Home › Forums › Closed Forums › Buying and Selling RE › The risks of buying with record low interest rates
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DWCAP.
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AuthorPosts
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January 29, 2008 at 3:24 PM #11663
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January 29, 2008 at 3:37 PM #144761
DWCAP
ParticipantYou assume that the conforming loan limit would be allowed to go back down in the future. Politics and the NAR would never allow that to happen once the cat is outa the bag. Remember, this is the government that gave us a rebate on our taxes last year because they were still collecting a tax on telephones that was inacted to pay for WWI ( or WWII, I forget). Either way that was 60-80+ years of taxation. Temporary isnt really temporary, it just means that they will have to pass another “fix” next year. It lets a Pol tell you they are doing something when they really are not, and keeps the PAC and special interest lobby money rolling in. If you want an example, think the alternative minimum tax that is so loathed on this board. Every year it is indexed up alittle so the middle class doesn’t revolt, but left open because if they fixed it, they would have to account for the Ten’s of Billions of dollars that would be lost in tax revenue.
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January 29, 2008 at 3:37 PM #145001
DWCAP
ParticipantYou assume that the conforming loan limit would be allowed to go back down in the future. Politics and the NAR would never allow that to happen once the cat is outa the bag. Remember, this is the government that gave us a rebate on our taxes last year because they were still collecting a tax on telephones that was inacted to pay for WWI ( or WWII, I forget). Either way that was 60-80+ years of taxation. Temporary isnt really temporary, it just means that they will have to pass another “fix” next year. It lets a Pol tell you they are doing something when they really are not, and keeps the PAC and special interest lobby money rolling in. If you want an example, think the alternative minimum tax that is so loathed on this board. Every year it is indexed up alittle so the middle class doesn’t revolt, but left open because if they fixed it, they would have to account for the Ten’s of Billions of dollars that would be lost in tax revenue.
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January 29, 2008 at 3:37 PM #145027
DWCAP
ParticipantYou assume that the conforming loan limit would be allowed to go back down in the future. Politics and the NAR would never allow that to happen once the cat is outa the bag. Remember, this is the government that gave us a rebate on our taxes last year because they were still collecting a tax on telephones that was inacted to pay for WWI ( or WWII, I forget). Either way that was 60-80+ years of taxation. Temporary isnt really temporary, it just means that they will have to pass another “fix” next year. It lets a Pol tell you they are doing something when they really are not, and keeps the PAC and special interest lobby money rolling in. If you want an example, think the alternative minimum tax that is so loathed on this board. Every year it is indexed up alittle so the middle class doesn’t revolt, but left open because if they fixed it, they would have to account for the Ten’s of Billions of dollars that would be lost in tax revenue.
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January 29, 2008 at 3:37 PM #145030
DWCAP
ParticipantYou assume that the conforming loan limit would be allowed to go back down in the future. Politics and the NAR would never allow that to happen once the cat is outa the bag. Remember, this is the government that gave us a rebate on our taxes last year because they were still collecting a tax on telephones that was inacted to pay for WWI ( or WWII, I forget). Either way that was 60-80+ years of taxation. Temporary isnt really temporary, it just means that they will have to pass another “fix” next year. It lets a Pol tell you they are doing something when they really are not, and keeps the PAC and special interest lobby money rolling in. If you want an example, think the alternative minimum tax that is so loathed on this board. Every year it is indexed up alittle so the middle class doesn’t revolt, but left open because if they fixed it, they would have to account for the Ten’s of Billions of dollars that would be lost in tax revenue.
-
January 29, 2008 at 3:37 PM #145100
DWCAP
ParticipantYou assume that the conforming loan limit would be allowed to go back down in the future. Politics and the NAR would never allow that to happen once the cat is outa the bag. Remember, this is the government that gave us a rebate on our taxes last year because they were still collecting a tax on telephones that was inacted to pay for WWI ( or WWII, I forget). Either way that was 60-80+ years of taxation. Temporary isnt really temporary, it just means that they will have to pass another “fix” next year. It lets a Pol tell you they are doing something when they really are not, and keeps the PAC and special interest lobby money rolling in. If you want an example, think the alternative minimum tax that is so loathed on this board. Every year it is indexed up alittle so the middle class doesn’t revolt, but left open because if they fixed it, they would have to account for the Ten’s of Billions of dollars that would be lost in tax revenue.
