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What The Recent Surge In Rates Means For Your Home Purchasing Power

Tyler Durden's picture





 

Contrary to what one may have read in the financial tabloids, a houseing market does not recover thanks to Fed-subsidzed REO-to-Rent loans used by the biggest private equity firms to buy up distressed property on the margin, by foreign oligrachs buying Manhattan triplexes sight unseen just to park 'tax-evaded' cash courtesy of the NAR's anti money-laundering exemption, and by foreclosure stuffing from the big banks desperate to subsidze the market higher before the sell into it. The recovery comes from the average consumer, who has disposable income and savings (in a hypothetical scenario of course) and who can buy houses based on a given monthly budget - a budget which must provide a better deal to own than to rent.

The problem with such a budget is that first and foremost its purchasing power is dependent on interest rates, and in an economy in which leverage is everything, rising rates mean a collapse in purchasing power. Here is a glimpse of what has happened to the mortgage rates in the past month alone: from Bloomberg's Jody Shenn:

Wells Fargo & Co., the largest U.S. mortgage lender, is offering 30-year fixed-rate loans at 4.5 percent, according to its website, up from 4.13 percent on June 18 and 3.88 percent on May 22, when comments by Bernanke to lawmakers and the release of the minutes of the last Fed meeting caused bonds to plummet. Freddie Mac’s survey, which is lagging behind the bond slump because it reflects originator responses through yesterday, showed average rates falling to 3.93 percent this week.

So in one month, the average 30 year fixed rate mortgage has jumped by over 60 basis points. What does this mean for net purchasing power? Well, as the chart below shows, assuming a $2000/month budget to be spent on amortizing a mortgage (or otherwise spent for rent), it means that suddenly instead of being able to afford a $425K house, the average consumer can buy a $395K house.

This means that, all else equal, housing just sustained a 7% drop in the average equlibrium price based on what buyers can afford.

But assuming the current selloff in rates continues, things are going to get much worse: we may be seeing 5%, 5.5% even 6% and higher mortgages in the immediate future.

It also means that a buyer who could previously afford a $506K house with a $2,000 monthly budget at an interest rate of 2.5% will be able to afford only $316K if and when the average 30 Year fixed hits 6.5%: a 40% drop in affordability based on just a 4% increase in interest rates!


And this is bullish for the economy?

 


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Thu, 06/20/2013 - 14:26 | Link to Comment Dareconomics
Dareconomics's picture

Then, can we finally put the mainstream media's housing recovery narrative to bed?

http://dareconomics.wordpress.com/2013/06/20/around-the-globe-06-20-2013/

Thu, 06/20/2013 - 14:50 | Link to Comment Praetorian Guard
Praetorian Guard's picture

Good! Can't wait until the fire sale really begins... foreclosures through the roof, ARM's going up in smoke... these greedy bastards from main street to wall street should have learned their lesson years ago, but they kept using their "get out of jail for free" card... those days are over... you watch - tons of mcshit shacks on the market, and the banks will DUMP and mark to market their inventory...

Thu, 06/20/2013 - 15:19 | Link to Comment MillionDollarBogus_
MillionDollarBogus_'s picture

Tyler, you suggest that the average consumer could afford a $425K house.

This is a joke, right..??

Thu, 06/20/2013 - 15:24 | Link to Comment Praetorian Guard
Praetorian Guard's picture

I agree. I remember in the early 1990's how a 120-130K house was for the rich side of town. Shit, 120K now is for a literal shit shack. However, a good wage back then was 15 bucks and hour, and food was cheap, gas, etc.

Fucking thing I hate the most is the boomers, ie my parents, telling me to get a new house (my house is paid off, but the neighborhood went down the shit tubes, though I have no problems). What they fail to understand is that their house caost all of 40K back in the 70's, is paid off, and they hold jobs with double the original value of their house note. In essence I asked them if that meant in the next 20 years if the 400K house I buy will translate to me earning 800K a year? Because if so, things are beyond fucked up...

Thu, 06/20/2013 - 16:46 | Link to Comment BraveSirRobin
BraveSirRobin's picture

Why yes, things are FUBAR. Please enjoy the rest of your day.

Thu, 06/20/2013 - 16:13 | Link to Comment NotApplicable
NotApplicable's picture

Not at all, once you realize how the average has evolved.

