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As Freddie Mac Reports An Uptick In The 30 Year Mortgage Rate, Have Mortgage Rates Hit A Floor?
Is the floor in mortgage rates in? After hitting a record all time low of 4.19% in the week ended October 14, the Freddie 30 Year Fixed mortgage rate has risen slightly but appreciatively to 4.21% (chart below). This is not all that surprising considering the 10 Year UST has been meandering around the 2.5% spot for a while now. What it does indicate, however, is that absent QE2 mortgages may have just hit their floor for the current regime. As it is no secret the Fed is intent on lowering mortgage rates as low as possible the question becomes whether a level in the low 4%'s is enough for mortgage activity to finally pick up.
Rosenberg, who chimed in on the rate conundrum doesn't think so.
So here we have this completely bizarre situation where even with market interest rates at historic lows, mortgage applications for new home purchases — the root of housing demand — slid 6.7% during the week ending October 15, on top of the 8.5% decline the prior reporting week and the level is back to its lowest in nine months, at 169.7. In “normal” times, the level of mortgage rates would have translated into a purchase index closer to 400, more than double where it is today. The Fed may well be able to drag bond yields and hence mortgage rates down even more, but the reality is that the central bank has no tools to deal with a total shift in household attitudes regarding debt, discretionary spending and homeownership.
As an aside, the purchase index is down 50% on a 26-week annualized basis, and from a year ago, purchases are down 37%. Incredible.
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In Ireland, home prices fall to 2002 level: http://www.independent.ie/business/personal-finance/property-mortgages/a...
Why would anyone take out a mortgage with all the crap thats going on? I am perfectly happy renting my basment Appartment.
Because they think it's just a "paperwork" issue, like the media has been presenting. You should've seen the look on the faces of some acquaintances when I explained the problem for those who've bought foreclosures, REO's and/or flips done from those. They didn't really believe me until I pointed out the special addendum that Wells Fargo has been forcing on people (saying that you can't sue WF if they don't really own the title that they are selling you).
People are just clueless. And if they think this is the bottom for interest rates, you can bet that a lot of them will rush in to grab their pot of gold. Nevermind the problems, or the shadow inventory which is about to come on the market after this mess gets sorted out.
Because when hyperinflation destroys the dollar, you can pay off your mortgage with a single fiat note, and get change.
Renters will get shafted.
if rates go up , prices have to come dowm.... oh the horror Bernakles.
Just like BAC, down 3% so far today.
All the banks getting blowtorched ..... They will show the way on the next leg down.
Market Cap-
34.81 Billion
82.47 Billion
69.02 Billion
54.49 Billion
50 Billion
114 Billion
148.32 Billion
118.67 Billion
4.1 Billion
136.64 Billion
ect .....
All told over 1 trillion rolling over....
After it rolls over, will it play dead?
Trying to pump the real estate market is pushing on a string.... People now need good credit (only 65% of households have FICO over 620), a down payment (avg household savings in cash equivalents $18,100) and a job (U6 unemployment 17%).
They are doing a much better job manipulating the stock and bond markets. Their actions have a direct influence on the direction, so they will focus on what is working. Like a "code blue" patient, they will continue to turn up the juice and hit the market with the paddles. CLEAR!!
The average household definitely does not have $18,000 cash lying around, minus debts. It has to be distorted by the uber-rich having $ millions lying around, and J6P who has less than nothing.
Agreed, until they throw in the towel on tougher lending standards, and go back to "fog a mirror" loans, etc... the real estate market is toast. Do they think 20-30 year olds will drive the market higher? They can't even find jobs. If they do, they pay $10/hr. Boomers stuck in McMansions will either take the hit and sell at a loss, or the upside down ones will walk away (credit score be damned).
Hey, have you all heard of this...
The Debt Free America Act calls for a 1% tax to be paid for every monetary transaction whether in cash or by check with every bank or financial institution in the US. This bill is slated to be ‘approved’ during the Christmas vacation, to keep it as secret as possible in order to finish the transfer of wealth from all citizens to the banks and the government.
“The bill is HR-4646 introduced by US Rep Peter DeFazio D-Oregon and U S Senator Tom Harkin. It is now in committee and will probably not be brought out until after the Nov. Elections.
