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SD Realtor
ParticipantFrom a strict financial standpoint, it would be foolish for a young twenty something to enroll in a plan. Simply pay the fine and walk away would make much more sense while somewhat more risky.
ParticipantAll the FED did last week was to reiterate what the intended plan has been all along. So they either were to stick with the plan or announce a QE4.
ParticipantDR very few. Most of them used fixed rate conforming loans. Some used FHA. However in no way do I see any sort of squeeze coming because alot of people carrying arms. The rates were so low there was no reason to.
Participantarrrrggggg….
Sometimes it can be so challenging reading posts.
No a little over a month ago you could not get a 3% mortgage. You could get perhaps a 3.625% rate. That same mortgage today with the same points is close to 4.5%. Rates move up instantaneously on days when the benchmark moves but take a few days to retrace when the benchmark goes the other way. Yes this does affect buyers.
I am not sure what panic button the FED can do. The FED buys bonds at auction. They buy MBS, they buy what they can buy. They cannot directly manipulate the yields on treasuries on a given day. Aye caramba. I do believe manipulation of financial markets is a given (see PPT) but that will not really affect local housing markets. To say that this is happening when the market is hot makes no sense. Any market is hot and then it cools down.
Many statements here mimic those posts back in 2006 that were ripe with titanic like prognostications. They were wrong then and they are wrong now.
I will maintain what I have always said which was that this hot market will normalize. Furthermore the only thing that will cause a serious problem in the housing market will be interest rate shock. Now this could be a precursor to that shock but I doubt it. The real question is, when will rates start to cause a tangible effect. Hard to say but my gut tells me if we hit a 6% rate then that will
cause pain. Take a 600k home with 20% down. At 3.5% your p/i is around 2155, at 4.5 it is 2430, at 5.5 it is 2725 and at 6.5 it is 3030. So in about 6 weeks we have added around 280 smackers per month to a payment. That hurts some and has an effect. At 5.5% we are adding almost 600 clams a month, close a 20% higher payment. To me that will indeed claim some buyers. However the market will also respond and sellers will need to adjust pricing. We will see what happens.Participantummm yes…
Perhaps I need to clarify… Over the past several months we have had extraordinary activity. The results included double digit annualized price increases, substantially reduced days on market, and a frenzied atmosphere in many (but not all) local submarkets. The activity was fueled by a severe shortage of inventory coupled with very low interest rates.
For many months the pace of purchase exceeded the inventory of new homes coming on the market. We started to see a trend reversal, albeit small in late April. JTR posted weekly stats for inventory in the NC community. Similarly new sellers felt entitled to unrealistic list prices that were not backed by comps but placed on the market based on the frenzied atmosphere. Predictably a few homes sold but some did not. Thus inventory continued to grow and did exceed the number of homes sold.
Even before the interest rate spike of the past week we already had experienced some fairly solid gains in the inventory for many communities I track. Make no mistake, these gains in no way, shape, or form, signalled an unhealthy market or a buyers market. They simply signalled a return to a more normalized market.
The interest rate been a wake up call but more for those on the bubble (being able to afford a given submarket) then anything else. More telling has been the move of 100 basis points in less then 6 weeks.
I don’t anticipate this to be a major trend reversal at all but a perfectly predictable reaction to what was an unsustainable period over the past 6 months/1 year. I anticipate more inventory growth and some price corrections that are more built on improper initial list pricing then anything else.
Understand this discussion is for SFH owner occupied homes in the more desired submarkets. School districts such as PUSD, TP and north county areas. Other areas may see some of the same. It is not for investor condos. Similarly other areas with a more modest price point, for instance Mira Mesa are still pretty scorching.
ParticipantPeople that throw in all cash offers and then change the financing terms in escrow are defaulting on the contract. They usually get punted because there are higher financed offers.
ParticipantI dont understand the comment either. The % of cash purchases for detached homes was below 20% of the total.
Of those cash purchases the majority of them were for the lower end homes (cheapest homes) in CV.
ParticipantTry to understand that the auctions have been propped up by the fed for awhile now.
ParticipantTotal closing in 92130 since 4/1/13 of detached homes 88. 16 of them are cash. The rest are financed. Less then 20%.
What is evident is that the lowest price homes in 92130 are the ones that are predominantly bought with cash.
Yet to me this is hardly the epidemic that people seem to be giving lots of personal stories about.
ParticipantOr could it be that there are lots of Chinese and Indians who are successful professionals here in San Diego with well paying jobs and are thus looking for homes in good school districts close to where they work?
Either way, does it really matter?
ParticipantIt could happen. I follow Gross at Pimco alot… back earlier in the spring said he seemed to signal a pullback in bonds… then as recently as last week he was saying they were buying again. As I said earlier he was saying what you were echoing as well which makes sense. Other bond guys are saying that while the bond bull run is not over, it is closer to the end rather then the beginning… but that is still measured in years not months. The data does seem to be on your side with respect to all of the numbers. I bought TBX not long ago but may take my money and run as I agree I think the tnx will pull back and settle out. Not sure if it is gonna run all the way back down to where it was at though. I guess we’ll see.
ParticipantI agree that the move since May had substance although I don’t think it was a surprise. The market usually leads in pretty much most economic trends. Gross from Pimco had spoke about bonds a few months back. You look at gold for instance at 1300. However many funds were selling gold back in February. While there was no landmark statement by Ben, everyone knew one of a few things would happen in a few years, either QE will scale back and the fed will slow or stop purchasing at auctions because the economy will improve, or the much worse alternative. Either way, the fed cannot keep monetizing the debt for another several years, it has to start scaling back. The market has been looking forward IMO but today was a knee jerk to China, not so much Ben. Also if you look at the past it looked like the market was definitely wobbling. It just needed an excuse to dump. Sell in May and go away was just a month late.
ParticipantI agree with SK.
I think the misconception is that people throw around the term “fed raising interest rates” in a haphazard manner. This is a typical knee jerk reaction however the 10 year yield has been slowly on the rise for the past several weeks.
Look at what Bill Gross said… pretty much the identical text that SK wrote above which I do agree with. The market movement was not only about the fed speech, it also had something to do with the slowdown in China.
All things being equal though, I would not have wanted to be a homebuyer floating a mortgage rate as you would have been slaughtered in the past 2 days. Bottom line is I don’t see the yield spiking…we are nowhere near that point and I don’t see the bond market bubble popping yet. It still has a few years left before it ruptures and when it does it will be ugly.
As for inflation, most of us have been suffering through higher prices for many commodities including food and water for the past several years. Don’t forget fuel and energy costs.
The only thing we have not had is wage inflation. I also believe the underemployment numbers and those that have simply dropped out of the workforce are fairly staggering. Similarly we have record numbers of citizens on welfare, food stamps, and disability.
June 19, 2013 at 11:38 AM in reply to: Another excellent Economist Mag article on the terrible state pension issues #763029Participantby raising taxes of course! then raise them again… and then again! then vote for sales tax increases. then repeal prop 13.
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