Rate update! 30 YR Fixed back to 5.00%

[Eugene]

[quote]We’re in a massive deflationary cycle right now. $30T lost in the markets, $3T lost in housing equity, $50T or more in CDS,etc…. I count credit as part of the money supply. So we’ve lost a huge amount of it in the last year. Look around. Commodities down about 75% accross the board. Homes around the country are about 25% down.[/quote]

I prefer the term “panic”. There is a lot of irrational fear in the markets. Mining companies like Rio and Freeport-McMoran trading below book. Blue-chip industrials like GE dipping into single digit P/E’s. Houses selling below rent and replacement value, purely because people are afraid to buy. Fear feeds on itself. We’re in a massive fear cycle.

But people don’t change easily. They might cut down on spending temporarily because their 401k’s drop 20% in one month. But that does not suddenly make them frugal in the long run. 6 months later, a stock-market rally might make their portfolios rise 20% and they will go on a shopping spree. People don’t cancel decisions to buy new cars because the economy is bad – they merely delay them. Everyone still needs to drive to work. A dip in new car sales in 2008 will be matched by a spike above the trendline in 2009 or 2010. If GM and Chrysler aren’t around to provide the supply of new cars, Toyota and Honda will make a killing – and so will everyone who buys TM and HMC today, when the night seems darkest.

[drunkle]

“There’s far less demand for debt as economies contract. ”

yes, but is demand destruction outpacing supply destruction. i don’t think so, demand destruction is being driven by supply destruction in this case;
debt defaults destroying dollars causing exodus from debt instruments decreasing supply even more causing demand destruction via credit, job and wealth destruction.

again, fed intervention is what caused mort rates to dump from 6.5 to 4.5 percent. hls pointed out that the intervention is losing influence because rates have risen back up to 5 from the low of 4.5. the rate manipulation is an attempt to spur demand and not the other way around; that demand destruction has caused banks to offer enticements.

edit: actually, hls was not pointing out the increase in rates, rather a decline. i just read it that way since i had the fed actions in mind, i guess.

note, despite a paper rate of 0%, it is still effectively infinite if no one can qualify for the loan. stricter standards are both risk mitigation and supply contraction; banks do not want to and cannot afford to lose more money, no matter what the offered rate.

“Rates tend to go up in a growth cycle and down in a bust.”

these charts suggest otherwise:

http://mortgage-x.com/trends.htm

at the tail end of a growth/contraction period, you may see a reversal as the economy comes *out* of the prevailing trend. note that when this shit storm first reared in spring of 2007, rates were on the way up.

[drunkle]

“There’s far less demand for debt as economies contract. ”

yes, but is demand destruction outpacing supply destruction. i don’t think so, demand destruction is being driven by supply destruction in this case;
debt defaults destroying dollars causing exodus from debt instruments decreasing supply even more causing demand destruction via credit, job and wealth destruction.

again, fed intervention is what caused mort rates to dump from 6.5 to 4.5 percent. hls pointed out that the intervention is losing influence because rates have risen back up to 5 from the low of 4.5. the rate manipulation is an attempt to spur demand and not the other way around; that demand destruction has caused banks to offer enticements.

edit: actually, hls was not pointing out the increase in rates, rather a decline. i just read it that way since i had the fed actions in mind, i guess.

note, despite a paper rate of 0%, it is still effectively infinite if no one can qualify for the loan. stricter standards are both risk mitigation and supply contraction; banks do not want to and cannot afford to lose more money, no matter what the offered rate.

“Rates tend to go up in a growth cycle and down in a bust.”

these charts suggest otherwise:

http://mortgage-x.com/trends.htm

at the tail end of a growth/contraction period, you may see a reversal as the economy comes *out* of the prevailing trend. note that when this shit storm first reared in spring of 2007, rates were on the way up.

[drunkle]

“There’s far less demand for debt as economies contract. ”

yes, but is demand destruction outpacing supply destruction. i don’t think so, demand destruction is being driven by supply destruction in this case;
debt defaults destroying dollars causing exodus from debt instruments decreasing supply even more causing demand destruction via credit, job and wealth destruction.

again, fed intervention is what caused mort rates to dump from 6.5 to 4.5 percent. hls pointed out that the intervention is losing influence because rates have risen back up to 5 from the low of 4.5. the rate manipulation is an attempt to spur demand and not the other way around; that demand destruction has caused banks to offer enticements.

edit: actually, hls was not pointing out the increase in rates, rather a decline. i just read it that way since i had the fed actions in mind, i guess.

note, despite a paper rate of 0%, it is still effectively infinite if no one can qualify for the loan. stricter standards are both risk mitigation and supply contraction; banks do not want to and cannot afford to lose more money, no matter what the offered rate.