It's from Jim Kirwan's latest piece.
If it passes, as it seems it will, what will that do to interest rates?
By the way, please consider converting some portion of yoru Au to Ag. Ag and Ag-ri.
Gold is going to lose it's luster.
ORI
http://aadivaahan.wordpress.com
China is shitting FRN's with violent diarrhea,keep some PM's handy.
"This bill is slated to be ‘approved’ during the Christmas vacation" I have heard of something like this before. Hmmmmmmm, what was it? Oh right, The Federal Reserve Act of 1913.
Hey, way to tell half truths. It seeks to repeal the individual income tax and replace it with a 1% tax on all financial transactions. You left off the part of repealing income tax...yeah this will get no where. It is a bill to create a flat tax and not to add more taxes to what we pay.
That will pass overwhelmingly............................
As well as all the other attempts to create a flat tax.
Also do not forget this will hurt the top 1% more than the rest as their transactions are rather large.
Sounds like an incentive for cash and barter transactions to me.
The way the bill reads is that the "Seller" is the payer of the tax. This is a complete opposite of where the majority of the current tax burden lies. It would garner HUGE public support despite what impact it might have on business.
Sorry, our banks will be "uncompetitive", wages will become "uncompetitive", bonuses will become "uncompetitive", we will lose "talent" to foreign markets, margins will deteriorate....
.....you know how it goes.
What tends to happen is, as mortgage rates start to pick up, so will activity. It's like chasing a stock. People feel that it won't go lower and is starting to go up so they better get in. That usually causes a spike in activity from those who have been waiting and now see rates moving higher.
That is true in normal times, unemployment rates to high for that major increase now. Also you have to be full time employed for a few years to get a mortgage.
Right, so once mortgage rates begin to rise, all the fence sitters buy. Once they are cleared out, inventory will start rising again without any real improvements in the unemployment situation.
So look for inventories to rise through 2011 - 2012.
That's probably true but there will be a pretty decent spike in buying before that happens giving the false hope that housing has bottomed and a temporary spark in prices.
Therefore, you have quantified the number of "fence sitters" and how much they will buy.........
How big with the spike be? Estimated number of units?
I sure hope so Harry. I'm a bit skeptical that there will be much of a bounce because of the fact that we are still very much experiencing a consumer balance sheet event and Obama regime is not going anywhere soon. There is still way too much debt and uncertainty in the system and more so "bad debt" on top of the fact that there is a large percentage of buyers (I'd say 50%) that can no longer buy real estate due to the tightening of the lending guidelines. Which is a good thing. But I'll take any kind of bounce, being that I'm in the home building industry and am gearing up too start a new project.
Harry just likes to come off like he has the answer to everything. Arrogant asshole.
How will that affect APPL?
"What tends to happen is, as mortgage rates start to pick up, so will activity. It's like chasing a stock. People feel that it won't go lower and is starting to go up so they better get in. That usually causes a spike in activity from those who have been waiting and now see rates moving higher."
On the margins, maybe. For most people, that particular "tendancy" has gone the way of the do do bird. The average re buyer has finally figured out that re comes with risk. After how many cycles? Not to say that re won't return. Timing is everything - that's the message people are getting right now - just like stocks. "Buy and hold" with no relevence for timing in re has been a painful lesson for many buyers.
I think this is backwards. In Aussie the Reserve Bank will put up rates to deal with inflation or an over active housing market maybe. Activity first, then rate rise.
Otherwise it is the banks putting up rates because their other sources of funds are more expensive.
The housing environment just got a lot more complicated ontop of falling prices. People will be thinking there is probably more shit to hit the fan in the housing market yet and will stay away.
Uh, why did Mr, Market get cut in half?
Heard that CNBC was talking down QE2, but I did not see it. Dollar about to go positive.
Seems, Bernanke went off to pee, and in the mean while all this happened.
No probs. He is back now....
Only Ben knows for sure.
They sure have hit a floor....Just try getting a 30 year fixed jumbo mortgage with a decent rate....Banks don't want to do it as they realize the rates are artificial.
I think the long-wave interest rate cycle hit bottom Oct. 8. The 29 year trend of falling rates is over. The 2.334% yield on the 10-yr won't be seen again.
