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Guest Post: 25 Years Of Real Estate In One Chart
With Bernanke now making it extremely clear that housing is all we have, the following may raise a few eyebrows.
Submitted by Ramsey Su via Acting Man blog,
There is good news. This is likely my shortest rant ever.
Freddie Mac recently released the 2013 First Quarter Refinance Report. My attention was drawn to one chart. More specifically, the blue line in the chart.
Boom and bust in mortgage finance … – via Freddie Mac – click to enlarge.
It may just be a coincidence but whoever created this chart used the time period that covers exactly the reign of Chairmen Greenspan and Bernanke. Real estate investors should look back and realize that they could not have asked for anyone better than these two.
Accommodate, accommodate, accommodate, accommodate... that was and is the mantra. It did not matter whether it was the S&L fiasco, 9/11, the sub-prime bubble or the Lehman collapse, the Fed's policy is to accommodate.
All good things must come to an end. Look at that chart. We are about to go off the page. With QE-to-infinity, Bernanke is spent.
Each new iteration of accommodation is bringing in less results. What can the next Fed chairman, or maybe chairwoman, do to continue this practice of accommodation? There is little room to lower rates of all maturities. Aside from transferring more and more debt onto the Fed's balance sheet, QE is done in. Not that it has not been lost already, but is there going to be any form of a free market economy left?
Repent, the end is near.
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Wow
Yeah, when that corrects. HOLY SHIT
Oh come on, can't be that bad. After all, everybody can get the money on the cheap!
What they're not pointing out is the inability to service the fucking debt.
Nevermind...
the chart is actually bullish for housing
if refi shares drop (as a percentage), it will be because so many new home buyers are entering the market, soaking up the opportunity to participate in the ameridream in this strengthening economy
We are hitting a boundary. It may be like the sound barrier, i.e., it is hard to predict what happens when you cross the line without actually doing it. In the case of the sound barrier, the energy to drive across the boundary is high, and when you do cross it you get a sonic boom. Many thought it would be impossible to cross but it was not. Finance is typically more linear, but with all the derivatives contracts dwarfing the world's GDP, and many potentially based on non-linear behaviors, who knows what will happen?
Of course it is, as long as they keep those 20 million foreclosed homes off the market. But when the mainlining stops who will pay for the loss???
Are you asking me? Fuck, man ... I was hoping you were going to tell me.
Please tell me that was a rhetorical question, and I'm just stupid, and some nice person is going to come along and take pity on me.
another crocodile chart - lots of wildebeests gonna get eaten
I'm sure all the bond managers at pimco, hancock, lord abbett, fidelity, et al are thinking i'll be able to sell before everyone else..... but to whom?
Ooh. Me. Me. Sell to me.
What's with gold and silver tonight? Should be going up.
Imagine a stammering little fucker named the Bernanke, putting more and more paper on a giant metal spring. The paper is heavy and is keeping the spring loaded, tighter and tighter....
Better question is 'What are those fucktards thinking?'. The little sawed-off fuck shows up on teevee, sticks his finger up (side) his nose and says "who coulda thunk it" and the dollar gets kicked up 120 pips in a hour. Where can I get some of that shit they are smoking?
What's with gold and silver tonight?
Now that Bearded Ben has indicated he may stop printing, the $ may just be a keeper. At least until Janet "Print" Yellen takes over.
What a spread, as in Spread em baby, ya gonna get fucked.
You guys ready for this.........I have not seen this Shit (Easy Money) since the 90's. I own a Big Car Audio store...and we just partnered with a new finance company called "FlexPay". No credit check.......All you need is a checking account. 90 days Same as Cash, and if you do not pay off the balance withing 90 days....guess what the Interest Rate is??..............185%. Yep. We are having people flock to our store and signing up. I don't know what to say.
What is that old saying? I think a drug dealer coined it...
"First one's free."
Good grief....how do people try to explain this kind of shit away?
Moar green shoots?
Nobody has any money, period. Credit is viewed by the young today as the ONLY way of life to acquire things you truly can't afford. To keep the spending illusion alive, credit is the engine. 185% means nothing to a young minority who could give a rip about the payment in month #3, all he cares about is pimpin' out with his homies.....