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January 29, 2008 at 3:39 PM #144766
blahblahblah
ParticipantThis is a very interesting topic and I’ve been thinking about the same thing. If interest rates go back up, home prices will need to come down. However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices. It could very well be that the guy who buys today at a 20% nominal discount from the 2005 peak with a very low fixed interest rate could come out ahead of someone buying two years from now with a much higher rate, even though the nominal price might fall a bit between now and then.
I’m as much of a bear as anyone, but just such a scenario is worrying me a bit. I think the government is going to try to spend their way out of this mess with bailouts, new government programs and defense spending, etc… All of these will devalue the currency and would be inflationary. I hope I’m wrong…
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January 29, 2008 at 3:53 PM #144786
Aecetia
ParticipantFYI-
The tax was imposed in 1898 to help pay for the Spanish-American War. It was designed as a tax on wealthy Americans, back when phone service was considered a luxury.
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January 29, 2008 at 4:05 PM #144796
barnaby33
ParticipantHigh interest rates do not mean high prices. High interest rates merely mean credit is scarce. Global wage arbitrage pretty much guarantees nobody is getting a big pay raise anytime soon. That was the 70’s.
High interest rates are your friend if you are a first time buyer. It means lower prices, not higher. Especially when combined with stricter lending standards which are sure to accompany the higher interest rates. Coming soon to an unwilling lender (who’s busy hoarding cash) near you!
Josh
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January 29, 2008 at 4:05 PM #145036
barnaby33
ParticipantHigh interest rates do not mean high prices. High interest rates merely mean credit is scarce. Global wage arbitrage pretty much guarantees nobody is getting a big pay raise anytime soon. That was the 70’s.
High interest rates are your friend if you are a first time buyer. It means lower prices, not higher. Especially when combined with stricter lending standards which are sure to accompany the higher interest rates. Coming soon to an unwilling lender (who’s busy hoarding cash) near you!
Josh
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January 29, 2008 at 4:05 PM #145062
barnaby33
ParticipantHigh interest rates do not mean high prices. High interest rates merely mean credit is scarce. Global wage arbitrage pretty much guarantees nobody is getting a big pay raise anytime soon. That was the 70’s.
High interest rates are your friend if you are a first time buyer. It means lower prices, not higher. Especially when combined with stricter lending standards which are sure to accompany the higher interest rates. Coming soon to an unwilling lender (who’s busy hoarding cash) near you!
Josh
-
January 29, 2008 at 4:05 PM #145065
barnaby33
ParticipantHigh interest rates do not mean high prices. High interest rates merely mean credit is scarce. Global wage arbitrage pretty much guarantees nobody is getting a big pay raise anytime soon. That was the 70’s.
High interest rates are your friend if you are a first time buyer. It means lower prices, not higher. Especially when combined with stricter lending standards which are sure to accompany the higher interest rates. Coming soon to an unwilling lender (who’s busy hoarding cash) near you!
Josh
-
January 29, 2008 at 4:05 PM #145134
barnaby33
ParticipantHigh interest rates do not mean high prices. High interest rates merely mean credit is scarce. Global wage arbitrage pretty much guarantees nobody is getting a big pay raise anytime soon. That was the 70’s.
High interest rates are your friend if you are a first time buyer. It means lower prices, not higher. Especially when combined with stricter lending standards which are sure to accompany the higher interest rates. Coming soon to an unwilling lender (who’s busy hoarding cash) near you!
Josh
-
January 29, 2008 at 4:18 PM #144811
temeculaguy
ParticipantAecetia, two points for you. I was about to reply when I saw your post about the Spanish American war. Good form but then I’d expect it from someone with your screen name (the goddess of fair trade and honest merchants).
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January 29, 2008 at 4:25 PM #144826
blahblahblah
ParticipantHigh interest rates do not mean high prices.
