When are we going to see mortgages rates going up to 8-10%

NEW -> Contingent Buyer Assistance Program
[quote author="biscuitninja" date=1231590217][quote author="flmgrip" date=1231581853]



bring it on guys !</blockquote>


As much as we'd like to do that, you haven't provided enough information to give a "good" answer. We would be speculating on alot and it would not be accurate.

</blockquote>


what do you need to know ? yes i simplified the math and left a lot of things out, but i believe the bottom line (for this last year) is that i actually was better off buying the house. i don't know what's gonna happen in 09, maybe if i feel like it i'll do an other comparision...



<blockquote>

But i'd like to mention one other point and that is, you haven't been here and met the other people. There are a significant portion of people on here who are going to purchase a home outright or have purchased a home with a significant discount that what you have. To call these "people out" is foolish at best.

good luck with your home

-bix</blockquote>


i havn't been here ? where online, offline ? who says i don't know anyone on here ? for all you know we had beers together before or went on a bikeride together... or maybe i'm a 12 year old posting on my dad's computer... you will never know



i didn't call anyone else out, i just stated my facts and and tried to (in a simple way) explain why i believe i was better off with my home purchase than renting. i don't have the time and interest to post a five page document explaining every penny i did spent or not and pull up charts etc... i leave that up to the other folks here
 
[quote author="flmgrip" date=1231653557]i didn't call anyone else out, i just stated my facts and and tried to (in a simple way) explain why i believe i was better off with my home purchase than renting. i don't have the time and interest to post a five page document explaining every penny i did spent or not and pull up charts etc... i leave that up to the other folks here</blockquote>


Essentially, your purchase is at roughly rental parity sans the downpayment interest lost. After taxes, it's probably actually cheaper to own and even with the lost down interest, at par. Could you have done better? maybe, maybe not. Maybe not worth waiting either.
 
Rick,



Don't take this blog site too seriously. I like to read it once or twice a week on my blackberry. My wife reads this all the time though.



I just find the replys etc so funny. There are a bunch of people here that would post short neg comments and take themselves too seriously as if they can time everything perfectly. I always find it so entertaining when a new poster asks a question and then a bunch of folks jump on him or her. Then there is the band of folks that would tell the new poster that they are dumb to not use the search feature to look up the topics or read some of the older posts. I think IHB has a bunch of posters here are just salivating for these opportunities. Panda has been helping all these posters feel better of themselves with all these questions.



I wouldn't take the advice from these folks here but I do like Irvinerenters sales data spreadsheet and BK's comments on structures etc. But in terms of when to buy a house, just do your own research.



Just don't take these posts too seriously. As to when to buy a house, everyone has their own special situation.
 
[quote author="blackvault_cm" date=1231651988][quote author="spclagent7" date=1231650058][quote author="stepping_up" date=1231591752]Awgee, just because you're one of the uber bears and are most likely right on a number of things, doesn't mean that you have to be mean to the knife catchers... My point is that you uber bears could be a little kinder to the "knife catchers." When you guys get all self righteous about housing prices are DEFINITELY going to drop another 30% in the next 12 months, you alienate a lot of others. </blockquote>


stepping_up and rickhunter -- I'm in the same boat as you with my mello roos topic. I presented the topic, only to have some on the forum come right back, take bits of my posting out of context, then make assumptions about me being somehow completely misguided and misinformed -- Making it personal. Then when I stand up for myself it of course goes completely downhill with a number of people ripping on me without knowing a damn thing about me.



On top of it all, those same people come back and try to say they've "been there" and "used to feel the same as me" (when I feel ZERO pressure to buy a house for the reasons they state). Apparently "being there" gives them license to be completely condescending, rather than mentor/share with people in a respectful, good way.</blockquote>


Oh please...nobody tore you up until you started calling people idiots and a$$holes. Here is the problem. People ask for advice, we give advice...if the advice doesn't align with their purchase or their views then they automaticaly get defensive trying to prove their point.



As far as I'm concearned. I could care less if you make 1M or lose 1M. My opinion is homes go lower and I'm simply going to wait. If you think its a great time to buy, then buy. Don't even come here for advice or views because obviously you have your own opinion that will go unchanged. Why even bother barking up this tree...go..buy...enjoy!



