Confused with the current market

[SD Realtor]

Scarlett yes I would say that if our international creditors continue to fund our debt then yes, rates will be kept artificially low. The secondary market for mortgages is essentially a socialized market backed by taxpayer money. Institutional and private investment disappeared.

Think of it this way. You buy a home. Wells or BofA originates your loan. It is then sold off on the secondary market to who? Well most likely one of the GSEs. Maybe even the Fed. Where did that money come from? In this day and age it was just tossed on our tab.

Furthermore our administration is wholeheartedly spending money and building up debt faster then any of the previous ones. This is what the majority of people in our country want. It is much easier to be taken care of then to take care of things.

So yes as long as everyone plays nice the dominoes will not fall. Todays dollar compared to 10 years ago dollar is about worth 62 cents. When the dominoes do fall we will see substantially higher rates. There may be some political horsetrading to lessen the blow. For instance maybe Taiwan will be a sacrificial lamb to China in exchange for another few years of credit extension.

Not sure if you lived here in the 1980s mortgages of 12% and higher were the NORM. If you have a big cashpile you are stoked. If you do not then you are screwed.

I am not really saying buy or dont buy now. Many people are buying now for various reasons however none of them that I know are buying because they think it is a market bottom. If you look at the most bearish posts on this site, those posters harp and harp on the fact that knifecatching buyers are doing so because they think it is a market bottom. There is a blind eye and ear to the fact that people buy homes (and other things for that matter) for other reasons then timing a market. Another hard to swallow fact is that alot of these buyers do have the resources to be able to do this. Even lately there is the “overbearing spouses” reasoning, that people are all buying because they are forced to buy thier overbearing spouse.

So whatever the reason is, people are buying, for better or for worse.

Keep your eyes open whatever you do.

[Arraya]

[quote=Scarlett]I agree with you
[quote=Arraya]There is NO recovery next year. We should be in for the largest economic contraction for at least hundred years and it will be global.[/quote]

I believe that IS the most likely scenario but in this case – what do you think would happen to the rates and the house prices in the next FEW years? I would think they’d keep the rates low, no more than 1-2% increase in the next FEW years, and the prices might fall a little. Any other thoughts for THIS scenario?[/quote]

The bond market controls rates not the Fed. When inflation is a problem the bond market will let us know. I think prices will get cut in half again. There is too many losses that will eventually be recognized and way too may job losses in the pipeline. They can’t play hide the salami forever. If printing were a cure all the banks would be cleaned up by now . As they stand now, they don’t know what to do with there ever worsening balance sheets, except lie and hide the truth.

The bond market is far more powerful than governments at this point. While the international debt financing model remains, the bond market will retain its power to prevent money printing. Even though governments are not succeeding in increasing the effective money supply for reasons already discussed, they are nevertheless increasing systemic risk with their activities.

This is a recipe for very much higher interest rates as a risk premium. Governments do not set interest rates, they decide what rate to defend, but if that rate is substantially different from what the bond market requires, then defending it would be ruinous.

I think we are headed (not imminently but eventually) for a bond market dislocation, with nominal interest rates on government debt spiking into the double digits. This will amount to hitting the emergency stop button on the economy, especially since real interest rates will be substantially higher (the nominal rate minus negative inflation).

I am in fact expecting interest rates on private debt to rise before we see problems in the market for government debt, as the latter should benefit substantially in the shorter term from a flight to safety. The risk premium on private debt is already rising, which is a serious danger signal for such thoroughly indebted societies as we see in the developed world.