And the best way to show bottom line growth in any firm that sells goods to people that can't afford the goods is to offer it at zero down. Problem solved! Customer gets the junk NOW, credit firm pays the principle and carries the loan, and the seller shows a sale. Future demand is brought forward and credit is abused to the point where we are today: On the edge of a catastrophe.
So whom is most at fault here?
Customer? Propagandized and advertized...
Seller? Mid-wifes the deal, "easy money"
Banker? Pays for the propaganda and buys the advertising....
Greed is good.
Maybe I'm just kinda old fashioned, but one of the diners has to pick up the tab, right? Or are we just finishing our desert knowing that in about ten minutes, we are all going to 'go to the bathroom' or maybe just run out the door screaming, "Fuck, yeah, mutha." I mean, someone's going to pay for this, right?
We all will through a diminished standard of living.
I could not believe "tires to rent" when first heard about it!
What's a 185% rate when you're delivering the car to Nigeria?
"We are having people flock to our store and signing up. I don't know what to say."
A fool and their money is soon parted? ;-)
I'm starting to wonder if it's not more the matter of a money and its fool is soon parted?
....maybe the customers figure the car itself is going to be repo'd long before that?
On another note, I just discussed with Citi their interest rate of 29.99% they are attempting to charge credit card customers. Being an old geezer, I can recall when most states (before the politicians were bought by the banks) had usery laws capping interest at 10%. Just more clear evidence of who is really running things.
I visited two car dealerships today, Kia and Hyundai, right across the street from each other and stated that I would pay cash. No fucking loans for me thank you. Yet, I was still quoted a monthly payment as if by habit. All that after making the first statement that I am not buying anything today and that I would pay cash in the future. I am no need to hurry here but the mention of cash elicited no emotional response at all.(discount?) It's like they do not want cash at all but rather loans and digitz. That's fucked up.
It's been that way for a long time. 30 years ago GM was basically selling cars at cost and making their profit on GMAC financing.
yup, finance is big business and it's not just banks doing it.
But these business gotta be careful because some of their customers won't be paying up
Your an idiot if you would not borrow 20K at .9% for 60 months. No one could care less than the dealership if you pay 'cash', they at least make SOMETHING even if you finance at .9. And you were quoted payments because entirely too many jackasses walk into a dealership and want the 'cash' price when they are really financing through their credit union and the dealerships almost always can match or beat the CU rates.The actual price changes if you finance in certain states due to doc stamp taxes, its not a lot but the dealership is not going to eat the $$ if you show up with a check from another bank. You ALWAYS want financing through the company you are buying the car from because oftentimes there is an extra rebate on the vehicle if you do. For instance right now Honda has a total of $1000 to give you to finance at .9% which you will not get unless you finance through them. Also, credit union financing sucks. IF for some reason you were unable to pay your car note they can take the $ right out of your checking account while slashing your credit card limit down to your balance all on the same day.
Correct Bill. My cars are all financed at like 1 or 2%, one of them for 5 and one of them for 6 years. SIX YEARS. I'll keep my powder dry and let them eat the inflationary loss.
Thanks for the info Bill. How does the cost of insurance factor into the decision?
You save quite a bit of $ over time by not having to carry full coverage. I've bought new cars all cash before for that reason, but not everyone wants to take the risk of having their car stolen.
Even if you have the cash, negotiate the car price down and tell em you'll finance it. make 1-2 payments and pay it off...you get the best price thay way
The market led the fed the whole way. They did'nt build that.
YA DRANG VALLEY! COL. HAL MOORE!
FUCK ALL PUNK COCKSUCKERS!
GIVE ME BACK MY BROTHERS THAT NEVER LIVED!
FUCK ALL OF YOU!
Thank You Brother. I weep.
Looks like the next boom is gonna need negative interest rates.
Real rates already are if you don't use the doctored CPI to compute them.
We're way past the point of using real estate as a barometer of anything.
Not even of stupidity?