Anyway, I feel like i'm repeating myself. I'm sure awgee feels the same. I'm packing my bags from this thread. Enjoy and good luck.</blockquote>


"Oh please" is right. I asked for perspective about mello roos which immediately degenerated into pessimism on homebuying, wrong assumptions about my motive for buying, and snide remarks. To which I didn't take any crap. I didn't ask at all whether it was time to buy or not.
 
[quote author="etheran" date=1231670450]Rick,



Don't take this blog site too seriously. I like to read it once or twice a week on my blackberry. My wife reads this all the time though.



I just find the replys etc so funny. There are a bunch of people here that would post short neg comments and take themselves too seriously as if they can time everything perfectly. I always find it so entertaining when a new poster asks a question and then a bunch of folks jump on him or her. Then there is the band of folks that would tell the new poster that they are dumb to not use the search feature to look up the topics or read some of the older posts. I think IHB has a bunch of posters here are just salivating for these opportunities. Panda has been helping all these posters feel better of themselves with all these questions.



I wouldn't take the advice from these folks here but I do like Irvinerenters sales data spreadsheet and BK's comments on structures etc. But in terms of when to buy a house, just do your own research.



Just don't take these posts too seriously. As to when to buy a house, everyone has their own special situation.</blockquote>


Good point and great post. I've been going back and reading older postings and see the pattern. You're right. This should be posted for all newbies.
 
[quote author="asianinvasian" date=1231469277]<img src="http://www.preconstructionprograms.com/real_estate/florida/images/conventional_fixed_mortgage_rate.png" alt="" /></blockquote>


Asian Invasion,



Thanks for posting this chart. I am an optimist at heart and don't particularly like the extreme Gloom and Doom guys that make it sound like our economy is headed down the worst Great Depression since the 1930s. Looking at the mortgage rate chart that AI posted, we can see that from 1975 - 1980 that mortgage rates are at 9% climbing to the peak of 16% to fight off deflation. I think that mortgage rates will start to rise as early as april/may of this year and start to accelerate to 8 - 10% as inflation will start to dominate in the very short term. I somehow feel that all the government stimulus and bail out packages will be a failed attempt. Bernanke will try to hyper-inflate us out of recession which may suddenly turn into a strong deflation, through a failed attempt, where every asset class will fall, including gold.



I know that some of you have argued that Irvine home prices will not fall like the rest of OC as inventory is tight, demand is strong from a dense population, and all the Cash rich FCBs buying up Irvine's inventory. Home prices in Irvine will have to drop 40-50% from its peak in 2006 in order to get back to fair value, not the 6.6% we have seen in 2008 - and that will have a devasting impact not only on the banking system but also on our government, which will have to continue to take over these mortgages and liablilities.



Every action that our government is taking is taking is following the precedence of the Japanese. Did you know that the Japanese blue-chip stock market, the Nikkei, was down 80% from 1990 to 2003 as Japan's baby-boom generation slowed in spending ahead of ours. Did you know that real estate in the largest and most densly populated city in the world, Tokyo, has been down over 60% from 1991 - 2005? I know that Tokyo's demand for housing and density was much, much tighter than that we are seeing of Irvine today.



I have also reconsidered my thought on the Legend of the cash rich FCBs. If we are headed into a major deflation in the next 1-3 years. I predict that new immigration into our country will slow down greatly as they will be also hurting just as much as us with their own recession, real estate crash, and high unemployment. The foreigners are very much dependent on us in the short-term.



If i were to tell you that by the year 2011, mortgages rates will be 10% and unemployment will rise from 7% - 15% in Irvine. Do you still believe that Irvine home prices will be immune to these economic conditions because it is "THE GREAT IRVINE". What if i were to tell that the bottom in Irvine will be at where home prices will be worth 2000 levels at best and at 1996 levels at worst, would you still buy in 2009 if mortgage rates are at low levels as they are now. I am not in any way implying that this will happen for sure, but something to think about as this scenario is a very feasible possibiliy in my opinion.



Irvine Renter, Awgee, Graphix, and others. Please do tell me if there are some big flaws with the way i am thinking.



Thanks.
 
<blockquote>For the average person,

The best time to buy is when you can afford to do so!

Dont overthink or make things more complicated than that?</blockquote>


This is true perhaps 85% of the time. But when we're coming off the biggest housing bubble of all history, by a factor of about 3, and facing a very possible depression, is part of the 15%. You *do* have to think about it now.