[Arraya]

[quote=Scarlett]I agree with you
[quote=Arraya]There is NO recovery next year. We should be in for the largest economic contraction for at least hundred years and it will be global.[/quote]

I believe that IS the most likely scenario but in this case – what do you think would happen to the rates and the house prices in the next FEW years? I would think they’d keep the rates low, no more than 1-2% increase in the next FEW years, and the prices might fall a little. Any other thoughts for THIS scenario?[/quote]

The bond market controls rates not the Fed. When inflation is a problem the bond market will let us know. I think prices will get cut in half again. There is too many losses that will eventually be recognized and way too may job losses in the pipeline. They can’t play hide the salami forever. If printing were a cure all the banks would be cleaned up by now . As they stand now, they don’t know what to do with there ever worsening balance sheets, except lie and hide the truth.

The bond market is far more powerful than governments at this point. While the international debt financing model remains, the bond market will retain its power to prevent money printing. Even though governments are not succeeding in increasing the effective money supply for reasons already discussed, they are nevertheless increasing systemic risk with their activities.

This is a recipe for very much higher interest rates as a risk premium. Governments do not set interest rates, they decide what rate to defend, but if that rate is substantially different from what the bond market requires, then defending it would be ruinous.

I think we are headed (not imminently but eventually) for a bond market dislocation, with nominal interest rates on government debt spiking into the double digits. This will amount to hitting the emergency stop button on the economy, especially since real interest rates will be substantially higher (the nominal rate minus negative inflation).

I am in fact expecting interest rates on private debt to rise before we see problems in the market for government debt, as the latter should benefit substantially in the shorter term from a flight to safety. The risk premium on private debt is already rising, which is a serious danger signal for such thoroughly indebted societies as we see in the developed world.

[Arraya]

[quote=Scarlett]I agree with you
[quote=Arraya]There is NO recovery next year. We should be in for the largest economic contraction for at least hundred years and it will be global.[/quote]

I believe that IS the most likely scenario but in this case – what do you think would happen to the rates and the house prices in the next FEW years? I would think they’d keep the rates low, no more than 1-2% increase in the next FEW years, and the prices might fall a little. Any other thoughts for THIS scenario?[/quote]

The bond market controls rates not the Fed. When inflation is a problem the bond market will let us know. I think prices will get cut in half again. There is too many losses that will eventually be recognized and way too may job losses in the pipeline. They can’t play hide the salami forever. If printing were a cure all the banks would be cleaned up by now . As they stand now, they don’t know what to do with there ever worsening balance sheets, except lie and hide the truth.

The bond market is far more powerful than governments at this point. While the international debt financing model remains, the bond market will retain its power to prevent money printing. Even though governments are not succeeding in increasing the effective money supply for reasons already discussed, they are nevertheless increasing systemic risk with their activities.

This is a recipe for very much higher interest rates as a risk premium. Governments do not set interest rates, they decide what rate to defend, but if that rate is substantially different from what the bond market requires, then defending it would be ruinous.

I think we are headed (not imminently but eventually) for a bond market dislocation, with nominal interest rates on government debt spiking into the double digits. This will amount to hitting the emergency stop button on the economy, especially since real interest rates will be substantially higher (the nominal rate minus negative inflation).

I am in fact expecting interest rates on private debt to rise before we see problems in the market for government debt, as the latter should benefit substantially in the shorter term from a flight to safety. The risk premium on private debt is already rising, which is a serious danger signal for such thoroughly indebted societies as we see in the developed world.

[Arraya]

[quote=Scarlett]I agree with you
[quote=Arraya]There is NO recovery next year. We should be in for the largest economic contraction for at least hundred years and it will be global.[/quote]

I believe that IS the most likely scenario but in this case – what do you think would happen to the rates and the house prices in the next FEW years? I would think they’d keep the rates low, no more than 1-2% increase in the next FEW years, and the prices might fall a little. Any other thoughts for THIS scenario?[/quote]

The bond market controls rates not the Fed. When inflation is a problem the bond market will let us know. I think prices will get cut in half again. There is too many losses that will eventually be recognized and way too may job losses in the pipeline. They can’t play hide the salami forever. If printing were a cure all the banks would be cleaned up by now . As they stand now, they don’t know what to do with there ever worsening balance sheets, except lie and hide the truth.

