At the time I'm writing this, mortgage rates are 5.32%, up from the high fours a few weeks ago.Mortgage Rates - It Could be as Bad as You Can Imagine
With respect to yesterday’s in the mortgage market — yes, it is as bad as you can imagine. No call can be made on the near-term, however, until we see where this settles out over the next week of so. If rates do stay in the mid 5%’s, the mortgage and housing market will encounter a sizable stumble. The following is not speculation. This is what happens when rates surge up in a short period of time — I lived this nightmare many times.
Yesterday, the mortgage market was so volatile that banks and mortgage bankers across the nation issued multiple midday price changes for the worse, leading many to ultimately shut down the ability to lock loans around 1pm PST. This is not uncommon over the past five months, but not that common either. Lenders that maintained the ability to lock loans had rates UP as much as 75bps in a single day. Jumbo GSE money — $417k - $729,750 — has been blown out completely with some lender’s at 8%. I have seen it all in the mortgage world — well, I thought I had.
A good friend in the center of all of the mortgage capital markets turmoil said to me yesterday “feels like they [the Fed] have lost the battle…pretty obvious from the start but kind of scary to live through it … today felt like LTCM with respect to liquidity.”
The consequences of 5.5% rates are enormous. Because of capacity issues and the long time line to actually fund a loan in this market, very few borrowers ever got the 4.25% to 4.75% perceived to be the prevailing rate range for everyone.
This raises a significant issue for bubbleheads: Prices are likely to keep falling for at least the rest of this year, but mortgage rates are likely to increase when the economy recovers. Rising mortgage rates will likely push real prices down further, but not enough to prevent monthly payments from rising significantly. The Fed's monetary policy also risks (but doesn't guarantee) significant inflation as the economy recovers.
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This only concerns the instant gratifcation obese lazy americans. I saved 35% down already in a year and a half and as prices drop my down payment grows whether I put more money in it or not!
ReplyDeleteI dont care about rates, cause at the rate things are dropping and will continue, perhaps I will be able to pay with cash! I hope the rates go to credit card highs!!!!
If rates keep going higher like they just recently did, then I'm going back to the sidelines. Why pay such a huge amount of interest and such astronomical transaction (closing) costs? If rates go much higher I'm going to do exactly what Anonymous suggested and save up the cash to buy something outright. I'd rather pay rent or commute than throw away money on mortgage interest and transaction costs. The market isn't going anywhere.
ReplyDeleteBetter to pay $200K @ 8% than $500K at 5%.
ReplyDeleteYou've been suckered into thinking the house price is unimportant but the interest rate is....
Typical.
Hey Nozzie is back! As you last recall, our good friend told us prices in DC median prices would get back to 2001 levels (199K). The first four months of the year is in for DC
ReplyDeleteJan 360K
Feb 360K
Mar 375K
Apr 389K
Part of this is seasonal, but you have to wonder...Noz confidently told us 2001 prices were in the bag...worst prediction ever....
".worst prediction ever...."
ReplyDeleteyeah cause we all know weve already hit bottom. Its all over, prices are going up!!!! lol
Yep, and the median prices for the first 4 months of 2008 were:
ReplyDeleteJan 2008 $ 428,000
Feb 2008 $ 414,000
Mar 2008 $ 399,500
Apr 2008 $ 438,000
I'm not saying 1999 prices are coming back, but I don't think 2005-2008 prices are, either....
"I'm not saying 1999 prices are coming back, but I don't think 2005-2008 prices are, either...."
ReplyDeleteI agree. My prediction was 2004 nominal prices (350K median). I stand by that, but its taking longer than I thought it may not get here til 2010. Contrast that to Noz who said 199K was our stopping point - talk about clueless!
My prediction is that by fall '09 we'll see $350k. 2010 will probably be lower, and 2011 and beyond, especially if interest rates go up, should be lower than that. But yeah, I don't expect to see 199k. Maybe 275k, though.
ReplyDeleteHey Nozzie is back! As you last recall, our good friend told us prices in DC median prices would get back to 2001 levels (199K). The first four months of the year is in for DC
ReplyDeleteJan 360K
Feb 360K
Mar 375K
Apr 389K
Part of this is seasonal, but you have to wonder...Noz confidently told us 2001 prices were in the bag...worst prediction ever....
Hey Anon...
Since you don't the balls to actually sign in, at least have the balls to go and buy a home and bury yourself in debt.
