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30 Year Freddie Fixed Rate Mortgage Drops To All Time Low Of 4.69%

Tyler Durden's picture




 

Full blown deflation is here: the 30 Year Freddie fixed rate mortgage just dropped to a fresh new all time low. The problem - not even record low mortgage rates are incentivizing consumers to buy homes. This is a complete disaster for the Fed which is now facing outright deflation in the face and will be forced, without debate, to monetize and launch another round of QE very shortly, as this trend suicidal to the banks' bloated balance sheets. If home prices continue dropping, look for the next Flow of Funds report to be a massacre for household net wealth. The nuclear option: giving away houses for free. Yet with yesterday's announcement by the GSEs that they will lock out any strategic defaulters, this has all the makings of a disaster for the administration.

 

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Thu, 06/24/2010 - 10:16 | 431314 IBelieveInMagic
IBelieveInMagic's picture

Why not institute speedy foreclosure rent back agreements to ensure some cash flow to the debt holders?

Thu, 06/24/2010 - 10:35 | 431379 Al Huxley
Al Huxley's picture

Because that would required an acknowledgement that there is a problem.

Thu, 06/24/2010 - 10:50 | 431414 Cursive
Cursive's picture

@ Al Huxley

Word.  Though, it is getting a bit difficult to ignore now.  I think the history books will show that the BP Horizon/Macondo blow-out was the personification of our collective problems and its physical presence could not be ignored.

Thu, 06/24/2010 - 11:08 | 431460 Cognitive Dissonance
Cognitive Dissonance's picture

"I think the history books will show that the BP Horizon/Macondo blow-out was the personification of our collective problems and its physical presence could not be ignored."

I've been considering writing an article on precisely this idea. Any suggestions?

Thu, 06/24/2010 - 11:52 | 431510 pan-the-ist
pan-the-ist's picture

Add some contrast and compare elements with the "dust bowl" and I think you'll have a ringer.

Thu, 06/24/2010 - 12:21 | 431565 Cursive
Cursive's picture

@Cd/pan-the-ist

This is a really good suggestion to draw similarities to the Great Depression.  We maybe looking back on our times as the Greater Depression.

Thu, 06/24/2010 - 12:19 | 431559 Cursive
Cursive's picture

Any suggestions?

Oh, the pressure!  Perhaps you could consider comparing the ability to ignore abstract concepts (debt, deflation) against the human instinct of reacting to immediate stimuli.  A gushing well is hard to hard to ignore.  There are other, reinforcing factors such as man-made structures (debt-backed money, contracts, political forces, belief in a social safety net) that aid in the collective avoidance of the inevitable.  Contrast these man-made institutions against the brutal force of raw nature.  At this stage of my reply to you, my thoughts took a interesting turn.  I have for some time been fascinated by the modern day existence of Homer's Lotus Eaters.  In a sense, Western democracies have become too easy.  Very little is demanded of the populace and so very little is returned to the public square (a clear example of this is the advent of the professional soldier via the "all-voluntary" armed services).  Power abhors a vacuum and the lack of public vigilance has created a situation where the surface is calm, but the waters beneath are treacherous.  We have ignored risks far too long.  Maybe the Macondo blow-out is Odysseus returning to wake his men from their Lotus induced stupor.

 

 

Thu, 06/24/2010 - 16:25 | 432215 Common_Cents22
Common_Cents22's picture

Yep, people spend more time choosing their movies on netflix or at blockbuster than they do planning for their retirement.

Keep things tangible and in front of their nose and they will go for it.  Look at the mail in gold scams.  Make it easy for people to mail their gold in and you can give them 10% of the value in return.

Thu, 06/24/2010 - 10:18 | 431315 Whizbang
Whizbang's picture

The rates can't go much lower, I am just waiting for prices to come down another 10-20% before I go whole hog into real estate. The rates are just half though, it's no good being 20% underwater with a low interest rate.