Certainly high interest rates will exert downward pressure on prices of those goods which are purchased on credit. However, interest rates are high in inflationary environments (like the US in the 70s). Although salaries lag inflation, they eventually catch up. I know this isn’t a pleasant thought but it may occur, especially since the US is so dependent on capital inflow from foreign countries. If they want to keep selling t-bills, they won’t be able to keep rates low forever.
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January 29, 2008 at 4:25 PM #145066
blahblahblah
ParticipantHigh interest rates do not mean high prices.
Certainly high interest rates will exert downward pressure on prices of those goods which are purchased on credit. However, interest rates are high in inflationary environments (like the US in the 70s). Although salaries lag inflation, they eventually catch up. I know this isn’t a pleasant thought but it may occur, especially since the US is so dependent on capital inflow from foreign countries. If they want to keep selling t-bills, they won’t be able to keep rates low forever.
-
January 29, 2008 at 4:25 PM #145092
blahblahblah
ParticipantHigh interest rates do not mean high prices.
Certainly high interest rates will exert downward pressure on prices of those goods which are purchased on credit. However, interest rates are high in inflationary environments (like the US in the 70s). Although salaries lag inflation, they eventually catch up. I know this isn’t a pleasant thought but it may occur, especially since the US is so dependent on capital inflow from foreign countries. If they want to keep selling t-bills, they won’t be able to keep rates low forever.
-
January 29, 2008 at 4:25 PM #145096
blahblahblah
ParticipantHigh interest rates do not mean high prices.
Certainly high interest rates will exert downward pressure on prices of those goods which are purchased on credit. However, interest rates are high in inflationary environments (like the US in the 70s). Although salaries lag inflation, they eventually catch up. I know this isn’t a pleasant thought but it may occur, especially since the US is so dependent on capital inflow from foreign countries. If they want to keep selling t-bills, they won’t be able to keep rates low forever.
-
January 29, 2008 at 4:25 PM #145166
blahblahblah
ParticipantHigh interest rates do not mean high prices.
Certainly high interest rates will exert downward pressure on prices of those goods which are purchased on credit. However, interest rates are high in inflationary environments (like the US in the 70s). Although salaries lag inflation, they eventually catch up. I know this isn’t a pleasant thought but it may occur, especially since the US is so dependent on capital inflow from foreign countries. If they want to keep selling t-bills, they won’t be able to keep rates low forever.
-
January 29, 2008 at 4:18 PM #145051
temeculaguy
ParticipantAecetia, two points for you. I was about to reply when I saw your post about the Spanish American war. Good form but then I’d expect it from someone with your screen name (the goddess of fair trade and honest merchants).
-
January 29, 2008 at 4:18 PM #145077
temeculaguy
ParticipantAecetia, two points for you. I was about to reply when I saw your post about the Spanish American war. Good form but then I’d expect it from someone with your screen name (the goddess of fair trade and honest merchants).
-
January 29, 2008 at 4:18 PM #145079
temeculaguy
ParticipantAecetia, two points for you. I was about to reply when I saw your post about the Spanish American war. Good form but then I’d expect it from someone with your screen name (the goddess of fair trade and honest merchants).
-
January 29, 2008 at 4:18 PM #145151
temeculaguy
ParticipantAecetia, two points for you. I was about to reply when I saw your post about the Spanish American war. Good form but then I’d expect it from someone with your screen name (the goddess of fair trade and honest merchants).
-
-
January 29, 2008 at 3:53 PM #145026
Aecetia
ParticipantFYI-
The tax was imposed in 1898 to help pay for the Spanish-American War. It was designed as a tax on wealthy Americans, back when phone service was considered a luxury.
-
January 29, 2008 at 3:53 PM #145052
Aecetia
ParticipantFYI-
The tax was imposed in 1898 to help pay for the Spanish-American War. It was designed as a tax on wealthy Americans, back when phone service was considered a luxury.
-
January 29, 2008 at 3:53 PM #145054
Aecetia
ParticipantFYI-
The tax was imposed in 1898 to help pay for the Spanish-American War. It was designed as a tax on wealthy Americans, back when phone service was considered a luxury.
