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September 17, 2007 at 2:01 PM in reply to: possible rate cut this tuesday;will it boost home sales & prices? #84849
(former)FormerSanDiegan
ParticipantI remain very agressively short the stock market.
Several analysts on CNBC agree with you, which is surprising since I find they lean bullward (?)
As more and more people and media outlets become bearish, it becomes a bullish sign for stocks.
ParticipantWho cares what he says. Look at his track record.
1. Irrational Exuberance
Greenspan also said that stocks were highly priced as the result of irrational exuberance on December 5, 1996. The S&P 500 closed at 744.38 that day. It never closed below 720 after that speech. Today the S&P 500 is about 1470.That’s a doubling in about 10 years. Via rule of 72 … 72/10= 7.2 or a 7.2% compounded annual rate of return. Not too shabby for a period that included the worst bear market in 30 years.
2. ARM loans
Suggesting that consumers might be better off with ARM loan during a speech in 2004. My guess is that ARM loans o0riginated within 24 months following this speech will experience the highest rate of foreclosure in a generation.September 17, 2007 at 9:07 AM in reply to: possible rate cut this tuesday;will it boost home sales & prices? #84804ParticipantWill the interest rate cut,which seems to be almost certain, trigger a upsurge in home sales and hence start pushing the price upward again?
NOAre the realtors in this forum suddenly noticing a up-tick in sales activity?
In September ? I seriously doubt it.Also, could it be the begining of a series of rate cuts, just the way it happened between 2002-2004?
Probably.ParticipantActually schizo is correct that inventory has been flat for a couple of months. But in a vacuum, this means nothing. Sales have been declining as well, resulting in further downward pressure on prices. Salt in the obvious things already stated in this thread regarding mortgage shakedown and I think it’s obvious where we are headed.
These facts should provide the necessary medication to help schizo avoid another attack. But at some point the underlying disease will cause symptoms to re-emerge.
I think the following definition says it all.
Schizophrenia, from the Greek roots schizein (σχίζειν, “to split”) and phrēn, phren- (φρήν, φρεν-, “mind”), is a psychiatric diagnosis that describes a mental illness characterized by impairments in the perception or expression of reality , most commonly manifesting as auditory hallucinations, paranoid or bizarre delusions or disorganized speech and thinking in the context of significant social or occupational dysfunction .
ParticipantIs there a possibility that in the mid 90’s, something drastic has happened?
Yes, it’s called flooding the world with cheap money, and under-reporting inflation.ParticipantYour loan is still intact, whether the servicer or paper holder(s) is(are) bankrupt or not. That piece of paper is an asset of the company (or comapnies) that hold it. You loan terms remain unchanged. Loans are sold all the time and the place you send your check to (loan servicer) may or may not change when that happens.
ParticipantHome prices are not significantly higher in Hawaii and Guam than in California, so why are those places afforded higher loan limits ?
Raising FHA as well as Fannie Mae and Freddie Mac conforming loan limits based on geographically based prices is long overdue, IMO.
The current situation is simply an excuse to correct this inequity.
ParticipantIf we were discussing this graph in 2005 we wouldn’t have the same perspective that we have right now. That graph isn’t current, and as our recent history proves, prices didn’t level off after all.
Excellent point, Bugs. In San Diego for example, the Case-Shiller index is off about 8% over about a two year period. Factor in another 6-7% inflation and KA-BOOM, you already would have nearly a 15% decline from the peak.
ParticipantPersonally, I prefer looking at prices of homes relative to renting the equivalent to ascertain value, not an academic exercise, which is misinterpreted by the original poster to mean we are at a new higher plateau.
Also, can someone ‘splain to me what a standard house was in 1890, and how to compare that to a standard house in 1975 ? Did they have Almond refrigerators and electric olive green ovens in 1890 ? What about shag carpet ? What about typical LTVs for loans prior to 1940 ? Has that changed over 120 years ? What were the FHA guidelines in 1915, or 1960 for that matter ?
The problem with a “statistic” like Shiller’s is that the system is not stationary over the length of the record he is analyzing. I would only consider the last 20-30 years of this chart, and I would also consider it with a large grain of salt, since inflation and changes in income distribution
are not considered.ParticipantI don’t really buy that, when there are so many other flaws.
For example, I’m pretty sure that the basket of goods used to track inflation has changed a lot since 1890.
One problem with Shiller’s chart is that it is based on official (understated since the mid 1990’s) inflation numbers.
Also, for those expecting another Great Depression, based on this history it’s a good time to buy a house. During the Great depression house values exceeded inflation by a cumulative ~15% over an 11-year period.
Participant“In addition to sales numbers that are not dropping off a cliff. We have stabilized yoy inventory numbers as well for about 2 months running.”
Sales are below 2006. Inventory is about the same. Therefore Months of inventory has increased. This is the key barometer for prices.
September 12, 2007 at 10:56 AM in reply to: Do the feds really think lowering the rates will “save” the real estate market? #84291ParticipantSuppose you have a mortgage re-setting in October.
Suppose your reset rate is tied to short-term Treasury rates (many are).
Suppose that 1-year treasuries have dropped by a full percentage point since July (they have), in anticipation of a FED rate cut.
If the Fed follows through (as the market anticipates), short-term treasuries are likely to stay roughly where they are now.
This would result in your reset rate at less than 7% (assuming a 2.5 -2.75% margin) instead of the nearly 8% you were facing a mere 2-3 months ago. This translates to 12.5% less of a payment than you would have had to make had your loan re-set a few months back.
Would a 12.5% break in your monthly housing expenses help ?
For some folks with liar loans and much higher margins (e.g. sub-prime borrowers) and barely enough income on the original teaser rate, it won’t matter. But for many others it will. I think this would help a large chunk of borrowers (maybe 30% … maybe 60%, I don;t know) , at least temporarily, and will smooth out the problem somewhat, perhaps spreading out the pain over a longer time-frame.
If the Fed does not cut, short-term rates will likely be negatively affected, thus hastening the demise.
ParticipantHypothetically, if you gave someone a lowball offer at 2001 price level and they accepted … would you go ahead and buy??
The likelihood of this happening currently is about equal to finding and purchasing a Porsche Carrera for sale from a pissed-off spouse for $100 in the Sunday newspaper.
Obviously, one would take that deal.
September 11, 2007 at 6:02 PM in reply to: August numbers out. No impact of the credit crunch in San Diego… #84207ParticipantHere’s how I would interpret this:
Despite the negative pressures, sometimes when things really, really suck (as in July), it’s really, really hard for them to suck more. -
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