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(former)FormerSanDiegan
Participant[quote=deadzone]
Are you serious? If interest rates rise considerably it is not a going to be because of a recovery. It will be because our foreign creditors have lost confidence and refuse to fund any more of our debt. That is already starting to happen, it is being covered up by the Feds purchasing programs.
Even if the economy improved, rising interest rates would still be disastrous. There are so many people out there who still have good jobs but are living on the edge due to their interest only and neg-am loans. I know and work with several people in this category. Just cause the economy improves doesn’t mean their salaries are all of a sudden going to jump. The payment shocks caused by rising interest rates will push many folks over the edge.[/quote]
Yes, I am serious. I acknowledge that there is some likelihood that rates rise for a period with no recovery due to the forces you cite. But, interest rates do not rise in a vaccum. At some point if rates choke off folks and push them over the edge, there is usually a reaction to it. What would be that reaction ? There are many possible outcomes.
I do find it odd that the mention of rising rates in a recovery, a return to the mean in terms of long-term inflation, rates and growth, is met by “are you kidding?”
ParticipantUpdate …
15 months after the start of this thread.
5 monmths after my last update.
Not much has changed.
LIBOR is at ~ 0.8%
Fully indexed (LIBOR +2.25 to 2.5%) ARM rates are ~ 3.125-3.25%
Here is a chart for the last 5 months …
3.25 ———–___________________________
3.125ParticipantUpdate …
15 months after the start of this thread.
5 monmths after my last update.
Not much has changed.
LIBOR is at ~ 0.8%
Fully indexed (LIBOR +2.25 to 2.5%) ARM rates are ~ 3.125-3.25%
Here is a chart for the last 5 months …
3.25 ———–___________________________
3.125ParticipantUpdate …
15 months after the start of this thread.
5 monmths after my last update.
Not much has changed.
LIBOR is at ~ 0.8%
Fully indexed (LIBOR +2.25 to 2.5%) ARM rates are ~ 3.125-3.25%
Here is a chart for the last 5 months …
3.25 ———–___________________________
3.125ParticipantUpdate …
15 months after the start of this thread.
5 monmths after my last update.
Not much has changed.
LIBOR is at ~ 0.8%
Fully indexed (LIBOR +2.25 to 2.5%) ARM rates are ~ 3.125-3.25%
Here is a chart for the last 5 months …
3.25 ———–___________________________
3.125ParticipantUpdate …
15 months after the start of this thread.
5 monmths after my last update.
Not much has changed.
LIBOR is at ~ 0.8%
Fully indexed (LIBOR +2.25 to 2.5%) ARM rates are ~ 3.125-3.25%
Here is a chart for the last 5 months …
3.25 ———–___________________________
3.125Participant[quote=briansd1]
I agree with deadzone. And I would add that the effects of unemployement (as opposed to the effects of real estate speculation) are only beginning to be felt.
[/quote]
The effects of unemployment are only beginning to be felt ?
Unemployment has been at or near 9% for almost 2 years. Did all these unemployed folks continue to buy houses at the same rate over the past 2 years? (real estate figures indicate otherwise). Did they spend at the same rate ? (GDP figures indicate otherwise).
I must have completely missed your point. What do you mean by this ?
Participant[quote=briansd1]
I agree with deadzone. And I would add that the effects of unemployement (as opposed to the effects of real estate speculation) are only beginning to be felt.
[/quote]
The effects of unemployment are only beginning to be felt ?
Unemployment has been at or near 9% for almost 2 years. Did all these unemployed folks continue to buy houses at the same rate over the past 2 years? (real estate figures indicate otherwise). Did they spend at the same rate ? (GDP figures indicate otherwise).
I must have completely missed your point. What do you mean by this ?
Participant[quote=briansd1]
I agree with deadzone. And I would add that the effects of unemployement (as opposed to the effects of real estate speculation) are only beginning to be felt.
[/quote]
The effects of unemployment are only beginning to be felt ?
Unemployment has been at or near 9% for almost 2 years. Did all these unemployed folks continue to buy houses at the same rate over the past 2 years? (real estate figures indicate otherwise). Did they spend at the same rate ? (GDP figures indicate otherwise).
I must have completely missed your point. What do you mean by this ?
Participant[quote=briansd1]
I agree with deadzone. And I would add that the effects of unemployement (as opposed to the effects of real estate speculation) are only beginning to be felt.
[/quote]
The effects of unemployment are only beginning to be felt ?
Unemployment has been at or near 9% for almost 2 years. Did all these unemployed folks continue to buy houses at the same rate over the past 2 years? (real estate figures indicate otherwise). Did they spend at the same rate ? (GDP figures indicate otherwise).
I must have completely missed your point. What do you mean by this ?