"consumer" = "someone that still has disposable income" = "upper class"

Non-consumers need not apply.

Thu, 06/20/2013 - 17:36 | Link to Comment MacGruber
MacGruber's picture

And to make matters worse, since most housholds in the U.S. are levered with revolving variable rate credit they will be even more tapped out as their rates go back through the roof. Bon voyage American Dream!

Thu, 06/20/2013 - 16:48 | Link to Comment max2205
max2205's picture

What moron would get an ARM with rates zo low....oh wait...

Thu, 06/20/2013 - 16:59 | Link to Comment DosZap
DosZap's picture

I was jsut informed my home and property may be termed not mine,(Eminent Domain) as there are plans for state use.I will be forced to take their offer, or else.FINE by me, it will free me up from this money pit, which all homes are, and relocation is finally a reality.PLEASE make me an offer.

Thu, 06/20/2013 - 16:44 | Link to Comment DosZap
DosZap's picture

Then the so CALLED recovery in the housing sector, will drop dead,No one is going to take a 6% loan,unless they are very wealthy.

Thu, 06/20/2013 - 16:55 | Link to Comment DosZap
DosZap's picture

dupe-stupe

Thu, 06/20/2013 - 14:27 | Link to Comment kito
kito's picture

cant wait to see the refi numbers!!!!!!!

Thu, 06/20/2013 - 14:30 | Link to Comment fonzannoon
fonzannoon's picture

I think I want tomato.

Thu, 06/20/2013 - 14:34 | Link to Comment kito
kito's picture

relaz fonz, the dow is barely breaking a sweat. the pullback is maybe considered a correction..............maybe...............silly fonz...as if reality has anything to do with stocks.......its all about worshipping ben.............

Thu, 06/20/2013 - 14:36 | Link to Comment fonzannoon
fonzannoon's picture

Ben will be tarred and feathered for worrying about inflation too much and not fighting the deflationary monster.

Thu, 06/20/2013 - 14:47 | Link to Comment smlbizman
smlbizman's picture

thts is the question i would have asked? why is inflation good for me and why is deflation bad?...your honor your honor...

Thu, 06/20/2013 - 15:08 | Link to Comment Al Huxley
Al Huxley's picture

He'll be tarred and feathered for breaking the bond market.  How ironic, for almost his entire term he does nothing but monetize the shit out of everything that moves, and then in his final months, one little hint that 'maybe we'll start to 'taper'' and his reputation as the 21st century's tight-money miser who destroyed America is assured.

 

Tough gig, hey Ben?  Nothing like academia.

Thu, 06/20/2013 - 16:15 | Link to Comment NotApplicable
NotApplicable's picture

Yep, that's the script all right. I wonder how long ago he figured out he was going to be the fall guy?

Thu, 06/20/2013 - 15:07 | Link to Comment Praetorian Guard
Praetorian Guard's picture

Pullback is considered a correction? WTF? Watch yields launch into orbit, explain to me how that will help the debt, credit, or loan amounts - the stuff businesses, mainstreet, and govt use to survive on a daily basis? This bitch is going to implode and drag a ton of collateral damage down with it in its wake...

Thu, 06/20/2013 - 15:55 | Link to Comment kito
kito's picture

you...sir....are getting ahead of yourself.....the sentiment isnt there for that.........yet.............

Thu, 06/20/2013 - 16:34 | Link to Comment Praetorian Guard
Praetorian Guard's picture

I got you... yea, but sentiment could vacillate within a few days at this rate...

Thu, 06/20/2013 - 16:48 | Link to Comment BraveSirRobin
BraveSirRobin's picture

You may see a burst as people rush in before rates go higher. If so, do not take this as a positive sign for the housing market.

Thu, 06/20/2013 - 14:27 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

Won't the US budget blow up before mortgages ever get back to 6.5%?  How much of the annual budget will go to servicing the debt at that point?

Thu, 06/20/2013 - 15:14 | Link to Comment Praetorian Guard
Praetorian Guard's picture

Yes, I believe last I looked it was like a 1% rise would tank the system...

Thu, 06/20/2013 - 15:26 | Link to Comment U4 eee aaa
U4 eee aaa's picture

So that's why Obama and family are in Europe. He's going to be begging for asylum soon!

