Optimistic Prediction for the New Year
Prediction: In January, the banks will realize that they cannot avoid lending forever. The Federal Reserve will financially punish any bank that refuses to lend by manipulating interest rates so that banks that hoard cash lose money. From the industry ashes a banking prophet will emerge who will preach the gospel of positive net interest…
Good of you to weigh in, Mark. I read your blog entry. The Fed strategy may have some impact on banks that have the money to lend, but it doesn’t address banks’ solvency issue. Banks are still writing down the value of their mortgage related assets and I’m sure many institutions aren’t marking them properly/realistically. The TED spread is still historically astronomical precisely because of this. Not all the dead bodies have been found.
With the access banks have to cheap money and the spreads that currently exist in the lending market, it wouldn’t be hard for a bank to make a lot of money by lending if they could be sure of the credit worthiness of their counterparties. They’re not lending because they aren’t sure and/or they’re on the brink of solvency already and don’t have the cash to lend. The Fed buying securities and thereby driving down yields may have a slight effect on the former issue, but it has no effect on the latter. Financials are still in deep doo doo.
Well whatever you do do not pay attention to what real estate brokers say. Their sweet talking and pumping up of home prices is what got us here in the first place. Real estate brokers are now heavily invested in local homes so you will never hear them say prices are going down. It is like watching a stock broker on TV saying a stock is “HOT” but that is only because he wants others to buy it at higher prices so he can dump it and make a profit. There are no more fools.
Mark Sunshine here.
While I appreciate the “shout out” on this blog a couple of clarifying thoughts might be helpful.
First, my real name is Mark Sunshine. No joke.
Second, who ever thought that I am an “optomist” because my future depends on it should either check out my blog and/or google me.
Third, the Fed is manipulating interest rates by purchasing securities in the open market.
Fourth, what I wrote may make more sense in the context of another blog post relating to money supply and Fed Policy. The link is http://www.firstcapital.com/blogs/mark_sunshine/?p=220.
Thanks again.
Mark Sunshine
No one can deny the market is in turmoil, but as history shows, even during the Great Depression when there was no Fed to back things up, the economy eventually turned around and people became wealthy. Patience is a virtue and I believe the prediction above is a combination of facts, opinion, precedent and gut instinct. Either way you can certainly argue both positive and negative views of the market, but I prefer to stay optimistic. Being pessimistic will only depress a person, won’t help the situation, lower consumer confidence(this is certainly no way of fixing an economy), etc. Everyone’s priority is different and although no one knows how to time the bottom, if you look over the past year bargains are definitely available, mortgage rates are at their all time lows and there are an abundance of tax benefits. Even if the market goes down further, you’re not looking to sell it in a year or two, so it really doesn’t matter.
First-time home buyers surely don’t have the luxury of gambling on the market bottom. Once the market starts to turn around, existing home buyers who wanted to move years ago will quickly sell their current home to buy a step-up home. When that happens the first-time home buyers will be out of luck.
I found this prediction very intriguing and enjoyed some of the other predictions from the article that I blogged it on my blog site as well.
http://www.SIRealEstateNews.com
Having spoke with someone I know who is a straight forward individual in the mortgage business stated the lenders are willing to lend up to 45% of ones debt to income ratio. My previous post was debt to income ratio was specific (but not noted) to what a mortgage payment debt to income ratio should be. My understanding is the lenders are at 28-36% for mortgage debt(principal & taxes) to income and a total of 45% for ones entire debt to income ratio to be eligible for a mortgage.
Mark SUNSHINE? Creative. Just like the prediction.
Nice, brownie.
***Bid half off peak comps***
FWIW – we had no trouble getting a loan in September and were told by our bank today that we would have no trouble refinancing. We meet all the guidelines though. My sense is that banks ARE lending to qualified borrowers.
Hmmmm,
An optimistic forecast from a guy from (drum roll, please…) FIRST CAPITAL!
And in other earth shatteringly shocking news, THE SUN ROSE TODAY!
What do you expect? A guy from First Capital saying something -pessimistic- about the future of the industry that is his career, future and his entire identity?
“. From what I’ve been hearing, even those with good credit and reasonable debt to credit ratios are having a hard time securing loans.”
Ding ding ding!!!
” Should’nt it be easy (ok, well, not easy but easier) for these ‘qualified buyers’ to get financing?”
Hell naw!!!
The What
Someday this war is gonna end…