"But lower rates won't stop the slide in house prices; the coming house price declines are inevitable."
True, to a degree. The tighter standards on mortgages will limit the number of buyers, thus limit sales. The cheaper the rates get, the more eligible buyers there are (in theory) and the more risk of 'bidding up', which is what made the housing price bubble. A risk of lower Fed rates is that it perpetuates, or at least extends, the price bubble.
Yep, that's the way I feel about it, too. Price declines WILL occur. What I think is going to make things worse is all this bailout mumbo-jumbo with the monoliners, and the Fed's penchant for helping out the stock market.
We. Need. To. Take. Our. Medicine. Pure and simple.
But how many of the mortgage applications are approved? Is the number so high because after your'e rejected at one lender, you just to apply at another lender?
Note that the surge in refis will be limited by the current (and upcoming) decline in prices, which will restrict refinancing to those with enough equity left to qualify. As these are not the people most in need of refi opportunities, this will hardly solve the short- and medium term crisis in foreclosures.
"Al Hensling, president of brokerage United American Mortgage in Irvine, said lenders were offering rates as low as 5% on Tuesday for a 30-year fixed mortgage with a one-point fee."
Conjure Bag says, "Al, give me a call when you're ready to quote a 30-year at 2.5% with no points."
Shouldn't these rates be going up instead of down ? I'm not sure I understand the logic behind long term rates as well as fixed rate mortgage rates going down. !
Re: The CEO of TOLL BROTHERS is the gentleman who went on bubblevision saying he was going to bury the shorts...just a few weeks before he sold millions of shares of stock.
This is the mentality of The Bush "insiders" that want to use wallstreet as a mechanism for fiscal policy, i.e, they want to burn the shorts, while they sell out the country!
I can second that on this board particularly, but also in the general populace the biggest bubble of all times has been blowN; I call it the "everything but particularly US negativity & panic bubble". It dwarfs any credit bubble, even the south-sea bubble many times.
As could be expected, the exact opposite will happen in the next years: the US$ will appreciate meaningfully along with US stock soaring and outperforming all other regions. So far this year US stocks are already clearly outperforming all other markets And the old rule is still 100% correct: only when the US turns, the world wide markets will follow.
The fed's move does a very good job of keeping some air in the balloon.
My local credit union is offering a 3.5% 1 year ARM to 95% LTV. (Presumably with good credit.) The adjust is 2/6, so while the shock could be pretty bad in a year, you've got 2 years of a max of 5.5%.
Get a couple of buyers for a house in a declining market (down 10%) that are happy to jump on the deal with a 3.5% or a 5% (fixed) loan, and you've got some comps that are only 10% down. If you have a bit of principle, or some savings, you might be able to squeeze in a refi and hold on for another 2-3 years.
And the really cheap (if not easy) money and low payments, combined with the realtors trumpeting "lowest prices in 2 years", will draw some buyers.
The lower rates will also potentially reduce payments on ARMs and credit cards, which will reduce some of the immediate pain. The 1 year LIBOR, on which my ARM is based, has dropped from 5.39 to 3.27 in the last year. I'm not quite to the point where a reset won't raise my payments, but close.
And I'm convinced that part of the intention is to trigger some inflation. 4.5% inflation for 2 years speeds up the correction process a fair bit. Let's just hope Ben doesn't let it get out of hand.
"Still, lower rates has to help some homeowners lower their monthly payments (probably homeowners with low LTV and excellent credit). But lower rates won't stop the slide in house prices; the coming house price declines are inevitable."
I have to agree with this and on AverageJoe's take on this from a few comment threads ago. The current levels of risk and LTV are too high regardless of the previously low rates. Many people who bought could not realistically afford their ongoing mortgage payments. If their IO rates reset, they lost a job, or other financial hiccup happened they were toast. Many people bought because they were afraid that if they waited they would not be able to afford a house later and/or they were counting on the appreciation to save them, in effect becoming unintentional speculators - Minsky Moment ponzi buyers.
And between then and now the lenders rediscovered religion on lending standards. There ain't no way they are going to allow a 100%+ LTV any more, particularly if it is non-recourse. On top of that the buyer better have sterling credentials and stable jobs.