Thu, 06/20/2013 - 16:52 | Link to Comment BraveSirRobin
BraveSirRobin's picture

If the average rate of interet paid by the USG climbs to 6.5%, yearly interest payments will rise from around $225 billion per year to around $1,100 billion ($1.1 trillion) per year.

But it's nothing to worry about, because we can easily print that, too.

Thu, 06/20/2013 - 14:28 | Link to Comment nbsharma
nbsharma's picture

the way to tackle this is to stop giving out subsidized money to PEs / hedgies / banks, and let the entire market be cleared with foreclosed homes in the market. low affordability with higher interest rates can still lead to higher home sales as long as the prices come down. no?

Thu, 06/20/2013 - 14:28 | Link to Comment FieldingMellish
FieldingMellish's picture

Debt = slavery.

Thu, 06/20/2013 - 16:13 | Link to Comment toady
toady's picture

I need a new roof, so I toyed with the idea of a home equity loan, put in a few online apps.

Chase called me yesterday. 10.25% for 10k, the minimum, and 6.75% for 25k. They get the money free from the bernank, and want 10% from me? I'll just pay cash.

Bad timing on my part I suppose...

Thu, 06/20/2013 - 16:19 | Link to Comment NotApplicable
NotApplicable's picture

Wow, that's insane. I guess they don't want anyone fixing up a home to put it on the market?

Thu, 06/20/2013 - 14:29 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Houses (there are no homes, only houses) are not bought with mortgages now.

They are bought by private equity firms for cash to be rented out.

So this examination of mortgage rates is not important.

Thu, 06/20/2013 - 14:29 | Link to Comment fonzannoon
fonzannoon's picture

Down almost 300 and the 10yr still selling off. 

It's gonna take a doozy to get that toothpaste back in the tube.

Thu, 06/20/2013 - 14:30 | Link to Comment BeansBulletsBandaids
BeansBulletsBandaids's picture

395k??? Dang, I guess that means my family and I are well, well below average. We'd be lucky to get a 105k house right now...

Thu, 06/20/2013 - 14:30 | Link to Comment Midasking
Midasking's picture

tapering is not happening or the entire world will be a smoking hole in the ground. QE will be expanded you can count on that. http://tinyurl.com/mem7o7x

Thu, 06/20/2013 - 14:31 | Link to Comment trebuchet
trebuchet's picture

and This post is why QE4eva billes as inducing wealth effects is NOT  a stock effect and only had a temporary flow effect by promoting liquidity. 

 

Banks know these numbers but wrote 3.5% mortgages knowing they could flip them to the fed. Now that the buyer is leaving town, time for property recovery to go into reverse as banks will not write low interest mortgages any more

 

 

Thu, 06/20/2013 - 14:30 | Link to Comment Bay of Pigs
Bay of Pigs's picture

Moar dog n ponies!

Thu, 06/20/2013 - 14:30 | Link to Comment bill1102inf
bill1102inf's picture

Its bullish if your a buyer who is renting. Buying a house that was built and sold in 06 for $350,000 to someone with a 5/1 option arm with a teaser introductory rate for $70,000 at 8% for a 30 year is so much more doable and payoffable. 

Thu, 06/20/2013 - 14:31 | Link to Comment devo
devo's picture

They're just going to tax the gains or kill them via interest rate hikes. It's one reason buying a home (to live in) is stupid. The other being they're overpriced to begin with and have poor fundamentals.

Thu, 06/20/2013 - 14:43 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

Yeah, let's all be nomads.  I have a stainless steel hockey mask for just that kind of lifestyle. 

Thu, 06/20/2013 - 14:46 | Link to Comment ebworthen
ebworthen's picture

And all those home-builder stocks, lumber, and the Lowe's/Home Depot ramps of 50%-60% will reverse.

All that shadow inventory on the bank's balance sheets will rot further.

Is it any wonder the FED is buying MBS's?

Taper?  Yeah right.

Jesse is on point today, knocking it out of the park:

"The games being played in the markets are apparent, heavy-handed, and beneath contempt, operating under the rationale of a 'necessary perception management.' Necessary for whom? It is officially sanctioned theft, pure and simple, however one wishes to rationalize it. The 'new normal' is really the new awful, with a decidedly oligarchic taint."

