California Loan Modifications update

[Effective Demand]

I recommend reading the MBS commentary blog over at Mortgage News Daily. It has a play by play of the daily rate movements.

http://www.mortgagenewsdaily.com/mortgage_rates/blog/

Personally I think we have one more multi-month sub-5% spurt in us and then things will come back to 5.5-5.75% then a couple years down the road we get in the 6’s. At these low levels quarter point movements is a large percentage and changes purchasing power significantly.

Any recovery in housing will be muted, both transactional and pricing. Right now the issue with the market is supply, demand isn’t that bad but they can’t really stretch and buy so they are stuck in a narrow range. Either people start making more money (wage inflation) or prices drop and transaction rise. Otherwise we will just stagnate for a long time.

[Eugene]

[quote=Effective Demand]
I still can’t imagine what the housing market would look like with 7% rates. I don’t think too many of todays homebuyers have thought that far ahead. But that would make the cost of money increase 35-40% and decrease buyers purchasing power significantly. [/quote]

Strictly speaking, rates at 7% instead of 5% would increase one’s pre-tax monthly payments by 16-18% (assuming same purchase price), and, once you account for tax deduction, the increase could be even less, especially at the high end.

Consider a hypothetical household with a 200K pretax income, 850K purchase price with 20% down (on the upper bound of new conforming), with hefty MR and HOA. If interest rates go from 5% to 7%, nominal monthly payments go up 17%, post tax deduction housing costs go up 13%.

[quote]The multi-trillion dollar question is.. how long can the Fed keep 30 yr rates this low. [/quote]

It’s supply and demand, and there are many factors affecting supply and demand.

For example, interest rates north of 6% would cut off refinancing (half of all people with equity refinanced in 2003, the other half refinanced in the last 6 months), and, without people refinancing, volume of new mortgage originations and supply of mortgage backed securities would shrink dramatically.

[Eugene]

[quote=Effective Demand]
I still can’t imagine what the housing market would look like with 7% rates. I don’t think too many of todays homebuyers have thought that far ahead. But that would make the cost of money increase 35-40% and decrease buyers purchasing power significantly. [/quote]

Strictly speaking, rates at 7% instead of 5% would increase one’s pre-tax monthly payments by 16-18% (assuming same purchase price), and, once you account for tax deduction, the increase could be even less, especially at the high end.

Consider a hypothetical household with a 200K pretax income, 850K purchase price with 20% down (on the upper bound of new conforming), with hefty MR and HOA. If interest rates go from 5% to 7%, nominal monthly payments go up 17%, post tax deduction housing costs go up 13%.

[quote]The multi-trillion dollar question is.. how long can the Fed keep 30 yr rates this low. [/quote]

It’s supply and demand, and there are many factors affecting supply and demand.

For example, interest rates north of 6% would cut off refinancing (half of all people with equity refinanced in 2003, the other half refinanced in the last 6 months), and, without people refinancing, volume of new mortgage originations and supply of mortgage backed securities would shrink dramatically.

[Eugene]

[quote=Effective Demand]
I still can’t imagine what the housing market would look like with 7% rates. I don’t think too many of todays homebuyers have thought that far ahead. But that would make the cost of money increase 35-40% and decrease buyers purchasing power significantly. [/quote]

Strictly speaking, rates at 7% instead of 5% would increase one’s pre-tax monthly payments by 16-18% (assuming same purchase price), and, once you account for tax deduction, the increase could be even less, especially at the high end.

Consider a hypothetical household with a 200K pretax income, 850K purchase price with 20% down (on the upper bound of new conforming), with hefty MR and HOA. If interest rates go from 5% to 7%, nominal monthly payments go up 17%, post tax deduction housing costs go up 13%.

[quote]The multi-trillion dollar question is.. how long can the Fed keep 30 yr rates this low. [/quote]

It’s supply and demand, and there are many factors affecting supply and demand.

For example, interest rates north of 6% would cut off refinancing (half of all people with equity refinanced in 2003, the other half refinanced in the last 6 months), and, without people refinancing, volume of new mortgage originations and supply of mortgage backed securities would shrink dramatically.