So in other words, even if the mortgage rates come down, housing prices are going to have come down - there just aren't as many qualified buyers and the previously allowed LTV's are not going to be seen again soon, particularly in a falling market. In fact, as AverageJoe put it, rates and/or required down payments really should be going up to account for the risk inherent in these loans. I'm surprised we haven't been seeing anything like that, but then again I'm not an expert in the area. (Tanta, any thoughts?)
Of course, if we start seeing rates drop really low, like at or near a real rate of zero (which is, what, 3.8% these days?) things could change. But I don't think the lenders are in the business of giving money away, they need some margin.
I've got a 5.5% 30 year fixed from several years ago. Never thought rates would drop to 5%. Refi isn't yet worth the trouble. But say 4%, a strong possibility. My mortgage pmt would be $300 a month. Not a bad pmt on my house currently valued at $450k. Hmmm.
This could be setting up a very nice scenario. Low rates and enough inventory overhang to keep prices from escalating. And many of us in our homes for many years can refi to 4 % and have lots more $$$ in our pocket every month.
One more thing no one here ever mentions-when those 2003-2006 buyers move out of their overpriced house and rent or buy a less expensive one, their payments go down A LOT (maybe $ 1000-2000/mo or more). That is money in their pockets to spend.
We didn't have 5% 30-year fixed mortgages when the FedFunds rate was 1%.
This is because the 10-year rates are 3.5%. At some point, the Fed's aggressive easing is going to increase inflationary expectations and that rate is likely to jump up, even as the FedFunds rate falls.
Interest rates had a massive reversal day today. Long bond rates touched 4.10% this morning (a record low yield) and finished at 4.31%. AND, the new low yield in 30's was unaccompanied by any other treasury maturity. Thus, it wouldn't surprise me if we've seen the lows in rates for this cycle, Fed or no Fed.
Recently moved into a newer home w/30 year @ 6.375% - killed me to give up a 15 year @4.75 w/6 years left.
You're right, could be a nice scenario. 15 year note now @ 5% and I doubt that they've baked in the surprise cut, let alone the expected one. I'm holding off for another week or two to see if it goes further down.
If, as it appears, things get deflationary, the less that I have to pay on total interest, the happier I'll be. I'll trade for the shorter term.
Have any of you considered how pessimistic and cynical the majority of you are. A group of sheep baa baaing to confirm each other's opinions. What if generational low mortgage rates encourage pent up demand to come out of the woodwork? What is buyers become slightly more flexible on their selling prices after a number of rejections? What if unsold inventories begin to fall because new construction decreases? Is there any price low enough or interest rate attractive enough to make a home affordable enough for you? I suggest you actually TALK to people in the real world who sell homes or want to buy homes. Ask them if there are any signs of markets moving towards equillibrium. There is money to be made on the long side by astute investors willing to be open minded. I'm not saying this is the exact moment because my crystal ball is broken. But, it might be. It sure won't be for you if all you can do is bleat and be cynical.
ades, I owe about $71k on this house. I've lived here for 14 years and during that time have my basis down very nicely and values have gone up (where I live I'm thinking ummm maybe a $50k drop in my house value over the next year or so though). No HELOC.
I thought strongly of paying the mortgage completely off a few years ago when I retired but felt I could do better investing that money.
Texalope,
Why are you wasting time here? Go watch Mad Money or CNBC. And follow their advice. Come back in a year and let us know how that worked out for you.
texalope,Have you considered buying in the SF Bay Area? Median prices in the outlying counties have dropped to 9x the median family income! Leslie Appleton-Young would smile at you,AND she has nice cleavage!
Pleeeease stick around on the board for the rest of the year texalope. Post every day and remind all us dumb sheep of your insightful theories. I can only speak for myself, but I know I can't get enough from bubblevision.
This is what they're gonna try. Bailing out the banks one mortgage at a time. Gotta keep prices stuck for a little while and tempt people to refi. That way they can be debt slaves for ever.
I'm wondering how many people with no skin in the game will choose this route however. We may see a short term reemergence of the greater fool.
