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30 Year Freddie Fixed Rate Mortgage Drops To New 2010 Low Of 4.78%
The Freddie Mac 30 year Fixed Rate Mortgage rate for the May 27 week was announced, and, in tried and true "let no crisis go to waste" fashion, it has dropped to a fresh 2010 low of 4.78%. So to recap: stocks are where they were at the beginning of the year, the US federal debt is over $13 trillion, QE is over, Europe is imploding, China is tightening, North and South Korea are blasting The Eagles at each other at over 200 dB in clear violation of the Geneva convention, there is no oil left in the GOM, US double dip is accelerating, Marsian global rescue swaps are being considered by the Fed, yet mortgages are cheaper than they ever have been, as the government goes double all in in its attempt to reflate the housing bubble. Well played, Ben, well played.
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I'm adding a new sig line to all my comments.
Ezekiel 33:6
We are the watchmen. It is our duty to alert.
(semi obscene watchmen joke deleted to avoid offending religious sensibilities.)
I'm waiting for ZIR(P) mortgage rates before I refinance.
Don't laugh. Wanna bet how desperate the madmen will get?
Not laughing...expecting it.
Secular yields are declining. There is no way around the diminishing returns phenomenon.
Those who expect rates to go up are in for a surprise - rates can't go up because there's so little that's profitable at these rates, there'd be even less demand for money at higher rates.
Thats what Ive been saying to the 'rising rates' crowd forever, HOW can you raise rates when no one can pay the present rate? ZIRP, here we come!
I am with Mish on this one... 'Banks do not want to lend to any but those that do not need the money and those that do not need the money do not want to borrow'...paraphrased, of course.
On a completely different topic...TPTB are beginning to wonder what all us little people are doing with our recently (and not so recently) dollars withdrawn from their financial institutions. Do you think Ben misjudged how far we would go to escape the vampire squid? Bring on QE 2, we need some more silver and gold!
Follow Australia's lead.
The consumer pays interest only on housing purchase.
The government covers the capital.
Everybody wins!
I am waiting to purchase my first home on this idea...not necessarily 0%, but I'm thinking it will get close....and hopefully, prices will come down, too.
Ahh, I catch shit for living with my parents for the time being, but I'm saving my money and plan on being in a much better position than most I know.
At the rate the housing market is going, you might be able to pay cash for a house of your dreams in short order.
Looking to purchase a bit of really prime light industrial CRE ~ 2011-12. Trade a little gold for a little low tax steady income producer...by then I figure the idiots in power will figure that returning manufacture to our shores might be a good idea...and CRE is on the verge of an implosion.
As long as it isn't in San Francisco...you can find a decent home in LV for the price of a nice German car.
I think we are going back there. My grand father did, with his SAVINGS.
CD, I'm actually expecting the ever elusive 50 or 100-year mortgage to come out first before ZIRMs
earth needs a bailout. Hopefully we will find an advanced alien civilisation that can lend us a few bob!
John Ringo wrote a series of books along those lines. Space elves come down and enslave our civilization selling us technology to save ourselves from another alien race...
Only issue is that the interest rates are pretty high and they end up owning our a$$e$.
(note - I haven't read the book/series so if you do - don't come after me for a synopsis of a synopsis I glanced at 6 months ago)
Don't forget about Australia's soon-to-be-deflating housing bubble/commodity bubble as well!
Had tha thought that Timmah let tha Chinese in on tha "Stock Kamret" honeypot...
I call for 0% interest-only 99 year mortgages for all (and a chicken in every pot)!
http://www.gold-silver.us/what_silver_gold_buys.html
I was looking at apartments in my city last night with Zwillow. Many are still 30% over the 2003-4 level. Have wages risen since then? Is unemployment lower? What on earth could justify these prices?
Oh, the Fed? Oh. Why would the Fed drive up asset values? Don't the "economists" there care about savers and the fiscally prudent? Or do they care about the banks? Am I a conspiracy theorist for wondering this?
YADA YADA, can't hear you over the sound of how useless my MBA is.
MBA? I have one of those too. I learned about portfolio theory and synergy. How about you? I should have been a welder.
A lot of MBAs skipped the class with the lecture on deflationary spirals. After all, nothing like that could ever beset a "modern" economic system.
I don't think that was covered in my MBA. Or my economics degree.
I am pondering wiping my arse with my parchments. I can't decide. Might be anti-climatic.
I am close to it. My parchment hangs in my bathroom
I'll be Thelma and you can be Louise.
Zillow is in on the game.
A month ago I bought a house that zillow never listed for sale,
for 1/3 the price they appraise it for,
and they still won't show it as recently-sold.
On Zwillow many homes were valued (zestimate) higher than the very recent sale price. Sometimes 10% or more. An asset is worth what it can be exchanged for.
I've noticed this too. We sold our townhouse in 2006 in recognition of the housing bubble and have been renting since then. We wanted to buy a single family home to raise our kids in, but prices were crazy. I've recently been searching for houses on Zillow. Although asking prices have come down since the peak, they are still asking three times what prices were before the bubble.
