Even at 5%, the majority of people seeking the debt aren't qualified. It's a non-starter. Prices are still high, American debt load is still too great.
sweet! bubble #3 here we come! remember the last time rates were SUPER low? and we didnt have the balls to raise them cause it would stifle the economy that was kicking all kinds of ass?
AWESOME. recession is over. here come good times again!
....TPTB still think lower mortgage rates are going to do anything to stimulate home sales. Anybody with any money has the sense to realize that buying RRE during a steep downward spiral is a "crap shoot" at best - unless they have a century to realize a profit of course.
Half New Yorkers Struggling to Pay for Groceries, Study Finds
A report released Tuesday by the Food Bank for New York City has found that approximately four million New Yorkersone in twoare having trouble paying for groceries, a 26 percent increase since the last survey in February.
Chase is currently offering 5% on a 5 year CDs and 30 year mortgages. Not quite sure how they plan to make money on this? They either believe we are going Japanese, or their capital structure isn't quite so sound as they would have you believe.
RockyR writes:
Even at 5%, the majority of people seeking the debt aren't qualified. It's a non-starter. Prices are still high, American debt load is still too great.
RockyR | 12.18.08 - 12:04 pm | #
Rocky, that was my point yesterday, except that here in Orange County, when you factor in taxes at about 1.5%, not the 1.1 you will be told, HOAs, and insurance, that 350K home will be like a 450K payment.
People don't understand the impounds.
Heck, at 6% for 30 years, it will cost you $600/month for every 100K borrowed. For me and the wife, a 300K home at those numbers would be 1800/month. Very doable. Our apartment is less than that, but I would buy for that.
HOWEVER, you can't find homes for that price yet, in Rancho Santa Margarita, and when you throw in the extra 600-800/month in impounds, you have just thrown us under the bus. That 300K home is now 400-425K. Outta of my league, 6X income.
JUST NOT WORTH IT.
And I don't want to move yet. Anyway, no one is hiring.
Renting is fine.
We'll see what this year brings.
P.S. Don't forget maintenance and upkeep. That will cost you too. If you stay 30 years, I can almost guarantee a new water heater and some roof work. There goes several grand.
If you're making 60K a year, have 10% down and have no other debts, the max house price you can afford at 30-years 5% is about 275K. Prices haven't come down that low in the bubble states yet.
"I have a HELOC on top of the first mortgage, am I likely to get any grief from the HELOC creditor about refinancing the first mortgage?"
I'm pretty sure that the HELOC creditor is not the issue. If the HELOC is not paid off, the bank issuing the refinance loan would be junior to the existing HELOC in the event of default.
Charles Kiting writes:
If you're making 60K a year, have 10% down and have no other debts, the max house price you can afford at 30-years 5% is about 275K. Prices haven't come down that low in the bubble states yet.
Charles Kiting | 12.18.08 - 12:17 pm | #
Charles, I would also like to point out that unless you are making beaucoup money and/or have a monster down, for most people in the areas that make 75-100K, homes more than 300K will never make sense anyway.
By the time you factor in ALL THE COSTS, some of these monsters will have cost you more than a million if you stay the 30 years.
And then you still have taxes and HOAs after the note is paid.
Good grief. I want home again, but people have to factor these costs in, esp. in light of the economy heading south for what I see as a long time, say 5-10 years, min.
The bit about loans over 417k reminded me of a cab ride I took earlier this week.
Driver and I started talking, he had a home in Hayward, SF Bay Area. Purchased at a little over 500k 4 years ago. Price has cliff dived, now appraises at a little over half, he said he hasn't paid on it in 6 months. Still living in it, get calls but no boot yet.
The next housing bubble, however, will be quick to the upside, but then will crash hard as everyone will be looking for an exit point in case things get ugly.
CR, didnt u post previously that these great 'lowest-in-history' rates apply for fictitious borrowers with features/attributes that 95% of a bank's borrower's don't possess?
Or was that another blogger.
I remember reading the day's typical rate offering for a typical borrower with typical small downpmt and typical credit score...and the offered rate was far from a historic low.
Are not these really bait-n-switch rates even at the conforming level?
Well, as noted above, I think when people are afraid for their jobs they don't want to borrow, unless they think their borrowing to buy something that's value can only go up. People can be stupid, but I don't know anyone who thinks that house prices are headed for a steep increase.
The job losses (current and future) haven't been priced in yet - at least not where I'm looking.
The only people I know who are confident they'll hold their jobs either already own, want to sell and retire, or don't make enough to afford even the tiniest starter. That's the market in a nutshell.
I'm in the Biz with a national bank. We're 7.25 at about 1/2 pt for loans over $625k, or a 5/1 at 6.0 for -0- pts.