The only other thing to consider is: these houses are in places where there are no job prospects, or are otherwise shitty. The inland empire in california is dead and gone, no work, high crime, in the middle of a desert. Florida might be a good vulture cap. opportunity.

Thu, 06/24/2010 - 10:29 | 431362 Almost Solvent
Almost Solvent's picture

Might want to wait on FL until this oil spill bleeds out.

Some worst case scenarios show both coasts covered in oil.

That might make prices fall off a bit.

Thu, 06/24/2010 - 10:39 | 431394 dryam
dryam's picture

"a bit" 

Thu, 06/24/2010 - 11:26 | 431472 hack3434
hack3434's picture

"The only other thing to consider is: these houses are in places where there are no job prospects, or are otherwise shitty. The inland empire in california is dead and gone, no work, high crime, in the middle of a desert. Florida might be a good vulture cap. opportunity."

I would also consider that many baby boomers will want/have to sell their home thus creating an even bigger glut of homes. Also gen y can barely get by much less buy a home or pay hefty rents.    

 

Thu, 06/24/2010 - 13:26 | 431728 Almost Solvent
Almost Solvent's picture

We have a winner.

New stimulus: any homeowner over 60 who continues working full time (FICA baby) with zero tax exemptions selected has their mortgage debt discharged on a sliding scale depending on how long they continue to work and not claim SS. Married couples must both continue working to qualify.

Thu, 06/24/2010 - 16:28 | 432231 Common_Cents22
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If you look at this cycle in terms of boomer cycles it all fits perfectly.  The prime peak home ownership coincided w/ peak boomer demographics.  Look at what the boomers will do in retirement and their demand for fixed income vs. equities.  Maybe the govt ponzi scheme can hang on for much longer than we think?  

Thu, 06/24/2010 - 13:22 | 431704 wyosteven
wyosteven's picture

I see your hog and will gladly eat 30% of it.

Housing has 50%+ to fall.

Perhaps it's time to start serving "optimist soup" starting with the real estate denial on the side.

Thu, 06/24/2010 - 10:17 | 431317 Robslob
Robslob's picture

I'll take the 5 I already paid for in taxes...please through in 5 free Ipads as well.

Thanks

Thu, 06/24/2010 - 10:17 | 431319 Rich V
Rich V's picture

If I wait a little longer will they pay me interest to take a loan?

Thu, 06/24/2010 - 10:17 | 431321 BlackBeard
BlackBeard's picture

Shell game bitches.

Thu, 06/24/2010 - 10:17 | 431322 rawsienna
rawsienna's picture

Does not matter - GSE not letting anyone refi and nobody can afford a downpayment without govt help.  Time for the GSE to facillitate refi's for people that are on time with payments but have negative equity - they are long the risk anyway and as long as people not taking out cash it reduces that risk

Thu, 06/24/2010 - 10:23 | 431337 Village Idiot
Village Idiot's picture

Simple and successful. Forget it.

Thu, 06/24/2010 - 10:24 | 431339 trav7777
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Who the hell should or would want to refi with negative equity?  You're signing up for a slave contract.

The mortgage market is a RISK market, for bank and borrower.  The "system" is trying to shove all of the risk onto the borrower no matter what.

The banks can even default on your fucking deposits; they have the FDIC backing THEM up.  And what this means is backing up of the bonuses of the executives no matter how criminal or stupid their behavior is.

Thu, 06/24/2010 - 11:07 | 431458 rawsienna
rawsienna's picture

If it was costless and reduced your payment who the fuck cares about the negative equity - If that person wants to walk, then walk,  But there are those who want to stay and the govt can make it easeir without any expense and reduce their risk all in one shot.

Thu, 06/24/2010 - 11:59 | 431525 pan-the-ist
pan-the-ist's picture

I'd be happy to be given the 4.69 interest rate.  Simple, Simple, Simple - but, I pay my mortgage so I am a cow that's feeding these fuckers, so I will never be given that without threating to walk.

