Million Dollar Question - Buy or Wait? 2022 Edition (Houston, Dallas: renter, university)

[Wittgenstein's Ghost]

Originally Posted by TurtleCreek80

That is true of a portion of PPP. However, they also helped MANY, MANY small businesses - mine included - continue to pay our employees while our “non essential” businesses were ordered to close and revenue fell by 80%+ in Spring 2020.

I was also a recipient of two rounds of PPP totaling over $100k. I didn't take a single dime of salary from it for myself, even though I was legally allowed to.

[Xalistiq]

Originally Posted by Wittgenstein's Ghost

You're moving around the argument here. Your previous post said that we know mortgage rates are going higher because we know the Fed already has future rate hikes planned. But the bond market already knows about those. Maybe the Fed will need to hike more than the bond market is expecting, but that's a totally different argument.

Just realize that you're betting on something markets aren't betting on right now. Maybe it will happen, maybe it won't.....but we can't know it's going to happen simply because the Fed has a hike in July and September planned.

You’re misinterpreting the point I’m making.

The Fed has signaled forthcoming 75 and 50 point hikes. My argument is that if the Fed is truly serious about taming runaway inflation, they may have to revise these numbers upward and/or plan further hikes in the Fall.

June’s CPI will be another disgracefully high figure, and the Fed may be forced to do exactly what they did with the most recent hike — at the last minute, revise their intended rate increase upward. So instead of 50 points, as the market is expecting, they could hike 75 points in September for instance.

The question is will the Fed actually follow through with their mandate to keep inflation low or will they allow inflation to run rampant to protect the stock market? Their monetary policies thus far have been utter failures so I won’t hold my breath.

Bottom line, significantly more hiking than what’s being proposed thus far will be needed to get inflation back down to 2%.

If I’m right and the Fed hikes several more times after September, I’m very confident mortgage rates are going over 8% by end of year. Only time will tell.

[NP78]

Originally Posted by TurtleCreek80

That is true of a portion of PPP. However, they also helped MANY, MANY small businesses - mine included - continue to pay our employees while our “non essential” businesses were suddenly ordered to close and revenue suddenly fell by 80%+ in Spring 2020.

PPP was an imperfect program but it did the job of quickly getting money into the hands of businesses that really needed it. It was much better administered than the SBA’s EIDL program which became so overly red-taped that many deserving and qualified businesses were denied LOANS (not grants) because of ticky, tacky stuff like 4505-T forms saying “Road” not “Rd” being denied for “unverifiable / potentially fraudulent address”.

Understood on both counts, but in the aggregate it was a program that cost approximately $800 billion with fraudulent outlays likely in the $80-$100 Billion range (estimates vary). Those fraudulent claims don’t even account for legal PPP outlays that were unnecessary.

I will give an anecdotal, but real world example. Our company recently completed due diligence on an acquisition. The company being acquired is what I would call mid-size. Annual revenue around $15M and solidly profitable. Family owned. They received $1.3M from the program. Revenues took a small hit in 2020, but that was it despite being located in CA. While it is true that this company did not lay off employees during COVID, they would not have needed to even without PPP.


Anyway, that’s just one example and I don’t want to claim that I am an expert on the administration of the PPP, but even a cursory glance at the research being done on the results of the program show an unprecedented theft of public funds.

[Wittgenstein's Ghost]

Originally Posted by Xalistiq

You’re misinterpreting the point I’m making.

The Fed has signaled forthcoming 75 and 50 point hikes. My argument is that if the Fed is truly serious about taming runaway inflation, they may have to revise these numbers upward and/or plan further hikes in the Fall.

June’s CPI will be another disgracefully high figure, and the Fed may be forced to do exactly what they did with the most recent hike — at the last minute, revise their intended rate increase upward. So instead of 50 points, as the market is expecting, they could hike 75 points in September for instance.

The question is will the Fed actually follow through with their mandate to keep inflation low or will they allow inflation to run rampant to protect the stock market? Their monetary policies thus far have been utter failures so I won’t hold my breath.

Bottom line, significantly more hiking than what’s being proposed thus far will be needed to get inflation back down to 2%.

If I’m right and the Fed hikes several more times after September, I’m very confident mortgage rates are going over 8% by end of year. Only time will tell.

Except that's not the point you were making:

Originally Posted by Xalistiq

Another 75 basis point hike is virtually assured in July, as is an additional 50 point hike in September, which amounts to yet another cumulative 125 points.

Assuming current mortgage rates follow the same trend of increases concurrent with Fed hikes, mortgage rates should be at minimum +30% higher than they are today by end of year.