The smarter money above $625k is gravitating towards short term ARM loans. There are some out there at T-bill (2.03) plus a 2.20 margin so 4.03 fully indexed.
A big financing issue is the 4 units only limit for conforming loans. I've got a slew of investor owned homes, not flips mind you, but solid investors who have 5 units or more and cannot get refinanced into a competitive fixed. I understand that there are great risks for non-owner loans, but if any bank would step up and lend to investors with 4 and more investment units, they'd make book in a hurry.
"The smarter money above $625k is gravitating towards short term ARM loans. There are some out there at T-bill (2.03) plus a 2.20 margin so 4.03 fully indexed"
The investors are why folks like me aren't buying. We need neighborhoods to stabilze, not more rentals. Until those knob bonnets leave the marketplace, you can't make any judgement on the risk for those areas.
I hope every investor looses their a$$ so we can get prices back down where they belong and get this recovery on the road already.
... and of course, strong anti-investor letter to follow >; )
....lets not forget the "starter" here: 2/1 single-wide POS trailer on 1.25 acres with own well, septic, & electric: $35K - owner financing....now THAT will appreciate if you don't mind cabin fever....
Having the necessary resources to deal with a problem like subprime isn't a luxury, it's a requirement. FINRA realizes this and has taken significant action in this area. I can assure you that both our surveillance and examination staffs are fully engaged.
My forecast of almost three years ago: The 10-Year US treasuries will below 2% before the end of 2008.
January 3, 2006
Treasury Yield & Housing Prices
Jas: The 10-Year US treasuries will fall below 3% some time between 2006Q3-2007Q2 [I was early on this, which is the case with most of my forecasts]. Then, below 2% before the end of 2008.
Kevin asked: How will the housing bubble burst if 10 year treasury yields fall to 2%?
Hello Kevin,
I am guided only by history. Two examples should suffice:
The housing prices in Southern California peaked in March 1990. For the next 3.5 years the yield of 10-Year Note declined 3.5% and housing price kept declining with the decline in the yield.
The Japanese 10-Year, JGB, have been yielding bet.1-2% more than a decade and the real estate prices declined for 13 years in a row!
When Treasury yields decline in a Depression, or anticipating a Depression, should housing prices go up? When 20% population is unemployed, counting those who stopped looking for a job or permanently discouraged, should housing prices go up? MOST IMPORTANTLY, WHEN THE NUMBER OF EMPTY HOUSING UNITS IS AT HISTORIC HIGH, SHOULD HOUSING PRICES KEEP GOING UP?
One has to be an economic ignoramus to believe that the housing prices in the bubble areas of the US will not go down substantially. A very easy prediction: THE PERCENTAGE DECLINE IN THE HOUSING PRICES IN CALIFORNIA WILL EXCEED THE PERCENT DECLINE IN 10-YEAR NOTE YIELD! When the yield goes below 2%, California home prices will be down between 60-80%. And I am being conservative! I can't wait to find out: How long economies supported on fraud, notably those of Manhattan and Silly.con Valley, hold up? The housing prices in the economies supported on fraud WILL turn into rubble.
Black Star Ranch writes:
....lets not forget the "starter" here: 2/1 single-wide POS trailer on 1.25 acres with own well, septic, & electric: $35K - owner financing....now THAT will appreciate if you don't mind cabin fever
Are borrowers really getting that rate? I mean is this just a hypothetical given the market making almost no new loans or could I, a guy with a 750ish credit score walk into a bank and really get a rate close to that right now? Assuming 20% and a viable job that is.
The key issue today is that falling rates will not trigger a huge tsunami wave of refinancing, because too many people are out of cash and more and more people are out of work, thus the capital needed to refi isnt there and the ability to have a high enough FICO isnt there and then the appraisal process will confirm the low value of your home -- so, although many will use this opportunity, most will not have that luxury!
As an example Wells Fargo is offering a 30 year fixed at 4.75% (up to $417K), but their rates are 7.375% for loans above that limit.
No, Wells Fargo is a conduit for federal subsidized loans below $417k. Their real rate, the point at which they can justify risk/reward when considering secondary markets is 7.375%. The real (not govt) lending markets are scared of even a tiny bump in interest rates. 10yr at 2.14% should it go up to 4%, an outrageous number not seen since... well several (8) weeks then the NPV goes to $85. Safe as bonds? The high jumbo rates are justified, it is other rates that are being successfully manipulated, for now.
my friend pulls rmcr's for mortgage offices thruout west and says the big thing is fha streamline refi....need to have fha loan..but very painless to drop rate right now...
If the Fed thinks interest rates will be near or below their present levels 'for some time'...what does that say about our prospects for growth 'for some time'?
we're in a 30yr fixed w/ 20% down on a 2006 new construction buy in SE Mich. No HELOC, but clearly upside down at this point due to the market taking a sh*t - is there any relief coming for the likes of us? I thought there was talk about a no-appraisal refi Federal program in the works - true?