-
January 29, 2008 at 3:53 PM #145123
Aecetia
ParticipantFYI-
The tax was imposed in 1898 to help pay for the Spanish-American War. It was designed as a tax on wealthy Americans, back when phone service was considered a luxury.
-
January 29, 2008 at 4:31 PM #144836
JWM in SD
ParticipantJWM in SD
“However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.”
Oh really??? Salaries will go up in an inflationary environment? How about an environment where your job is in constant danger of outsourcing and downsizing because the corporation cannot predict it’s future costs adequately?
Repeat after me…there will be no wage inflation. Why? Because Bernanke and the Fed will not allow it to happen.
Get that out of your head right now because is completely wrong.
-
January 29, 2008 at 4:46 PM #144856
blahblahblah
ParticipantGet that out of your head right now because is completely wrong.
I hope you’re right. Still, there are two possible ways this can play out — inflationary or deflationary. Right now it is headed towards the deflationary scenario with each fed rate cut. But an inflationary scenario is always possible. Remember that salaries increase only nominally in an inflationary environment, and that companies will be receiving inflated nominal values for their products as well. In a high-inflation environment, salaries and prices can be constant or even decreasing in real terms. Inflation is an easy and ever-popular way for governments to get rid of debt, by reducing the value of the currency the debt is denominated in. That’s why I’m so suspicious that the guys running the show will choose that old favorite from the playbook…
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January 29, 2008 at 4:46 PM #145095
blahblahblah
ParticipantGet that out of your head right now because is completely wrong.
I hope you’re right. Still, there are two possible ways this can play out — inflationary or deflationary. Right now it is headed towards the deflationary scenario with each fed rate cut. But an inflationary scenario is always possible. Remember that salaries increase only nominally in an inflationary environment, and that companies will be receiving inflated nominal values for their products as well. In a high-inflation environment, salaries and prices can be constant or even decreasing in real terms. Inflation is an easy and ever-popular way for governments to get rid of debt, by reducing the value of the currency the debt is denominated in. That’s why I’m so suspicious that the guys running the show will choose that old favorite from the playbook…
-
January 29, 2008 at 4:46 PM #145122
blahblahblah
ParticipantGet that out of your head right now because is completely wrong.
I hope you’re right. Still, there are two possible ways this can play out — inflationary or deflationary. Right now it is headed towards the deflationary scenario with each fed rate cut. But an inflationary scenario is always possible. Remember that salaries increase only nominally in an inflationary environment, and that companies will be receiving inflated nominal values for their products as well. In a high-inflation environment, salaries and prices can be constant or even decreasing in real terms. Inflation is an easy and ever-popular way for governments to get rid of debt, by reducing the value of the currency the debt is denominated in. That’s why I’m so suspicious that the guys running the show will choose that old favorite from the playbook…
-
January 29, 2008 at 4:46 PM #145126
blahblahblah
ParticipantGet that out of your head right now because is completely wrong.
I hope you’re right. Still, there are two possible ways this can play out — inflationary or deflationary. Right now it is headed towards the deflationary scenario with each fed rate cut. But an inflationary scenario is always possible. Remember that salaries increase only nominally in an inflationary environment, and that companies will be receiving inflated nominal values for their products as well. In a high-inflation environment, salaries and prices can be constant or even decreasing in real terms. Inflation is an easy and ever-popular way for governments to get rid of debt, by reducing the value of the currency the debt is denominated in. That’s why I’m so suspicious that the guys running the show will choose that old favorite from the playbook…
-
January 29, 2008 at 4:46 PM #145196
blahblahblah
ParticipantGet that out of your head right now because is completely wrong.
I hope you’re right. Still, there are two possible ways this can play out — inflationary or deflationary. Right now it is headed towards the deflationary scenario with each fed rate cut. But an inflationary scenario is always possible. Remember that salaries increase only nominally in an inflationary environment, and that companies will be receiving inflated nominal values for their products as well. In a high-inflation environment, salaries and prices can be constant or even decreasing in real terms. Inflation is an easy and ever-popular way for governments to get rid of debt, by reducing the value of the currency the debt is denominated in. That’s why I’m so suspicious that the guys running the show will choose that old favorite from the playbook…
-
January 29, 2008 at 4:56 PM #144871
Eugene
ParticipantHowever, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.