There is one home we may be interested in, but it is asking $975K. Prebubble, it sold for around the mid $300's. Zillow shows the price per sq. ft. of recently sold homes (all bigger houses with the same size or bigger lots within 1.5 miles of the house we like). I ran the price per sq. ft. on the house we like to find the fmv. Based on the most recent 3 sales (March/April 2010), it should be currently priced between $360K and $590K (down from the highest recent comp of $700K in Sept. 2009). The Zestimate is $962K! If they did find some greater fool to pay this ridiculous price, how would the house ever appraise? (Well, I guess I did see that MD is ranked 6th in mtg. fraud this year on a CNBC slideshow.)
We were thinking of making an offer based on the comps. The seller will probably reject it (from public records, it looks like they owe about $550K), but maybe it will give them a wakeup call. I'm ready for the realtors to tell us that our offer is insulting. Based on the recently sold comps, I think it is their asking price that is insulting.
MD. That's your problem. You're now competing with bankers as DC is their new money supply center, not to mention defense contractors and top of food chain technocrats.
Exacly re: MD.
We're becoming like Thailand or Argentina, where all political/economic power is concentrated in one area (NY-DC corridor) and the rest of the country be dammed. The elites in NYDC don't give a damn about Dallas or Salt Lake. They have their own little obsessions and proclivities that are entirely irrelevant to life as lived by 290 million people.
Yes, we really don't like living in socialist state of MD. We'd love to move back to NE PA near family, but there are no jobs there. I've been searching for houses in PA anyway, but the prices are completely out of whack with incomes because of all the NYers that commute to the area. The same thing happened when I was in HS. The NYers moved in driving up prices during that bubble (nowhere near as big as this one) because the area looked "affordable" compared to the city. This priced locals out of the market. Then when the bubble burst, most of them moved back to the city leaving foreclosures behind.
Last year they had a plan. Now all they got is delusion. Keep trying guys, the more you fight, the faster you sink in the quicksand as we all cheer.
I disagree with the "reinflate" characterization. This is an attempt to keep the housing market from completely DEflating.
In our current economic situation, people can only pay a static amount for housing, regardless of where that money goes. So home buyers look at the all-important monthly payout (X). X is made up of two numbers primarily: principal (Y) and interest (Z). X = Y + Z
X will be static for a long time for the average wage earner (if they are lucky). So if the interest (Z) spikes, then Y, and thus the market price of homes, must precipitously drop. Interest rate increases will destroy an already decimated housing market.
This isn't a matter of re-inflating anything. Unless wages increase the price of housing will, at best, remain stagnant. This is a matter of keeping the market here at this level, instead of imploding in a deflationary deathspiral that in all likelihood would bring everything else down to its knees.
If only this would happen, I could finally afford to buy.
This ole house is a-gettin' shaky
This ole house is a-gettin' old
This ole house lets in the rain
This ole house lets in the cold
On his knees I'm gettin' chilly
But he feel no fear nor pain
'Cause he see an angel peekin'
Through a broken windowpane
http://www.youtube.com/watch?v=0WhLhF12TBE
I like. Like this too
http://www.youtube.com/watch?v=aBCRJCXKSAA&feature=related
"and endless red tape to keep the truth confined..."
Tyler, how could you forget American Idol?!
They re probably lowering to see if anyone is gonna pay their mortgages for real from now on
There is no "they."
There simply isn't demand for money at these rates.
The friction is between lenders who want more interest for their money and borrowers who want to pay less.
But, overarching all of this is that borrowers CANNOT borrow at 6% to earn a 5% ROI. If aggregate economicality is in the 5% range, you will find almost no demand for credit/money at 6%. Rates would have to decline to find buyers of credit.
Is that why "they"underwrite 97% of them. lol
And for the rest of the news, the Sun is shining and all is fine in lala land :)
The government cannot easily leave the real estate business.
Now that homeowners are aware that they may exercise their put option with impunity, lenders must embed the cost of this put option into loan costs. On 10% down, maybe 150 bps?
It's like Afghanistan today, they can keep throwing money at the problem and keep it half away stabilized, or cut and run and loose the dogs of hell.
I'll take an interest-only loan at ZIRP...
Okay, but the house has to be in Oakland or Las Vegas. Deal?
Near all-time lows yet not low enough.... end of the credit system before your eyes.
Europe is not "imploding" Why CNBC just announced "Markets Rally as Europe Fears Fade"
The Ministry of Truth has spoken!
Wall St market headlines change faster than CNBC anchor chicks to tighter shirt during commercial breaks.
So, uh, what'll this do for the market for my jumbo-loan-requiring McMansion acquired at the top of the bubble?
Oh.
460,000 more jobs just lost, only 3% anemic economic growth (which is probably a pumped number itself), they must face the facts soon that Keynesian BS has utterly failed and we're in a hole that theres no way out of.
3% subtracted by tarp, stimulus and feds subprime investment - you d probably be closer to -10%
Make that 460,000 initial jobless claims. That's only the folk that can make an unemployment claim. Doesn't count out of work independent contractors, declines in commissioned sales staff and so on. Our local auto dealers have cut sales staff in half and the ones left are selling just enough cars to feed themselves (but not enough to pay their mortgages).