Thu, 06/24/2010 - 14:28 | 431883 rawsienna
rawsienna's picture

will be 4.25 by SEPT

Thu, 06/24/2010 - 10:28 | 431356 Muir
Muir's picture

"Time for the GSE to facilitate refi's for people that are on time with payments but have negative equity ...."

 

Yeah, I heard about that one guy in Wisconsin also.

 

__

Thu, 06/24/2010 - 11:46 | 431499 superman07
superman07's picture

How about lowering the property taxes. That is my limiting factor. I refuse to buy a better home just to throw a couple k a month to some stupid twit, supporting redundant school administrators, teachers on paid leave, and 14 coaches for 6 sports.

Housing is screwed. The Obama "team" and I use the term loosly, have lost. there strategy has failed. To much information today to sell the re-inflation theory to everyone. The elections will already be a bloodbath. Only the feckless republicans are left to stand in thier own way. I expect a full court press by helicopter ben. The PPT will work overtime, I wouldnt rule out anything now. Tanking the EU purposly, false flag ops in Iran, who knows.

I just dont expect any of it to make any sense. And I dont expect my dollar to buy shit by 2012.

Thu, 06/24/2010 - 10:22 | 431328 Duuude
Duuude's picture

 

"this has all the makings of a disaster for the administration"

 

Who tha hell's gonna notice another disaster...

 

It's tha NewNormal

 

 

Thu, 06/24/2010 - 10:21 | 431329 Careless Whisper
Careless Whisper's picture

why are we surprised with deflation, when the may 2009 to may 2010 M2 money supply has increased by 2%.  the banks aren't making loans, just sitting in the treasuries.

Thu, 06/24/2010 - 10:22 | 431332 trav7777
trav7777's picture

It won't make a fucking difference if they go to 0%.  People without income can't qualify for loans.  The securitization market is DEAD and buried and without it, banks have to eat and collect on the loans they make.

A majority of the late-stage housing sales were to people who COULD NOT, irrespective of their income strata, really afford the home they were in.

Thu, 06/24/2010 - 11:06 | 431446 B9K9
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I love ZH, but the entire situation is getting pretty tedious. I think we can all agree that the continuous updates covering various economic, financial, political and ecological events, trends & outrages is incredible. Yet they are all merely symptomatic; nothing really seems to address the core issue.

The bottom line governing all possible outcomes is economic growth, or lack thereof. Since the last 150 years of economic growth has been entirely based on fossil fuels, the likelihood of developing any alternative bases, while not impossible, is highly improbable.

So here we are, waiting, waiting ... and waiting some more. The entire fucking construct of the credit-money system has always been, and still is, based upon a foundation predicated on perpetual, compound annual growth. No CAGR, no interest bearing loans. (Sort of like no tickie no washie.)

I've said it before, and I'll say it again: I would be the first to say adios & shed the mantle of impending doom if some flipping miracle were to come out of right field. Trust me, I've been looking, but I ain't seeing anything. So, the alternative is to prepare for what must come.

4-5% mortgage rates, HFT, the Gulf oil spill, precarious state finances, etc, etc are all very entertaining, buy they don't address what happens when the credit-money system collapses. When this occurs, all bets are off.

Our current money system was invented & perfected by a few crafty parties. They were able to get the world's largest economies to outsource their entire monetary systems to their privately controlled cabals. The system has "worked" only so long as there was economic growth.

That's all one really needs to understand. No growth, no system. No system, we (re)discover that we're all just hairless apes recently removed from the jungle.

Thu, 06/24/2010 - 11:09 | 431457 Ragnarok
Ragnarok's picture

The core problem is debt and soft money not fossil fuels and economic growth.  The only reason you need continued, aggressive growth is to outpace inflation and to service debts.

Thu, 06/24/2010 - 11:32 | 431482 jdrose1985
jdrose1985's picture

Goddamnit what don't you people understand that we have to grow fossil fuel extraction and consumption at a rate which is unsustainable?

