's at the top of the spike I'm not going to sign. I'll have to think about 4.75%. That's still historically nice, and I feel pretty much like the bond market does. Only an appraisal and a subordination fee sunk so far.
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Old 05-28-2009, 05:24 PM   #8
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Low interest mortgages does nothing to solve the long term picture. Sure, it allows the current home owner to more easily afford the current "expensive" mortgage, but unless rates stay low forever, future buyers will not be able to afford the expensive house prices when rates go up. I guess if our economy goes into Hyper inflation, Mortgage mess will be solved!
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Old 05-28-2009, 08:58 PM   #9
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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.
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Old 05-28-2009, 09:06 PM   #10
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Low interest mortgages does nothing to solve the long term picture. Sure, it allows the current home owner to more easily afford the current "expensive" mortgage, but unless rates stay low forever, future buyers will not be able to afford the expensive house prices when rates go up. I guess if our economy goes into Hyper inflation, Mortgage mess will be solved!
In the long term, true. In the short term, it helps. In the intermediate term, a gradual transition from historically low mortgage rates to relatively average/inline rates would probably be the best outcome.
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Old 05-28-2009, 09:28 PM   #11
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Came back from France in time for 4.75, no points; just moved in. This LBYM is great.
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Old 05-28-2009, 09:28 PM   #12
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Quote:
Originally Posted by DAYDREAMER View Post
Low interest mortgages does nothing to solve the long term picture. Sure, it allows the current home owner to more easily afford the current "expensive" mortgage, but unless rates stay low forever, future buyers will not be able to afford the expensive house prices when rates go up. I guess if our economy goes into Hyper inflation, Mortgage mess will be solved!
For some perspective, I bought my current home in 2000. Rate was 8.25%...
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Old 05-28-2009, 09:47 PM   #13
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For some perspective, I bought my current home in 2000. Rate was 8.25%...
My first purchased home was a small condo in San Jose in 1989. The rate? 11%.

We refi'd it twice -- to 8.25% and then to 6.375% -- before selling it in '97.
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Old 05-28-2009, 10:00 PM   #14
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First home (1984) was at 10.25% with 2 points
Second Home (2001) was at 7.25% with no points
Third Home (2001) was at 6.125% with one point
Looking at ~5% this time around... a half-point rise isn't a big deal, since we are looking at repos/foreclosures/ bank owneds at 50-60% of appraisa/lender value... still a great time to buy a house.
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Old 05-28-2009, 10:05 PM   #15
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Any thoughts on whether there will be a corresponding increase in CD interest rates?
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Old 05-29-2009, 09:58 AM   #16
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Yes, it does look worrisome. I'm trying to figure out what the consequences might be but I'm just spinning my mental wheels. I hope that the stock market doesn't tank again.
The grim consequences:

1. Lower home values as more buyers become priced out of the real estate market (yes, even lower than current prices).
2. More company failures as the cost of borrowing goes up. Many companies are already having trouble raising funds, higher interest rates will accelerate this problem.
3. The consequences for your investment portfolio are as follows: stocks lower, all but the shortest term T-Bills (avoid all corporate, agency and municipal bonds) lower, commodities lower. Moral of the story: get into short term T-bills.

Think return OF capital and forget return ON capital for a while. The value of your dollars will appreciate relative to all other assets classes which is the same thing as getting earning interest.
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Old 05-29-2009, 10:03 AM   #17
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There was a time when I would make light of these 'gloom and doom' posts. Now I find myself thinking, "That won't happen...will it?"
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Old 05-29-2009, 10:23 AM   #18
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There was a time when I would make light of these 'gloom and doom' posts. Now I find myself thinking, "That won't happen...will it?"
Same here REWahoo . But when faced with reality one can adapt or ignore. Unfortunately, people are finding it harder and harder to ignore.
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Old 05-29-2009, 11:36 AM   #19
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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.
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Old 05-29-2009, 11:40 AM   #20
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I'm supposed to sign my refi papers tonight. The rate lock is long gone. No idea what the rates and points will be now. This should be interesting. I signed up for 4.375% with about 1.7 points on 3/26/09 with a 30 day lock. That offer has been pretty stable up until yesterday (5/27/09). 5/26/09 they offered 4.375% for 1.8 points. Yesterday they wanted 3.963 points for 4.375%, or my original 1.7 points were good for about a 5% rate. This morning 4.75% was the lowest rate showing and they want 1.7 points for that. A little less than that right now.

So, depending on when they finalized the papers, my rate could be anywhere. If it's at the top of the spike I'm not going to sign. I'll have to think about 4.75%. That's still historically nice, and I feel pretty much like the bond market does. Only an appraisal and a subordination fee sunk so far.

I got the 4.375% rate and points with papers signed last night. Just need to wait through the money transfers. I was told the martgage was already purchased by GMAC.

I'm thinking that's the bottom of the mortgage interest rates, but I'm not sure I'd read too much into a spike and small step up in rates.
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