Don't worry, though. The recession is over. Remain calm, all is well. Move along, nothing to see here.
It's the little things that always get you Ben. You have a great plan. Looks good on paper. The theory is grand. The one little thing though is......unemployed people can't make house payments no matter how low the interest rates get.
Dude, I've had a rough night, and I hate the fuckin Eagles, man.
Thats IT! Get the fuk out of my cab man!
okay, kids, slightly off topic, but from David Einhorn's NYT Op-Ed today: "I recently posed this question to one of the president’s senior economic advisers. He answered that the government is different from financial institutions because it can print money, and statistically the United States is not as bad off as some other countries. For an investor, these responses do not inspire confidence."
My response, as I read this, was an out-loud "holy fucking shit" - I really actually thought that somehow, perhaps, someone up there got it - maybe there was a voice of reason somewhere in the administration. Now I realize there is not - the lights may be on, but truly, nobody is home.
Right on, Big Daddy.
We will be fortunate to survive.
Ezekiel 33:6
Wow.
No, no, no It is Holy Flurking Schnit!
I got burned once in the bubble, but will want to buy again within the next 18 months.
I have some direct connections to the banks' managers and their REO lists, my question is this... If I buy a property at ~55% peak 2006 pricing, and a 20% down traditional fixed rate, at a interest rate of close to 4.5% sometime in the next 18 months... how can I go wrong if the price of the house is under 3X my gross income?
In the area the Case Shiller index rent vs buy is at or near equilibrium... assuming any increase in property taxes to bulk up gov budgets would pass along to renters anyway... I simply ran out of reasons to not start a house hunt effort by lowballing REO listings.
I've been a RRE bear since 2006, but in the NYC suburbs house prices have stabilized in almost every zipcode within 45 mile radius of Central Park with low crime and decent school systems...
barring complete meltdown scenarios... but I think the Fed will not let that happen as long as the Treasury can fund the deficit through auctions.
My faith in the bear is wavering, I have come to ZH to replenish my spiritual cup... bring it on...
That's the risk. If they can, then inflation is your friend, as your raises will quickly make that debt < 3x your income and, like the other debtors, you'll cheer on the printing presses and rising interest rates, since your mortage is fixed.
If we go into a deflationary death spiral, your home will lose value, you may be in for a pay cut or lose your job, and that ratio will change.
Set aside enough cash to make 12 months of payments, in case of unemployment, and buy.
How could you go wrong?
1. You could loose your income. Injury, accident, laid off, employer bankrupt, stolen by government, etc.
2. The stabilized prices could de-stabilize and drop some more. We are not out of the woods by a long shot.
Still, you have to have a roof over you head and the deal you've laid out seems prudent. Just don't kid yourself in thinking that this is an absolutely safe deal. Haven't we seen that there's really no such thing? In a worst case scenario you could do everything right and still end up underwater.
That's the ticket, Hell and mushroom clouds. So, the task for the Fed is to ignite the propensity to take on credit.. to insure a future of full-employment by keeping the stock-market up, or in other words, diverting QE money to the invested classes. or else what..? The last Depression was on the eve of the affordable automobile, the modern home, it was accompanied by the New Deal- there was a construction boom, it was a totally opposite demographic. Bernake is fighting the last depression. That Depression blew out the Banks and the population; this has just blown out the people (17% unemployment!) yet except for 45 cents of every hundred dollars, QE is going directly through the Banks... how completely inequitable this is. Sure, throwing money into the population isn't going to work ever, despite what Rogoff suggested, but remind me.. jobs are being created by funnelling the money through the banks, yes or no? No.
Is inflation out of control? Yes. .. so, if the Fed takes it's finger out the Dyke, what falls down that's worth saving? - because everything that is important is crashing already. In fact, a collapsing bank balance sheet is Deflationary, and from a consumerperspective, that is a great thing -expectations of lower levels of money in circulation - it puts downward pressure on prices. That includes industrial goods prices, it becomes cheaper to purchase capital items. Never mind housing, that's a by-product of a vibrant economy, it's long-term investment, you can't expect housing to mend before the rest of the economy. Mark it to myth for the next fifteen years, imprudent bankers crying to their whores, no-one with a family to support gives a damn about bank balance sheets.
ernanke's entire plan hinges on the assumption that Deflation will reduce Profitability BELOW a level attractive to Investment. At 17% unemployment, the elasticty of consumption, plus the percentage differences on lower costs could well negate that sentiment. Whatever the case, a lot of very smart people are strongly opposed to the invervention by Central Banks in the context of the monetary experiments.. it's not market manipulation, it's the pure elitism. There is an obvious division between those for whom money is printed and given and everyone else. There is no way on God's earth this is going to continue.
@ tic tock
As long as the USD is the last domino standing, Bernanke is doing his job. If the rest of the world is a smoldering pile of default, and the 30 year is at 200, didn't we win?
That ongoing buying support I detected has morphed into a rally...
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1