The bond market is far more powerful than governments at this point. While the international debt financing model remains, the bond market will retain its power to prevent money printing. Even though governments are not succeeding in increasing the effective money supply for reasons already discussed, they are nevertheless increasing systemic risk with their activities.

This is a recipe for very much higher interest rates as a risk premium. Governments do not set interest rates, they decide what rate to defend, but if that rate is substantially different from what the bond market requires, then defending it would be ruinous.

I think we are headed (not imminently but eventually) for a bond market dislocation, with nominal interest rates on government debt spiking into the double digits. This will amount to hitting the emergency stop button on the economy, especially since real interest rates will be substantially higher (the nominal rate minus negative inflation).

I am in fact expecting interest rates on private debt to rise before we see problems in the market for government debt, as the latter should benefit substantially in the shorter term from a flight to safety. The risk premium on private debt is already rising, which is a serious danger signal for such thoroughly indebted societies as we see in the developed world.

[Arraya]

[quote=Scarlett]I agree with you
[quote=Arraya]There is NO recovery next year. We should be in for the largest economic contraction for at least hundred years and it will be global.[/quote]

I believe that IS the most likely scenario but in this case – what do you think would happen to the rates and the house prices in the next FEW years? I would think they’d keep the rates low, no more than 1-2% increase in the next FEW years, and the prices might fall a little. Any other thoughts for THIS scenario?[/quote]

The bond market controls rates not the Fed. When inflation is a problem the bond market will let us know. I think prices will get cut in half again. There is too many losses that will eventually be recognized and way too may job losses in the pipeline. They can’t play hide the salami forever. If printing were a cure all the banks would be cleaned up by now . As they stand now, they don’t know what to do with there ever worsening balance sheets, except lie and hide the truth.

The bond market is far more powerful than governments at this point. While the international debt financing model remains, the bond market will retain its power to prevent money printing. Even though governments are not succeeding in increasing the effective money supply for reasons already discussed, they are nevertheless increasing systemic risk with their activities.

This is a recipe for very much higher interest rates as a risk premium. Governments do not set interest rates, they decide what rate to defend, but if that rate is substantially different from what the bond market requires, then defending it would be ruinous.

I think we are headed (not imminently but eventually) for a bond market dislocation, with nominal interest rates on government debt spiking into the double digits. This will amount to hitting the emergency stop button on the economy, especially since real interest rates will be substantially higher (the nominal rate minus negative inflation).

I am in fact expecting interest rates on private debt to rise before we see problems in the market for government debt, as the latter should benefit substantially in the shorter term from a flight to safety. The risk premium on private debt is already rising, which is a serious danger signal for such thoroughly indebted societies as we see in the developed world.

[Scarlett]

[quote=SD Realtor]Scarlett yes I would say that if our international creditors continue to fund our debt then yes, rates will be kept artificially low. The secondary market for mortgages is essentially a socialized market backed by taxpayer money.
(…)Not sure if you lived here in the 1980s mortgages of 12% and higher were the NORM. If you have a big cashpile you are stoked. If you do not then you are screwed.
(…)
Keep your eyes open whatever you do.[/quote]
I am aware of those things. In my case, I don’t have a big pile of cash at all, just enough for a 20% downpayment. I am 40, have kids and would like to buy a home that I can afford the payment sooner than later. Renting where we like is not that much cheaper either. Not at the bottom, I know. Not the most secure financial state, I know that too. But life goes by fast, and it’d be nice to have a nice home. If I’d be 10 yrs younger and sans kids, I’d continue renting another 10 years if needed, and accumulating cash. But realistically, with kids, for us is very hard to save money at a significant rate (other than for college/retirement), so our downpayment won’t increase substantially in the next couple of years. That’s why I *might* buy in the next year or so while rates are low.