The smarter money goes for the ARM because if you believe that we are at ZIRP for 3-5 years would you not rather pay 4% vs 7.25? Assuming we are turning Japanese in our banking system we could see 10 years at ZIRP.
4 Unit, Non Owner, is roughly
5.625%.
Yes, your average joe with 20% down is getting fixed loans in the low 5's (4.875 at zero fees existed for 2 hrs yesterday) for near zero cost as long as your in California and have a $625k max loan. That max loan varies throughout the nation.
There are many mortgage lurkers out there who could help you with any financing needs. I do not think it's appropriate on this board to solicit business, as much as I'd like to of course, but I would think at some point in time the moderator will have a trusted set of lenders available to refer.
I don't know anyone who thinks that house prices are headed for a steep increase.
I wish I could say the same. A close friend of mine who owns and is in good shape economically is looking to move to a bigger place. He decided to sell his current place and then rent until the market gets more realistic. (This is in NY). If he rents he can get a place at least 50% better than if he buys for the same money per month; and no down payment of course. Despite this his wife's mom went ballistic saying that he is throwing away money on the rent and that prices always go up and he is an idiot. Other people have said the same thing without quite going ballistic.
Not everyone is in a bubble state, or in debt up to their eyeballs. Some of us do have savings, and are looking to refinance at these low rates. Per $100K @ 4.75% for 30 years, your monthly payment is $521 and change. While I do not think that it makes sense for me to refinance, given that I already have a low rate, it sure does look tempting.
Navy fed CU which now has Af and army and marine CU's:
Product Interest Rates as
low as Discount
Points APR as
low as Interest Rates as
low as Discount
Points APR as
low as
40Yr Conforming 5.250% 0.750 5.382% 5.375% 0.250 5.470%
I would like to see HOAs go the way of the albatross for single family housing. Who wants to pay an additional $200-$300 per month for a swimming pool that no one has time to go to, for someone else to spend 15 minutes a week cutting your postage stamp yard, and for various rules that have no legal teeth? Any truly onorous eyesore in a neighborhood can be taken care of through a complaint to local code enforcement for free.
Low rates but no one to qualify. Even if their credit is good, most are upside down in their homes and it doesn't matter what the rate is anyway. Go Feds!
The smarter money above $625k is gravitating towards short term ARM loans.
The smarter money goes for the ARM because if you believe that we are at ZIRP for 3-5 years would you not rather pay 4% vs 7.25? Assuming we are turning Japanese in our banking system we could see 10 years at ZIRP.
If, indeed, the government decides to ZIRP for 10 years or more (not impossible, I concede), then getting a 5/1 hybrid with teaser rate might make some sense right now.
However, that's a mighty big IF. And if there's one thing I've learned, it's that it is very hard to predict what the government may do over the short run, much less a 10-year timespan. Should asset prices bottom well before that 10 years is up, and inflation begins to seriously rebound, that may not be such a "smart" play after all.
The Fed is working against itself - trying to prevent price drops but trying to encourage buying.
There is a lot to be learned from the way this whole collapse has been approached by the government.
FRED wrote:
"The smarter money above $625k is gravitating towards short term ARM loans. There are some out there at T-bill (2.03) plus a 2.20 margin so 4.03 fully indexed"
Your kidding me right? I mean this has to be a joke? Smart money, are you from the NAR? With what's coming down the pike inflation wise anything but fixed Long Term is NUTS!
Man you have to leave that ripple stuff and move to a good highland single malt.
Well, this should provide a nice test for Hubbard & Mayer. When average rates were still over six percent, they were promoting the idea of subsidized rates at 5.25. That would save the housing market! Now we have that, so according to them, sales and prices should take off, right? Because prices are already corrected. Bwaa ha ha.
Can't feel too bad about the jumbo rates, though. If the buying jumbo houses can't afford the rate (which is still not terribly high) they probably can't really afford the house.
CR, creativity abounds. In areas where zoning doesn't prohibit it, people with big homes that are suited to it are getting them declared to be 2 or 3 unit. Thus, they can use the OFHEO's higher jumbo conforming limit.
If I had a 6000 sf home on two levels that I was trying to get rid of, this might sound like a good idea.
These low mortgage rates are a big nothingburger for most. And someone got it right about it being a bait and switch. Between FICO, LTV, D/I most won't qualify. And as for resets, most ARMs will reset at full amortization, so even with lower rates, people will be paying a higher monthly.
What a sick joke on homeowners.
Why is it so hard for some to understand that having a low cost basis with expensive money is better for the borrower than a high cost basis with cheap money?
When (not "if") mtg. rates move lower, you can refi at a favorable rate.