“Rates tend to go up in a growth cycle and down in a bust.”

these charts suggest otherwise:

http://mortgage-x.com/trends.htm

at the tail end of a growth/contraction period, you may see a reversal as the economy comes *out* of the prevailing trend. note that when this shit storm first reared in spring of 2007, rates were on the way up.

[drunkle]

“There’s far less demand for debt as economies contract. ”

yes, but is demand destruction outpacing supply destruction. i don’t think so, demand destruction is being driven by supply destruction in this case;
debt defaults destroying dollars causing exodus from debt instruments decreasing supply even more causing demand destruction via credit, job and wealth destruction.

again, fed intervention is what caused mort rates to dump from 6.5 to 4.5 percent. hls pointed out that the intervention is losing influence because rates have risen back up to 5 from the low of 4.5. the rate manipulation is an attempt to spur demand and not the other way around; that demand destruction has caused banks to offer enticements.

edit: actually, hls was not pointing out the increase in rates, rather a decline. i just read it that way since i had the fed actions in mind, i guess.

note, despite a paper rate of 0%, it is still effectively infinite if no one can qualify for the loan. stricter standards are both risk mitigation and supply contraction; banks do not want to and cannot afford to lose more money, no matter what the offered rate.

“Rates tend to go up in a growth cycle and down in a bust.”

these charts suggest otherwise:

http://mortgage-x.com/trends.htm

at the tail end of a growth/contraction period, you may see a reversal as the economy comes *out* of the prevailing trend. note that when this shit storm first reared in spring of 2007, rates were on the way up.

[drunkle]

“There’s far less demand for debt as economies contract. ”

yes, but is demand destruction outpacing supply destruction. i don’t think so, demand destruction is being driven by supply destruction in this case;
debt defaults destroying dollars causing exodus from debt instruments decreasing supply even more causing demand destruction via credit, job and wealth destruction.

again, fed intervention is what caused mort rates to dump from 6.5 to 4.5 percent. hls pointed out that the intervention is losing influence because rates have risen back up to 5 from the low of 4.5. the rate manipulation is an attempt to spur demand and not the other way around; that demand destruction has caused banks to offer enticements.

edit: actually, hls was not pointing out the increase in rates, rather a decline. i just read it that way since i had the fed actions in mind, i guess.

note, despite a paper rate of 0%, it is still effectively infinite if no one can qualify for the loan. stricter standards are both risk mitigation and supply contraction; banks do not want to and cannot afford to lose more money, no matter what the offered rate.

“Rates tend to go up in a growth cycle and down in a bust.”

these charts suggest otherwise:

http://mortgage-x.com/trends.htm

at the tail end of a growth/contraction period, you may see a reversal as the economy comes *out* of the prevailing trend. note that when this shit storm first reared in spring of 2007, rates were on the way up.

[The OC Scam]

HLS,

Good info!

Thanks

[The OC Scam]

HLS,

Good info!

Thanks

[The OC Scam]

HLS,

Good info!

Thanks

[The OC Scam]

HLS,

Good info!

Thanks

[The OC Scam]

HLS,

Good info!

Thanks

[moneymaker]

Congratulations to Peterb! The first to mention Depression, I had a gut feeling a couple of days ago that we had just entered a depression, and oppossed to the old joke (“when your neighbor loses his job it’s a recession, when you lose your job it’s a depression”), I still have my job. While reading up on it I was surpried at the parallels occuring now.

[moneymaker]

Congratulations to Peterb! The first to mention Depression, I had a gut feeling a couple of days ago that we had just entered a depression, and oppossed to the old joke (“when your neighbor loses his job it’s a recession, when you lose your job it’s a depression”), I still have my job. While reading up on it I was surpried at the parallels occuring now.

[moneymaker]

Congratulations to Peterb! The first to mention Depression, I had a gut feeling a couple of days ago that we had just entered a depression, and oppossed to the old joke (“when your neighbor loses his job it’s a recession, when you lose your job it’s a depression”), I still have my job. While reading up on it I was surpried at the parallels occuring now.

[moneymaker]

Congratulations to Peterb! The first to mention Depression, I had a gut feeling a couple of days ago that we had just entered a depression, and oppossed to the old joke (“when your neighbor loses his job it’s a recession, when you lose your job it’s a depression”), I still have my job. While reading up on it I was surpried at the parallels occuring now.

[Author]

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