Oh boo hoo...to hear Lereah basically plead with the Fed to pause is very gratifying. "Interest-senstive" vulnerable housing markets. Somebody should aks him if a decline in prices in those interest-sensitive markets would really be a bad thing, seeing how affordability is at an all-time low. Whoops, I forgot, the NAR "anti-bubble reports" justify housing prices in every single major metro market, so affordability is at an all-time high, I forgot...(end sarcasm)His comments are amusing CR, I agree, but also sad that anyone publishs his drivel without an asterisk that says "This man's opinions reflect what realtors want you to hear, not the realities of the markets. NAR members only make money whe you buy a home, so you'll never hear them say it's a bad time to buy".
Amusing to you, and somewhat to me, as I chuckle sardonically. But to many people, these statements combined with Greenspan's about taking out adjustable rate mortgages while he was clearly nowhere near done with his series of rate hikes, is borderline irresponsible. It's like cigarette companies telling you smoking is good for your health.
Okay Lereah, if home prices rise 1.5 points faster than inflation, how do you explain the last 5 years? What could possibly happen to maintain that historical trend?
Here's a REAL argument by a very bright guy who believed enough in the housing demise to stand behind his words: Channel Rendering Reg...ale_06+2005.htm
I have a very low fixed rate mortgage. I could just pay it off, but I can get better interest on a 1 year CD so there's really no incentive. Is it possible for me to purchase my mortgage at a discount? I.e. suppose I owe $100,000 at 4.5%, would it be possible for me to buy the mortgage for say $95,000?
Good question, Bad Shift. If housing appreciation has been close to 10 times inflation for the past 5 years, how much stagnation does the market require to get back to that historic inflation-plus-1.5 to 2% appreciation?
Bob,
First, the present value of the mortgage is 100K (not plus interests). Why they are will to settle for 95K? Is your mortgage so risky to deserve a heavy discount?
You are right. After tax, you only paid around 3% interest for your mortgage, but if your CD only make 4.5%, after tax, you still get around 3%.
henry,
They would be willing to sell for $95,000 because 5.25% on $95,000 yields more than 4.5% on $100,000. It's not any different than bond prices. If interest rates go up, bond prices go down. Interest rates have gone up since I purchased my mortgage, so my mortgage isn't worth as much as when I bought it.
Anyone who says the economy under George Bush is not the greatest econonomy ever undermines our nation and will destroy it just as the media have lost the war in Iraq.
We have a perfect economy with houseing increasing 10 to 12% annually the rest of the world will be happy to lend us money forever and we all retire millioniares.
Bob,
Hold your mortgage... net present value it is the cheapest liability you owe as you will repay your lender with dollars having less and less purchasing power.
Defend your financial security by allocating more assets to t-bills and some gold... let inflation and deflation take care of your debts... just like the Treasury is doing. lol.
When no one talks about deflation it is most likely just around the corner. Please, review the history of past deflation crises that were caused by easy credit in 1720, 1835, and 1929. For more on deflation, click here.
Thanks, I always need a good (but sad) laugh. Unless you're serious, you've got pitch perfect cynicism and you've captured the tone and silliness of all who know little history and less economics.
For those who might mistake your snarkyness for seriousness, here are some facts in lieu of specious knee-jerk opinion:
Treason is not upholding the oath to defend and protect the constitution from enemies foreign and domestic. It will undermine our nation, perhaps even destroy it. That the media is hiding the Presidents great success at winning freedom and democracy in Iraq is a transparent misdirection a ploy required by all cons to confuse the mark.
Perfect economy? The plummeting decline in the dollars purchasing power, falling median incomes, defaulting pension plans, inflation kept low by cheap consumer goods made by slave-wage labor overseas, a non-self-liquidating global debt bubble that when deflated will crash all financialized assets, the transfer of trillions of dollars of capital to foreign competitors priceless!
Sure, every rational lender will keep giving their savings to consumers who grow increasingly unable to pay their bills. Yeah, that makes sense.
Millionaires? Nope, gazillionaires!! Then again, it will take a billion dollars to buy a loaf of bread.
Thanks again. You reminded me that when you cry, you cry alone; laugh and the world laughs with you."
If you believe deflation to be a possibility then shouldn't Bob attempt to buy off his mortgage at a discount now instead of paying with more expensive (due to deflation) future dollars?
I guess it's too much to ask for real estate markets that weren't so over-leveraged with debt that the merest HINT of higher interest rates wouldn't put them in danger of collapse. I wish that I was confident that 30-50% "correction" would only affect those who have speculated on these absurd real estate valuations, and not pose systemic risks.
Looks like the soft landing is being talked into a reality and I'm sure that is the intention. But is the correction that pliable? Is the slaughter confined to the few misfortunate buyers who misjudged the peak?
A glimpse at what those (many more) holding RE related jobs will do after the correction is the hard landing part that few spend any time on.
Ryen,
Lenders will fail in droves. Borrowers will be able to dictate new terms to these weak negotiators (or some future super-sized version of the RTC): "rewrite my note, or I'll buy my own default out of delinquency at auction, in a no-demand market... after you've gone to all the unaffordable legal costs. It's your choice."
You can always contact your lender about paying off your mortgage at a discount; the lender is in the business of making a profit, so they will listen to a reasonable offer. If you think that interest rates will continue to rise, however, you are wisest to sit tight until you think that rates have peaked.
Also, take into account that the amount of the discount is taxable income to you. So, if you borrowed $100K and satisfy the obligation with only $95K, you have $5K taxable income.