[Eugene]

[quote=Effective Demand]
I still can’t imagine what the housing market would look like with 7% rates. I don’t think too many of todays homebuyers have thought that far ahead. But that would make the cost of money increase 35-40% and decrease buyers purchasing power significantly. [/quote]

Strictly speaking, rates at 7% instead of 5% would increase one’s pre-tax monthly payments by 16-18% (assuming same purchase price), and, once you account for tax deduction, the increase could be even less, especially at the high end.

Consider a hypothetical household with a 200K pretax income, 850K purchase price with 20% down (on the upper bound of new conforming), with hefty MR and HOA. If interest rates go from 5% to 7%, nominal monthly payments go up 17%, post tax deduction housing costs go up 13%.

[quote]The multi-trillion dollar question is.. how long can the Fed keep 30 yr rates this low. [/quote]

It’s supply and demand, and there are many factors affecting supply and demand.

For example, interest rates north of 6% would cut off refinancing (half of all people with equity refinanced in 2003, the other half refinanced in the last 6 months), and, without people refinancing, volume of new mortgage originations and supply of mortgage backed securities would shrink dramatically.

[Eugene]

[quote=Effective Demand]
I still can’t imagine what the housing market would look like with 7% rates. I don’t think too many of todays homebuyers have thought that far ahead. But that would make the cost of money increase 35-40% and decrease buyers purchasing power significantly. [/quote]

Strictly speaking, rates at 7% instead of 5% would increase one’s pre-tax monthly payments by 16-18% (assuming same purchase price), and, once you account for tax deduction, the increase could be even less, especially at the high end.

Consider a hypothetical household with a 200K pretax income, 850K purchase price with 20% down (on the upper bound of new conforming), with hefty MR and HOA. If interest rates go from 5% to 7%, nominal monthly payments go up 17%, post tax deduction housing costs go up 13%.

[quote]The multi-trillion dollar question is.. how long can the Fed keep 30 yr rates this low. [/quote]

It’s supply and demand, and there are many factors affecting supply and demand.

For example, interest rates north of 6% would cut off refinancing (half of all people with equity refinanced in 2003, the other half refinanced in the last 6 months), and, without people refinancing, volume of new mortgage originations and supply of mortgage backed securities would shrink dramatically.

[pemeliza]

I think we all have to at least consider the possibility that we have entered an era of “permanent” low long term interest rates. I can’t even fathom a fed funds rate above 2-3% at this point. Look at Japan.

[pemeliza]

I think we all have to at least consider the possibility that we have entered an era of “permanent” low long term interest rates. I can’t even fathom a fed funds rate above 2-3% at this point. Look at Japan.

[pemeliza]

I think we all have to at least consider the possibility that we have entered an era of “permanent” low long term interest rates. I can’t even fathom a fed funds rate above 2-3% at this point. Look at Japan.

[pemeliza]

I think we all have to at least consider the possibility that we have entered an era of “permanent” low long term interest rates. I can’t even fathom a fed funds rate above 2-3% at this point. Look at Japan.

[pemeliza]

I think we all have to at least consider the possibility that we have entered an era of “permanent” low long term interest rates. I can’t even fathom a fed funds rate above 2-3% at this point. Look at Japan.

[peterb]

I’ve heard that many rates are keyed off the T Bill 10 year note. These look to be on rising over time. Should these keep on rising, the cost of houses will see more advanced downwrd pressure on the prices.

[peterb]

I’ve heard that many rates are keyed off the T Bill 10 year note. These look to be on rising over time. Should these keep on rising, the cost of houses will see more advanced downwrd pressure on the prices.

[peterb]

I’ve heard that many rates are keyed off the T Bill 10 year note. These look to be on rising over time. Should these keep on rising, the cost of houses will see more advanced downwrd pressure on the prices.

[peterb]

I’ve heard that many rates are keyed off the T Bill 10 year note. These look to be on rising over time. Should these keep on rising, the cost of houses will see more advanced downwrd pressure on the prices.

[Author]

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