• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Dollar May Beat Euro as Inflation Focus Trumps Subprime Rout

Status
Not open for further replies.

moh malekpour

Elite Member
Joined
May 25, 2002
Professional Status
Certified Residential Appraiser
State
California
It is not clear whether or not the Fed is going to raise the interest rate but according to this article, they may have to do it and if they do, the already ailing housing market is going to be finished.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aH7Ot_4N9ISg&refer=home
Currency forecasters are betting that the dollar rally is just getting started as the Federal Reserve's shift to fighting inflation makes it likely to raise interest rates more aggressively than the European Central Bank.
 

Cigar

Member
Joined
Aug 9, 2007
Professional Status
General Public
State
California
Moh:

But if new housing is finished, shouldn't that reduce supply and increase demand for existing housing, stopping the slide in the market? I realize mortgage rates will go up making qualifying more difficult, but this downturn has affected the lower end more than the upper end, wouldn't that balance the equation more?
 

Non Sequitur

Elite Member
Supporting Member
Joined
Feb 14, 2002
Professional Status
Certified Residential Appraiser
State
Louisiana
It is not clear whether or not the Fed is going to raise the interest rate but according to this article, they may have to do it and if they do, the already ailing housing market is going to be finished.
Why? The real estate market chugged along fine at 8-9% before the ding-dongs lowered rates to next to nothing. People are spoiled and think 5-6% is some sort of birth right. The truth is rates should have been raised a couple of years ago. The Feds policy after 911, while understandable, should not have been long term. If it weren't for the Feds bad monitary policy and wild speculation oil would be at $40-50 a barrel.
 

moh malekpour

Elite Member
Joined
May 25, 2002
Professional Status
Certified Residential Appraiser
State
California
Why? The real estate market chugged along fine at 8-9% before the ding-dongs lowered rates to next to nothing. People are spoiled and think 5-6% is some sort of birth right. The truth is rates should have been raised a couple of years ago. The Feds policy after 911, while understandable, should not have been long term. If it weren't for the Feds bad monitary policy and wild speculation oil would be at $40-50 a barrel.

They have already created the morass. Why they did it and shouldn’t they have done it is a different question for policy makers and economic historian to discuss about for many years to come. The fact is that they know the economy and the housing market is in trouble. So far, they have kept the housing market and the economy in the life support by keeping the fed rate low at 2%. Almost all lenders are in trouble and some of them may not survive because they don’t have any capital, any reserve left and are totally under water. The fed has kept the rate down for them to borrow and lend back for 6.75% on conforming loans and 7.5% on jumbo loans. These are the only loans that are available in the market now. Banks make a tremendous profit by borrowing at 2% from the Fed and lending at 6.5 to 7.5%. The fed thinks by encouraging the banks increasing their capital and borrowing from the fed at low and lending back at high may save them.
In addition, many loans that were made in 2005 to 2007 for purchase or refinance are ARM loans and are indexed to fed rate. They are usually few percent above the fed rate and adjust according to that rate after their resetting. Some of them are resetting now at about 7 or 8%. If the fed rate increased, that rate will jump to even higher.
The fed is in charge of money supply. When the economy is in recession, the fed, cuts the rate to put more money in the economy to get it going but the fed also has to watch where the money goes. Unfortunately, the fed didn’t watch and the money went to speculators and lenders and created bubble. The bubble, devalued the dollar and since oil is traded in dollar, its price went up.
With the help of globalization, the developing countries mostly Asian countries were able to create jobs for their citizens. Although these jobs were low paid jobs but they were much higher than what those workers used to get in the farms. All those goods that were made in those developing countries with low paid jobs were exported to developed countries like US and Europe and kept the inflation low even though the inflation should have been high due to constant increase of money supply.
Now, those developing countries whose citizens have jobs and their investors are building factories to produce goods for developed countries have high demand for oil and food. Their workers are driving cars now and eat meat and food that western people eat and they need to import them. So, we got the oil and food shortage and prices high in everywhere and we are facing inflation and recession at home at the same time (Stagflation). The price of our domestic goods are going to be higher because it costs more to make them. Oil and food are going be high because both of them are going to be in more demand and low supply. Our imported goods from developing countries which used to be low and kept our inflation low are going to be higher because they are going cost those nations more to make and export them. Both the inflation and recession are going to stay for a while and I don’t know how it is going to play out. Some people say Bernanke talks the talk but doesn’t walk the walk. He says he is going to raise the rate to fight the inflation or inflation expectation but he is not going to do. If he does, the current housing market is going to look like a picnic. It is going to be painful but that is possibly the only medicine to save the economy. I would say, lets do it and get over with it but I am not the Fed chairman who has to answer legislators questions at the election season.
 

Big ole Boy

Elite Member
Joined
Dec 6, 2003
Professional Status
General Public
State
Tennessee
the domestic mortgage market house cleaned

The Fed gave every home owner the chance to get there mortgages in order and lock-in..... the ones that could anyways ........

...now that the Fed has done all it can for the domestic mortgage market ....

... it has been clean and adjusted for the solid borrowers ....

... the Fed knows that the weak loans are dead anyways .....

... now its time to get the dollar back before people start melting down the metal in US coins .......
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks