Removal of Band-Aids to Reveal Deeper Housing Wounds?
With worries about the deficit intensifying, the government is eager to start withdrawing some of its support programs. The first step could happen as early as next month, when the Federal Reserve has said it will end its trillion-dollar program to buy up mortgage securities. That program has driven mortgage interest rates to lows not…
The bankrupt US government should not be propping up the market for million dollar condos. If you cannot see the folly of these government programs, there is no point to even discussing the issue.
Fact is we need need to reduce both public and private debt which means reducing the debt load on home buyers which is completely out of line with income. The biggest beneficiaries from over inflated asset prices is the finance sector. Since the finance sector controls the US government though legal bribes that our society politely calls “lobbying”, All the King’s Horses and All the King’s Mens are fighting to put the Humpty Dumpty Housing Market back together again. But it’s a fool errand. Bad debts need to be written down and asset prices must be adjusted to reflect income streams.
Of course, the Fed will do its best to prevent the banking sector from having write downs. The Joker in the Deck is that Bernanke tries to institute hyperinflation which would save the banking sector from having write offs, but it will destroy the wealth of the American people in the process.
Question is: Which Side Are You On?
As to which scenario is better, like may things, it all depends on your personal perspective. If you’re a potential cash buyer, clearly you’d stand to benefit from higher interest rates driving prices down. If you’re Joe-20%-down-and-mortgage-guy then the picture is more clouded and depends on many variables.
Rates have a long way to go before they get to 7-8%. Be realistic.
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Agreed Dave. Though,what are your thoughts about a potential bump up in 10yr t bills as a result of fears over the U.S. debt load?
no, Park Loper
I do not think that rates will rise that much.
Although very short term rates are artificially low due to fed and treasury action, and will have to rise, causing a narrowing or even an inversion of the yield curve.
Mortgage rates are not likely to rise very much unless the economy starts to really heat up, which seems highly unlikely in light of the forthcoming housing blood bath.
Dibs:
were you directing your question at me?
I was merely asking if that’s even possible??
Rob – that’s one of the better questions you’ve ever asked. I’m curious to hear what people would say. I would think that “low price/high interest rate” is better because eventually, when mortgage rates go down you can refinance and wind up with the best of both worlds – “low price/low interest rate”.
Rates have a long way to go before they get to 7-8%. Be realistic.
And what’s going to drive these rates??? Foreclosures don’t have anything to do with rates, in and of themselves.
Please present a non-lunatic case for why rates will rise to 7-8%.
I was agnostic.
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hmmm… you were agnostic with a name like ‘Deadcatbounce’ on a REAL ESTATE website??
unless you like throwing dead cats out of windows…
nonetheless, welcome to team awesome. we are sooo right.