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Stockman, this is the guy who once admitted he didn't understand most of the economic statistics while head of OMB. Another right-wing trickle down guy who really has no idea regarding the facts on the ground.
There may or may not be a bubble, but the scenario he described is at best misleading and his supporting evidence dubious. He is erroneously concluding that there is no first-time or trade-up buyers in the market because he looks at the buyers of sold homes, see little of such group and made his conclusion. The fact is, there are lots of first-time and trade-up buyers on the market but they either cannot compete with all-cash investors, turn off by the crappy inventory, or scared off by the bidding wars.
He also fails to mention that if you're an investor, you are putting in a lot of cash. There is no 20% down for an investor, try 50%, and the credit is much more difficult to obtain than for a home purchase. Investors have much more skin in the game now.
He also acts like the interest rate is going up 4% in three months! We all know it's going up, but if it's going up... gradually, the adverse effect may be minimized. It's what's called a soft landing, and thus far it looks like that's what we're heading for.
He also acts like the interest rate is going up 4% in three months! We all know it's going up, but if it's going up... gradually, the adverse effect may be minimized. It's what's called a soft landing, and thus far it looks like that's what we're heading for.
If interest rates are artificially held low, it distorts the true market and creates investment where there wouldn't be any.
If you buy a house with a super-low interest rate, and then rates go higher, the market price will usually go down in response to the higher rates. Now you're stuck with a house worth less than you paid for it, and your low interest rate won't help if you need to sell.
If that happens, you're living the same scenario as everyone who bought in the previous bubble.
It only makes sense to buy now IF you find an extraordinary deal, or if you intend to remain in the house for a long time.
He also fails to mention that if you're an investor, you are putting in a lot of cash. There is no 20% down for an investor, try 50%, and the credit is much more difficult to obtain than for a home purchase. Investors have much more skin in the game now.
And for that exact reason....you will see investors dump houses about as fast as they can list them the moment they see the market trend down. They aren't like you and I, they are doing this to make MONEY not wait another 10 years for the market to come around again. Blackstone group is not in the business of buying and holding to do everyone a favor, they are there to profit and move on. They (and their friends) will sell at or near the top, and they will know where it is before you will or pretty much anyone due to how well they are connected. The simple fact is they will know when interest rates are heading up far in advance of you or I because they golf & have dinner dates with central bankers. Main street buyers will be left holding the bag....yet again.
Pure genius. Wall Street created this mess in the first place, main street bailed them out....and they are going to transfer yet MORE wealth from main street to Wall Street again. People never learn, and when it comes to something like houses people have the emotional intelligence of a 3 year old.
The low rates available through programs like the VA loan program include an assumable mortgage -- if rates do go up significantly when you need to sell an a nice low rate will make your home far more attractive to buyers.l.
Quote:
Originally Posted by Shooting Stars
If interest rates are artificially held low, it distorts the true market and creates investment where there wouldn't be any.
If you buy a house with a super-low interest rate, and then rates go higher, the market price will usually go down in response to the higher rates. Now you're stuck with a house worth less than you paid for it, and your low interest rate won't help if you need to sell.
If that happens, you're living the same scenario as everyone who bought in the previous bubble.
It only makes sense to buy now IF you find an extraordinary deal, or if you intend to remain in the house for a long time.
He also acts like the interest rate is going up 4% in three months! We all know it's going up, but if it's going up... gradually, the adverse effect may be minimized. It's what's called a soft landing, and thus far it looks like that's what we're heading for.
Yeah, i think this is key. interest rates will go up as the demand increases, which will likely make home values flatten in the shorter term. I assume they are planning this.
"With home prices rising, interest rates falling and builders building, some prominent housing advocates are calling for a new kind of loan for buyers with lower incomes or bad credit. They'd like to call it the dignity mortgage, but it has another name, one that's become more of an epithet since the housing crash: subprime."
If interest rates are artificially held low, it distorts the true market and creates investment where there wouldn't be any.
If you buy a house with a super-low interest rate, and then rates go higher, the market price will usually go down in response to the higher rates. Now you're stuck with a house worth less than you paid for it, and your low interest rate won't help if you need to sell.
If that happens, you're living the same scenario as everyone who bought in the previous bubble.
It only makes sense to buy now IF you find an extraordinary deal, or if you intend to remain in the house for a long time.
Not always the case. In 1998, interest is about 7% for 30-yr. In 2000, the rate had increased to over 8%. But during the same period in San Francisco, houses appreciates roughly 15% every year. Why? Demand. The regional economy was great and people need housing.
Interest rate is not the be-all, end-all of this discussion. In fact, the economy is going to play a much bigger part in future housing prices than the interest rate. If this economy continues to recover, housing prices will rise or flatten even if the rate rises with it.
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Assumable mortgages are helpful...