Mortgage interest isn't set by the market. It is set by government fiat.
Since home buyers today are not driven to get as much house as they possibly can for a given payment, lowering interest won't help home prices.
Just what Dr. Bernanke ordered:
"Look, rates are UP by 1 basis point! We must act with $5 trillion QE Infinity right now otherwise people can't afford homes!"
No jobs ,No houses. Everyone who wants one, or can actually get financed has one..No jobs, No houses
So the govt doesn't want me owning gold. Didn't want me going into debt, now want's me to take on more debt. Looked down their noses when i bought a house when others couldn't then wanted me to buy two houses then got pissed when I did now are pissed that I won't. They want me to destroy my credit cards but is now pissed that I don't have any. Oh Dear Leader please tell me what you want. Just stop changing your mind and stick to one message. Just know when you do I will turn to George Costanza rules and do exactly the opposite as in the long term I'm pretty confident that I will be safer.
rates can't rise because there is NO DEMAND for credit at these prices.
Interest rates are the price tag on credit. It's important to realize this.
Exactly, interest is the price of credit. Interest is often mistaken as the price of money; which is false.
I expect 30 year will bottom between 3.5 and 3.75 and the 15 year will bottom between 3.0 and 3.25. 15 year today with a point is 3.5.
Everyone not underwater, with income, and no credit blemishes will get auto refied.
Underwater notes still an issue. Purchases will remain marginal for a while. Additionally, there is a wave of resets in 2011.
Securing the note with future earnings like in recourse states needs to be looked at more seriously. Go ahead bankster, securitize my future earnings and give me a credit rating instead of a credit score.
-profd
The flooor will be near zero, Ben Shalom Bukkake will ensure this to be true.
(Reuters) - Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) may need as much as $215 billion in additional capital from the Treasury through 2013 to offset losses and maintain a positive net worth, their federal regulator said on Thursday.
NEW mortage activity can't pick up until hiring picks up and there is no increase in hiring. Any initial claims weekly over 400K is bad news and when was the last time we had a weekly under 400K? If you count unemployment using the same techniques as used during the Great Depression, unemployment in the US is about 22%. The Great Depression peaked at 25% unemployment and had several years near 22%.
In short, people can't buy new houses unless they have jobs to pay for them OR Congress authorizes more funny money games for the liars, shills, and whores on Wall Street. (And yes, if you work on Wall Street, you are, by definition, at least one of the above if not all three.)
New mortgage activity needs economic activity which is not happening under the current fascist regime, ergo, mortgage rates are irrelevant. Solve the economic problems and you solve the mortgage problem. Trying to solve the mortgage problem without providing jobs is simply ass backwards, but given Ben Bernanke's obsession with being always wrong, this does not surprise me.
This is no doubt a key ingredient that will help lead too a more stable housing market. I don't think however that enough attention is being directed at the "Uncertainty" that is lingering in almost every Americans mind right nowconcerning Obama and his merry band of thieves. This is emotional and emotions drive most all consumer buying decisions. We need to find a way, as a Nation, too lower the anxiety level. Obama and his regime has failed miserably in this category. There is a huge population of prospective home buyers and sellers just sitting idly on the sidelines waiting for our National financial and political situation to improve.
But the real estate agent assured me "Theres never been a better time to buy"....or was that Ben? I forget which - does it matter?
Like savers are getting fucked now, the Fed will never let the 90% get a 30 mortgage for less than 4%. Even when the long bond goes to 2% they will say , no it's 4% to account for default risk. Love it or leave it
Have Mortgage Rates Hit A Floor? No.
QE2.0 will grind mortgages rates to below 4.0% early next year.
...the purchase index is down 50% on a 26-week annualized basis, and from a year ago, purchases are down 37%. Incredible.
Not really. These days homes are not viewed as commodities, they are still viewed as investments. With investments, demand increases as they become more expensive, not less. Just like when a stock price goes up people want that stock. When stock prices fall people don't want to hold those stocks.
I'd rather buy a home when they are getting more expensive. The last thing you want to buy is a house when their values are falling.
Is a 4.21% loan today better than a 4.5% loan on 80% of the principal next year?
Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
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