Come on Heliben, it's been a while since we had a good old fashioned you-guys-don't-get-it/don't-talk-to-real-people/see reality bubble believer around (O-Joe and Sebastian don't count, they're regulars). We used to get a lot more of them.
texalope calls us "a group of sheep baa baaing", and then proceeds to say: "I suggest you actually TALK to people in the real world who sell homes or want to buy homes."
You mean we should consult the RE agents (the wolves) and the speculators, flippers and sheeples that brought about this whole situation? Great idea!
Markar,did you get that stated income loan from fannie or freddie? and where are all the folks who have negative equity going to get the $ to bring to the table? Sonoma county is already officially 25% off the peak with a loooong way to go.
Again, these rates are being offered only if you take from a dealer's REO stock...
Aunt betty selling BO, - no, you can't get that rate...
Just like used car sales...
Cramer said today marked the BOTTOM in equities. My account got dizzy today, and yesterday. I think that's exactly what the hedgies want, to milk the retail dupes and run them off so they can rule the markets alone, draining 401k & Pension funds at will.
These rates are amazing by any standards. 5% 30 yr fixed conforming and 6.25% for a 30 yr jumbo? Obviously nothing is going help allow those that bought the bubble pricing who should have remained renters and/or the bagholder speculators/flippers...BUT...for those that manage their credit, equity, and finances well this is an opportunity at least in the short term. I would submit that these lower mortgage rates will cushion the correction to a certain degree it the least affected/most stable (relative) markets don't you think?
Also, the idea of proving one's TRUE income and assets in writing prior to being given a $417K or higher mortgage is standard operating procedure is it not? Of course notwithstanding QCOM at $100, BRCM at $180, TOL at $60, NASDAQ $5000 etc...
"But lower rates won't stop the slide in house prices; the coming house price declines are inevitable."
True, to a degree. The tighter standards on mortgages will limit the number of buyers, thus limit sales. The cheaper the rates get, the more eligible buyers there are (in theory) and the more risk of 'bidding up', which is what made the housing price bubble. A risk of lower Fed rates is that it perpetuates, or at least extends, the price bubble.
Yep, that's the way I feel about it, too. Price declines WILL occur. What I think is going to make things worse is all this bailout mumbo-jumbo with the monoliners, and the Fed's penchant for helping out the stock market.
We. Need. To. Take. Our. Medicine. Pure and simple.
first
But aren't most OC home prices above the conforming limit?
But how many of the mortgage applications are approved? Is the number so high because after your'e rejected at one lender, you just to apply at another lender?
it would be sweet justice if lower rates come as a boon to those who did not overpay for housing over the last five years and, instead, saved.
Note that the surge in refis will be limited by the current (and upcoming) decline in prices, which will restrict refinancing to those with enough equity left to qualify. As these are not the people most in need of refi opportunities, this will hardly solve the short- and medium term crisis in foreclosures.
With ZIRP, we all get new mortgages!
Can I assume these 5% mortgages require 20% down? These mortgage rates will provide some price support up to the $450K - $500K level.
The question is -- what do you get for your $450K - $500K? This won't stop the progression of better and better homes dropping to this level.
Thank you to all the suckers who propped up the financials today. I never thought I could get back in to SKF and SRS at these low prices.
in everyone's opinion, what's the interest rate differential on a fixed loan where it makes sense to refinance if your timeline to sell is 5-7 years?
Richard --- It's not opinion..... it's math.
Old payment, new payment, # of months, closing costs, time value of money, blah blah blah
CR ryl just blew chunks with a $4.80 loss.
Expired
Of course the stock was up that much today!
Rational thought has flown out the window.
Someday this war's gonna end...
"Al Hensling, president of brokerage United American Mortgage in Irvine, said lenders were offering rates as low as 5% on Tuesday for a 30-year fixed mortgage with a one-point fee."
Conjure Bag says, "Al, give me a call when you're ready to quote a 30-year at 2.5% with no points."
Shouldn't these rates be going up instead of down ? I'm not sure I understand the logic behind long term rates as well as fixed rate mortgage rates going down. !
Builders and banks get tax break.
How does it work?
Expired
wawawa,
It's called socialize the losses - taxpayers pick up the tab.
Conjure Bag says, "Al, give me a call when you're ready to quote a 30-year at 2.5% with no points."
Does Conjure still have those fangs in his mouth?