From "Pictures From a Monetization" here:  http://jessescrossroadscafe.blogspot.com/

(link opens in new window)

Thu, 06/20/2013 - 14:32 | Link to Comment Freedom In Your...
Freedom In Your Lifetime's picture

Throughout history human beings have never had a problem creating housing for themselves. It is just a sign of how fucked up things are that it takes 5+ years of labor for a person to have a house to live in. Once again, the only reason this is the current reality is because of industry imposed government regulations and 'laws'. Go long Cobb, earthships, adobe, earth bags, even straw bales and make a house with resources from you own land instead of asia. http://russellbybee.hubpages.com/hub/For-Those-Frustrated-with-the-Curre...

 

Thu, 06/20/2013 - 16:36 | Link to Comment MisterMousePotato
MisterMousePotato's picture

I haven't seen the movie, but I did see pictures of the sets Peter Jackson made for The Hobbit.

What's wrong with that?

Biggest impediment in life is .GOV. Building codes running to thousands of pages and real property taxes. Doing something about them is the first thing needed for liberty.

So what if someone wants to live in a tent? It's not always a matter of economic necessity (Muammar Gaddafi, for instance).

Thu, 06/20/2013 - 14:32 | Link to Comment Dr. Engali
Dr. Engali's picture

But an anyliston CNBC this morning said that the U.S. Consumer was 'getting richer' because home prices were going up. Surely he can't be wrong.

Thu, 06/20/2013 - 14:46 | Link to Comment IllusionOfChoice
IllusionOfChoice's picture

Dr. Housing Bubble made the argument sometime back that rates going up will bring home prices down - which is great for anyone who doesn't own and wants to get in, especially if they have cash waiting. His argument was that the market has to respond to interest rates going up by dropping prices because people simply cannot afford to pay more, and the inverse was that rates going down allowed home values to appreciate.

This seems to be just one more way that the Fed losing control of interest rates endangers our glorious recovery.

Thu, 06/20/2013 - 14:37 | Link to Comment Cheeseus Sonofdog
Cheeseus Sonofdog's picture

What does it mean to flippers who blew their wad of cash? Will they make the profits on that flip they had figured into their overbidding? Will they regret buying a declining asset when deleveraging hasn't finished yet? The sucker they planned on buying with a mortgage might not be there. Somebody gonna get stuck.

Thu, 06/20/2013 - 14:36 | Link to Comment Peter Pan
Peter Pan's picture

I believe that people fail to apprecate that the printing machine will once again be cranked up. If it isn't the effect will be so devestating that failures in everything across the board that carries debt will be witnessed. That includes banks. Gold will therefore more than hold its relative value and probably its nominal value. Perhaps it might even rise.

If the presses across the world start whirring then everything will levitate for a while only as everyone attempts to cash in befre the final crunch.

Thu, 06/20/2013 - 14:37 | Link to Comment Monedas
Monedas's picture

This roaring RE bubble must be reigned in !

Thu, 06/20/2013 - 14:41 | Link to Comment devo
devo's picture

It seems like PM investors will take their loses in a few days, and housing/stock investors will take them over decades via property and gain taxes + inflation, interest rate manipulation, etc. The latters' loses will be "hidden" behind nominal price increases or flatlining prices, so they'll feel they did okay. It has to be this way to keep faith in those assets, since those assets are our economy.

Thu, 06/20/2013 - 15:08 | Link to Comment Peter Pan
Peter Pan's picture

Housing losses will be quiteimmediate and savage if rtes increase because cash flow will be devestated.

In the days ahead gold may suffer more as leveraged gold traders feel the pinch and sell otherwise those that have bought will stick it out at least for a while.

Thu, 06/20/2013 - 14:40 | Link to Comment Cheeseus Sonofdog
Cheeseus Sonofdog's picture

Another shock buyers may have is property taxes. If prices are up 20% their property taxes may be too. Doubt they were budgeting in that little surprise. Especially flippers who can't get homestead exemptions...

Thu, 06/20/2013 - 14:43 | Link to Comment devo
devo's picture

Might result in bracket creep too for some people renting the homes out....

There are no winners. Just people who won't understand they're losing.

Thu, 06/20/2013 - 16:55 | Link to Comment BraveSirRobin
BraveSirRobin's picture

But don't expect your local government to lower assessed value when housing prices drop.

