Where will mortgage rates be in 2010/2011?

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<blockquote>$500,000 loan today at 6% = $2,997 + ($6,250/12 = $521 in property tax (calculated at 1.25% of value)) = $3,518 mo PIT

$350,000 loan 2010/2011 at 9.75% = $2,997 + ($4,375/12 = $364 in property tax (calculated at 1.25% of value)) = $3,361 mo PIT </blockquote>
I knew this was true, but it's nice to see actual numbers to back it up. Thanks.
 
[quote author="Masterofdamoney" date=1209783081]You should be praying for MUCH higher rates if you are looking to buy in 2010/2011. The higher the rates, the less you'll pay.



And you can always refi later to lower it.



$500,000 loan today at 6% = $2,997 + ($6,250/12 = $521 in property tax (calculated at 1.25% of value)) = $3,518 mo PIT



$350,000 loan 2010/2011 at 9.75% = $2,997 + ($4,375/12 = $364 in property tax (calculated at 1.25% of value)) = $3,361 mo PIT



Now I know these #'s are a little off cause you loan amount and property value will not be the same (HOPEFULLY!) but you get the idea... Always better to buy for less with higher rate, you also get a property tax savings there too!



Now when you go to refi in 2012-2015, it just goes downdowndown from there. The guy with the $500,000 on the same house is probably still underwater or close to 100% LTV at that time, and refinancing does nothing for him unless rates crash to historic lows, which would STILL help you MORE with the smaller loan amount.



Done and done.</blockquote>


Yes, I would love to see 15% rates, and if inflation gets out of control, the FED may do it regardless of the recession it creates. They did this in 1980, and it resulted in 25 years of economic prosperity.
 
Historically, what has happened to wages when inflation hit 10% or 15%? DId wages increases accordingly? I'm curious if companies would actually give large COLA adjustments to wages?
 
Looks like the fed did apply a rather large COLA adjustment to social security benefits between 1979-1982. Wonder how wages compared...



<a href="http://www.ssa.gov/OACT/COLA/colaseries.html">Fed COLA adjustments</a>
 
[quote author="Bubblegum" date=1210222864]Historically, what has happened to wages when inflation hit 10% or 15%? DId wages increases accordingly? I'm curious if companies would actually give large COLA adjustments to wages?</blockquote>


The inflation of the late 70s was fueled by unions demanding higher wages and higher oil prices. Since the power of unions is greatly diminished, it is unlikely we will see significant wage inflation any time soon. Right now, the driver of inflation is the declining dollar causing a dramatic spike in the price of everything imported.
 
Can I just ask why CalGal thinks she has any weight in this discussion? Sorry, just a little ticked about her attittude of knowing so much about everything. I will post in this discussion tomorrow when I have the mental fortitude to do so....In the meantime, you 15% predictors are just nuts. Any idea how much expectations of the future economy have to do with long term rates? Do any of you actually think that we will go back to 7% unemployment as the equilibrium norm?



IR... you seem like a pretty sharp guy, but



"The inflation of the late 70s was fueled by unions demanding higher wages and higher oil prices. Since the power of unions is greatly diminished, it is unlikely we will see significant wage inflation any time soon. Right now, the driver of inflation is the declining dollar causing a dramatic spike in the price of everything imported. "



Inflation was driven by a number of factors, not the unions. They were only asking for wages to keep up with prices... I'm anti union, but I don't blame them for the inflation we saw back then. We can discuss if you wish.
 
[quote author="stepping_up" date=1210244416]Can I just ask why CalGal thinks she has any weight in this discussion? Sorry, just a little ticked about her attittude of knowing so much about everything. I will post in this discussion tomorrow when I have the mental fortitude to do so....In the meantime, you 15% predictors are just nuts. Any idea how much expectations of the future economy have to do with long term rates? Do any of you actually think that we will go back to 7% unemployment as the equilibrium norm?



IR... you seem like a pretty sharp guy, but



"The inflation of the late 70s was fueled by unions demanding higher wages and higher oil prices. Since the power of unions is greatly diminished, it is unlikely we will see significant wage inflation any time soon. Right now, the driver of inflation is the declining dollar causing a dramatic spike in the price of everything imported. "



Inflation was driven by a number of factors, not the unions. They were only asking for wages to keep up with prices... I'm anti union, but I don't blame them for the inflation we saw back then. We can discuss if you wish.</blockquote>


Maybe because CalGal and hubby were smart enough to sell at the top of the market, are now leasing, and are now waiting to buy; unlike some moronic knife catcher.
 
Maybe because CalGal and hubby were smart enough to sell at the top of the market, are now leasing, and are now waiting to buy; unlike some moronic knife catcher



Doesn't give her the right to have some superior attitude about other people, nor does it give it her any credentials for this discussion. Future long term interest rates involve a multidute of diverse and complex factors and I doubt that miss smary pants can really discuss them. Fine, call me a knife catcher, but I can at least have an intelligent conversation about economics.
 
no one knows. if you could have gone back in time and told someone in 2002 that crude would be over $120 in 2008, gold would trade over $1000 and the euro would hit 1.60, but that they could only play interest rates as a way of capitalizing on this knowledge, they would have bought the farm that we'd be at at least 8% on the ten year note now, if not higher. but that isn't what has happened, quite the opposite has.



even with perfect knowledge and anticipation of some trends, it is still impossible to predict how a given market reacts in a given timeframe.
 
Interest rates will rises when the Chinese stop financing the US lifestyle. 35% of the Chinese economy is export related and it causes the most of the environmental and social dislocations. It is fast approaching a zero sum game.
 
The return on shorter term maturity US paper is negative in real vs. nominal dollars. Institutional investors and Sovereign entities will accept losses in real asset value for only so long. (Heck, even my nother is po'ed on her return from US bonds.) They will sell and when they start selling, they all be heading for the same door at once. The UST market is a big door, but not big enough.<p>/<p>

What do you think?
 
The 30 year bond is at 4.57% There is almost no way mortgage rates in two years will be above 7%. You could effectively guarantee a low mortgage then by hedging against the 30 year now.
 
If the credit market improves... since 30 yr jumbos are 7% and 30 yr fixed are roughly 6%....I can't see 30 yr rates be higher than 7.5-8% in 2 yrs.
 
So, is the best advice to take a short term ARM? Or to take the 10/1 or 30-year now? It seems that one thing is for sure, if rates remain in a tight range for the next two years, the housing bust might take longer to work out.
 
[quote author="GrewUpInIrvine" date=1210313301]So, is the best advice to take a short term ARM? Or to take the 10/1 or 30-year now? It seems that one thing is for sure, if rates remain in a tight range for the next two years, the housing bust might take longer to work out.</blockquote>


That's the $60k question.....how long will the bust take.



I can't see the FED raising rates much (even w/high inflation) as the housing market keeps slipping away.



On the other hand, I doubt interest rates will go down much further.



If I were to purchase a home right now, I would buy and lock in a 30 yr.
 
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