 

How the fuck you don't realize this is quite beyond me.

Inflation is simply a byproduct of economic growth. They can print from here til Vegas and there ain't a prayer of it ever making it's way into the system if people aren't seeing good reason to take the loans out.

Thu, 06/24/2010 - 11:54 | 431519 Ragnarok
Ragnarok's picture

jdrose,

 

I don't understand your problem with my post, please clarify.

 

 

Thu, 06/24/2010 - 13:23 | 431709 malusDiaz
malusDiaz's picture

This started with a Unsustainable Lifestyle Crisis.

It bled over via the Energy Crisis.

Then Economics tanks.

Now we have a currency crisis.

Soon it will be a leadership/government crisis.

 

It will not be over until we are destroying less then we create on a Day-to-Day net basis.

 

I.E. Its not the hamburger, its the Box, Wrapper, the miniature catchup packet, the drink cup and napkins.  

 

No matter how you slice and dice it, your expending much more energy then your conserving.  

 

This too shall pass.

Thu, 06/24/2010 - 15:44 | 432090 jdrose1985
jdrose1985's picture

Sorry, misplaced and misguided frustration in my reply, ragnarok.

I can't tell if its finance deflation causing energy deflation or vice versa. My gut tells me its the latter.

Thu, 06/24/2010 - 12:06 | 431533 ZakuKommander
ZakuKommander's picture

You're right, paradigm must be changed.  

I have seen studies showing that up to 80% of oil is used in the US for transportation.  If transportation became electric or hybridized, then alternative energy sources that generate electricity could begin paradigm shifting.

Thu, 06/24/2010 - 10:24 | 431340 tmosley
tmosley's picture

Sorry, how are low, low rates deflationary?  It seems to me they are decreasing the cost of money in an attempt to push more into circulation, and reflate the housing bubble.

Interest rates that are less than real inflation will cause inflation to accelerate, as we learned in the 70's.  Or are you implying that the downward manipulation of the interest rate forces down money supply?  If so, that makes no sense.

Thu, 06/24/2010 - 10:29 | 431359 Ragnarok
Ragnarok's picture

There is no demand for that money at this rate, and that's why it keeps falling.  If the rates get low enough and home prices drop substantially than maybe yes, your scenario would happen.

Thu, 06/24/2010 - 14:48 | 431931 tmosley
tmosley's picture

The lack of demand seems more like a function of supply saturation rather than deflation at this point.  It's like the government program to subsidize Porches.  There are only so many cars that you really can handle, before you don't want any anymore, even at a low low interest rate.

Also, rents have fallen so much that you can pick up more house for less cash with lesser liabilities.

As such, I still don't get why mortgage interest rates have anything to do with deflation.

Thu, 06/24/2010 - 10:31 | 431366 Menelaus
Menelaus's picture

Take a trip to Japan and get back to me.

Thu, 06/24/2010 - 14:50 | 431912 tmosley
tmosley's picture

Ok, I'm back, and all I saw was asset deflation (mainly in the stock market).  Cost of living is still much higher than everywhere else, and has never even thought about looking down.  In addition, their currency is just as weak as everyone else's, more or less.

Thu, 06/24/2010 - 10:34 | 431374 Muir
Muir's picture

"Sorry, how are low, low rates deflationary?"

Well, you answered your own question in the next line.

  "It seems to me they are decreasing the cost of money in an attempt to push more into circulation, and reflate the housing bubble."

 

[notice you said "in an attempt ... Now, it may be just me, but I do not "attempt" to assuage my wife's anger unless she's really pissed. But maybe that's just me.]

 

__

 

Thu, 06/24/2010 - 10:41 | 431399 TBT or not TBT
TBT or not TBT's picture

If you keep loaded pistols around the house, all with a round in the chamber and safety off, you can install a regime of mutual assured destruction that'll calm things down.  Worth a try.