You were arguing that we already know mortgage rates are headed 30% higher just by knowing the Fed will hike a total of 125 more points in July and September.

[Xalistiq]

Originally Posted by Wittgenstein's Ghost

Except that's not the point you were making:




You were arguing that we already know mortgage rates are headed 30% higher just by knowing the Fed will hike a total of 125 more points in July and September.

I never suggested we already know anything.

My original post estimated that the effect of 50 and 75 basis point increases will result in 8% interest rates by December, in spite of the predictable way in which bond markets have historically priced in expected Fed hikes in the past.

My subsequent posts hypothesized that additional or upward revisions to planned hikes will very likely be required by the Fed to tackle inflation, in which case mortgage rates will, in my opinion, be higher than 8% by December.

I could be wrong, but I have consistently been correct with a bullish take on rising mortgage interest rates since early this year, when most posters and media “experts” saw mortgage rates rising in a predictable and slow manner.

Bottom line, no one expected, not even me, that 30-year fixed rates would already be 6%+ in late June.

[Kenro911]

Originally Posted by Xalistiq

Agreed.

And we will be paying for all that free money for years into the future in the form of high inflation.

The fact that PPP and stimulus mostly benefited financial institutions, the wealthy, and SMB owners, is one reason why I’ve been so adamant about a major housing correction.

That money didn’t largely trickle down to the middle or lower classes. Real wages have actually declined since 2020 and yet homes are up in value +30%, +40%, +50% or more since 2020. Not sustainable.

I have very little faith that they would let housing market collapse.

[crazyforger]

Originally Posted by Xalistiq

You’re misinterpreting the point I’m making.

The Fed has signaled forthcoming 75 and 50 point hikes. My argument is that if the Fed is truly serious about taming runaway inflation, they may have to revise these numbers upward and/or plan further hikes in the Fall.

June’s CPI will be another disgracefully high figure, and the Fed may be forced to do exactly what they did with the most recent hike — at the last minute, revise their intended rate increase upward. So instead of 50 points, as the market is expecting, they could hike 75 points in September for instance.

The question is will the Fed actually follow through with their mandate to keep inflation low or will they allow inflation to run rampant to protect the stock market? Their monetary policies thus far have been utter failures so I won’t hold my breath.

Bottom line, significantly more hiking than what’s being proposed thus far will be needed to get inflation back down to 2%.

If I’m right and the Fed hikes several more times after September, I’m very confident mortgage rates are going over 8% by end of year. Only time will tell.

Agree with your points on the housing market.
However, contrary to popular opinion, the Fed don't need to raise rates aggressively from here to tame inflation.
Couple more 0.25% hikes should be sufficient.

The Fed got to give it time.
When Interest rates are hiked, it takes time for it to take effect.
For example, it results in higher rents in short term but over a longer period, when home prices fall, inflation would trend down.

Fed is trying to overcorrect after not doing enough for a long time.

[DabOnEm]

Originally Posted by Kenro911

I have very little faith that they would let housing market collapse.

Why not? With as much stuff they let happen, housing can surely collapse again.

[Xalistiq]

Originally Posted by crazyforger

Agree with your points on the housing market.
However, contrary to popular opinion, the Fed don't need to raise rates aggressively from here to tame inflation.
Couple more 0.25% hikes should be sufficient.

The Fed got to give it time.
When Interest rates are hiked, it takes time for it to take effect.
For example, it results in higher rents in short term but over a longer period, when home prices fall, inflation would trend down.

Fed is trying to overcorrect after not doing enough for a long time.

You think the most recent .75% hike will bring inflation back down to pre-pandemic levels? Or are you using the word “tame” more figuratively to mean a significant reduction in 8%+ YoY inflation?

I agree with you that the Fed cannot hike too much more after the cumulative planned 125 basis point hikes, because servicing the debt on its colossal balance sheet will become impossible.

I personally think heightened inflation is here to stay: too much money printing, a permanently damaged supply chain, geopolitical challenges (Russia/China), Ukraine war, poor energy policies, a declining dollar, etc

[loves2read]

Originally Posted by crazyforger

Agree with your points on the housing market.
However, contrary to popular opinion, the Fed don't need to raise rates aggressively from here to tame inflation.
Couple more 0.25% hikes should be sufficient.

The Fed got to give it time.
When Interest rates are hiked, it takes time for it to take effect.
For example, it results in higher rents in short term but over a longer period, when home prices fall, inflation would trend down.

Fed is trying to overcorrect after not doing enough for a long time.

I am afraid they were slow to start and now will jump in with both feet too heavily and overcorrect