Re: The CEO of TOLL BROTHERS is the gentleman who went on bubblevision saying he was going to bury the shorts...just a few weeks before he sold millions of shares of stock.
This is the mentality of The Bush "insiders" that want to use wallstreet as a mechanism for fiscal policy, i.e, they want to burn the shorts, while they sell out the country!
Rational thought has flown out the window.
Someday this war's gonna end...
AllenM
I can second that on this board particularly, but also in the general populace the biggest bubble of all times has been blowN; I call it the "everything but particularly US negativity & panic bubble". It dwarfs any credit bubble, even the south-sea bubble many times.
As could be expected, the exact opposite will happen in the next years: the US$ will appreciate meaningfully along with US stock soaring and outperforming all other regions. So far this year US stocks are already clearly outperforming all other markets
And the old rule is still 100% correct: only when the US turns, the world wide markets will follow.
O-Joe
It's called socialize the losses - taxpayers pick up the tab.
The IRS is suddenly starting to look like a giant helicopter, isn't it?
It would be ironic, but not surprising IMO, if the IRS turned into a mechanism for handing out money instead of collecting it.
"Where's my recession, dude?"
It looks like ~70% of all fixed rate mortgages can now profitably refinance at these rates. Tanta: can you confirm?
Thanks,
O-Joe
What is there a party somewhere? Where? Did I miss it?
The fed's move does a very good job of keeping some air in the balloon.
My local credit union is offering a 3.5% 1 year ARM to 95% LTV. (Presumably with good credit.) The adjust is 2/6, so while the shock could be pretty bad in a year, you've got 2 years of a max of 5.5%.
Get a couple of buyers for a house in a declining market (down 10%) that are happy to jump on the deal with a 3.5% or a 5% (fixed) loan, and you've got some comps that are only 10% down. If you have a bit of principle, or some savings, you might be able to squeeze in a refi and hold on for another 2-3 years.
And the really cheap (if not easy) money and low payments, combined with the realtors trumpeting "lowest prices in 2 years", will draw some buyers.
The lower rates will also potentially reduce payments on ARMs and credit cards, which will reduce some of the immediate pain. The 1 year LIBOR, on which my ARM is based, has dropped from 5.39 to 3.27 in the last year. I'm not quite to the point where a reset won't raise my payments, but close.
And I'm convinced that part of the intention is to trigger some inflation. 4.5% inflation for 2 years speeds up the correction process a fair bit. Let's just hope Ben doesn't let it get out of hand.
O-Joe, what a surprise to see you on today. Like clockwork,
SKG,
The kind of inflation being triggered won't help in the least. Rising commodity prices won't re-inflate the housing bubble.
There are some crazy low rates now.
If homeowers didnt get the (&(& hint before, this is another chance for them to get on the fixed rate train.
That being said, I have 20% down and am not touching the housing market. I want high rates and low prices, not low rates and high prices.
"Still, lower rates has to help some homeowners lower their monthly payments (probably homeowners with low LTV and excellent credit). But lower rates won't stop the slide in house prices; the coming house price declines are inevitable."
I have to agree with this and on AverageJoe's take on this from a few comment threads ago. The current levels of risk and LTV are too high regardless of the previously low rates. Many people who bought could not realistically afford their ongoing mortgage payments. If their IO rates reset, they lost a job, or other financial hiccup happened they were toast. Many people bought because they were afraid that if they waited they would not be able to afford a house later and/or they were counting on the appreciation to save them, in effect becoming unintentional speculators - Minsky Moment ponzi buyers.
And between then and now the lenders rediscovered religion on lending standards. There ain't no way they are going to allow a 100%+ LTV any more, particularly if it is non-recourse. On top of that the buyer better have sterling credentials and stable jobs.
So in other words, even if the mortgage rates come down, housing prices are going to have come down - there just aren't as many qualified buyers and the previously allowed LTV's are not going to be seen again soon, particularly in a falling market. In fact, as AverageJoe put it, rates and/or required down payments really should be going up to account for the risk inherent in these loans. I'm surprised we haven't been seeing anything like that, but then again I'm not an expert in the area. (Tanta, any thoughts?)