For starters, 10-year is at 3.6% today even though we’re not in a deflationary environment. (At least not in the strict sense of the word) Interest rates are so low because we have a bear market in stocks, resulting in flight to safety. Flight to safety temporarily overrides any deflationary/inflationary mechanisms that might be otherwise going on.
http://finance.yahoo.com/q/bc?t=6m&s=%5ETNX&l=on&z=m&q=l&c=&c=%5EGSPC
Bear market will end eventually and at that point 10-year yields will likely go back into 4-5% land, if not higher.
Secondly, interest rates may go up if spread between 10-year and mortgage increases. This will happen if GSEs start experiencing financial problems.
Now, about an inflationary environment. Inflation results in higher long-term interest rates, higher wages, and depreciated currency. The effect on long-term interest rates and exchange rates is immediate (investors’ expectations can change overnight). The effect on wages is drawn-out and delayed. In fact monetary expansion does NOT lead to wage inflation as long as there is substantial unemployment. Only when the unemployment is low, monetary expansion will start to translate into higher wages for everyone.
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January 29, 2008 at 4:56 PM #145109
Eugene
ParticipantHowever, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.
For starters, 10-year is at 3.6% today even though we’re not in a deflationary environment. (At least not in the strict sense of the word) Interest rates are so low because we have a bear market in stocks, resulting in flight to safety. Flight to safety temporarily overrides any deflationary/inflationary mechanisms that might be otherwise going on.
http://finance.yahoo.com/q/bc?t=6m&s=%5ETNX&l=on&z=m&q=l&c=&c=%5EGSPC
Bear market will end eventually and at that point 10-year yields will likely go back into 4-5% land, if not higher.
Secondly, interest rates may go up if spread between 10-year and mortgage increases. This will happen if GSEs start experiencing financial problems.
Now, about an inflationary environment. Inflation results in higher long-term interest rates, higher wages, and depreciated currency. The effect on long-term interest rates and exchange rates is immediate (investors’ expectations can change overnight). The effect on wages is drawn-out and delayed. In fact monetary expansion does NOT lead to wage inflation as long as there is substantial unemployment. Only when the unemployment is low, monetary expansion will start to translate into higher wages for everyone.
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January 29, 2008 at 4:56 PM #145137
Eugene
ParticipantHowever, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.
For starters, 10-year is at 3.6% today even though we’re not in a deflationary environment. (At least not in the strict sense of the word) Interest rates are so low because we have a bear market in stocks, resulting in flight to safety. Flight to safety temporarily overrides any deflationary/inflationary mechanisms that might be otherwise going on.
http://finance.yahoo.com/q/bc?t=6m&s=%5ETNX&l=on&z=m&q=l&c=&c=%5EGSPC
Bear market will end eventually and at that point 10-year yields will likely go back into 4-5% land, if not higher.
Secondly, interest rates may go up if spread between 10-year and mortgage increases. This will happen if GSEs start experiencing financial problems.
Now, about an inflationary environment. Inflation results in higher long-term interest rates, higher wages, and depreciated currency. The effect on long-term interest rates and exchange rates is immediate (investors’ expectations can change overnight). The effect on wages is drawn-out and delayed. In fact monetary expansion does NOT lead to wage inflation as long as there is substantial unemployment. Only when the unemployment is low, monetary expansion will start to translate into higher wages for everyone.
-
January 29, 2008 at 4:56 PM #145140
Eugene
ParticipantHowever, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.
For starters, 10-year is at 3.6% today even though we’re not in a deflationary environment. (At least not in the strict sense of the word) Interest rates are so low because we have a bear market in stocks, resulting in flight to safety. Flight to safety temporarily overrides any deflationary/inflationary mechanisms that might be otherwise going on.
http://finance.yahoo.com/q/bc?t=6m&s=%5ETNX&l=on&z=m&q=l&c=&c=%5EGSPC
Bear market will end eventually and at that point 10-year yields will likely go back into 4-5% land, if not higher.
