You've argued that a 20% drop in new home sales is a high-odds recession signal. Purchase applications are down 20% from their peak. Speculative holdings of residential real estate are being liquidated, so new home sales may face pretty stiff competition, and lose more than their share of the market. If demand is down 20% and new homes lose market share...
Falling mortgage rates may help those needing to refi (a good thing, no doubt), but so long as home prices continue to level (or even fall), the fact that the home ATM is tapped out cannot possibly be good for an economy so driven by consumer spending. Indeed, it was an unsustainable situation.
Perhaps this proves the old adage, "No matter which way you turn, your rump is behind you." ??
or refi'ing a 30 yr fixed into a better rate which i am considering doing at this point in time....
dc1000,
That's initially what I thought until I saw CRs earlier article citing that 90% of refis involved cashouts.
If these are really just refis to fixed rates, then it's not so worrisome. But if that 90% figure still holds true then it could be a real problem.
Locally we have a radio ad proclaiming that "the housing bubble has begun to burst" and imploring homeowners to "cash out your equity while you still have some".
Until I see evidince to the contrary, I'm going to assume this is what's going on.
This is a truly twisted situation. With rates falling, and nearly 50 basis points has to be considered a substantial drop, the pool of people who can help themselves out of an ARM mess has to have grown, though I've no idea by how much. If they act prudently they can do themselves a big favor. I hope they do, but I'm not confident.
Used home sales cratered in July. Shouldn't we expect bad weather in July to hit used sales harder in August, when the closings for sales contracted in July are likely to happen? Which is to say, doesn't this look more like a bad market than bad weather? Last month this bad, by the way, was January of 2004, when it was the weather that did the damage. The inventory ratios for used homes surged in July, even for condos, where sales were up 2.8%. Supply is just flooding into the used market.
do those equity pull out refi' numbers tell you how much? for example, when i refi'ed into a 30yr fixed i used about 2k of equity to finance the transactions costs of the refi and nothing more.
Freddie Mac defines "cash out" as a refi with a balance at least 105% of the old balance, precisely to exclude loans like yours. (Freddie's cash out report is the reliable source for refi information, not the MBA purchase index.)
So if I take $10,000 out of my remaining (ca. $100K) mortgage in refinancing and shortening (which would roughly keep the payments the same), it would count as a refi.
I suspect the 5% level is too low a threshold when you're talking about properties whose value price has doubled and interest rates that have dropped.
You've argued that a 20% drop in new home sales is a high-odds recession signal. Purchase applications are down 20% from their peak. Speculative holdings of residential real estate are being liquidated, so new home sales may face pretty stiff competition, and lose more than their share of the market. If demand is down 20% and new homes lose market share...
Again, the divergence of purchases and refis is troubling to me. It suggests people are trying to bail water out of a sinking ship...
or refi'ing a 30 yr fixed into a better rate which i am considering doing at this point in time....
In the meantime, the growth of home equity loans has turned negative.
http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0608/document/dd082106.pdf
Falling mortgage rates may help those needing to refi (a good thing, no doubt), but so long as home prices continue to level (or even fall), the fact that the home ATM is tapped out cannot possibly be good for an economy so driven by consumer spending. Indeed, it was an unsustainable situation.
Perhaps this proves the old adage, "No matter which way you turn, your rump is behind you." ??
or refi'ing a 30 yr fixed into a better rate which i am considering doing at this point in time....
dc1000,
That's initially what I thought until I saw CRs earlier article citing that 90% of refis involved cashouts.
If these are really just refis to fixed rates, then it's not so worrisome. But if that 90% figure still holds true then it could be a real problem.
Locally we have a radio ad proclaiming that "the housing bubble has begun to burst" and imploring homeowners to "cash out your equity while you still have some".
Until I see evidince to the contrary, I'm going to assume this is what's going on.
This is a truly twisted situation. With rates falling, and nearly 50 basis points has to be considered a substantial drop, the pool of people who can help themselves out of an ARM mess has to have grown, though I've no idea by how much. If they act prudently they can do themselves a big favor. I hope they do, but I'm not confident.
Used home sales cratered in July. Shouldn't we expect bad weather in July to hit used sales harder in August, when the closings for sales contracted in July are likely to happen? Which is to say, doesn't this look more like a bad market than bad weather? Last month this bad, by the way, was January of 2004, when it was the weather that did the damage. The inventory ratios for used homes surged in July, even for condos, where sales were up 2.8%. Supply is just flooding into the used market.
do those equity pull out refi' numbers tell you how much? for example, when i refi'ed into a 30yr fixed i used about 2k of equity to finance the transactions costs of the refi and nothing more.
would that count?
dc1000:
Freddie Mac defines "cash out" as a refi with a balance at least 105% of the old balance, precisely to exclude loans like yours. (Freddie's cash out report is the reliable source for refi information, not the MBA purchase index.)
So if I take $10,000 out of my remaining (ca. $100K) mortgage in refinancing and shortening (which would roughly keep the payments the same), it would count as a refi.
I suspect the 5% level is too low a threshold when you're talking about properties whose value price has doubled and interest rates that have dropped.
Oops. There should have been a strikethrough through "value" above.