I'll ask how you're doing in a year or two.
And since your brain seems to be malfunctioning, I'll explain it to you....mean prices have been going up because lower priced homes are dropping out of the mean price calculations...hence raising the price.
For dimwits like you, this is the perfect season and reason to buy a home.
Best of luck sucker.
By the way ANON, if you factor in inflation, 2001 prices are what you will see. But being that you're a bit slow, I can see why you're confused.
ReplyDeleteNow please...go buy a home...and then come crying for a bailout.
This has more implications for refinancing than for the first-time home buyer. Lower rates and the higher home appraisal values that go along with it makes it possible for home owners in trouble to lower their mortgage payment. Of course, higher interest rates that lead to declining market value on homes makes it difficult for those who want to sell but are now underwater. Instead of a stable market in which to shop, home buyers will have to settle for distressed properties--not necessarily the best scenario for the majority.
ReplyDelete"Noz said...mean prices have been going up because lower priced homes are dropping out of the mean price calculations...hence raising the price."
ReplyDeleteUhh nope - if you had any clue you would realize that low end inventory still dominates the market - hence prices are dropping YOY - just nowhere near the -55% it will take to get back down to your nominal bottom.
Still, I do expect what you described to happen at some point. It will skew low on the way down, it will skew high on the way back up, but in the end it will end up exactly where it should be. I figured this into my calculations as to the bottom call of 350K. Im not sure why Noz didnt.
If we grant Noz inflation, (which he didnt before when he said 2000-2001 prices), he NOW says DC proper will see median prices of 239K. Lets forget that he is now moving 40K higher than his original prediction. Noz now tells us DC will see 239K. Anyone want to take that bet?
Uhh nope - if you had any clue you would realize that low end inventory still dominates the market - hence prices are dropping YOY - just nowhere near the -55% it will take to get back down to your nominal bottom.
ReplyDeleteInteresting...the slopes of graphs of prices in your region and elsewhere tell another story entirely. Lower priced homes in LA are also dominating, but the shift foreclosure activity, moratoriums in such activity have warped the recent numbers.
Still, I do expect what you described to happen at some point. It will skew low on the way down, it will skew high on the way back up, but in the end it will end up exactly where it should be. I figured this into my calculations as to the bottom call of 350K. Im not sure why Noz didnt.
What calculations??? LOL....and where do you get that number? Show us your calculations and superimpose it onto the negative prices slopes you see on the prices graphs today. Let's see how your predictions layout the price points for the next say....3-5 years?
If we grant Noz inflation, (which he didnt before when he said 2000-2001 prices), he NOW says DC proper will see median prices of 239K. Lets forget that he is now moving 40K higher than his original prediction. Noz now tells us DC will see 239K. Anyone want to take that bet?
Are you one of those who need to have their hand held all day long? Can't figure it out for yourself?
And wait...where did you get my 199K number? I'm curious...my memory doesn't serve me so well like yours apparently. Honestly I can't even remember.
I'm sorry but if you can't factor in such things in your calculation, what makes you think anyone will take you seriously?
So far, you've been wrong about pricing altogether. So I don't really think you've got much room to talk.
It seems to me you look at a few months of data points and conclude that's the result for the rest of decade. That's the only conclusion I can come to with your numbers...you can't see beyond the length of your arm.
"Interesting...the slopes of graphs of prices in your region and elsewhere tell another story entirely. Lower priced homes in LA are also dominating, but the shift foreclosure activity, moratoriums in such activity have warped the recent numbers."
ReplyDeleteOnce again, your failure to understand this area leads you to this conclusion. On a whole (DC Metro) what you say is probably true - the point was DC proper (which is very much running behind the NOVA region) isnt seeing that yet.
"Noz Said...What calculations??? LOL....and where do you get that number? Show us your calculations and superimpose it onto the negative prices slopes you see on the prices graphs today. Let's see how your predictions layout the price points for the next say....3-5 years?"
Not surprising you dont remember this exchange - you seem to travel the ends of bubbledom arguing with bulls about areas you dont care about.
In any event, the bet was lets come up with an actual quantifiable number (Medians as reported by our local MLS) so at the end of the day, one of us will be wrong and one of us will be right.