Secondly, interest rates may go up if spread between 10-year and mortgage increases. This will happen if GSEs start experiencing financial problems.
Now, about an inflationary environment. Inflation results in higher long-term interest rates, higher wages, and depreciated currency. The effect on long-term interest rates and exchange rates is immediate (investors’ expectations can change overnight). The effect on wages is drawn-out and delayed. In fact monetary expansion does NOT lead to wage inflation as long as there is substantial unemployment. Only when the unemployment is low, monetary expansion will start to translate into higher wages for everyone.
-
January 29, 2008 at 4:56 PM #145210
Eugene
ParticipantHowever, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.
For starters, 10-year is at 3.6% today even though we’re not in a deflationary environment. (At least not in the strict sense of the word) Interest rates are so low because we have a bear market in stocks, resulting in flight to safety. Flight to safety temporarily overrides any deflationary/inflationary mechanisms that might be otherwise going on.
http://finance.yahoo.com/q/bc?t=6m&s=%5ETNX&l=on&z=m&q=l&c=&c=%5EGSPC
Bear market will end eventually and at that point 10-year yields will likely go back into 4-5% land, if not higher.
Secondly, interest rates may go up if spread between 10-year and mortgage increases. This will happen if GSEs start experiencing financial problems.
Now, about an inflationary environment. Inflation results in higher long-term interest rates, higher wages, and depreciated currency. The effect on long-term interest rates and exchange rates is immediate (investors’ expectations can change overnight). The effect on wages is drawn-out and delayed. In fact monetary expansion does NOT lead to wage inflation as long as there is substantial unemployment. Only when the unemployment is low, monetary expansion will start to translate into higher wages for everyone.
-
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January 29, 2008 at 4:31 PM #145076
JWM in SD
ParticipantJWM in SD
“However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.”
Oh really??? Salaries will go up in an inflationary environment? How about an environment where your job is in constant danger of outsourcing and downsizing because the corporation cannot predict it’s future costs adequately?
Repeat after me…there will be no wage inflation. Why? Because Bernanke and the Fed will not allow it to happen.
Get that out of your head right now because is completely wrong.
-
January 29, 2008 at 4:31 PM #145102
JWM in SD
ParticipantJWM in SD
“However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.”
Oh really??? Salaries will go up in an inflationary environment? How about an environment where your job is in constant danger of outsourcing and downsizing because the corporation cannot predict it’s future costs adequately?
Repeat after me…there will be no wage inflation. Why? Because Bernanke and the Fed will not allow it to happen.
Get that out of your head right now because is completely wrong.
-
January 29, 2008 at 4:31 PM #145106
JWM in SD
ParticipantJWM in SD
“However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.”
Oh really??? Salaries will go up in an inflationary environment? How about an environment where your job is in constant danger of outsourcing and downsizing because the corporation cannot predict it’s future costs adequately?
Repeat after me…there will be no wage inflation. Why? Because Bernanke and the Fed will not allow it to happen.
Get that out of your head right now because is completely wrong.
-
January 29, 2008 at 4:31 PM #145175
JWM in SD
ParticipantJWM in SD
“However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices.”
Oh really??? Salaries will go up in an inflationary environment? How about an environment where your job is in constant danger of outsourcing and downsizing because the corporation cannot predict it’s future costs adequately?
Repeat after me…there will be no wage inflation. Why? Because Bernanke and the Fed will not allow it to happen.
Get that out of your head right now because is completely wrong.
-
-
January 29, 2008 at 3:39 PM #145006
blahblahblah
ParticipantThis is a very interesting topic and I’ve been thinking about the same thing. If interest rates go back up, home prices will need to come down. However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices. It could very well be that the guy who buys today at a 20% nominal discount from the 2005 peak with a very low fixed interest rate could come out ahead of someone buying two years from now with a much higher rate, even though the nominal price might fall a bit between now and then.
