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powayseller
Participantdavelj, my opinion will definitely be changed in the light of new evidence and data. That’s why I am asking you how you think those people can refinance. For example, if you tell me for sure the Fed will lower rates back to 1%, then I would agree all those people can refinance. My question is sincere.
ParticipantTheBreeze, you are right, and I’ve made those same comments too: people who purchased or refinanced into an exotic loan will be in trouble. Some old time homeowners refinanced out their equity. It isn’t just the buyers who did it. Middle aged and near-retirement folks are in for a nasty retirement.
Davelj, the ability to refinance is compromised by several factors: declining home equity, rising interest rates, lower credit scores.
1) Lower credit scores
If the homeowner missed a payment and then seeks to refinance, I think they have trouble getting a loan; a 30-day late seems to be a problem for lenders. More HELOCs and higher debts accumulated can also lower the credit score.
2) Declining home equity
Declining homes value are a problem too; if you’re underwater on your mortgage, you can’t refinance. If you got a 0% down loan, then how can you refinance? Will the lender loan you 120% of your home value in a refi?
3) Rising interest rates
If your income didn’t keep up with rising interest rates, the you won’t quality for a loan. The guy who barely got a loan at 3% or 4%, cannot get that same loan at today’s 6% rate. The payment is too high for his income.So how do you propose the 2002 – 2005 batch of borrowers can refinance? Anyone from 2004 onward lost his equity, most likely. The interest rates are now higher, so how can they afford it? I’m very interested in any knowledge you might bring to this subject.
Participantrseiser, call CPA Michael Gallon, and tell him I referred you. The guy knows everything about taxes, and his prices are good. My sister and mom spent days doing my sister’s very simple tax return, and I took her to see Michael, and he found a couple grand in overpayment that she missed. So his fee of $130 more than made up for the refund.
Michael Gallon 619-286-6116
I really want to buy a bunch of gold, but can’t convince my husband to buy more than 5% of our assets into gold. What should I do now? I’m basically screwed with the dollar going down, and there’s nothing I can do without his agreement. He’s rather put the money into an inverse stock fund, like the inverse Nasdaq. He thinks gold is too risky, too volatile. He’s very smart, and he remembers the volatility over the years, so I can’t say I blame him.
One advantage to bullion or gold coins in physical possession (safety deposit box included) is that any intentional or accidental interference in our electronic communication cannot wipe out our money. That came back to mind after today’s announcement that Al Qaeda plans to hack into our banking and financial systems anytime after Friday.
ParticipantAN, Dean Baker just published Recession Looms for the U.S. Economy in 2007.
I’d be interested in your thoughts on this – what do you disagree with?
ParticipantFSD and PerryChase, I agree with you guys. Hmmm….wonder why Daniel and Davelj didn’t ask either of you guys to make a $10,000 bet on that prediction.
Participantasianautica, the auto sales doesn’t come from GDP data, but from the Commerce Department. The signs for a recession are all here: declining auto sales, declining new home starts, inverted yield curve. GDP growth is slowing, whether 1.6% or 2.2%, it is definitely getting less every quarter.
“The indicators suggests a recession is either ‘under way or set to begin within a few months.’ ”
It never warned of a recession that did not occur, since it started in 1968.
So yo think that this is the first time in 6 decades that the 3 recession indicators are wrong?
Barry Ritholtz, quoting Floyd Norris of NYT:
“The rule — unveiled here for the first time — is that if the figure is down 2 percent or more, a recession is either under way or set to begin within a few months. The figure fell to a negative 2.4 percent when June sales figures were released last week by the Census Bureau.
If things are miserable for America’s new-car dealers, can a recession be averted? History says it cannot and suggests a downturn may have already begun.
The available data go back to 1968, a period in which the American economy has recorded six recessions. The “dealer doldrums indicator,” as we will call it, called five of them, missing the 1981-82 recession only because it was not persuaded that the 1980 downturn had ever ended. It has never warned of a recession that did not occur.”
Participantjg, next thing you know, Daniel and davelj will ask you to put up $10K to prove that you really mean what you say 🙂
ParticipantToday, Roubini, “Deutsche Bank is now revising down its U.S. Q4 growth forecast to 0% from its previous 1%:
In light of continued weakness in the economic data, we are cutting our fourth quarter real GDP growth forecast to zero from the +1.0% that we were originally predicting. This is largely due to weakness in durable goods shipments and orders, but also due to weak consumer spending…” which is not gettting the hoped-for boost from falling gasoline prices.
ParticipantNominal rents just keep going up. They went down slightly in the bimonthly BLS owner’s equivalent rent series only 3 times, and that was during the spring of 1984 – 1986. Otherwise, it just keeps growing. Jan 1986, 138.0 to March 1986, 136.6, but back up to 138.7 in May 1986.
Only 1 decrease in the semiannual series started in 1988: H2 1994 181.7, to H1 1995 179.5, but back up in H2 1995 to 181.6.
ParticipantIf Q4 GDP is close to 0% as Roubini now predicts, then I will be close in my recession call. Actually, at the beginning of the year, I thought we would be in a recession by fall. Now it looks like it will be late 06 or early 07. Barry Ritholtz just blogged about ATA (trucking indicator)…
ParticipantGDP is up because inventory is higher than originally forecast. That is bad news. Rising inventory is another sign of economic slowing. Inventory piles up because spending is down. (The second reason is lower gas prices, which reduced our imports, so that is good.) It seems that manufacturers were slow to adapt to reduced demand from consumer, so they kept making stuff, increasing GDP. But if you can’t sell the stuff you made, you’re going to be happy about the economy because you made it? That doesn’t even make sense.
ParticipantIt’s not the greed of lenders, but the need of foreigners to invest all those surplus dollars. What else are they going to do with all those dollars?
ParticipantD&D, You guys might enjoy opening an account at Intrade, so you can bet on events like bird flu, who will win the Oscars, legal and political race outcomes, whether Dick Cheney will resign by a certain date, and other events.
Even though I am not going to take you up on your offer, I hold the conviction of that high default rate. Many things can transpire to change the likelihood of a 90% default occurence, such as new federal regulations, a lending overhaul by banks to salvage the market, a Fed funds rate under 2%, so betting on that would be really stupid.
You really think a person who put 90% of their money in fixed income accounts would gamble in prediction markets, LOL? No way, Jose!
ParticipantMy brother has said for years that China will one day own all our deeds of trust. Maybe they will… Will China want to own residential real estate? Isn’t commercial/industrial RE more desireable? Even better are big companies, toll roads, mineral rich land in Africa, Australia, Canada, the Middle East.
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