Of course... but stupidity doesn't cover it.
And on further thought, I think my comment was stupid, because the irrational behavior in the housing sector is actually a good barometer to measure the greater insanity and brokenness. And desperation.
I disagree, it's going to tell us what the peak core temperature of the thermonuclear explosion of this economy is going to be. Looks to be pretty damn high.
Can't remember if it was the Tylers or a poster, but someone here observed (correctly) that most people buy house payments, not real estate. Like the car salesman who comes back with your "I'll pay invoice" offer with "if I keep the payments to $__, will that work for 'ya?". Who cares what you're paying in total if you can afford the payment, right? The Bernanke thought (incorrectly) that he could foreover keep control of the monthly payment via low rates, thus increasing home prices ad infinitum. I doubt this is the end, but it is the beginning of the end.
I plussed you for being spot on.
Salesmen understand this, who cares about the LONG BIG NUMBER as long as the SHORT SMALL NUMBER doesn't bust the MONTHLY BUDGET.
Several people/articles have observed that buyers shop house payments and not sales price. However, when they sell they market the price and not payments. I learned this in the mid '80s here in Central TX and have done well with RE. I believe its one of the secrets in being a successful RE investor/slumlord by playing this mindset.
"Like the car salesman who comes back with your "I'll pay invoice" offer with "if I keep the payments to $__, will that work for 'ya?"."
The same twisted principle holds for the progressive income tax, except, most feel like it wasn't stripped from their labors...they only look at the bottom line, what they're dragging home.
Shit, banks are selling mortgage pmts. When you underwrite a loan and are checking borrower solvency, you simply look at (housing pmt)/(pretax income). No effort is made to make sure a borrower will be able to continue to make pmts for the 30 yr term so long as the bare minimums set by regulations are met so the risk can be sold to fannie/freddie
In a relatively stable economy, a reasonably intelligent house-purchaser might well approach the transaction just as you describe: what is the monthly payment?
And I don't think Bernanke has been consumed with propping-up the housing market -- the housing market fell into his lap while he (his club) was busy manipulating in a greater sense.
Most importantly, do not leave puppetry out of the equation.
And we all fall down.
rand as been there...the exact pharsing is..."what be my muntly"...
Tyler - What happened with Facebook around 3:30 this afternoon...up almost $1 in 3 seconds from some fat finger....then right back down.
Short demand.
Is it too late to get in on house flipping..?
just as the so called Maestro cleansed his hands of all wrongdoing, so will Benark when he leaves.
The article should be called "25 years of refininancing at lower rates to use your house as an ATM."
When that ends, as rising rates will surely kill it (nobody refinances at a HIGHER rate, obviously), there's more paper spending/GDP we won't be getting any more.
When you are, as a nation, only getting by on ever lower interest rates to support ever higher debt loads PRETTY MUCH EVERYWHERE, hitting the interest rate trough and climbing back up again hurts. Bad. It breaks things. You think you hate it now, but just wait. The forecast calls for PAIN.
If rate rise, then u can do a cash-out reverse mortgage. See the money always flows... It's magical to behold.
Ring Ring.. "Hello"
"I see you just refi'd 3 months ago at 3.50, would you like to do it again at 3.75?"
"Ummmm, no"
This actually happend to me about 2 weeks ago - our house is being sold and my lender keeps calling me to "refi" even though we are 6 weeks from closing!
when the people got a taste of no mortgage payments, it was game over
Moral hazard is a bitch ........ too bad for Bernanke
I'm getting a loan for $125K - that buys about 10 acres and a house in my part of the country. $125K loan = 40K salary a year. If you want to improve your standard of living, I'd suggest buying land. I grew up homesteading, got away from it for 10 years and couldn't compete with the fresh food and family time.
High rates AND inflation cure themselves. Bernank does not control credit.
Interest rates go down slowly... then BAM! The rug is pulled from underneath you!
"Accommodate, accommodate, accommodate, accommodate... that was and is the mantra."
"Accommodate" is the precipitate in your Commode, after someone "eased".
Scrubbing bubbles can remove that!
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