Housing Bubble Bursting?

[Fred]

I attempted to warn Americans on this forum on May 21, 2005 that the infamous U.S. Housing Bubble would Burst in 2006.

Others had been warning me since 2002. I was also warned about radon, the coming herpes epidemic, mad cow disease, swine flu, bird flu, how the AIDS "epidemic" would decimate the heterosexual population, global warming ending life as we know it, and about 100 other impending disasters that are still "impending." All of which, I "scoffed" at. Now, it's the housing "bubble."

The message and the discussion have more meaning when disconnected from the hype. We all know that the FED raised interest more than 10 times and this has made housing more expensive.

As to riduculing and scoffing, are those good terms to describe you referring to those who have the audacity to disagree with you as "blind"

The Housing Bubble Bursting will consequently wreck the U.S. economy

Wreck? And when this doesn't happen, will you come back on to say those who "scoffed" you were the sighted ones and you were blind?

 

[Randolph Kinney]

The message and the discussion have more meaning when disconnected from the hype. We all know that the FED raised interest more than 10 times and this has made housing more expensive.

Just a minor point, the 30 year fix rate mortgage market is not control by the FED funds rate nor is the the 10 year U.S. Treasury market.

What has been affected by the rise in the FED funds rate is the cost of short term money and mortgages that are indexed to some cost of funds that is influenced by same. So the people who have used ARMs at very low teaser rates, for example, 1% or 2%, are now panicking when the reset happens to them. Or people who have HELOC loans.

Today, the ARM rates are just about equal to the fixed rate mortgages, which is excluding potential borrowers and buyers at lower rates.

Today, home prices have slowed to practically no increase from a year ago or in some markets, home prices have declined. That in turn is causing grief to those who bought last year at 100% financing or have ARMs that need to be refinanced.

 

[Dee Dee]

Someone much wiser than I posed this question before on this thread. How many of the resident sages who foresaw this disaster cashed out at the top and and are now wealthy tenants?

Seems pretty obvious that person probably didn't have kids.
Is that why you think they are much wiser than you? :icon_wink:

 

[Randolph Kinney]

The USA can lighten up on building codes. Everyone will still have a place to live.

I, for one, am going forward with my snap together cardboard kit homes (flex foam insulation liner and all weather urethane coating optional). Look for the roll out at Wal-Mart,

Cheaper and affordable homes are the answer. As you say, the Wal-Mart solution is one way. The other way is for the current housing stock to decline in price such that more people can afford to buy them at current prevailing terms and rates. Or, a third option is for house prices to stay constant for 10 years and let inflation catch up along with incomes.

 

[moh malekpour]

Bobby,
They could have bought oil stocks in May 2004 at $34 and sell it a month ago at $78 just by clickin on the mouse and make much more money without dealing with real estate agents, appraisrs, lenders and purchase contracts.

 

[Randolph Kinney]

Someone much wiser than I posed this question before on this thread. How many of the resident sages who foresaw this disaster cashed out at the top and and are now wealthy tenants?

I would go a step farther, however, it is really dependent on how you view yourself. If you are owning a home as an investment, and not to satisfy a basic need, how many sold their homes and moved, not into a rent paying situation (that won't maximize the gain or cash flow) but out on the street or a park? Wow! No rent, no utilities, no commitments. Just enjoy your opportunity costs and keep rolling the dollars to where investors go.:new_all_coholic:

 

[Fred]

Just a minor point, the 30 year fix rate mortgage market is not control by the FED funds rate nor is the the 10 year U.S. Treasury market.

No one said "controlled by." Mortgage rates tend to move in the same direction as other interest rate benchmarks. If the FED reverses their 10 unecessary interest rate hikes, residential mortgage rates will go down.

 

[Randolph Kinney]

No one said "controlled by." Mortgage rates tend to move in the same direction as other interest rate benchmarks. If the FED reverses their 10 unecessary interest rate hikes, residential mortgage rates will go down.

I really disagree with that statement and your prior statement. The FED has been raising the FED funds rate now for two years. Look at the below chart of 30 year fixed rate mortgages as published by Freddie Mac, where do you see the correlation of raising the FED funds rate from 1% to 5.25% since 2004 and what long term mortgage money interest rates are doing?

Now if you want to change your statement and say the FED funds rate will affect short term market interest rates, I will agree. Otherwise, show me your data.

6.28% and 0.4 points - 30-year fixed-rate mortgage, average in Western U.S. for week ending October 5, 2006. Blue line is Freddie Mac forecast made 9/8/2006.

"Mortgage rates fell to a six-month low this past week, and, not surprisingly, home refinancing rose 18 percent last week, accounting for almost half of all mortgage applications," said Frank Nothaft, Freddie Mac vice president and chief economist. "This is due both to the recent decline in mortgage rates and to homeowners who are refinancing ARMs rather than waiting for them to reset in the future when rates may be higher.​

 

[Fred]

Randolph,
After your last fiasco, I'd think you want to stay away from graphs. You would need a graph that tracks at least two things for it to be relevant to my comments.

FED funds rate

I never limited it to FED funds rate. So this is the second post in a row, you did an excellent job of refuting a point no one made.

Even at that, the mortgage rate trend line that is on your graph declines while the FED was lowering its rates and rises while the FED was increasing it's rates. That's what I was referring to.

I really disagree with that statement and your prior statement

Then you are just disagreeing with reality I'll graph it for you. Are you unaware that most long term rates like prime, T-rates and mortgage rates tend to move together up and down? Maybe you have been looking at too many of the fudged-number graphs, like the one you posted here not to long ago, also to "disagree" with me.

 

[Randolph Kinney]

Randolph,
After your last fiasco, I'd think you want to stay away from graphs. You would need a graph that tracks at least two things for it to be relevant to my comments.

I never limited it to FED funds rate. So this is the second post in a row, you did an excellent job of refuting a point no one made.

Even at that, the mortgage rate trend line that is on your graph declines while the FED was lowering its rates and rises while the FED was increasing it's rates. That's what I was referring to.

Then you are just disagreeing with reality I'll graph it for you. Are you unaware that most long term rates like prime, T-rates and mortgage rates tend to move together up and down? Maybe you have been looking at too many of the fudged-number graphs, like the one you posted here not to long ago, also to "disagree" with me.

I can see that you obfuscate with words and no data is going to be presented by you so you go around in circles with you arguments. After awhile, people get tired with your word maneuvers and move on. I see that is the appropriate action with you, especially on this one.

Present your data or just keep on blathering, either one will be entertaining.