The annual property taxes, insurance and anything else tied to the sale price of your house is lower.
You are less likely to end up underwater when you need/want to sell & move.
Less competition from amateur RE speculators and crooks, who depend on easy, no-doc financing.
Not from the NAR. Real Estate as an asset class will not rebound until 2011 and even then it's rate of inflation (if that...) period. The statement had to do with loan types, not stimulating prices.
Hyperinflation will not come in the era of ZIRP. It didn't for Japan. Why should it happen here? There isn't an "exit strategy" coming from the Fed or the Treasury so ZIRP is here to stay for some time.
At some point I believe a universal loan mod program will be laid out - similar to the FHA Streamlined Refinance program - no income verif, no appraisal needed - so that the 110m mortgage loans out there can get rate and term lowered without issue. This will likely be backed by a shared appreciation recapture provision so that investors will stomach the low returns. It's the only universal way out of this I can see, unless there is a better idea?
Hyperinflation will not come in the era of ZIRP. It didn't for Japan. Why should it happen here? There isn't an "exit strategy" coming from the Fed or the Treasury so ZIRP is here to stay for some time.
Some significant differences between us and Japan:
Japan didn't have a massive foreign-financed national debt to service.
Japan was/is a net exporting nation with a large, positive trade surplus.
Japan could finance government spending/stimulus programs entirely with domestic taxes and savings, and didn't rely heavily on foreign lending.
We are seeing significant general deflation now, this is true. However, I would not bet the farm that it can/will continue indefinitely, despite what the government does.
This is so awesome! A 4.75% interest rate. This will change everything. All you need is a 740 fico, 25% equity in your home, and money coming out of your ears! There's LOADS of people like that around!
Hello
Oil under 38. Wow
Third!
Who needs a loan when you have a TARP?
Wow, third, that's worth a bronze!
Even at 5%, the majority of people seeking the debt aren't qualified. It's a non-starter. Prices are still high, American debt load is still too great.
Why get a mortgage now if the Fed is going to offer 4.5%? This bailout mindset sucks.
Yeah WF rates are not that good and as an employee there, can't seem to get people to jump on those rates.
Oh wait, people are afraid for their jobs. Damn.
Why stop there? Why not have mortgage rates at zero?
Why have any sort of interest rates at all?
Clearly interest rates are an impediment to the function of the economy. This reality can be extrapolated from our endless attempts to suppress them.
Why not get rid of them completely?
For that matter why have the concept of debt?
Clearly it doesn't nothing but harm the economy.
So let's stop with the half measures and get straight to the final goal - the abolition of debt and credit.
"Yeah, but what about jumbo rates?"
Class warfare, stick it to the rich!
They're eating their own.
Plus, we'll 'throw' in a pair of shoes.
CU this morning...4.375 no points
CU jumbos 7.25 no points
Maybe Wells Fargo is worried about loans de-jumboing.
So, if we enlist in the Federation now, all our living expenses will be taken care of? Cool.
sweet! bubble #3 here we come! remember the last time rates were SUPER low? and we didnt have the balls to raise them cause it would stifle the economy that was kicking all kinds of ass?
AWESOME. recession is over. here come good times again!
My question is; are these all gonna be full recourse loans?
Like this pile of crap will follow you the rest of your life.
Deflation. Banks are still not wanting to lend.....we are all angry savers now
Conforming Jumbos are facing a lot of headwinds, especially the lack of PMI. If you look at Confumbo FHA rates I bet you see them much lower.
Hmmm, the banks are borrowing for ZIRP, I'm fairly positive I'm further from bankruptcy than they are....I should get ZIRP!
The angel closes her eyes..
....TPTB still think lower mortgage rates are going to do anything to stimulate home sales. Anybody with any money has the sense to realize that buying RRE during a steep downward spiral is a "crap shoot" at best - unless they have a century to realize a profit of course.
Can I get a no-appraisal mortgage fixed at the ZIRP rate? I'd go for that.
this is troublesome, this bad, this early...
Half New Yorkers Struggling to Pay for Groceries, Study Finds
A report released Tuesday by the Food Bank for New York City has found that approximately four million New Yorkersone in twoare having trouble paying for groceries, a 26 percent increase since the last survey in February.
Half New Yorkers Struggling to Pay for Groceries, Study Finds - Gothamist
Chase is currently offering 5% on a 5 year CDs and 30 year mortgages. Not quite sure how they plan to make money on this? They either believe we are going Japanese, or their capital structure isn't quite so sound as they would have you believe.
Dollar moving up again.
RockyR writes:
Even at 5%, the majority of people seeking the debt aren't qualified. It's a non-starter. Prices are still high, American debt load is still too great.
RockyR | 12.18.08 - 12:04 pm | #
Rocky, that was my point yesterday, except that here in Orange County, when you factor in taxes at about 1.5%, not the 1.1 you will be told, HOAs, and insurance, that 350K home will be like a 450K payment.
People don't understand the impounds.
Heck, at 6% for 30 years, it will cost you $600/month for every 100K borrowed. For me and the wife, a 300K home at those numbers would be 1800/month. Very doable. Our apartment is less than that, but I would buy for that.
HOWEVER, you can't find homes for that price yet, in Rancho Santa Margarita, and when you throw in the extra 600-800/month in impounds, you have just thrown us under the bus. That 300K home is now 400-425K. Outta of my league, 6X income.
JUST NOT WORTH IT.
And I don't want to move yet. Anyway, no one is hiring.
Renting is fine.
We'll see what this year brings.
P.S. Don't forget maintenance and upkeep. That will cost you too. If you stay 30 years, I can almost guarantee a new water heater and some roof work. There goes several grand.
Just a matter of time before banks relax their lending standards at the request of their masters (Congress, Fed, FDIC, etc).
It's all we got.
Asked about the secret behind his success in business, he answered: "silence, more silence, and even more silence
Every BIG crash has one. Let's hope Madoff is he. If there are other cockroaches, well...
Premium content | Economist.com
If you're making 60K a year, have 10% down and have no other debts, the max house price you can afford at 30-years 5% is about 275K. Prices haven't come down that low in the bubble states yet.
I have a HELOC on top of the first mortgage, am I likely to get any grief from the HELOC creditor about refinancing the first mortgage?
I'll ask too, is there any way to get a non full-recourse refi? I am in NY.
"crispy&cole writes:
CU this morning...4.375 no points."
What is CU?
Credit union I think
"I have a HELOC on top of the first mortgage, am I likely to get any grief from the HELOC creditor about refinancing the first mortgage?"
I'm pretty sure that the HELOC creditor is not the issue. If the HELOC is not paid off, the bank issuing the refinance loan would be junior to the existing HELOC in the event of default.
sorry...Credit Unio
Johnny,
there are better free links on Ivar Kreuger that have been posted here days ago...
Charles Kiting writes:
If you're making 60K a year, have 10% down and have no other debts, the max house price you can afford at 30-years 5% is about 275K. Prices haven't come down that low in the bubble states yet.
Charles Kiting | 12.18.08 - 12:17 pm | #
Charles, I would also like to point out that unless you are making beaucoup money and/or have a monster down, for most people in the areas that make 75-100K, homes more than 300K will never make sense anyway.
By the time you factor in ALL THE COSTS, some of these monsters will have cost you more than a million if you stay the 30 years.
And then you still have taxes and HOAs after the note is paid.
Good grief. I want home again, but people have to factor these costs in, esp. in light of the economy heading south for what I see as a long time, say 5-10 years, min.
The bit about loans over 417k reminded me of a cab ride I took earlier this week.
Driver and I started talking, he had a home in Hayward, SF Bay Area. Purchased at a little over 500k 4 years ago. Price has cliff dived, now appraises at a little over half, he said he hasn't paid on it in 6 months. Still living in it, get calls but no boot yet.
The next housing bubble, however, will be quick to the upside, but then will crash hard as everyone will be looking for an exit point in case things get ugly.
The time horizons seem to be much shorter.
I think its fair to say that risk was appropriately being priced when rates were at 6.0%.
More dumb group think.
......
CR, didnt u post previously that these great 'lowest-in-history' rates apply for fictitious borrowers with features/attributes that 95% of a bank's borrower's don't possess?
Or was that another blogger.
I remember reading the day's typical rate offering for a typical borrower with typical small downpmt and typical credit score...and the offered rate was far from a historic low.
Are not these really bait-n-switch rates even at the conforming level?
Well, as noted above, I think when people are afraid for their jobs they don't want to borrow, unless they think their borrowing to buy something that's value can only go up. People can be stupid, but I don't know anyone who thinks that house prices are headed for a steep increase.
The job losses (current and future) haven't been priced in yet - at least not where I'm looking.
The only people I know who are confident they'll hold their jobs either already own, want to sell and retire, or don't make enough to afford even the tiniest starter. That's the market in a nutshell.
I'm in the Biz with a national bank. We're 7.25 at about 1/2 pt for loans over $625k, or a 5/1 at 6.0 for -0- pts.
The smarter money above $625k is gravitating towards short term ARM loans. There are some out there at T-bill (2.03) plus a 2.20 margin so 4.03 fully indexed.
A big financing issue is the 4 units only limit for conforming loans. I've got a slew of investor owned homes, not flips mind you, but solid investors who have 5 units or more and cannot get refinanced into a competitive fixed. I understand that there are great risks for non-owner loans, but if any bank would step up and lend to investors with 4 and more investment units, they'd make book in a hurry.