I’m as much of a bear as anyone, but just such a scenario is worrying me a bit. I think the government is going to try to spend their way out of this mess with bailouts, new government programs and defense spending, etc… All of these will devalue the currency and would be inflationary. I hope I’m wrong…
-
January 29, 2008 at 3:39 PM #145032
blahblahblah
ParticipantThis is a very interesting topic and I’ve been thinking about the same thing. If interest rates go back up, home prices will need to come down. However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices. It could very well be that the guy who buys today at a 20% nominal discount from the 2005 peak with a very low fixed interest rate could come out ahead of someone buying two years from now with a much higher rate, even though the nominal price might fall a bit between now and then.
I’m as much of a bear as anyone, but just such a scenario is worrying me a bit. I think the government is going to try to spend their way out of this mess with bailouts, new government programs and defense spending, etc… All of these will devalue the currency and would be inflationary. I hope I’m wrong…
-
January 29, 2008 at 3:39 PM #145034
blahblahblah
ParticipantThis is a very interesting topic and I’ve been thinking about the same thing. If interest rates go back up, home prices will need to come down. However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices. It could very well be that the guy who buys today at a 20% nominal discount from the 2005 peak with a very low fixed interest rate could come out ahead of someone buying two years from now with a much higher rate, even though the nominal price might fall a bit between now and then.
I’m as much of a bear as anyone, but just such a scenario is worrying me a bit. I think the government is going to try to spend their way out of this mess with bailouts, new government programs and defense spending, etc… All of these will devalue the currency and would be inflationary. I hope I’m wrong…
-
January 29, 2008 at 3:39 PM #145105
blahblahblah
ParticipantThis is a very interesting topic and I’ve been thinking about the same thing. If interest rates go back up, home prices will need to come down. However, interest rates won’t go up unless we are in an inflationary environment. In an inflationary environment, salaries will increase too so that will put upward pressure again on home prices. It could very well be that the guy who buys today at a 20% nominal discount from the 2005 peak with a very low fixed interest rate could come out ahead of someone buying two years from now with a much higher rate, even though the nominal price might fall a bit between now and then.
I’m as much of a bear as anyone, but just such a scenario is worrying me a bit. I think the government is going to try to spend their way out of this mess with bailouts, new government programs and defense spending, etc… All of these will devalue the currency and would be inflationary. I hope I’m wrong…
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January 29, 2008 at 5:13 PM #144881
DWCAP
ParticipantI stand corrected. WWI/II didnt sound right, but I couldnt put my finger on the right war. Should have done my HW, my old history professor prob just cryed alittle inside. Even so, my point still stands, if not is reinforced. In the US Gov. nothing is ever temporary unless policically unpopular. This is politically popular.
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January 29, 2008 at 5:13 PM #145119
DWCAP
ParticipantI stand corrected. WWI/II didnt sound right, but I couldnt put my finger on the right war. Should have done my HW, my old history professor prob just cryed alittle inside. Even so, my point still stands, if not is reinforced. In the US Gov. nothing is ever temporary unless policically unpopular. This is politically popular.
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January 29, 2008 at 5:13 PM #145147
DWCAP
ParticipantI stand corrected. WWI/II didnt sound right, but I couldnt put my finger on the right war. Should have done my HW, my old history professor prob just cryed alittle inside. Even so, my point still stands, if not is reinforced. In the US Gov. nothing is ever temporary unless policically unpopular. This is politically popular.
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January 29, 2008 at 5:13 PM #145150
DWCAP
ParticipantI stand corrected. WWI/II didnt sound right, but I couldnt put my finger on the right war. Should have done my HW, my old history professor prob just cryed alittle inside. Even so, my point still stands, if not is reinforced. In the US Gov. nothing is ever temporary unless policically unpopular. This is politically popular.
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January 29, 2008 at 5:13 PM #145221
DWCAP
ParticipantI stand corrected. WWI/II didnt sound right, but I couldnt put my finger on the right war. Should have done my HW, my old history professor prob just cryed alittle inside. Even so, my point still stands, if not is reinforced. In the US Gov. nothing is ever temporary unless policically unpopular. This is politically popular.
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