interest rates in the USA v other advanced economies

[gzz]

More record low rates in overnight Asian trading:

30 year US under 2% first time ever

Australia 10 year below 0.9%

JP Morgan says the US ten year bonds could hit 0% in 2021, meaning 1.6% 30 year mortgages.

Oil slips below $55, driving down inflation and defanging the few Fed hawks who don’t want a big rate cut.

German 10-year hits record low of -.65%. Swiss ten year falls below -1%, and the negative Swiss rates extend all the way to the Swiss 50-year bonds, which are at -0.4%.

At this point, if you want the Swiss gov to give you 100 francs in 2069, you have to pay it 122 now. I should start a giant bank vault company and charge only 0.25% a year!

[gzz]

“Lower rates don’t mean households go out and borrow immediately especially during periods of economic anxiety.”

Haha you don’t know your people very well. Americans just can’t help themselves, we are optimistic, not anxious.

“Some real estate deals are cash only. Like condos in communities witth low owner occupancy.”

The alternative investment of bonds keeps getting worse and worse. I think stocks are roughly at fair value and would guess returns over the next 5 years of about 2% appreciation and 3% dividend. Not bad, not great, and plenty of volatility.

For bonds, do you really want to lock in a 1.97% return for 30 years, and have to pay income tax on the full 1.97% every year? Not me!

The problem with the fed rate increases the past few years is banks suddenly are paying 1.5-2% on savings accounts, though you have to move the money around every year to get the promo rates. Let’s knock that down to 0 again.

[svelte]

Dec 2018 (country) Aug 2019

2.86 USA 1.59
2.06 Canada 1.10
0.25 Germany 0.71
1.26 UK 0.40
0.73 France 0.44
1.40 Spain 0.05
0.41 Holland 0.59
-0.24 Switzerland -1.12
0.02 Japan -0.25
2.44 Australia 0.88
2.45 New Zealand 0.99
2.03 Hong Kong 1.05
2.00 South Korea 1.15
—- Italy 1.34

about the same gap with the US as before, but rate is a lot lower!

[gzz]

The 2019 numbers in your chart need minus signs for Germany France Holland and UK.

Rates can only get so far below 0, you’d think, so the money flows will eventually have to go to our bond market with its juicy returns of more than 1%.

You see a little of that in the chart, the biggest rate declines are the ones that started above 2.4%.

The lowest rate in the world is on Swiss bonds maturing in 9 years at -1.17%.

I read a couple days ago that $17 trillion of world gov debt now has negative yields. Corporate bonds in Europe often have negative rates too.

[gzz]

I just checked a few rate quote sites as well as average rate data, the recent plunge in rates that started July 30 hasn’t passed through to the mortgage market yet. Maybe August sales will be weak as buyers delay closing to rate shop.

[FlyerInHi]

So it makes sense that that USD is appreciating vs other currencies.

[gzz]

Denmark sees its first negative mortgage rates, German mortgage average falls below 1%, France at 1.39%:

https://www.bloomberg.com/amp/news/articles/2019-08-18/negative-mortgages-set-another-milestone-in-a-no-rate-world

I looked up Swiss mortgage rates. Despite having the lowest overall rates, mortgage rates are about 1% on 5-10 year loans and 1.5% on 15 year. Probably because of low volume and lack of government support.

[spdrun]

The reality is more complicated…

https://www.cnbc.com/2019/08/12/danish-bank-is-offering-10-year-mortgages-with-negative-interest-rates.html

(1) They make money on fees that raise the effective rate above zero.
(2) It’s not a conventional mortgage designed for payoff at the end, but a 10-year loan — you’ll still owe most of the balance at the end. It’s a redux of the “teaser rate” scam in 2006 or so.
(3) They apparently enforce 80% LTV fairly strictly, a lesson the US would do well to emulate.

[FlyerInHi]

I wonder, if I have income in Germany, can I get a loan to buy a condo?

I was told it’s a pain rent out properties in Europe with rent control, permits, etc… And the rents aren’t as high as in USA

[FlyerInHi]

60 Minutes Australia.
I guest the housing crash is coming to them.
I wonder if banks are allowed to go after borrower assets other than the collateral.

[gzz]

Germany: high taxes, declining population, cold weather causing retirees to go south. I don’t like it as a long term real estate investment. Why not just go with upstate NY?

The NYT used to have regular articles about 2nd homes in Europe that would describe the mortgage and property tax situation at the end. I think you’d have to put about half down as a foreigner. The one time transaction costs and taxes were often very high.

[spdrun]

High taxes, but they actually GET something for those taxes, not just private prisons, military “heroes” (LOL!), defense contractor parasites, and their homicide sprees abroad. Free/good educational system, world-class healthcare system, good public/rail transit system, rule of law/environmental protection. Plus, Germany is a lot prettier than upstate NY.

Germany’s population is approximately stable, as other countries should strive to be. Zero population growth should be a stated goal of governments, not just an NGO catchphrase.

[FlyerInHi]

Berlin has experienced growth population and RE appreciation and is attracting young people. Berlin in hip and cool with a good international crowd.

There are dying parts of Germany for sure, especially in the former East.

My old cousin lives near West Point upstate NY. Boring area. She’s the caretaker of the gravesites of the family, haha. It’s like waiting for death there.

I have to go investigate. I heard that rental regulations in Europe are onerous. I would like to Airbnb, 30 days or more if required. In USA if you Airbnb over 30 days, nobody can force you to stop (unless HOA CCRs say otherwise) And if you want to rent out your unit, you don’t need a permit. I don’t want socialist regulations limiting my property rights, haha.

[spdrun]

Here’s the benefit of the socialist regulations — they reduce competition since many other people ALSO won’t want to deal with them.

[FlyerInHi]

I think Canadians are most active in US RE. They can visit visa free for 6 months at a time. The culture is almost the same and savvy people know how to play the currency game.

I just don’t understand why Canadians would want mobile homes in Florida as vacation homes. Sounds deplorable to me.

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