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Old 08-16-2007, 07:37 AM
 
134 posts, read 1,222,255 times
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There is yet another article in today's Dallas Morning News about the slump in new builds, but the article seems to be saying the Midwest is doing well inspite of the downward trend. Is anyone seeing big incentives from builders, also, do you think interest rates will go down this year? Do you think a reduction of interest rates would help the current slump? The article can be found here New home construction slowest in decade - Real Estate - MSNBC.com (broken link).
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Old 08-16-2007, 10:03 AM
 
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I think that most analysts are predicting a rate drop in the near future. The slump is more than just rates though. In many parts of the country, home prices kept rising and rising. This was great for existing homeowners who could cash out and get a bigger home (or enjoy the gains). It was unfortunate for new home buyers who had to deal with astronomical prices. I mean seriously on an average salary, how does one even start to afford a home in California?

I suppose many of those mortgages were made to people who didn't understand the terms, or couldn't afford the payments. The big question is how many qualified buyers are really out there? With lending being tightened, your pool of potential homebuyers just got smaller, so fewer buyers. Foreclosures and excess builder inventory mean more houses.

It will be interesting to see how things play out. I think a rate cut might stimulate things a bit, but some of the markets out there are just ridiculously priced, making it very difficult for many to get approved.

On the bright side, the DFW market didn't see insanely high appreciation, so perhaps we'll be immune to most of this turmoil.
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Old 08-16-2007, 04:43 PM
 
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Growth in the DFW Real Estate market is tied to the relocation/transplant market. That market is in trouble.

I'm not sure I'd agree that rates are going to drop, but if they do, it will be pretty risky. If they do drop, I'm thinking it may be in a crisis prevention fashion, which is not something we want.

The Fed needs to keep rates stable to keep the dollar stable and inflation in check. With the impending threat that China will sell 900B our debut (because we are telling them they must decouple their currency from ours), that's another red flag.

China threatens 'nuclear option' of dollar sales - Telegraph

The sale of this debt would cause the short term bond yield to climb in order to make our debt instruments more attractive globally (we need this debt to finance our gov't activities, like the war). This would make fed money much more expensive to lending institutions and homes affordable for just a very few and - probably send us into a rec____n (hate that word).

The mortgage/credit crisis is much bigger than people think and involves alot more than a few people in CA that over extended themselves on mortgages.

Countrywide is talking about chapter 11. Why, because they can't sell their mortgages to wall street anymore...the market is drying up for this type of product and they built a strong dependent business model around it.

Last edited by socketz; 08-16-2007 at 04:53 PM..
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Old 08-17-2007, 07:52 AM
 
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They did it:

Dow Jumps 300 Points in Opening Minutes: Financial News - Yahoo! Finance (broken link)

And the market is on fire this morning.

An entire 1/2 point!!

I think the excitment may be short lived though.
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Old 08-17-2007, 08:03 AM
 
549 posts, read 2,195,366 times
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Quote:
Originally Posted by socketz View Post
They did it:

Dow Jumps 300 Points in Opening Minutes: Financial News - Yahoo! Finance (broken link)

And the market is on fire this morning.

An entire 1/2 point!!

I think the excitment may be short lived though.
This is the discount rate not the fed funds right?

At least my rollover ira is up today
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Old 08-17-2007, 01:02 PM
 
3,035 posts, read 14,437,600 times
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Quote:
Originally Posted by NY - Dallas View Post
This is the discount rate not the fed funds right?

At least my rollover ira is up today
Correct. The discount rate is what was cut. This was a move to make money more available to the large lenders, so the consumer will probably not see any difference.

However, Countrywide may be breathing a sigh of relief.

They took out a 11Bill credit line so that they could keep their doors open.

The spread is bad for them with such a credit line.
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