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More pain, and nothing to stop real house prices from falling. Too much debt to be bailed out ($4T or so). But it won't stop them from trying. Plus, it's a good band aid to hold back the flood waters until after November.
Nominal values may be rescued, but what difference is it if it costs $2000 to fill your fridge?
I've been expecting this as have many, but it does feel like a punch in the stomach.
Unless people start buying houses at more normal rates there is no confidence in mortgage backed securities. The liquidity disappears unless the rates are high enough to address the perceived risk.
With Fanny and Freddie being run by treasury we may see a short term drop in interest rates.
With tighter lending standards many would be purchasers won't be able to participate.
I've been expecting this as have many, but it does feel like a punch in the stomach.
Unless people start buying houses at more normal rates there is no confidence in mortgage backed securities. The liquidity disappears unless the rates are high enough to address the perceived risk.
With Fanny and Freddie being run by treasury we may see a short term drop in interest rates.
With tighter lending standards many would be purchasers won't be able to participate.
I see a refi boom coming, to suck up more liquidity.
I'm not sure what you mean. You think treasury is going to be forgiving principle?
More like a personal belief that interest rates will drop and many people will try to refi to lower rates.
Remember, the problems are limited to a minority of housing, and most homeowners are NOT in trouble currently.
But given the opportunity for a 5.25% 30 year loan when sitting on 6%, or 6.5%, and in a house that will appraise, I think you will see folks refinancing.
I think the series of events in the last 6 months-- and then this-- is unprecedented. Which makes predicting "what's next" just about impossible.
I'm keeping my head down.
Quite right. We could see Treasury rates go to Pluto and the Fed having no real power over the mortgage rate they charge. It takes a willing investor to purchase the mortgage security. How will our overseas investors react to this phenomena?
More like a personal belief that interest rates will drop and many people will try to refi to lower rates.
Remember, the problems are limited to a minority of housing, and most homeowners are NOT in trouble currently.
But given the opportunity for a 5.25% 30 year loan when sitting on 6%, or 6.5%, and in a house that will appraise, I think you will see folks refinancing.
I know that if I believed that I had equity in my house and interest rates did drop a 100 basis points I'd look at a refi. You may have a point. I don't see it happening in Florida or California.
Do you think treasury will break up Fannie and Freddy? selling off either performing or non-performing assets?
Nominal values may be rescued, but what difference is it if it costs $2000 to fill your fridge?
Nothing about this is particularly inflationary, in fact its an indication of how much credit is vanishing. Nominal prices should fall back to 1998~2000 ranges.
Anyhow, rates may drop a bit in the short term but any mass movement of people trying to refi would push rates back up. There is only so much available money.
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