<blockquote>Please do tell me if there are some big flaws with the way i am thinking.</blockquote>


I think you're being very clear-thinking. The one thing you need to consider, though, is whether the losses in alternative investments will be even worse than the inevitable losses in real estate. E.g., in your japan example, real estate is down 60% and stocks down 80%. So, if your waiting included parking a lot in stock - which most do for multiyear waits - you'd actually have been better off buying.



Now that the Fed is obviously trying to inflate the tradeoffs are getting much more complex. Before, you could park in bonds or cash. With significant inflation a strong possibility, *nothing* is safe now. Buying a house with a cheap mortgage is currently a rational (perhaps not optimal, but rational) decision *IF* - and this is a big IF - you are certain you won't need to sell for 30 years, or until after a major inflation. If you buy now, and have to sell into an inflationary market with high interest rates, you are *****ed. Bye-bye down payment.
 
[quote author="spclagent7" date=1231650058][quote author="stepping_up" date=1231591752]Awgee, just because you're one of the uber bears and are most likely right on a number of things, doesn't mean that you have to be mean to the knife catchers... My point is that you uber bears could be a little kinder to the "knife catchers." When you guys get all self righteous about housing prices are DEFINITELY going to drop another 30% in the next 12 months, you alienate a lot of others. </blockquote>


stepping_up and rickhunter -- I'm in the same boat as you with my mello roos topic. I presented the topic, only to have some on the forum come right back, take bits of my posting out of context, then make assumptions about me being somehow completely misguided and misinformed -- Making it personal. Then when I stand up for myself it of course goes completely downhill with a number of people ripping on me without knowing a damn thing about me.



On top of it all, those same people come back and try to say they've "been there" and "used to feel the same as me" (when I feel ZERO pressure to buy a house for the reasons they state). Apparently "being there" gives them license to be completely condescending, rather than mentor/share with people in a respectful, good way.</blockquote>


Special,



Please don't quote me to defend your bad behavior. Yes, I do think that sometimes that the uber bears are too harsh, but your behavior in the thread you started on Mello Roos was truly awful.
 
[quote author="FairEconomist" date=1231735676]I think you're being very clear-thinking. The one thing you need to consider, though, is whether the losses in alternative investments will be even worse than the inevitable losses in real estate. E.g., in your japan example, real estate is down 60% and stocks down 80%. So, if your waiting included parking a lot in stock - which most do for multiyear waits - you'd actually have been better off buying.</blockquote>


That's incorrect unless you buy 100% cash. There is a lot of leverage in RE.



Example: You have $100k and could get a $500k house.



A) Invest in Stock Market:

You lose 80% and have 20k left.

Net Worth: 20k



B) Invest in RE

Buy $500k house (20% down or $100k)

House falls 60%.

House Value: 200k

Net Worth: -200k
 
Panda, I encourage you to read <a href="http://www.europac.net">Peter Schiff</a>, if you don't already do.



He usually publishes a weekly letter. Here's his latest that hits many points you talked about:

"The Fed?s Bubble Trouble





A few weeks ago when the Fed announced a strategy designed to bring down long-term interest and home mortgage rates through unlimited Treasury bond purchases, government debt staged a spectacular rally. To the unschooled market observer, the spike may be difficult to understand. After all, why would the value of Treasury bonds rise while their underlying credit quality is deteriorating faster than Bernie Madoff?s social schedule? The move is actually a perfect illustration of the tried and true Wall Street strategy of ?buy the rumor and sell the fact?.



If it is well known that Fed will be a big purchaser of Treasuries, those buying now will be positioned to unload their holdings when the buying spree begins. If the Fed pays higher prices in the future, traders can earn riskless speculative profits. If the traders lever up their positions, as many are likely doing, even small profits can turn unto huge windfalls.



The downside of course, is that all of the demand for Treasuries is artificial. Treasuries are now in the hands of speculators looking to sell, not investors looking to hold. These players are analogous to the mid-decade condo-flippers who flocked to new developments for quick profits. They did not intend to occupy their properties, but rather flip them to future buyers. Once these properties came back on the market, condo prices collapsed, as developers were forced to compete for new sales with their former customers.



This is precisely what will happen with Treasuries. Just as the U.S. government issues mountains of new debt to finance the multi-trillion annual deficits planned by the Obama Administration, speculative holders of existing debt will be offering their bonds for sale as well. In order to prevent a complete collapse in the bond prices the Fed will be forced to significantly increase its buying.



