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It makes no sense in this mortgage crisis for mortgage rates to rise. My guess is that they will fall to historic lows this year as one of the ingredients necessary to diminish the crisis and boost the economy. Fed will see to it, no question.
the fed cannot manipulate the bond market:
A steep drop in the price of the benchmark 10-year Treasury note pushed its yield up to 3.72%, up from 3.55% late Tuesday and the highest level since last November. That increase touched off fears that the government won't be able to hold down interest rates long enough to allow the economy to recover.
Along with increasing borrowing costs for the government, rising yields on Treasury debt could hamper an economic recovery since they are used as benchmarks for home mortgages and other kinds of loans. Higher mortgage rates could delay a recovery in the battered housing market.
The market went up yesterday partly due to the rise in interest rates and oil prices, some were saying it was a sign of economic recovery. But interest rates jumped up a month ago and then came back down. I doubt the rates will go lower than they have been -fed rate is almost '0' now. The only direction to go from here is up, it is really up to the banks now. Supply and demand, once lending loosens up, rates will go up as more people qualify for loans.
If minor fluctuations in interest rate are enough to make a house unaffordable for you, I suggest buying a less expensive house. Just my $.02.
Bingo!
-- break break--
As to the question at hand, I continue my prediction of 8% interest rates by May 2010. This sub 5% environment is unsustainable, there are more overriding economic factors than appeasing a housing inventory. The govt can't continue to hold down the borrowing cost in aggregate much longer without outright killing the paper currency. The creditor nations are nervous as heck and can't hold out another year. For that reason you will see the cost of borrowing go up. The probative value of debasing the currency and triggering hyperinflation is not something the Obama cheer camp wants to go down with on the history books, they'll take a prolonged economic contraction (what they should have done in the first place) than a collapse of the dollar on their watch. Like I said, nowhere to go but up, up and up. 8% by may 2010.
That said, who cares? Houses should be a utility anyways, higher cost of borrowing would lower the mean price of homes, which means less people can make money off it by trading it like a commodity. Sounds good to me. Realtors might not like that, guess what, if the global mantra was good to shove on the 25 year aircraft mechanic it's good enough for the FIRE rent seekers too! Incomes drive this fight and are the real problem in this country, houses are just a pacifier everybody keeps pointing at as if it was decoupled from the income problem americans face.
As to the question at hand, I continue my prediction of 8% interest rates by May 2010. This sub 5% environment is unsustainable, there are more overriding economic factors than appeasing a housing inventory. The govt can't continue to hold down the borrowing cost in aggregate much longer without outright killing the paper currency. The creditor nations are nervous as heck and can't hold out another year. For that reason you will see the cost of borrowing go up. The probative value of debasing the currency and triggering hyperinflation is not something the Obama cheer camp wants to go down with on the history books, they'll take a prolonged economic contraction (what they should have done in the first place) than a collapse of the dollar on their watch. Like I said, nowhere to go but up, up and up. 8% by may 2010.
That said, who cares? Houses should be a utility anyways, higher cost of borrowing would lower the mean price of homes, which means less people can make money off it by trading it like a commodity. Sounds good to me. Realtors might not like that, guess what, if the global mantra was good to shove on the 25 year aircraft mechanic it's good enough for the FIRE rent seekers too! Incomes drive this fight and are the real problem in this country, houses are just a pacifier everybody keeps pointing at as if it was decoupled from the income problem americans face.
^^^^^This^^^^^
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