Buying with monopoly money

[bubble_contagion]

Just keep in mind that housing prices and interest rates have no relationship. I have read this from several sources including Calculated Risk and Rich. The following quote is from the latest Nov 10 data rodeo:

“I firmly disagree with the idea that there is a one-to-one relationship between rates and prices, such that if rates increase a certain percent, prices should be expected to decline by that percent or anywhere near it. The historical data clearly demonstrates that there is no such correlation. However, there is no question that sustained higher rates will reduce demand, all other thing being equal, just as super-low rates have in recent times boosted housing activity above what it otherwise would have been.”

From CR:

“I’ve tried to explain this several times in several different ways. Price is what you pay for something. Interest rates are related to how the item is financed. Some people pay cash for a house. Would they pay more because interest rates are low? Nope.

Imagine just one buyer gets a special interest rate. Would that lucky buyer be willing to pay more than all other buyers for the same property? Nope.

It is true that low rates make buying more attractive as compared to renting. And that can increase the demand for buying – and more demand might mean slightly higher prices. But if rates are low, a rational buyer will expect mortgages rates to rise when they sell the property, and under the theory that mortgage rates impact price, the price will then fall in the future. That makes the property less attractive, and the buyer in the low interest rate environment will not want to overpay for the house.

So the buyer needs to consider both current interest rates and future interest rates, and by the time they are done doing all the calculations, you get the graph that Leonhardt shows. And that is exactly what I’d expect – there is little relationship between house prices and mortgage rates. That doesn’t surprise me at all.”

http://www.calculatedriskblog.com/2010/09/mortgage-rates-and-home-prices.html

I am suspect that there is truly no relationship but the data seems to be clear on this.

[permabear]

[quote=ocrenter]While jumping on bandwagons is typically not the smartest move, being a permabear can be just as bad as for one’s financial health as being a permabull.[/quote]

Did somebody say my name? 🙂

I actually think the economy is getting better, albeit very slowly. Monthly fluctuations can obscure the overall trend:

http://www.aheadofthecurve-thebook.com/11-03.html

It is interesting that the bond market is giving the middle finger to QE2 though.

In the long term, our country is still f’ed unless we figure out a way to fund stuff like education and bridges. Maybe we just need a few more bridges to collapse and then we can push thru a TBRP – Troubled Bridge Relief Program.

[permabear]

[quote=ocrenter]While jumping on bandwagons is typically not the smartest move, being a permabear can be just as bad as for one’s financial health as being a permabull.[/quote]

Did somebody say my name? 🙂

I actually think the economy is getting better, albeit very slowly. Monthly fluctuations can obscure the overall trend:

http://www.aheadofthecurve-thebook.com/11-03.html

It is interesting that the bond market is giving the middle finger to QE2 though.

In the long term, our country is still f’ed unless we figure out a way to fund stuff like education and bridges. Maybe we just need a few more bridges to collapse and then we can push thru a TBRP – Troubled Bridge Relief Program.

[permabear]

[quote=ocrenter]While jumping on bandwagons is typically not the smartest move, being a permabear can be just as bad as for one’s financial health as being a permabull.[/quote]

Did somebody say my name? 🙂

I actually think the economy is getting better, albeit very slowly. Monthly fluctuations can obscure the overall trend:

http://www.aheadofthecurve-thebook.com/11-03.html

It is interesting that the bond market is giving the middle finger to QE2 though.

In the long term, our country is still f’ed unless we figure out a way to fund stuff like education and bridges. Maybe we just need a few more bridges to collapse and then we can push thru a TBRP – Troubled Bridge Relief Program.

[permabear]

[quote=ocrenter]While jumping on bandwagons is typically not the smartest move, being a permabear can be just as bad as for one’s financial health as being a permabull.[/quote]

Did somebody say my name? 🙂

I actually think the economy is getting better, albeit very slowly. Monthly fluctuations can obscure the overall trend:

http://www.aheadofthecurve-thebook.com/11-03.html

It is interesting that the bond market is giving the middle finger to QE2 though.

In the long term, our country is still f’ed unless we figure out a way to fund stuff like education and bridges. Maybe we just need a few more bridges to collapse and then we can push thru a TBRP – Troubled Bridge Relief Program.

[permabear]

[quote=ocrenter]While jumping on bandwagons is typically not the smartest move, being a permabear can be just as bad as for one’s financial health as being a permabull.[/quote]

Did somebody say my name? 🙂

I actually think the economy is getting better, albeit very slowly. Monthly fluctuations can obscure the overall trend:

http://www.aheadofthecurve-thebook.com/11-03.html

It is interesting that the bond market is giving the middle finger to QE2 though.

In the long term, our country is still f’ed unless we figure out a way to fund stuff like education and bridges. Maybe we just need a few more bridges to collapse and then we can push thru a TBRP – Troubled Bridge Relief Program.

[GH]

Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion!

[GH]

Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion!

[GH]

Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion!

[GH]

Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion!

[GH]

Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion!

[Anonymous]

[quote=SD Realtor]So necessary commodities like food, resources and other tangible goods will go up in cost.[/quote]

Why?

What will prompt my local Ralphs to raise prices?

Is the store manager going to read about QE2 and start remarking items on the shelves?

And what will stop the manager at Albertsons from lowering his prices? Because of high unemployment his cost of labor is lower. So he decides to get an edge on Ralphs…

Can someone explain exactly how current policy leads to massive inflation without simply using the premise that “printing money leads to inflation?”

[Anonymous]

[quote=SD Realtor]So necessary commodities like food, resources and other tangible goods will go up in cost.[/quote]

Why?

What will prompt my local Ralphs to raise prices?

Is the store manager going to read about QE2 and start remarking items on the shelves?

And what will stop the manager at Albertsons from lowering his prices? Because of high unemployment his cost of labor is lower. So he decides to get an edge on Ralphs…

Can someone explain exactly how current policy leads to massive inflation without simply using the premise that “printing money leads to inflation?”

[Anonymous]

[quote=SD Realtor]So necessary commodities like food, resources and other tangible goods will go up in cost.[/quote]

Why?

What will prompt my local Ralphs to raise prices?

Is the store manager going to read about QE2 and start remarking items on the shelves?

And what will stop the manager at Albertsons from lowering his prices? Because of high unemployment his cost of labor is lower. So he decides to get an edge on Ralphs…

Can someone explain exactly how current policy leads to massive inflation without simply using the premise that “printing money leads to inflation?”

[Anonymous]

[quote=SD Realtor]So necessary commodities like food, resources and other tangible goods will go up in cost.[/quote]

Why?

What will prompt my local Ralphs to raise prices?

Is the store manager going to read about QE2 and start remarking items on the shelves?

And what will stop the manager at Albertsons from lowering his prices? Because of high unemployment his cost of labor is lower. So he decides to get an edge on Ralphs…

Can someone explain exactly how current policy leads to massive inflation without simply using the premise that “printing money leads to inflation?”

[Author]

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