Of course, if we start seeing rates drop really low, like at or near a real rate of zero (which is, what, 3.8% these days?) things could change. But I don't think the lenders are in the business of giving money away, they need some margin.
I've got a 5.5% 30 year fixed from several years ago. Never thought rates would drop to 5%. Refi isn't yet worth the trouble. But say 4%, a strong possibility. My mortgage pmt would be $300 a month. Not a bad pmt on my house currently valued at $450k. Hmmm.
Hazard any interest in a HELOC ?
This could be setting up a very nice scenario. Low rates and enough inventory overhang to keep prices from escalating. And many of us in our homes for many years can refi to 4 % and have lots more $$$ in our pocket every month.
O-Joe, what a surprise to see you on today. Like clockwork,
Heliben
I was on yesterday and last week, too
No pain, no gain.
O-Joe
One more thing no one here ever mentions-when those 2003-2006 buyers move out of their overpriced house and rent or buy a less expensive one, their payments go down A LOT (maybe $ 1000-2000/mo or more). That is money in their pockets to spend.
We didn't have 5% 30-year fixed mortgages when the FedFunds rate was 1%.
This is because the 10-year rates are 3.5%. At some point, the Fed's aggressive easing is going to increase inflationary expectations and that rate is likely to jump up, even as the FedFunds rate falls.
Interest rates had a massive reversal day today. Long bond rates touched 4.10% this morning (a record low yield) and finished at 4.31%. AND, the new low yield in 30's was unaccompanied by any other treasury maturity. Thus, it wouldn't surprise me if we've seen the lows in rates for this cycle, Fed or no Fed.
aotc:
Recently moved into a newer home w/30 year @ 6.375% - killed me to give up a 15 year @4.75 w/6 years left.
You're right, could be a nice scenario. 15 year note now @ 5% and I doubt that they've baked in the surprise cut, let alone the expected one. I'm holding off for another week or two to see if it goes further down.
If, as it appears, things get deflationary, the less that I have to pay on total interest, the happier I'll be. I'll trade for the shorter term.
Have any of you considered how pessimistic and cynical the majority of you are. A group of sheep baa baaing to confirm each other's opinions. What if generational low mortgage rates encourage pent up demand to come out of the woodwork? What is buyers become slightly more flexible on their selling prices after a number of rejections? What if unsold inventories begin to fall because new construction decreases? Is there any price low enough or interest rate attractive enough to make a home affordable enough for you? I suggest you actually TALK to people in the real world who sell homes or want to buy homes. Ask them if there are any signs of markets moving towards equillibrium. There is money to be made on the long side by astute investors willing to be open minded. I'm not saying this is the exact moment because my crystal ball is broken. But, it might be. It sure won't be for you if all you can do is bleat and be cynical.
ades, I owe about $71k on this house. I've lived here for 14 years and during that time have my basis down very nicely and values have gone up (where I live I'm thinking ummm maybe a $50k drop in my house value over the next year or so though). No HELOC.
I thought strongly of paying the mortgage completely off a few years ago when I retired but felt I could do better investing that money.
I got a 5% 30-year fixed in 2002...zero points. I just happened to get lucky and nail the bottom of that cycle...and I had an honest mortgage broker!
Texalope,
Why are you wasting time here? Go watch Mad Money or CNBC. And follow their advice. Come back in a year and let us know how that worked out for you.
texalope,Have you considered buying in the SF Bay Area? Median prices in the outlying counties have dropped to 9x the median family income! Leslie Appleton-Young would smile at you,AND she has nice cleavage!
Pleeeease stick around on the board for the rest of the year texalope. Post every day and remind all us dumb sheep of your insightful theories. I can only speak for myself, but I know I can't get enough from bubblevision.
"Can I assume these 5% mortgages require 20% down? These mortgage rates will provide some price support up to the $450K - $500K level."
30% down and a 680 credit score. Without that the rate is up to 2 points higher conforming. FHA goes that low with 3% down + mortgage insurance.
Now is a very good time for those in stable markets to refi. California is still screwed unless conforming limits are raised.
igel,California is still screwed if they raise the conforming limit,you have to prove income now.And california is in recession.
This is what they're gonna try. Bailing out the banks one mortgage at a time. Gotta keep prices stuck for a little while and tempt people to refi. That way they can be debt slaves for ever.