My .02, SGIP.
oops, "risk wasnt being appropriately priced"
.....
Turbo are you the same one from a long time ago?
The angel opens her eyes.. pale blue colored eyes...
"The smarter money above $625k is gravitating towards short term ARM loans. There are some out there at T-bill (2.03) plus a 2.20 margin so 4.03 fully indexed"
You might wantt o rethink the "smart" part.
"The smarter money above $625k is gravitating towards short term ARM loans."
This confuses me. Is the "smart" consensus that long term rates are somehow going to get substantially lower than the low 7s for jumbos?
It's a great time to buy!
If you have any monies.
The investors are why folks like me aren't buying. We need neighborhoods to stabilze, not more rentals. Until those knob bonnets leave the marketplace, you can't make any judgement on the risk for those areas.
I hope every investor looses their a$$ so we can get prices back down where they belong and get this recovery on the road already.
... and of course, strong anti-investor letter to follow >; )
These new low rates are terrific news! That is, for both people that can quality for them.
-Jim
Anon-
you must like that Live song..I agree
....lets not forget the "starter" here: 2/1 single-wide POS trailer on 1.25 acres with own well, septic, & electric: $35K - owner financing....now THAT will appreciate if you don't mind cabin fever....
Banks get free money from Fed, buy treasuries at 2.5 at no risk. They will be in no hurry to loan to us slobs
"knob bonnets" --can someone use that slur here?
OT on Obama SEC pick:
Mary L. Schapiro
Chief Executive Officer & Friend to SIFMA Corruption
FINRA - Mary Schapiro Speeches
Having the necessary resources to deal with a problem like subprime isn't a luxury, it's a requirement. FINRA realizes this and has taken significant action in this area. I can assure you that both our surveillance and examination staffs are fully engaged.
More angel!
Repost more appropriate for this thread...
My forecast of almost three years ago: The 10-Year US treasuries will below 2% before the end of 2008.
January 3, 2006
Treasury Yield & Housing Prices
Jas: The 10-Year US treasuries will fall below 3% some time between 2006Q3-2007Q2 [I was early on this, which is the case with most of my forecasts]. Then, below 2% before the end of 2008.
Kevin asked: How will the housing bubble burst if 10 year treasury yields fall to 2%?
Hello Kevin,
I am guided only by history. Two examples should suffice:
When Treasury yields decline in a Depression, or anticipating a Depression, should housing prices go up? When 20% population is unemployed, counting those who stopped looking for a job or permanently discouraged, should housing prices go up? MOST IMPORTANTLY, WHEN THE NUMBER OF EMPTY HOUSING UNITS IS AT HISTORIC HIGH, SHOULD HOUSING PRICES KEEP GOING UP?
One has to be an economic ignoramus to believe that the housing prices in the bubble areas of the US will not go down substantially. A very easy prediction: THE PERCENTAGE DECLINE IN THE HOUSING PRICES IN CALIFORNIA WILL EXCEED THE PERCENT DECLINE IN 10-YEAR NOTE YIELD! When the yield goes below 2%, California home prices will be down between 60-80%. And I am being conservative! I can't wait to find out: How long economies supported on fraud, notably those of Manhattan and Silly.con Valley, hold up? The housing prices in the economies supported on fraud WILL turn into rubble.
Jas
Yes Nades, same Turbo.
SGIP - what is a typical refi fixed rate for a 4 unit not owner-occupied? Thanks.
Black Star Ranch writes:
....lets not forget the "starter" here: 2/1 single-wide POS trailer on 1.25 acres with own well, septic, & electric: $35K - owner financing....now THAT will appreciate if you don't mind cabin fever
Where? I like the spond of it
I'm not sure these rates are really the lowest, because two years ago I was able to get a morgage with 1% interest rate , and no money down.
That sounds a lot lower than 5.17%.
Jas - where do you see the 10 year settling at next year?
Are borrowers really getting that rate? I mean is this just a hypothetical given the market making almost no new loans or could I, a guy with a 750ish credit score walk into a bank and really get a rate close to that right now? Assuming 20% and a viable job that is.
Or rather, Jas when do you think the 10 year will go under 1.0?
OT--Great story about the amazing incompetence by the SEC in ignoring for years evidence against Madoff. Interesting reading:
Busting Bernie Madoff: One Man's 10 Year Crusade
"Where? I like the spond of it?"
Crystal, Amargosa, Beatty, Pahrump, NV area....
Jas,
The key issue today is that falling rates will not trigger a huge tsunami wave of refinancing, because too many people are out of cash and more and more people are out of work, thus the capital needed to refi isnt there and the ability to have a high enough FICO isnt there and then the appraisal process will confirm the low value of your home -- so, although many will use this opportunity, most will not have that luxury!