Thu, 06/20/2013 - 14:40 | Link to Comment KidHorn
KidHorn's picture

We're still a long way off from 5% 30 year rates. The fed will taper for a few months, we may hit the low 4's, the politicians will panic and then QE will be back in full force.

Thu, 06/20/2013 - 14:41 | Link to Comment digitlman
digitlman's picture

That low rumbling isn't my hungry stomach....it's my full bowels. 

 

Guess what comes next?

Thu, 06/20/2013 - 14:41 | Link to Comment Al Huxley
Al Huxley's picture

Wow, with Treasuries falling apart the way they are today, 'the economy's getting stronger by the minute' since Ben opened his mouth yesterday in the Q&A.

Thu, 06/20/2013 - 14:43 | Link to Comment Bay of Pigs
Bay of Pigs's picture

RED, RED paint it RED, some like it hot, I like it RED.

http://www.youtube.com/watch?v=JIV9iUwwhqo

Thu, 06/20/2013 - 14:47 | Link to Comment Jack Burton
Jack Burton's picture

I refinanced and got a 15 year fixed at 3.01%. My monthly payments dropped by 25%. It seems I got that done at just the right time. Seriously, it was almost impossible to resist going from 4.86%, which was pretty good when I built, to the new fixed at 3.01%. The mortgage broker said many were coming in to try a refinance, but they had to be able to qualify to much higher standards than during the insane housing bubble. Just because rates were low, did not mean you qualified to get them.

Over in the UK, the government now plans to hand out free money to home buyers, in an attempt to boost house prices, which are already too high. All this accomplishes is boosting the estate agents profits, getting developers higher profits and locking in home buyers to long term and unaffordable mortgages. AND, of course, the bet by buyers is that "prices will continue to rise". Against all good sense and the evidence of housing busts, another generation is signing up to debt slavery on a speculative bet that is unlikley to pay off long term. The UK housing bust will come in perhaps 3-5 years, when it does, it will be epic in it's long slow slide to oblivion. Debt slaves will lose their speculative bets and in middle and old age still be paying for their large mortgages on underwater homes. This is a bad bet for their retirement security. But banks will profit, and when it's busts, government will bail them out. UK banks are already insolvent, this will just confirm what honest book keeping would show.

Thu, 06/20/2013 - 16:18 | Link to Comment theprofromdover
theprofromdover's picture

All UK governments are stupid beyond belief.

Every time they put money into the system, the basic price goes up by the equivalent. They have tried it in old-folks support for nursing home fees, kiddie playgroups, student loans, and now housing mortgage support.

Every time a joke.

Thu, 06/20/2013 - 14:53 | Link to Comment AbbeBrel
AbbeBrel's picture

<< They were dubbed McMansions. That word has now at least seven new "derivatives":

· McDilapidation. Self-explanatory.

· McMould. Likewise.

· McMammal. When animals move into your neighbour's foreclosed home.

· McTermitebait. This actually can be used to include mould and all the other blights that come with leaving houses deserted for long periods.

· McRats. Say no more.

· McIcedam. Home after home has been deserted in the colder states but no one has turned off the water. If these are left in freezing temperatures, water bursts the pipes, snow builds up around and over the house and all sorts of other things happen. They may trouble the bears… >> (July 27 2007, The Age).


Read more: http://www.businessspectator.com.au/article/2013/6/17/economy/soothsayer...


RIP: David Hirst h/t Keen Debtwatch

Thu, 06/20/2013 - 14:54 | Link to Comment ToNYC
ToNYC's picture

House is an albatross when chasing opportunity. Worry and die, or be moving on.

Thu, 06/20/2013 - 14:55 | Link to Comment Satan
Satan's picture

Oh well, you can always rent a place from Blackrock...

Thu, 06/20/2013 - 15:00 | Link to Comment Kreditanstalt
Kreditanstalt's picture

Not bullish tor "the economy" but it will squish some borrowing, which can't be bad.

This Potemkin Economy is so corrupt, so unjust, so deceitful, manipulated, rigged, fixed, subsidized and bailed-out it DESERVES TO DIE.