[Scarlett]

[quote=SD Realtor]Scarlett yes I would say that if our international creditors continue to fund our debt then yes, rates will be kept artificially low. The secondary market for mortgages is essentially a socialized market backed by taxpayer money.
(…)Not sure if you lived here in the 1980s mortgages of 12% and higher were the NORM. If you have a big cashpile you are stoked. If you do not then you are screwed.
(…)
Keep your eyes open whatever you do.[/quote]
I am aware of those things. In my case, I don’t have a big pile of cash at all, just enough for a 20% downpayment. I am 40, have kids and would like to buy a home that I can afford the payment sooner than later. Renting where we like is not that much cheaper either. Not at the bottom, I know. Not the most secure financial state, I know that too. But life goes by fast, and it’d be nice to have a nice home. If I’d be 10 yrs younger and sans kids, I’d continue renting another 10 years if needed, and accumulating cash. But realistically, with kids, for us is very hard to save money at a significant rate (other than for college/retirement), so our downpayment won’t increase substantially in the next couple of years. That’s why I *might* buy in the next year or so while rates are low.

[Scarlett]

[quote=SD Realtor]Scarlett yes I would say that if our international creditors continue to fund our debt then yes, rates will be kept artificially low. The secondary market for mortgages is essentially a socialized market backed by taxpayer money.
(…)Not sure if you lived here in the 1980s mortgages of 12% and higher were the NORM. If you have a big cashpile you are stoked. If you do not then you are screwed.
(…)
Keep your eyes open whatever you do.[/quote]
I am aware of those things. In my case, I don’t have a big pile of cash at all, just enough for a 20% downpayment. I am 40, have kids and would like to buy a home that I can afford the payment sooner than later. Renting where we like is not that much cheaper either. Not at the bottom, I know. Not the most secure financial state, I know that too. But life goes by fast, and it’d be nice to have a nice home. If I’d be 10 yrs younger and sans kids, I’d continue renting another 10 years if needed, and accumulating cash. But realistically, with kids, for us is very hard to save money at a significant rate (other than for college/retirement), so our downpayment won’t increase substantially in the next couple of years. That’s why I *might* buy in the next year or so while rates are low.

[Scarlett]

[quote=SD Realtor]Scarlett yes I would say that if our international creditors continue to fund our debt then yes, rates will be kept artificially low. The secondary market for mortgages is essentially a socialized market backed by taxpayer money.
(…)Not sure if you lived here in the 1980s mortgages of 12% and higher were the NORM. If you have a big cashpile you are stoked. If you do not then you are screwed.
(…)
Keep your eyes open whatever you do.[/quote]
I am aware of those things. In my case, I don’t have a big pile of cash at all, just enough for a 20% downpayment. I am 40, have kids and would like to buy a home that I can afford the payment sooner than later. Renting where we like is not that much cheaper either. Not at the bottom, I know. Not the most secure financial state, I know that too. But life goes by fast, and it’d be nice to have a nice home. If I’d be 10 yrs younger and sans kids, I’d continue renting another 10 years if needed, and accumulating cash. But realistically, with kids, for us is very hard to save money at a significant rate (other than for college/retirement), so our downpayment won’t increase substantially in the next couple of years. That’s why I *might* buy in the next year or so while rates are low.

[Scarlett]

[quote=SD Realtor]Scarlett yes I would say that if our international creditors continue to fund our debt then yes, rates will be kept artificially low. The secondary market for mortgages is essentially a socialized market backed by taxpayer money.
(…)Not sure if you lived here in the 1980s mortgages of 12% and higher were the NORM. If you have a big cashpile you are stoked. If you do not then you are screwed.
(…)
Keep your eyes open whatever you do.[/quote]
I am aware of those things. In my case, I don’t have a big pile of cash at all, just enough for a 20% downpayment. I am 40, have kids and would like to buy a home that I can afford the payment sooner than later. Renting where we like is not that much cheaper either. Not at the bottom, I know. Not the most secure financial state, I know that too. But life goes by fast, and it’d be nice to have a nice home. If I’d be 10 yrs younger and sans kids, I’d continue renting another 10 years if needed, and accumulating cash. But realistically, with kids, for us is very hard to save money at a significant rate (other than for college/retirement), so our downpayment won’t increase substantially in the next couple of years. That’s why I *might* buy in the next year or so while rates are low.