My predictions were (and again this is nominal pricing):
DC - 350K
Arl - 407K
Alex - 355K
Ffx - 308K
Lou - 270K
PWC - 135K
Your predictions were
DC - 199K
Arl - 250K
Alex - 200K
Ffx - 238K
Lou - 238K
PWC - 161K
I will go back and try to find the thread at issue, but seriously do you not remember this in the slightest?
"Uhh nope - if you had any clue you would realize that low end inventory still dominates the market"
ReplyDeleteSo why is it that even though the median prices go up, the price per square foot has TAAAAAAAAAAAAAAANKED?
"So why is it that even though the median prices go up, the price per square foot has TAAAAAAAAAAAAAAANKED?"
ReplyDeleteWhat the hell are you talking about? This is what I showed you for median price trend for the last 4 months:
Jan 360K (-15.9% YOY)
Feb 360K (-13.0% YOY)
Mar 375K (- 6.1% YOY)
Apr 389K (-10.9% YOY)
Where exactly did the "median prices go up" as you state?
Look at Jan, then look at April. Now look at price per square foot nose dive. So in fact BIGGER BETTER HOMES ARE ON THE MARKET SELLING FOR LESS THAN TRASHED HOMES LAST YEAR!
ReplyDeleteI know you must be feeble minded, but if you cant see the prices you posted going UP month to month, I cant explain it any better than I just did.
"Look at Jan, then look at April. Now look at price per square foot nose dive. So in fact BIGGER BETTER HOMES ARE ON THE MARKET SELLING FOR LESS THAN TRASHED HOMES LAST YEAR!"
ReplyDeleteOK as much as I like trading insults, lets tone it down a sec. I dont understand what your point is and either you or I am about to learn something here agreed?
For starters, please post the info you have on ppsf for homes in DC proper. I dont think ive seen anything on that - that would be nice to see.
Secondly, you say, look at Jan, then look at April. OK, I agree that prices are rising, but I argue that it is mere seasonality.
As an example, take a look at records for DC proper comparing Jan to April (in any given year) from 1998 til now.
In 11 of 12 cases, prices rose in april versus january. It didnt matter if it was flat years (98-02), bubble years (03-06) or down years (07-09) in 11 of 12 cases prices rose every April.
So again, if prices rise every April over January what does that tell us about PPSF tanking? Clearly there is no causality, otherwise, we would have seen tanking PPSF in 11 of the last 12 years, (Jan versus April) and I dont think thats right.
What is the big deal with 5.32% that is still a very good rate? Anything under 6% is good. People are spoiled.
ReplyDelete"I dont understand what your point is and either you or I am about to learn something here agreed?"
ReplyDeletePoint is this. Eventhough prices have WENT UP month to month from Jan to April, price per square foot has dropped.
This means LARGER BETTER BIGGER HUGER BETTER AWESOME HOUSES SLAMMING ON THE MARKET!!! POW ZING ZANG JIZAM! Get it Got it GOOD??
So in Jan $10K would have bought you a pinto, and in April $10K buys you a BMW. Yet prices of cars have been declining overall. So when you are talking about "cars" havent moved much in price in DC....its because people are now buying BMWs for the price they bought Ford Pinto previously.
Next year when the numbers show that prices havent declined, it will be because people are buying Lamborghini.
http://graphs.trulia.com/real_estate/Washington-District_Of_Columbia/graph.png?version=153&width=600&height=250&type=qma_price_per_sqft&city=Washington&state=DC
sorry to double post, but just to clarify. I was responding to this statement.
ReplyDelete"Uhh nope - if you had any clue you would realize that low end inventory still dominates the market"
low end inventory is not the only on the market declining. You can see that based on price per square foot falling.
I think you may be trying to argue with something Im not saying.
Noz said: "Better to pay $200K @ 8% than $500K at 5%"
ReplyDeleteI completely agree with that. However, the big assumption here is that the value of a property will change to reflect the current rates. It definitely should but it's impossible to tell how long that will take and if it will happen at all. The lower prices go, the more short sales and foreclosures, the more government intervention, and the more control banks have. Since the banks can obscure properties via creative accounting methods and hold them off market in hopes for a rebound, there's no guarantee values will adjust in a timely manner or at all.
"It definitely should but it's impossible to tell how long that will take and if it will happen at all."
ReplyDeleteYeah but who cares. Cause that gives you more time to SAVE MONEY and put a larger down payment or even pay with cash to avoid the larger interest.
Again, the only people hurt by this are obese lazy instant gratification morons