Thu, 06/24/2010 - 13:03 | 431659 Kegfreak
Kegfreak's picture

So your saying its not normal to keep loaded guns all over your house?  I found one in the fridge the other day, my wife put it there when she went to work so the dog didn't get ahold of it agian to chew on it.  Thank god we don't have kids!

Thu, 06/24/2010 - 10:45 | 431409 TBT or not TBT
TBT or not TBT's picture

"It seems to me they are decreasing the cost of money "

In the case of 30 year rates, "they" is mostly the market.    Still, maybe some of that is reduced supply of new 30 year treasuries?    ZH has remarked that the treasury has strangely not put much of that on the block, considering how low rates are now.   In theory less supply drives up price a bit, which lowers 30 year rates.    Maybe some pro here can clarify.

Thu, 06/24/2010 - 11:01 | 431441 Howard_Beale
Howard_Beale's picture

Mortgages trade off the spread to the 10yr, not the 30yr. Rates are set by the market, not the Fed. Even with Fed MBS purchases, they were only narrowing the spread but it was a waste of money since the market is doing it without assistance. And in case you missed it, we have plenty of supply of all maturities. More than anytime in history. Just because a WI becomes the currently traded issues, it's not like the previous issues stop trading.

Thu, 06/24/2010 - 10:45 | 431410 TBT or not TBT
TBT or not TBT's picture

"It seems to me they are decreasing the cost of money "

In the case of 30 year rates, "they" is mostly the market.    Still, maybe some of that is reduced supply of new 30 year treasuries?    ZH has remarked that the treasury has strangely not put much of that on the block, considering how low rates are now.   In theory less supply drives up price a bit, which lowers 30 year rates.    Maybe some pro here can clarify.

Thu, 06/24/2010 - 14:21 | 431459 maxximus
maxximus's picture

Let's see if I have this right.  As you point out, low rates are not deflationary.  However, they are a sign of deflation at work.  Deflation is here - has been for some time now. Beginning to manifest in more ways, the lack of home buyers at otherwise very cheap mortgage rates is but one sign. 

Thu, 06/24/2010 - 10:26 | 431346 I need more asshats
I need more asshats's picture

Nice. I've got a 3.5% target so they still need to shed a point or so...

Thu, 06/24/2010 - 10:28 | 431358 godfader
godfader's picture

All in line with Richard Koo's analysis: fewer and fewer are interested in taking on new debt even if the interest rates are ridiculously low. Ironically his name has been ridiculed on this site repeatedly for no reason whatsoever.

Thu, 06/24/2010 - 10:30 | 431364 Robslob
Robslob's picture

Desperation = Depression, the kind meds won't work for resolving...well maybe?

Credit contraction "when neither a borrower wants to borrow nor lender wants to lend" has been going on for 14 straight months.

Depression bitches

Thu, 06/24/2010 - 10:31 | 431367 -Michelle-
-Michelle-'s picture

Well, I'd love to refinance but we'd have to pony up about $80,000 to get our loan to 80%.

Thank you speculators!  And deadbeats!  You've managed to completely destroy home prices in our community.

I'll just keep on buying PMs and wait for the day that I can send the bank a gold Eagle in exchange for my deed.

Thu, 06/24/2010 - 10:42 | 431401 Cognitive Dissonance
Cognitive Dissonance's picture

LOL

I printed one of those glossy US Mint pictures of a Gold Eagle and put it in a small frame on my desk for my clients to see. The picture represents one of the Gold Eagles I have in my possession that I will use to pay off my mortgage in a few years.

I use the picture to start a discussion about inflation, Fed money printing and the Ponzi. I'm delighted someone else has the exact same picture in their head of a paid off mortgage courtesy of one Gold Eagle.

Thu, 06/24/2010 - 12:09 | 431545 Jeff Lebowski
Jeff Lebowski's picture

Or....  You could keep the gold eagle and tell the bank to fuck themselves.

I'm just sayin'...