[pemeliza]

“I think prices will get cut in half again. ”

50% off of houses already 50% from peak would be 75% off peak. That would put us into mid 80’s to late 80’s nominal pricing. Recall at this time interest rates were 10+% and you could buy a nice home in La Jolla Farms for well under 1 million. I don’t see the government pulling their support out from under the mortgage market until the risk premimum has been severely diminished. I think this will happen when the economy is robust again at which point housing in SD will have stabilized and likely be moving up.

I do agree that the economy is awful and that the bubble has done incredible damage to the short term health of SD real estate. Personally, I could see most housing go to 00-01 nominal prices but not 87-88 nominal prices which are at the extreme end of some of the bearish views on the board.

I recently bought at probably an ’02 price so I full well expect that my house will drop in value before it starts to rise. For me it came down to really wanting a particular neighborhood that is hard to get into at my price point.

[pemeliza]

“I think prices will get cut in half again. ”

50% off of houses already 50% from peak would be 75% off peak. That would put us into mid 80’s to late 80’s nominal pricing. Recall at this time interest rates were 10+% and you could buy a nice home in La Jolla Farms for well under 1 million. I don’t see the government pulling their support out from under the mortgage market until the risk premimum has been severely diminished. I think this will happen when the economy is robust again at which point housing in SD will have stabilized and likely be moving up.

I do agree that the economy is awful and that the bubble has done incredible damage to the short term health of SD real estate. Personally, I could see most housing go to 00-01 nominal prices but not 87-88 nominal prices which are at the extreme end of some of the bearish views on the board.

I recently bought at probably an ’02 price so I full well expect that my house will drop in value before it starts to rise. For me it came down to really wanting a particular neighborhood that is hard to get into at my price point.

[pemeliza]

“I think prices will get cut in half again. ”

50% off of houses already 50% from peak would be 75% off peak. That would put us into mid 80’s to late 80’s nominal pricing. Recall at this time interest rates were 10+% and you could buy a nice home in La Jolla Farms for well under 1 million. I don’t see the government pulling their support out from under the mortgage market until the risk premimum has been severely diminished. I think this will happen when the economy is robust again at which point housing in SD will have stabilized and likely be moving up.

I do agree that the economy is awful and that the bubble has done incredible damage to the short term health of SD real estate. Personally, I could see most housing go to 00-01 nominal prices but not 87-88 nominal prices which are at the extreme end of some of the bearish views on the board.

I recently bought at probably an ’02 price so I full well expect that my house will drop in value before it starts to rise. For me it came down to really wanting a particular neighborhood that is hard to get into at my price point.

[pemeliza]

“I think prices will get cut in half again. ”

50% off of houses already 50% from peak would be 75% off peak. That would put us into mid 80’s to late 80’s nominal pricing. Recall at this time interest rates were 10+% and you could buy a nice home in La Jolla Farms for well under 1 million. I don’t see the government pulling their support out from under the mortgage market until the risk premimum has been severely diminished. I think this will happen when the economy is robust again at which point housing in SD will have stabilized and likely be moving up.

I do agree that the economy is awful and that the bubble has done incredible damage to the short term health of SD real estate. Personally, I could see most housing go to 00-01 nominal prices but not 87-88 nominal prices which are at the extreme end of some of the bearish views on the board.

I recently bought at probably an ’02 price so I full well expect that my house will drop in value before it starts to rise. For me it came down to really wanting a particular neighborhood that is hard to get into at my price point.

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