However, since the only way the Fed can buy bonds is by printing money, the more bonds they buy the more inflation they will create. As inflation diminishes the investment value of low-yielding Treasuries, such a scenario will kick off a downward spiral. But the more active the Fed becomes in their quest to prop up bond prices, the bigger the incentive to hit the Fed?s bid. The result will be that all Treasuries sold will be purchased by the Fed. But with the resulting frenzy in the Treasury market, and with inflation kicking into high gear, we can expect that demand for other debt classes that the Fed is not backstopping, such as corporate, municipal and agency debt, to fall through the floor, pushing up interest rates across the board.



In order to ?save? the economy from these high rates the Fed will then have to expand its purchases to include all forms of debt. If that happens, run-away inflation will quickly turn into hyper-inflation, and our currency will be worthless and our economy left in ruins.



To avoid this nightmare scenario, the Fed should pull out of the bond market before it?s too late and let prices fall to where real buyers, those willing to hold to maturity, re-enter the market. Given how high inflation will likely be by the time this happens, my guess is that long-term Treasury yields will have to rise well into the double digits to clear the market.



But we should know that the bursting of the bond market bubble will have even more dire consequences than the bursting of prior bubbles in stocks and real estate. Significantly higher interest rates and inflation that will result will severely compound the current problems. Imagine how much worse our economy would be if we faced double digit interest rates? In addition, not only will homeowners be confronted with record high mortgage rates, but the Government will be staring at trillion dollar annual interest payments on the national debt, making interest by far the single largest line item in the Federal budget. Just like homeowners who relied on teaser rates, the Government will face a similar problem when all its low-yielding short-term debt matures.



The grim reality of course is that when the real estate bubble burst the Government was able to ?bail-out? private parties. However, when the bond market bubble bursts, it will be the U.S. Government itself that will be in need of the mother of all bailouts. If U.S. taxpayers or foreign creditors are unwilling or unable to pony up, and if the nightmare hyper-inflation scenario is to be avoided, default will be the only option. If misery really does love company, Bernie Madoff?s clients might finally find some comfort."
 
Awgee,



Do you know if there is direction relationship with mortgages rates vs. deflation/inflation? Do mortgage rates generally go up when there is an inflation and do down when there is a deflation.



Sorry if this is stupid question, but I have no idea.
 
<em>Goldman Sachs decided that they were going to increase their estimates on how far home prices might fall. Previously they thought that housing would perhaps bottom out at the end of 2009, down another 15%. Now they think it may be all the way into the middle of 2010, and that the lows will be 20-25% from here.</em>



I wonder if GS is guessing, or do you think maybe they use all available data and draw their best fit conclusions. And then modify those conclusions as new data is available. Nah, they are just guessing.
 
[quote author="PANDA" date=1231812627]Awgee,



Do you know if there is direction relationship with mortgages rates vs. deflation/inflation? Do mortgage rates generally go up when there is an inflation and do down when there is a deflation.



Sorry if this is stupid question, but I have no idea.</blockquote>


Idunno. But, I do know that there is much less of an inverse correlation between interest rates and re prices than most folks think.



Libor has come way down and mortgage interest rates are following. Libor was skyrocketing during what most think was a deflationary period, and libor has now moved down during the same "deflationary" period. So maybe there is no statistical correlation, maybe there is. Idunno.



During the last highly inflationary period, mortgage interest rates, and all interest rates, went through the roof. My dad bought a house with an apartment on top of the garage three houses from the beach on a walk street in Manhattan Beach and got a 18% variable interest rate mortgage for $187,000. Not only did he rent out the apartment, but he also rented out two rooms in our new home in order to make the payments. A few years later interest rates calmed down; he no longer needed roomates, kicked me out, made the third story into it's own bootleg apartment, and rented out the downstairs house. The man is my hero for teaching me about positive cash flow.
 
[quote author="awgee" date=1232018175][quote author="PANDA" date=1231812627]Awgee,



Do you know if there is direction relationship with mortgages rates vs. deflation/inflation? Do mortgage rates generally go up when there is an inflation and do down when there is a deflation.



Sorry if this is stupid question, but I have no idea.</blockquote>


Idunno. But, I do know that there is much less of an inverse correlation between interest rates and re prices than most folks think.



Libor has come way down and mortgage interest rates are following. Libor was skyrocketing during what most think was a deflationary period, and libor has now moved down during the same "deflationary" period. So maybe there is no statistical correlation, maybe there is. Idunno.



