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Lumber hit the daily limit in the futures markets today... it rose so much trading was halted
the small up trend in activity in the housing market has actually got certain building related commodities starting to spike upward in advance of things happening.
could it be reacting to things we dont even see yet? or just anticipating something thats still pretty far off....
if only we knew.
Dropping home prices are just the beginning of a contraction of the wayyy overblown US economy. In the past, home prices were a reflection of the ongoing good or not so good employment stats, in the case of todays market that hasn't changed.
Yes, there is some activity in US GDP and that could be accepted as evidence of some kind of recovery, but only when that activity comes from a resurgence of hiring and buying, it won't count for beans if the money is coming from government bailouts. We all know that the infusion of trillions of dollars in a fourteen trillion dollar economy is going to show up in some market metrics as an improvement, but, the truth is coming to the fore in those honest unemployment figures.
Government spending in a more direct handoff to the mass consumer base would have made for a much faster recovery, but then again, how would that have benefitted those on Wall Street, you know, those folk's who REALLY run America..........
I don't question any one individual's decision to buy a home. But in aggregate, and I feel like I'm beating a dead horse, there is no way home prices can rise let alone stop falling until we stop bleeding jobs and foreclosures slow. And since the government must begin withdrawing the massive amounts of liquidity in our economy, even Obama knows we can't have a get healthy until the economy can operate without life support.
Any data points giving optimism are being spun as positive and are only temporary.
as i said many times its not home prices that may rise so fast, its those mortage rates that can shoot up on a dime.
the fed is fighting to hold them artificially low but its been harder and harder as world investor pressure has been pushing them upward.
they went from low 4's to high 4's low 5's.....
1% jump in rates on a 400,000 mortgage is the same jump in monthly costs as if the house jumped 10% to 440,000 and now you had to take a 440,000 mortgage instead......
Last edited by mathjak107; 11-18-2009 at 01:15 PM..
as i said many times its not home prices that may rise so fast, its those mortage rates that can shoot up on a dime.
the fed is fighting to hold them artificially low but its been harder and harder as world investor pressure has been pushing them upward.
they went from low 4's to high 4's low 5's.....
1% jump in rates on a 400,000 mortgage is the same jump in monthly costs as if the house jumped 10% to 440,000 and now you had to take a 440,000 mortgage instead......
But doesn't a rise in rates reduce the value of property accordingly, all things considered? Won't it will destroy any recovery in the RE market at this point in time?
Here's a scenario:
I am looking to buy a home valued at $400,000 today at 5%. Disregard a downpayment to keep the numbers simple.
So I only qualify for a maximum $400,000 mortgage.
Then I wait a period (let's say 12 months) and during this time rates rise to 6%.
Now I can only qualify for a $360,000 mortgage at 6% due to the rate increase. Isn't that same home valued previously at $400,000 now really worth just $360,000?
FIRST OFF MARKETS HAVE NO MEMORY, they are only worth what they are worth at the moment , not what was.
Dont assume because rates rise that prices will fall, thats like saying because rates just fell to historical lows prices should have rose or soared... there are so many other factors that are involved including human emotions, fear, greed and perceptions of whats next.
the truth is we are so far below the historical average of around 7% that 6% to 7% is still a normal deal under normal times, most of our real estate growth periods have been even higher. i jumped into a booming market at 8-1/4 in 1987.
once rates kick up you can have all those potential buyers still on the fence have human emotion take over and decide we better buy now before rates go even higher and we can afford even less house on our budget.
the fact that once rates rise even a point alot of people have to buy a cheaper home now and that could put pressure on prices of lower end homes..
now one can predict but it holds just as much of an argument as any other outlook
Last edited by mathjak107; 11-18-2009 at 02:30 PM..
But doesn't a rise in rates reduce the value of property accordingly, all things considered? Won't it will destroy any recovery in the RE market at this point in time?
Here's a scenario:
I am looking to buy a home valued at $400,000 today at 5%. Disregard a downpayment to keep the numbers simple.
So I only qualify for a maximum $400,000 mortgage.
Then I wait a period (let's say 12 months) and during this time rates rise to 6%.
Now I can only qualify for a $360,000 mortgage at 6% due to the rate increase. Isn't that same home valued previously at $400,000 now really worth just $360,000?
It may mean a lot of thing! People associate price to just interest rate. That's just one part. Let's see from supply and demand side, shall we?
If there are more supply than that can be taken in a years time, the 400K house will wait for you at 360K (to use your number) Now the sellers has waited a year and see nobody is touching their property. If not, it would be a 320K house that's going to wait for you at 360K (again just using your number) because now sellers have seen that house are closing in no time.
In a years time your earning power could increase and buy the 400K and you would say " I did it because I can afford it NOW." That's why in the long run people income and house appreciating has to be in line. Otherwise, well we know what has just happened.
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I'm in North Mesa, too.