Thu, 06/20/2013 - 15:01 | Link to Comment FrankDrakman
FrankDrakman's picture

Oh, geez. The basic argument - that rising interest rates will reduce home buyer's purchasing power - is sound, but duh. It's the hyperbole, and the comparison of apples and oranges that makes me puke.

If you're going to say that there's a "40% drop in affordability based on a 4% rise in interest rates", you're mixing what you mean by percentages. If you're measuring the drop in affordability by % (e.g. before you could afford $500k house, now only $400k, so you've lost 20% in purchasing power), then you must measure the increase in interest rates by % as well, not the nominal increase. The percentage increase from 2.5% to 6.5% is NOT "4%"; it is (6.-5-2.5)/2.5 * 100 = 160%.

Welcome to the 21st century: filled with the illiterate, innumerate, and inebriated. Idiocracy, indeed.

Thu, 06/20/2013 - 15:03 | Link to Comment Kreditanstalt
Kreditanstalt's picture

If you have to BORROW - be leveraged - to "afford" a home, you shouldn't get one. RENT!

Thu, 06/20/2013 - 15:04 | Link to Comment ejmoosa
ejmoosa's picture

So we should have seen tonos of higher end real estate moving the last year.  Funny thing is it wasn't.

 

 

Thu, 06/20/2013 - 15:05 | Link to Comment Poor Grogman
Poor Grogman's picture

Now I understand why you need a sociopath that has no empathy or conscience as head of the fed.

No normal person could handle that much power without turning into a bulimic zombie pill popper...

Thu, 06/20/2013 - 15:06 | Link to Comment Al Huxley
Al Huxley's picture

Somebody should check in with Ben and see if he has an estimate as to how much stronger the economy's likely to get as a result of this 'tapering' jawboning.  It would be nice to see if he has a target...

Thu, 06/20/2013 - 15:08 | Link to Comment Uncle Zuzu
Uncle Zuzu's picture

"instead of being able to afford a $425K house, the average consumer can buy a $395K house."

Fortunately for the buyer, it will probably be the same house. Too bad for the seller.

Thu, 06/20/2013 - 15:25 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

A 30yr mortgage hit 3.5% at its low, a lot of the contracts being closed now were locked at 3.5%, today's buyer is facing a 100bps increase in rates.

Thu, 06/20/2013 - 15:52 | Link to Comment Hongcha
Hongcha's picture

This was a one-wave spike brought on by Chinese/Russkie and other furner cash buyers, consortium/fund/monopoly buyers, and marginal buyers taking out 3% Gov. loans.  I agree with the above, you have to a healthy fucking middle class to truly put in a sustainable bottom, otherwise it's just a meth head dancing.

This year's buyers are next year's bagholders.  I have friends & family trying to stuff their ass down this shrinking rabbit hole.  I done tole them to wait.  If we learned anything from 2006 it should be this:

Your "Last best chance to buy" is really your "Last best chance not to buy."

Thu, 06/20/2013 - 15:57 | Link to Comment Ignorance is bliss
Ignorance is bliss's picture

What does decreasing home values do to local and state tax revenues? I hear dominos falling.

Thu, 06/20/2013 - 18:00 | Link to Comment TalkToLind
TalkToLind's picture

If you live in CA or IL, your real estate assessment will go up no matter what.

Thu, 06/20/2013 - 16:21 | Link to Comment theprofromdover
theprofromdover's picture

You have to remember, the pirates are running this lagoon.

It won't be long before mortgage rates are 20%, but the 'special-people' rates are still at 0%.

They might call it 3% mortgages, but the fees and annual charges and levies and whatever, will make it 20%

We won't get any fair treatment til these guys are lynched, starting with Robert Rubin and Larry Summers.

Thu, 06/20/2013 - 17:17 | Link to Comment robertocarlos
robertocarlos's picture

Zero Hedge is widely quoted. The guest on BNN just used the exact housing price numbers 425k down to 395k for the same monthly money. Not sure if he gave ZH any credit. 

Fri, 06/21/2013 - 10:03 | Link to Comment PTR
PTR's picture

That didn't last long.  My neighbors got out while the going was (very,very,very,very,very,very,very briefly) good. The other one that just listed...probably not. 

Fri, 06/21/2013 - 13:13 | Link to Comment rational
rational's picture

Durdens new math: a 4 point increase in rates is a 160% increase not a 4% increase

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