During the last highly inflationary period, mortgage interest rates, and all interest rates, went through the roof. My dad bought a house with an apartment on top of the garage three houses from the beach on a walk street in Manhattan Beach and got a 18% variable interest rate mortgage for $187,000. Not only did he rent out the apartment, but he also rented out two rooms in our new home in order to make the payments. A few years later interest rates calmed down; he no longer needed roomates, kicked me out, made the third story into it's own bootleg apartment, and rented out the downstairs house. The man is my hero for teaching me about positive cash flow.</blockquote>


Awgee,



I think many of us believe that mortgage rates will very high in 2012 when the RE prices bottoms. but if we face extreme deflation (which I think we will) like that of 1930s, we may see a situation where home prices are 40 - 50% discounted from the 2006 peak with 3-4% mortgage rates. In any case, I am really glad that 66% of IHBloggers voted on the poll that they are going to wait until 2012 to purchase a home. I think that timing is totally right on. Buying in 2010 still seems too early. Imagine a Mills Fleurs in Woodbury that sells for $1.2 million today you are able to buy for $700,000 with 3-4% mortgage rates in 2012. It totally does not matter if all the Asian FCBs are buying up these homes right now... Let them buy and catch the knife. I think somewhere between now at 2010 we will see mortgage rates shoot up between 8 - 10% killing home prices even further.

Panda can smell it already.
 
You guys are all smart enough not to care about mortgage rates and buy when prices are just starting to increase (although I think we can agree it will be a while). Has there ever been a time when mortgage rates haven't dropped significantly over a period of more than a few years? I don't know the history. It seems you can always change the rate, it's that damn sales price that doesn't change.
 
I don't think the vast majority of people looking to buy understand the difference interest rates make. They either have a number in their head that they can afford or have prequalified before at higher rates and are only looking at prices that work with the higher rate they qualified for or put in a calculator.
 
I really am wondering how low the newer high-end homes in Woodbury/Quill/PorSprings can drop.



Sure... there may not be enough FCBs but during the peaks, when these houses were selling for mid $1mil... but there were enough people around buying them who could actually afford them. So they'll either keep them until the market rebounds or new knife catchers will step in because they perceive them as bargains compared to '06 pricing.



Add to that the fallacy that the gov is going to keep people afloat and that just translates into a secondary bubble that will take very long to deflate. The problem is during the last bubble in the early 90s... the newer 3000sft homes were like $500k dropping to $400k. Compare that to now where a newer $1.2mil is predicted to drop to $720k... big difference and very hard to see happening.
 
[quote author="stepping_up" date=1232019422]I don't think the vast majority of people looking to buy understand the difference interest rates make. They either have a number in their head that they can afford or have prequalified before at higher rates and are only looking at prices that work with the higher rate they qualified for or put in a calculator.</blockquote>




Definitely true, but most people don't understand that the price is more important than the rate. People are willing to buy for whatever they qualify for and they don't think very clearly about the consequences.
 
[quote author="tmare" date=1232033528][quote author="stepping_up" date=1232019422]I don't think the vast majority of people looking to buy understand the difference interest rates make. They either have a number in their head that they can afford or have prequalified before at higher rates and are only looking at prices that work with the higher rate they qualified for or put in a calculator.</blockquote>




Definitely true, but most people don't understand that the price is more important than the rate. People are willing to buy for whatever they qualify for and they don't think very clearly about the consequences.</blockquote>


tmare - Please clarify.

Why do you believe that sales price is more important than the interest rate?

Or are you making another statement?

I don't think that I agree.
 
[quote author="IrvineRealtor" date=1232034979][quote author="tmare" date=1232033528][quote author="stepping_up" date=1232019422]I don't think the vast majority of people looking to buy understand the difference interest rates make. They either have a number in their head that they can afford or have prequalified before at higher rates and are only looking at prices that work with the higher rate they qualified for or put in a calculator.</blockquote>




Definitely true, but most people don't understand that the price is more important than the rate. People are willing to buy for whatever they qualify for and they don't think very clearly about the consequences.</blockquote>


tmare - Please clarify.

Why do you believe that sales price is more important than the interest rate?

Or are you making another statement?

I don't think that I agree.</blockquote>


Rates can change, price can't change. I'm just saying that I wouldn't use the current low rates as a justification for buying a house now when we all believe that prices are still going to drop further.
 
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