Thu, 06/24/2010 - 10:33 | 431370 Clayton Bigsby
Clayton Bigsby's picture

Debt bad = new normal

Thu, 06/24/2010 - 10:35 | 431383 buzzsaw99
buzzsaw99's picture

I wouldn't buy if rates were 0%. F$CK FNM, FRE. Scum sucking ghetto trash.

Thu, 06/24/2010 - 10:39 | 431387 TBT or not TBT
TBT or not TBT's picture

This will be great for ZeroHedge page views, so there's always that.

Thu, 06/24/2010 - 10:38 | 431388 John McCloy
John McCloy's picture

They have absolutely no idea..no idea what to do next. The U.S. Citizens are not seeing anything that remotely resembles results. No jobs = home prices will collapse. Trillions of dollars spent and record low mortgages + tax break incentives and nothing..no budge.
There are just entirely too many who own homes or were past homeowners obliterated by this disaster from a credit and debt standpoint. The Fed need understand that Keynes madness cannot work.

Compare it to the oil volcano. The oil volcano is a problem with destructive powers. It is physcally creating destruction and as much as many would love the problem to go away it requires a PHYSICAL solution. You cannot pretend there is no problem or print away money. Money printinng will only temporarily ease the destruction and the damages inflicted but it requires a physical solution.
Now think of banks and debt. They tried false Fairy dust temporary solutions because it is more difficult to see the destruction occur but there is no difference. The finance volcano still needs a physical solution.

Thu, 06/24/2010 - 13:14 | 431684 rmsnickers
rmsnickers's picture

John, I always enjoy your posts, keep up the good work.  I may be mistaken but I thought I saw you mention you were a young dude...makes your writing and grasp of things all the more impressive.  Thanks.

Thu, 06/24/2010 - 10:43 | 431404 Trundle
Trundle's picture

They're probably thinking they can legalize all illegals by executive order and then give each new "legal" a house for free- of course by executive order. 

Go long Insane Clown Posse!

 

 

 

Thu, 06/24/2010 - 10:51 | 431419 -Michelle-
-Michelle-'s picture

How sad is it that I read your comment and thought "yep, that's probably what they'll do?"

Housing is a "right," after all.  They'll probably couch it in terms of being our saving grace.  Here are all of these illegals who work so hard and will add to our economy and, while they're at it, they'll live in those empty houses and make the yards look pretty again...

Thu, 06/24/2010 - 11:00 | 431440 IBelieveInMagic
IBelieveInMagic's picture

Great, what's wrong with adding a few more freeloaders. The global economy will welcome this addition to the American economy.

Thu, 06/24/2010 - 10:48 | 431413 QQQBall
QQQBall's picture

I guess the best they can manage is turn GOM into a "No Fly Zone", use toxic dosperants to keep the oil submerged and lie about the size of the leak.

Thu, 06/24/2010 - 10:51 | 431416 Lndmvr
Lndmvr's picture

Ran 300 miles inspecting 9 properties yesterday. The rural areas of Iowa have some nice homes on good size lots with weeds up to the windows. 20 to 100 years old. I expect after the first hurricaine the immigration wave will start. Still trying to figure out if .gov will do a mortgage trade to make up for the mess they are going to have in the gulf area. I am trying to sell a handyman special fo 18k on a nice city lot and everyone wants contract for deed cause the banks are not lending. I don't trust holding paper either.

Thu, 06/24/2010 - 10:52 | 431422 jkruffin
jkruffin's picture

America's Ticking Debt Bomb,  Worse than Greece

 

http://finance.yahoo.com/tech-ticker/america%27s-ticking-debt-bomb-like-...

Thu, 06/24/2010 - 10:52 | 431423 RockyR
RockyR's picture

if rates fall far enough, it will have a stimulative impact on housing sales much like FTHBTC.  Falling rates + falling prices (should this be allowed to come to pass) will let us find a bottom.  It's a start.