As an example Wells Fargo is offering a 30 year fixed at 4.75% (up to $417K), but their rates are 7.375% for loans above that limit.
No, Wells Fargo is a conduit for federal subsidized loans below $417k. Their real rate, the point at which they can justify risk/reward when considering secondary markets is 7.375%. The real (not govt) lending markets are scared of even a tiny bump in interest rates. 10yr at 2.14% should it go up to 4%, an outrageous number not seen since... well several (8) weeks then the NPV goes to $85. Safe as bonds? The high jumbo rates are justified, it is other rates that are being successfully manipulated, for now.
my friend pulls rmcr's for mortgage offices thruout west and says the big thing is fha streamline refi....need to have fha loan..but very painless to drop rate right now...
OCDan, I appreciate your comments as I am in the exact same position...just waiting and renting.
If the Fed thinks interest rates will be near or below their present levels 'for some time'...what does that say about our prospects for growth 'for some time'?
we're in a 30yr fixed w/ 20% down on a 2006 new construction buy in SE Mich. No HELOC, but clearly upside down at this point due to the market taking a sh*t - is there any relief coming for the likes of us? I thought there was talk about a no-appraisal refi Federal program in the works - true?
it depends dingo
--are you too big to fail?
The smarter money goes for the ARM because if you believe that we are at ZIRP for 3-5 years would you not rather pay 4% vs 7.25? Assuming we are turning Japanese in our banking system we could see 10 years at ZIRP.
4 Unit, Non Owner, is roughly
5.625%.
Yes, your average joe with 20% down is getting fixed loans in the low 5's (4.875 at zero fees existed for 2 hrs yesterday) for near zero cost as long as your in California and have a $625k max loan. That max loan varies throughout the nation.
There are many mortgage lurkers out there who could help you with any financing needs. I do not think it's appropriate on this board to solicit business, as much as I'd like to of course, but I would think at some point in time the moderator will have a trusted set of lenders available to refer.
SGIP
--are you too big to fail?
Samdog
well, we are considering chartering ourselves as a bank - Dingo Bank & Trust.
Hey, I kinda like the sound of that - can I haz TARP now?
--Good! At least you thinking ahead...
Ooops
"you're"
a dingo ate the baby |
My TARP is your TARP....
C&C; is that KSFCU?
Hell, they hit 3.5 and I may be presuaded to jump back in.
the streamlined HFA refi sounds like what I was hearing about, i.e., the 4.5% no-appraisal refi. what if the current loan isn't HFA? hard cheese?
Nothing closing south of a line from Tampa to Brevard except FHAs.
Credit score of 750 isn't good enough.
Guy who put 30% down at peak in nice neighborhood in Dade is 'way underwater.
Also, hard equity.
Those rates are a myth. And if I were loaning my own money I'd want at least 9%, and probably really 12%.
Gee liz, I don't want to borrow from you
You're mean.
Nope, just want to make money.
I don't know anyone who thinks that house prices are headed for a steep increase.
I wish I could say the same. A close friend of mine who owns and is in good shape economically is looking to move to a bigger place. He decided to sell his current place and then rent until the market gets more realistic. (This is in NY). If he rents he can get a place at least 50% better than if he buys for the same money per month; and no down payment of course. Despite this his wife's mom went ballistic saying that he is throwing away money on the rent and that prices always go up and he is an idiot. Other people have said the same thing without quite going ballistic.
Bottom line denial is not just a river in Eqypt.
Ugh, ugh, ugh just read your
post, Kristina.
Arms not going down, just awful.
Worse than hard equity lender.
Can he actually sell, loud?
It was GE Moneybank originally, go figure....Oh CNBC how I hate thee...die...lol
Is it really that easy to walk away from commercial property? Banks typically require personal guarantees, correct?
They do, anon.
But not so much on 1-4 family.
Not everyone is in a bubble state, or in debt up to their eyeballs. Some of us do have savings, and are looking to refinance at these low rates. Per $100K @ 4.75% for 30 years, your monthly payment is $521 and change. While I do not think that it makes sense for me to refinance, given that I already have a low rate, it sure does look tempting.
Navy fed CU which now has Af and army and marine CU's:
Product Interest Rates as
low as Discount
Points APR as
low as Interest Rates as
low as Discount
Points APR as
low as
40Yr Conforming 5.250% 0.750 5.382% 5.375% 0.250 5.470%
30Yr Conforming 4.750% 1.250 4.948% 4.875% 0.250 4.985%
30Yr Jumbo 4.875% 1.250 5.075% 5.000% 0.250 5.111%
15Yr Conforming 4.250% 1.250 4.590% 4.375% 0.250 4.563%
15Yr Jumbo 4.375% 1.250 4.716% 4.500% 0.250 4.689%
I would like to see HOAs go the way of the albatross for single family housing. Who wants to pay an additional $200-$300 per month for a swimming pool that no one has time to go to, for someone else to spend 15 minutes a week cutting your postage stamp yard, and for various rules that have no legal teeth? Any truly onorous eyesore in a neighborhood can be taken care of through a complaint to local code enforcement for free.