Lereah's comments aren't even worth publishing. They are basically propaganda at this point.
Geoff, I find Lereah's comments amusing.
Best Wishes.
Oh boo hoo...to hear Lereah basically plead with the Fed to pause is very gratifying. "Interest-senstive" vulnerable housing markets. Somebody should aks him if a decline in prices in those interest-sensitive markets would really be a bad thing, seeing how affordability is at an all-time low. Whoops, I forgot, the NAR "anti-bubble reports" justify housing prices in every single major metro market, so affordability is at an all-time high, I forgot...(end sarcasm)His comments are amusing CR, I agree, but also sad that anyone publishs his drivel without an asterisk that says "This man's opinions reflect what realtors want you to hear, not the realities of the markets. NAR members only make money whe you buy a home, so you'll never hear them say it's a bad time to buy".
Amusing to you, and somewhat to me, as I chuckle sardonically. But to many people, these statements combined with Greenspan's about taking out adjustable rate mortgages while he was clearly nowhere near done with his series of rate hikes, is borderline irresponsible. It's like cigarette companies telling you smoking is good for your health.
are (not is) Coffee time...
Okay Lereah, if home prices rise 1.5 points faster than inflation, how do you explain the last 5 years? What could possibly happen to maintain that historical trend?
Here's a REAL argument by a very bright guy who believed enough in the housing demise to stand behind his words:
Reg...ale_06+2005.htm
Channel Rendering
Sorry, here's the link:
The page cannot be found
I have a mortgage question...
I have a very low fixed rate mortgage. I could just pay it off, but I can get better interest on a 1 year CD so there's really no incentive. Is it possible for me to purchase my mortgage at a discount? I.e. suppose I owe $100,000 at 4.5%, would it be possible for me to buy the mortgage for say $95,000?
Good question, Bad Shift. If housing appreciation has been close to 10 times inflation for the past 5 years, how much stagnation does the market require to get back to that historic inflation-plus-1.5 to 2% appreciation?
Bob,
First, the present value of the mortgage is 100K (not plus interests). Why they are will to settle for 95K? Is your mortgage so risky to deserve a heavy discount?
You are right. After tax, you only paid around 3% interest for your mortgage, but if your CD only make 4.5%, after tax, you still get around 3%.
henry,
They would be willing to sell for $95,000 because 5.25% on $95,000 yields more than 4.5% on $100,000. It's not any different than bond prices. If interest rates go up, bond prices go down. Interest rates have gone up since I purchased my mortgage, so my mortgage isn't worth as much as when I bought it.
I find these remarks close to treason.
Anyone who says the economy under George Bush is not the greatest econonomy ever undermines our nation and will destroy it just as the media have lost the war in Iraq.
We have a perfect economy with houseing increasing 10 to 12% annually the rest of the world will be happy to lend us money forever and we all retire millioniares.
But some people hate America!
Bob,
Hold your mortgage... net present value it is the cheapest liability you owe as you will repay your lender with dollars having less and less purchasing power.
Defend your financial security by allocating more assets to t-bills and some gold... let inflation and deflation take care of your debts... just like the Treasury is doing. lol.
When no one talks about deflation it is most likely just around the corner. Please, review the history of past deflation crises that were caused by easy credit in 1720, 1835, and 1929. For more on deflation, click here.
Best,
Patriot,
Thanks, I always need a good (but sad) laugh. Unless you're serious, you've got pitch perfect cynicism and you've captured the tone and silliness of all who know little history and less economics.
For those who might mistake your snarkyness for seriousness, here are some facts in lieu of specious knee-jerk opinion:
Thanks again. You reminded me that when you cry, you cry alone; laugh and the world laughs with you."
David,
If you believe deflation to be a possibility then shouldn't Bob attempt to buy off his mortgage at a discount now instead of paying with more expensive (due to deflation) future dollars?
I guess it's too much to ask for real estate markets that weren't so over-leveraged with debt that the merest HINT of higher interest rates wouldn't put them in danger of collapse. I wish that I was confident that 30-50% "correction" would only affect those who have speculated on these absurd real estate valuations, and not pose systemic risks.
Looks like the soft landing is being talked into a reality and I'm sure that is the intention. But is the correction that pliable? Is the slaughter confined to the few misfortunate buyers who misjudged the peak?
A glimpse at what those (many more) holding RE related jobs will do after the correction is the hard landing part that few spend any time on.
Ryen,
Lenders will fail in droves. Borrowers will be able to dictate new terms to these weak negotiators (or some future super-sized version of the RTC): "rewrite my note, or I'll buy my own default out of delinquency at auction, in a no-demand market... after you've gone to all the unaffordable legal costs. It's your choice."
I like you, David, you're even batshit crazier than me.
Bob,
You can always contact your lender about paying off your mortgage at a discount; the lender is in the business of making a profit, so they will listen to a reasonable offer. If you think that interest rates will continue to rise, however, you are wisest to sit tight until you think that rates have peaked.
Also, take into account that the amount of the discount is taxable income to you. So, if you borrowed $100K and satisfy the obligation with only $95K, you have $5K taxable income.
WildJohnny,
Thanks for the compliment!
I'm joyfully batshit crazy like a fox! (Sorry if I've offended any who are revulsed by inter-specie feces references).
If what passes for conventional wisdom is the norm, I'm glad I'm those sheeple think I'm insane. It's made me millions over the past 30 years.
Smug Contrarian Curmudgeon = Smudgeo