Thu, 06/24/2010 - 11:01 | 431442 SimpleSimon
SimpleSimon's picture

Falling rates + falling prices - no jobs - already indebted to the gills = bottomless pit

Thu, 06/24/2010 - 11:09 | 431462 Howard_Beale
Howard_Beale's picture

Lest you forget, the Depression stopped an entire generation from home buying. They saw it as too risky, some for their entire lives. We may well go the same way this time around. If you factor in the uncertainty of state deficits and property taxes (in some states) home ownership seems even more risky. So it might not be a start--like the double burn in the market.

Thu, 06/24/2010 - 10:58 | 431435 OpenEyes
OpenEyes's picture

Last night, I was discussing the all-time low in new home sales announced yesterday and the drop in existing home sales announced the day before, and a new thought occurred to me.  If home prices continue to decline, or even decline at a quicker pace, AND real estate taxes continue to increase (as is likely in many states and municipalities) there may come a point where your mortgage is the smaller portion of your home 'ownership' costs.  You may be paying more in real estate taxes that you pay in mortgage (principle and interest).  I'm no expert on these things, but this seems like a new paradigm for future homebuyers to consider.  When shopping for real estate it may not be the 'cost' of the home that prices you out of  that particular market, it may be the real estate taxes.  

Thu, 06/24/2010 - 11:02 | 431444 dryam
dryam's picture

You will be a slave to either the banks or the government, or both.

Thu, 06/24/2010 - 11:04 | 431445 RockyR
RockyR's picture

you are going to pay the taxes no matter what.  you have to have a place to live.  there is no escaping them.  you can reduce your nut by living in smaller quarters, but that's it.

we'll be living in a tax hell before we collapse... slaves to our governments' debts.  then comes collapse.

Thu, 06/24/2010 - 13:26 | 431730 malek
malek's picture

as a renter you have it a lot easier to vote with your feet...

Thu, 06/24/2010 - 11:06 | 431452 IBelieveInMagic
IBelieveInMagic's picture

This is not too far fetched. I have seen this happening with timeshares where the annual maintenance fees are sky rocketing (also due to defaults by other timeshare owners). You can't give away a timeshare now! Nobody wants them...

Thu, 06/24/2010 - 11:07 | 431456 ozziindaus
ozziindaus's picture

So how do underwater home owners take advantage of these low rates???

What a damn mess.

Low rates driven by economic uncertainty which is only reflecting the 10Y-USTB.

Prospective buyers are lured in with low rates and the illusion of cheap homes with a 3% down payment (33x leverage).

Market takes another 3% dump and wipes out all equity.

Homeowner is now underwater without ability to refinance when rates drop further.

Strategic defaults exacerbating the cycle

Thu, 06/24/2010 - 16:42 | 432269 Common_Cents22
Common_Cents22's picture

The old pushing on a rope conundrum.

Thu, 06/24/2010 - 11:10 | 431463 Joe Shmoe
Joe Shmoe's picture

So, if I can remember my Econ lessons, this means the demand curve for mortgages (from normal people) is steep - as in, big changes in price (reductions in interest rate) don't translate into big changes in quantity demanded (mortgages).  

The takeaway for policymakers?  If people don't have jobs, or are underemployed, it doesn't matter how low rates are, because they either can't afford to buy new homes or don't have the credit score (anymore) to get through the screening process of the stingy baks (who started this whole fucking mess in the first place).

And guess what? Government has never been able to do shit about creating strong fundamental employment... because the true job growth will come from some area that the bureaucrats don't have on their radar screens (like rag selling or bathtub whisky).

 

Thu, 06/24/2010 - 11:51 | 431507 Currently Smoki...
Currently Smoking Cannabis's picture

Dear Old Timer:

Bathtub whiskey was replaced by closet cannabis around the time of Abba.  Please update your analogies.

Thank You,

The Next Generation

 

P.S. Cadillac is no longer an appropriate synonym for "best".