Low rates but no one to qualify. Even if their credit is good, most are upside down in their homes and it doesn't matter what the rate is anyway. Go Feds!
Soylent Green Is People writes:
The smarter money above $625k is gravitating towards short term ARM loans.
The smarter money goes for the ARM because if you believe that we are at ZIRP for 3-5 years would you not rather pay 4% vs 7.25? Assuming we are turning Japanese in our banking system we could see 10 years at ZIRP.
If, indeed, the government decides to ZIRP for 10 years or more (not impossible, I concede), then getting a 5/1 hybrid with teaser rate might make some sense right now.
However, that's a mighty big IF. And if there's one thing I've learned, it's that it is very hard to predict what the government may do over the short run, much less a 10-year timespan. Should asset prices bottom well before that 10 years is up, and inflation begins to seriously rebound, that may not be such a "smart" play after all.
The Fed is working against itself - trying to prevent price drops but trying to encourage buying.
There is a lot to be learned from the way this whole collapse has been approached by the government.
wally writes:
...There is a lot to be learned from the way this whole collapse has been approached by the government.
Yes. As in "how NOT to handle a speculative bubble's collapse."
FRED wrote:
"The smarter money above $625k is gravitating towards short term ARM loans. There are some out there at T-bill (2.03) plus a 2.20 margin so 4.03 fully indexed"
Your kidding me right? I mean this has to be a joke? Smart money, are you from the NAR? With what's coming down the pike inflation wise anything but fixed Long Term is NUTS!
Man you have to leave that ripple stuff and move to a good highland single malt.
Well, this should provide a nice test for Hubbard & Mayer. When average rates were still over six percent, they were promoting the idea of subsidized rates at 5.25. That would save the housing market! Now we have that, so according to them, sales and prices should take off, right? Because prices are already corrected. Bwaa ha ha.
Can't feel too bad about the jumbo rates, though. If the buying jumbo houses can't afford the rate (which is still not terribly high) they probably can't really afford the house.
"Yeah, but what about jumbo rates?"
CR, creativity abounds. In areas where zoning doesn't prohibit it, people with big homes that are suited to it are getting them declared to be 2 or 3 unit. Thus, they can use the OFHEO's higher jumbo conforming limit.
If I had a 6000 sf home on two levels that I was trying to get rid of, this might sound like a good idea.
These low mortgage rates are a big nothingburger for most. And someone got it right about it being a bait and switch. Between FICO, LTV, D/I most won't qualify. And as for resets, most ARMs will reset at full amortization, so even with lower rates, people will be paying a higher monthly.
What a sick joke on homeowners.
Why is it so hard for some to understand that having a low cost basis with expensive money is better for the borrower than a high cost basis with cheap money?
Diogenes,
Not from the NAR. Real Estate as an asset class will not rebound until 2011 and even then it's rate of inflation (if that...) period. The statement had to do with loan types, not stimulating prices.
Hyperinflation will not come in the era of ZIRP. It didn't for Japan. Why should it happen here? There isn't an "exit strategy" coming from the Fed or the Treasury so ZIRP is here to stay for some time.
At some point I believe a universal loan mod program will be laid out - similar to the FHA Streamlined Refinance program - no income verif, no appraisal needed - so that the 110m mortgage loans out there can get rate and term lowered without issue. This will likely be backed by a shared appreciation recapture provision so that investors will stomach the low returns. It's the only universal way out of this I can see, unless there is a better idea?
Mish made a light go on in my head. These super low mortgages rates fix the ARM problem. Lots of the resets are now going to be to a lower rate.
Hyperinflation will not come in the era of ZIRP. It didn't for Japan. Why should it happen here? There isn't an "exit strategy" coming from the Fed or the Treasury so ZIRP is here to stay for some time.
Some significant differences between us and Japan:
We are seeing significant general deflation now, this is true. However, I would not bet the farm that it can/will continue indefinitely, despite what the government does.
"Mish made a light go on in my head."
Waubay, read to the end... he also explains the problems (no price discovery, no exit strategy)
Are jumbo rates indexed based on location? 417k in NJ isn't the same as in Kansas.
This is so awesome! A 4.75% interest rate. This will change everything. All you need is a 740 fico, 25% equity in your home, and money coming out of your ears! There's LOADS of people like that around!
With the 10-yr Treasury at just over 2% and Uncle Sucker formally guaranteeing agency debt, a 30-year fixed out to be 3.5%.