I'm wondering how many people with no skin in the game will choose this route however. We may see a short term reemergence of the greater fool.
Cheers,
Come on Heliben, it's been a while since we had a good old fashioned you-guys-don't-get-it/don't-talk-to-real-people/see reality bubble believer around (O-Joe and Sebastian don't count, they're regulars). We used to get a lot more of them.
Misean
see a short term reemergence of the greater fool
we're seeing that right now in the stock mkt. i'm gradually scaling in more shorts as these stocks bounce.
Shoot, Had a hard time getting banks to loand to EACH OTHER. Now Benny lowers rates to ~3.25% and problem solved? Keep dreaming.
O joe, AC, and Sebastian are DINK types who have no conscience for the next generation. Just business baby! Show me the money!
California is still screwed if they raise the conforming limit,you have to prove income now.And california is in recession
Not true. I just got a 7yr fixed@5.25 stated income 720+ FICO required w/ 80LTV
Have any of you considered how pessimistic and cynical the majority of you are.
I know that I have, and often.
Now, do you know what has four legs and goes "aaaaaaaaaaaah"?
Hmmm, 720 FICO 80 LTV types like you Markar are not the problem.
More like an illegal immigrant maid named Juanita with a 500000.00 dollar home? Uh oh! No Re-fi for you!
I turned on CNBC by accident after Cramer's program just started. Before i could reach for the remote he managed to call... THE BOTTOM.
Great! Another bottom call from drama queen Cramer. What a douchebag. Anyone that listened to him in the last year is almost certainly flat broke.
texalope calls us "a group of sheep baa baaing", and then proceeds to say:
"I suggest you actually TALK to people in the real world who sell homes or want to buy homes."
You mean we should consult the RE agents (the wolves) and the speculators, flippers and sheeples that brought about this whole situation? Great idea!
Markar,did you get that stated income loan from fannie or freddie? and where are all the folks who have negative equity going to get the $ to bring to the table? Sonoma county is already officially 25% off the peak with a loooong way to go.
That SRS was just a screamer straight down today. Any ideas? Is CRE now all of a sudden going to the moon?
brokebrain benny-I am not a DINK, but rather a SITK. You're idiocy is now on view for all. But you probably think that is good.
a sheep with no lips
Again, these rates are being offered only if you take from a dealer's REO stock...
Aunt betty selling BO, - no, you can't get that rate...
Just like used car sales...
Does'nt Cramer always talk about renting stocks...
Why is he so concerned about absolute
's if he's a renter.
"As low as 6.125%"?
How would you like a 30-year fixed jumbo for 5.375% with 1 point, or for 5.125% with 2 points, up to 90% loan to value?
https://www.dcu.org/mortgage_he/index.html
Does Conjure still have those fangs in his mouth?
son of zinger | 01.23.08 - 5:16 pm |
zinger, Conjure has blood dripping from his fangs today, and it's just the beginning.
This week's "meltdown" is nothing.
mp "This week's "meltdown" is nothing"
Cramer said today marked the BOTTOM in equities. My account got dizzy today, and yesterday. I think that's exactly what the hedgies want, to milk the retail dupes and run them off so they can rule the markets alone, draining 401k & Pension funds at will.
barely, these schoolboys have never seen a meltdown.
Need I say it? Cramer is an idiot and this thing is out of control.
Does anyone in their right mind really question that?
Somebody has been busy. I notice the Online Visitors count (217) is back underneath the payday loan ad.
Who(m?)ever is responsible - thanx.
Jim
CR,
These rates are amazing by any standards. 5% 30 yr fixed conforming and 6.25% for a 30 yr jumbo? Obviously nothing is going help allow those that bought the bubble pricing who should have remained renters and/or the bagholder speculators/flippers...BUT...for those that manage their credit, equity, and finances well this is an opportunity at least in the short term. I would submit that these lower mortgage rates will cushion the correction to a certain degree it the least affected/most stable (relative) markets don't you think?
Also, the idea of proving one's TRUE income and assets in writing prior to being given a $417K or higher mortgage is standard operating procedure is it not? Of course notwithstanding QCOM at $100, BRCM at $180, TOL at $60, NASDAQ $5000 etc...