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Old 09-21-2010, 04:19 PM
 
Location: NC
31 posts, read 35,092 times
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Do you think mortgage rates have bottomed out and where do you see them going in 2011?
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Old 09-21-2010, 05:09 PM
 
Location: Planet Earth
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be right back, I left my crystal ball in the car
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Old 09-22-2010, 05:51 AM
 
Location: Plano, Texas
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The only way you know if rates have bottomed out is after they rise, then it is too late.

Rates should remain low for the foreseeable future. For rates to go lower, the stock market is going to have to go much lower.
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Old 09-22-2010, 10:05 AM
 
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Yesterday the Federal Reserve again met and decided to keep the rates they charge member banks to borrow money at or near zero. Nearly two years ago they adopted this policy and said they believe it will remain with that policy "for an extended period".
The relationship between the policy and rates set by the Federal Reserve and changes that has for mortgages is a complex one. Lenders can try and set the rates for mortgages based on how much demand their is from investors for loans paying a certain rate and offering a somewhat well understood level of risk but they still have to have borrowers willing to take out those loans.


If the policy of the Fed shifts the banks will be forced to respond, but only so much as the investor and borrower community will tolerate so that supply and demand stay pretty much in balance. Most investors fear that inflation will seriously boast interest rates and they would rather not be stuck owning MBS that pay only a tiny amount and borrowers worry that if the economy does not improve they will never see their homes appreciate so paying down their mortgage is not a wise use of their funds...

The heat that right now is fueling voter anger and Tea Party success is likely to cool off in the spring. If that also means that changes in taxes are enacted that make investors even less eager to put money into less certain uses that would likely back it harder for interest rates to rise. The other side of the coin is that if the lawmakers and the Whitehouse tend to be more gridlocked and less of a one party rubber stamp the business community tends to be a bit more robust. If that means more people working and more jobs there might be faster sales of new and existing homes, which might translate into slowly increasing rates...

Tough calls also exist in the realm of "hard to guess but still probable" events in global security, global commodities, and global business. Any kind of defense related shocks will probable have a two step "overreaction / correction" type effect where rates either shoot dramatically and then rebound even lower or the opposite, where markets react by essentially stopping all activity with a brief window of ridiculously low rates followed by an over shot to the high side.

Same kinds of things have happened with oil supply, news of difficulties in foreign markets (like Greece) and of course the roller coaster of news surrounding business scandal. It has beeb a long time since we have heard about any investigations / trials / insider deals in business and I think we are due for some fireworks either from a US based firm or a large global firm in the banking or energy sectors. Either of those could make for some" hold onto your hat" kid of reactions of investors...

I will watch the news feeds and react based on what I have seen before, and the reality is that my reactions may be out of sync with others.

There was very interesting, but ultimately sobering, news out earlier this week. The various industry, government and academic economists that all really do use lots of high powered computers and all really do have much better access to information than ever before all generally collaborate a great deal on improving their field. They share their predictions through processes that have been in place for decades. Unfortunately , their predictions really have not gotten much better at all. In some ways it is worse than just a coin toss , as the firms and governments really do have more that a bit of impact on the outcome by even making their predictions -- in many cases the "wrong prediction" endorsed by a multi-billion dollar investment banking firm or the government itself tends to worsen the ability of things to turn around...
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Old 09-22-2010, 11:37 AM
 
Location: Albuquerque
5,548 posts, read 15,366,722 times
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Quote:
Originally Posted by Wheelwright
Do you think mortgage rates have bottomed out
Yeah, maybe. Maybe not, however.
Quote:
Originally Posted by Wheelwright
and where do you see them going in 2011?
I see rates going wherever the bond market says they should go.

People waiting to buy so they can get a clearer view of the market are being prudent.

People waiting to buy in case interest rates fall some more are just gambling and
can, pretty much, be lumped into the category of people who play the lottery.
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Old 09-22-2010, 11:55 AM
 
Location: Union County
6,059 posts, read 9,421,126 times
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Quote:
Originally Posted by mortimer View Post
Yeah, maybe. Maybe not, however.

I see rates going wherever the bond market says they should go.

People waiting to buy so they can get a clearer view of the market are being prudent.

People waiting to buy in case interest rates fall some more are just gambling and
can, pretty much, be lumped into the category of people who play the lottery.
Rates will go where The Fed tells them to go... No market is beyond their reach and manipulation.

The "gamble" in waiting regarding rates is offset by the tremendous downward pressure on prices... It's nowhere near like a lottery. As a buyer, waiting is a win-win right now.
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Old 09-22-2010, 02:12 PM
 
Location: Albuquerque
5,548 posts, read 15,366,722 times
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Quote:
Originally Posted by MikeyKid
Rates will go where The Fed tells them to go... No market is beyond their reach and manipulation.
The Fed is the biggest individual player, but the bond market is bigger.