Participant[quote=briansd1]
I agree with deadzone. And I would add that the effects of unemployement (as opposed to the effects of real estate speculation) are only beginning to be felt.
[/quote]
The effects of unemployment are only beginning to be felt ?
Unemployment has been at or near 9% for almost 2 years. Did all these unemployed folks continue to buy houses at the same rate over the past 2 years? (real estate figures indicate otherwise). Did they spend at the same rate ? (GDP figures indicate otherwise).
I must have completely missed your point. What do you mean by this ?
Participant[quote=deadzone]FSD, in your case things might have worked out okay (up to now) but that is only because LIBOR is at a historic low. This just demonstrates how fragile the housing market is.
It also proves that the real reason behind the FED QE has been to minimize the foreclosure crisis due to the ARM loans resetting in 2010-2012 (as identified in the reset chart).
But we can debate all day long about the severity of the reset chart but one thing is certain, these resets are not going to help the housing recovery. Furthermore, if interest rates creep up in the next two years (at this point they are so low the only way they could move is up)it is going to exacerbate the problems and induce more foreclosures out of those resets.
So again, best case scenario (fed is successful in keeping rates at historic lows for the next two years, economy recovers, jobs recover, etc) RE prices will remain flat to slightly up. But worst case scenario things could get very, very ugly. Again, the prudent thing to do is wait until all of the ARMs resets are flushed out of the system because the potential down side is much greater than the upside.[/quote]
If interest rates rise conmsiderably, it likely means that there is some sort of recovery. The important factors on these resets will be 1) how long do rates stay this low; and 2) when rates do go back up will they be doing so in a growth environment; 3) how underwater are the loans when the rates go up.
It’s amazing what a few years of low interest rates will do to knock down the principal in a loan.
The net effect of the “second wave” of resets is that the impact will be spread over a number of years (e.g. half a decade or more), as opposed to the intial wave, in which resets at 7-8% triggered defaults and most went bad over about a 12-month period.
Participant[quote=deadzone]FSD, in your case things might have worked out okay (up to now) but that is only because LIBOR is at a historic low. This just demonstrates how fragile the housing market is.
It also proves that the real reason behind the FED QE has been to minimize the foreclosure crisis due to the ARM loans resetting in 2010-2012 (as identified in the reset chart).
But we can debate all day long about the severity of the reset chart but one thing is certain, these resets are not going to help the housing recovery. Furthermore, if interest rates creep up in the next two years (at this point they are so low the only way they could move is up)it is going to exacerbate the problems and induce more foreclosures out of those resets.
So again, best case scenario (fed is successful in keeping rates at historic lows for the next two years, economy recovers, jobs recover, etc) RE prices will remain flat to slightly up. But worst case scenario things could get very, very ugly. Again, the prudent thing to do is wait until all of the ARMs resets are flushed out of the system because the potential down side is much greater than the upside.[/quote]
If interest rates rise conmsiderably, it likely means that there is some sort of recovery. The important factors on these resets will be 1) how long do rates stay this low; and 2) when rates do go back up will they be doing so in a growth environment; 3) how underwater are the loans when the rates go up.
It’s amazing what a few years of low interest rates will do to knock down the principal in a loan.
The net effect of the “second wave” of resets is that the impact will be spread over a number of years (e.g. half a decade or more), as opposed to the intial wave, in which resets at 7-8% triggered defaults and most went bad over about a 12-month period.
Participant[quote=deadzone]FSD, in your case things might have worked out okay (up to now) but that is only because LIBOR is at a historic low. This just demonstrates how fragile the housing market is.
It also proves that the real reason behind the FED QE has been to minimize the foreclosure crisis due to the ARM loans resetting in 2010-2012 (as identified in the reset chart).
But we can debate all day long about the severity of the reset chart but one thing is certain, these resets are not going to help the housing recovery. Furthermore, if interest rates creep up in the next two years (at this point they are so low the only way they could move is up)it is going to exacerbate the problems and induce more foreclosures out of those resets.
So again, best case scenario (fed is successful in keeping rates at historic lows for the next two years, economy recovers, jobs recover, etc) RE prices will remain flat to slightly up. But worst case scenario things could get very, very ugly. Again, the prudent thing to do is wait until all of the ARMs resets are flushed out of the system because the potential down side is much greater than the upside.[/quote]
If interest rates rise conmsiderably, it likely means that there is some sort of recovery. The important factors on these resets will be 1) how long do rates stay this low; and 2) when rates do go back up will they be doing so in a growth environment; 3) how underwater are the loans when the rates go up.
It’s amazing what a few years of low interest rates will do to knock down the principal in a loan.
The net effect of the “second wave” of resets is that the impact will be spread over a number of years (e.g. half a decade or more), as opposed to the intial wave, in which resets at 7-8% triggered defaults and most went bad over about a 12-month period.
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