Fri, 06/25/2010 - 06:31 | 433206 Joe Shmoe
Joe Shmoe's picture

Dear shit for brains,

My references were to 1930s, not my age or yours.  Smoke less, read more.

Thu, 06/24/2010 - 11:32 | 431486 jesusonline
jesusonline's picture

What is happening with this?

Bank execs panic over proposed change to orderly liquidation authority

 


http://www.politico.com/email-alerts/morningmoney/morningmoney_06242010.html

It was morning news, but last time i heard - it was rejected.

Is this correct? Wonder why the markets accelerated their downturn after the opening (it's not only bad data and lousy economy - don't give me that please:)

 

 

Thu, 06/24/2010 - 11:54 | 431516 Temporalist
Temporalist's picture

Even if someone knew nothing about the economy and real estate if you told them mortgages were at an all time low but housing purchases are at all time lows they would be able to figure out something is horribly wrong.

Thu, 06/24/2010 - 12:30 | 431582 Hammurabi
Hammurabi's picture

there is no such a thing as deflation

Thu, 06/24/2010 - 12:39 | 431600 Grand Supercycle
Thu, 06/24/2010 - 12:56 | 431644 Milestones
Milestones's picture

C/D Like your idea of an article. Between the GOM and what we are doing fracturing our shale deposits all over the country to obtain "cheap" natural gas (never mind the need for an exemption of the clean water act as it contaminates our water recources) We as a people and nation have reduced ourselves to a crack/heroin addict to maintaining a "lifestyle" that is gross by any standards at the cost of shitting in our nests fot the next thousands of years.Absolute short term mindless idiocy.

Our institutions are 100 years behind the reality of the communication changes that have modified our societial structures. I still have a 1968 Marshall McLuhan interview done in Playboy which is right on target of what is now happening. Oswald Spengler seen much the same in his seminal work; The Decline of the West of 1913.

We are in the midst of a pardigm change which most do not comprehend. I don't know where it is going, but the consequences will be enormous as we go into a new Dark Ages for 100 years or more. The toll will be frightful and necessary for this planet cannot sustain it current population. I hope for my children and grandchildren I am wrong but the signals all point in that direction.

I look forwrd to your attempt--you are an excellent writer and I immensely enjoyed your last 5 part article. Regards Milestones.

Thu, 06/24/2010 - 13:08 | 431675 idoubtit
idoubtit's picture

Can somebody please explain to me how QE is going to cause hyperinflation?  The Fed can buy assets and keep rates low but how can they make us borrow?  Don't we need people to borrow and money supply to increase for there to be hyperinflation?  It seems to me that all the Fed can do is to offer cheap money.  Money is cheap already and nobody is borrowing.   Seriously, unless they plan on GIVING money to us, I can't see how this is all going to result in hyperinflation.

Thu, 06/24/2010 - 14:19 | 431860 ozziindaus
ozziindaus's picture

EXACTLY with a slight correction. It's actually not in the Feds complete power to determine interest rates.

They have done all they possibly can including monetising junk MBS's and buying UST's. They are running out of bullets and know it. Last thing they want to do is simply dispose of their greatest assets (FRN's) which they can't do anyway.

Money through credit is created by YOU when you apply for a loan. If that's not occurring but instead being defaulted on, how in hell do you even get inflation?

Thu, 06/24/2010 - 14:51 | 431942 tmosley
tmosley's picture

The government can spend it into the economy.  They are doing so as we speak, in fact.

Thu, 06/24/2010 - 16:47 | 432284 Common_Cents22
Common_Cents22's picture

I don't see hyperinflation either seeing that any QE is not getting lent out and using the velocity/expansion of money through fractional reserve lending.  The QE was to funnel taxpayer money to the connected banksters.

They are now talking about, 'ok, time to REALLY QE to small biz" but that won't happen either.

Hyperinflation will be after a major collapse of the money system and a race will be on to acquire tangible goods and paper money alternatives as stores of wealth.

 

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