When the market no longer is willing to buy Treasuries, rates will rise. They can't
just issue them in infinite amounts. The question is where is the tipping point?
I think they are trying to find it. At that point, $2,000 gold will look like a bargain.

Quote:
Originally Posted by MikeyKid
The "gamble" in waiting regarding rates is offset
by the tremendous downward pressure on prices...
No argument there.

Would you like another 25% off that house? Not good enough?
How about 40%? ... It's possible.

My comment was entirely regarding betting on interest rates.
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Old 09-22-2010, 05:59 PM
 
Location: Union County
6,059 posts, read 9,421,126 times
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Quote:
Originally Posted by mortimer View Post
The Fed is the biggest individual player, but the bond market is bigger.

When the market no longer is willing to buy Treasuries, rates will rise. They can't
just issue them in infinite amounts. The question is where is the tipping point?
I think they are trying to find it. At that point, $2,000 gold will look like a bargain.

No argument there.

Would you like another 25% off that house? Not good enough?
How about 40%? ... It's possible.

My comment was entirely regarding betting on interest rates.
Something happens to these guys when they get to control so much money and wield so much power... You honestly think Bernanke worries about a tipping point? 20 consecutive weeks of net outflows out of the stock market and they keep it flat - it's completely propped. Hedge funds are folding up shop because there's no game left when 90%+ of stocks all move up slowly - good news, bad news... it doesn't even matter with the POMO. They're playing the bond market to fool everyone with the stock market.

20th Consecutive Week Of Outflows | zero hedge

The real fun is the global game that's beginning to heat up... It's the great fiat devaluation race. It's like the financial geek Olympics. The real shame of it is that nobody is going to play fair and it can get ugly fast.
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Old 09-23-2010, 09:58 AM
 
Location: Albuquerque
5,548 posts, read 15,366,722 times
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Quote:
Originally Posted by MikeyKid
You honestly think Bernanke worries about a tipping point?
... It's the great fiat devaluation race. ...
I honestly don't know.

I think that Bernanke thinks that he's far away from it.
I don't know when the tipping point will come, but I assume that it
will come sooner than we or Bernanke think it will. (*)

In the "devaluation race" the US Fed can feel free to issue dollars at will since
the central banks of the Far East will buy them all to avoid hurting exports.

OnTopic: In effect, a loan is just arbitrage of the interest rate versus the inflation
rate. If you can keep your job and your pay goes up as fast or faster than inflation,
your loan becomes cheaper and cheaper. If rates are 4% and you really want a house
then you buy. Waiting to see if you can get 3% is dumb. You might get 3% if you
wait, but at 4% rates are historically low. Your loan will always be the same in terms
of dollars, so next year, your $1,500 payment ( as an example ) will be cheaper than
it was this year. Even if escrow adds $50 to your payment each year, your pay,
in dollars, should go up faster - making the loan cheaper.

If you are not confident that your pay will increase faster than inflation
or that you will keep your job, you have no business getting a loan for
anything. You should save and plan for hard times.

In the mean time, gold is the only money.
The rest are going the way of the Dodo.

Bernanke:

YouTube - Every Breath Bernanke Takes

(*) The "tipping point" we are referring to is the point where the US can no
longer just make money by "creating it" by printing on paper or making computer entries.
Ordinary people in the US get paid in dollars. In order to buy that Japanese car, Chinese
shirt or oil from the Middle East, we have to give them something in return. Dollars work
today. In a year, it might require giving up land or something. If we are not willing to do
that, they will ask for more dollars. In another year - even more dollars.

As Americans we see it as prices going up. As a citizen of another country, they see it
as the value of the dollar going down. In either case, as an American, your pay effectively
goes down. The tipping point is when you see the price of gasoline go from $3 to $7
for no apparent reason. You can't buy a low quality shirt for less than $100, a Corolla
costs $80,000. You can't buy an American-made version because we have voluntarily
shipped off all of our factories to other countries.

Of course, those countries will have no where to export since they always have to
run a trade surplus. That's why the tipping point always seems get pushed out.

Last edited by mortimer; 09-23-2010 at 10:23 AM..
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Old 09-23-2010, 12:53 PM
 
Location: Union County
6,059 posts, read 9,421,126 times
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It's an excellent commentary on the OP's question related to interest rates next year. Trade wars and the value of the USD.

Interesting wrinkle on the old argument that "corporations are sitting on tons of cash":

Why Massive Offshore Cash Parking Means Companies Have Access To Only A Fraction Of The Record Cash Stash | zero hedge

Apparently they're offshoring it and would take a huge US tax hit to bring it back. lol

* Just wait until gubmint forces them to repatriate it. oopsie
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