so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

[cjppjc]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

It pays for itself in 13 months. Definitely worth it for us. As we were only 4 months into our loan, we didn't significantly extend our loan either.

It definitely made sense for us. The place is within walking distance to my office, bus stops and stores. Quiet neighborhood. It has enough of a yard for a small garden. It is small, so the heating cost is cheap. It isn't a glamorous place but we bought planning to stay as long as possible.

Good for you. Very well done.

[nero3]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

If the fed buys them, and peg them, it's something I think they will only do if deflation is a very big threat, like in Japan, when they did this between 2001 and 2006. I certainly don't think they will buy them unless it is needed to spur some inflation, and right now it seems they already have inflationary pressures, maybe so great that they instead have to hike short term rates.

[Jay]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

Are you renting a house now, or an apartment? If you're renting an apartment, then possibly renting a house will buy you some time.

It's a house ASH and a nice one too. It was just rebuilt, has a new roof, windows, electric, insulation plumbing, baths, kitchen, you name it. I save a ton each month on the difference between the mortagage, tax, and insurance equivalents for a similar home in the same area. The energy savings in a well insulated, smaller home are a bonus. It is a bedroom short of our luxury wants but suits our needs well at the moment. We just can't have guests over the way we would like, which is something we try to do often. That and it is in the slightly less desirable, but still safe and nice section of town. We have some traffic of "sketchy" people which would be cut down in another place and have had three minor incidents in the neighborhood in three years; a car break in, my wife had her gas siphoned, and a neighbor caught someone trying to take her bike out of her garage. The neighbors are great.

I won't be able to push things much longer I am afraid.

[Jay]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

This inflation play idea seems obvious to me but I have not before seen it mentioned on the tulip. There seems to be almost a moralistic hatred of debt on these pages. But surely it is rational to have debt at a fixed interest rate if you are expecting inflation. I see reference to negative real interest rates often. So congratulations for taking advantage. But you may attract the wrath of many a tuliper....

I have a giant school loan at 2.85% that I am sitting on.

[ax]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

I have a giant school loan at 2.85% that I am sitting on.

When I consolidated my loan a few years ago, Sallie Mae promised me a decrease of 1% if I paid my loan for the first 36 months. I wonder if they'll honor that now?

[big67]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

Now you got there.

30 years 5.51% (Bloomberg present time)

(previous month 4.98% ... ouch!)

[zoog]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

Now you got there.

30 years 5.51% (Bloomberg present time)

(previous month 4.98% ... ouch!)

Here's a Bloomberg story from yesterday

June 8 (Bloomberg) -- Yields on Fannie Mae and Freddie Mac mortgage securities climbed to their highest since Nov. 24, the day before the Federal Reserve announced plans to buy the bonds to drive down interest rates on new home loans.

Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds rose 0.15 percentage point to 5.05 percent as of 4 p.m. in New York, according to data compiled by Bloomberg. That’s up from 3.94 percent on May 20.

The Fed’s mortgage-bond purchases will likely slow, not increase, according to Wachovia Capital Markets LLC debt analysts led by Glenn Schultz in Charlotte, North Carolina.

That’s partly because its bid to hold down loan costs is meeting with “limited success” and partly because “if it tries too hard, we believe the Fed could create a situation in which the private market has a harder time adjusting once government support is withdrawn,” they said in a June 5 report.

The analysts predicted spreads on home-loan securities will continue widening, and that “the housing market likely can withstand modest increases in mortgage rates and still sustain its recovery,” based on measures of the affordability of homes for buyers at current prices and loan rates.

[FRED]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

Here's a Bloomberg story from yesterday

From MSM Money site:

[big67]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

From MSM Money site:

So you get the low prime rate if you basically do not need a mortgage.

So it is easy to predict that the housing market is in for a second leg down, once the seasonality effect (the spring-summer buying season) will subside, unless a sustained economic rebound takes firm footing in the next 3 months or so...

[Nero]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

I just refinanced to a 30 year @ 4.375 on 175K and the costs were 6k.
I had a 15 year bi-weekly @6.0 and the 900.00 every 2 weeks were too much stress for someone on only commission.
my payment went down to 1250.00 per month including taxes and insurance.
141k went in to pre 33 Swiss 20 Francs (gold coins) back in oct 08 when I originally took out the first mortgage and now they are worth 167k.

[loweyecue]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

These charts are great, but has anyone actually tried to refinance lately or buy a house? If you actually pay your debts like I do, you will be told that you're last in line to refi behind the millions of dead beats who are delinquent despite the announcement of $9 billion in programs for people like myself (even with my mortgage having been bought by Freddie last we checked). Buying a house at these rates is also impossible without paying points I'm told by friends in the mortgage business, which of course, eliminates most people immediately who can barely afford the nut of the down payment to begin with.

Yes, I pay my debts and I just closed my re-fi. I had let my ARM loan reset and it settled 0.250% above the original loan in March. But I didnt feel safe about rates being low very long so I applied in March and closed last week! It took me a while to find a loan without points and I had to get it from a credit union. Forget banks unless you are ready to pay 0.5 -2.0 points up front. Kinda defeats the purpose of a loan to me, pay the interest up front bleah!!

I also took enough money out to pay off a car loan but now I am thinking I may pay off part of it and hold on to the rest of the cash. I don't have a great cash cushion, so this would help a bit. All said and done, I am good for another 30 years at 4.875%

Now if treasury rates really start going up, I can reinvest the cash from the loan into those as long as they exceed the rate on my car loan.

[nero3]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

The idea of the fed not hiking short term rates are starting to look less and less realistic.

[ASH]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

The idea of the fed not hiking short term rates are starting to look less and less realistic.

Any takers for the notion that the Fed won't hike short term rates as long as job losses continue? It would be a difficult policy to explain to the public at this point, because for years the simplistic narrative transmitted by the MSM has been "low rates = more jobs". If it happens, it would be a good measure of the political independence of the Fed... or possibly the magnitude of their concern.

[nero3]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

Any takers for the notion that the Fed won't hike short term rates as long as job losses continue? It would be a difficult policy to explain to the public at this point, because for years the simplistic narrative transmitted by the MSM has been "low rates = more jobs". If it happens, it would be a good measure of the political independence of the Fed... or possibly the magnitude of their concern.

I think the yield curve is similar now to late 2001/ early 2002, and around mid 2003.

There is for certain similarities to the era around 1977, and even around 1981, 1992, and a slight to 1998.

I am thinking 1977-1978, could be where we are headed. I think bernanke want to count the beans, before they hike rates. How long that might take, I don't know. The CPI should increase before they hike.

If the fed hikes rates, then they must be going for a double dip recession, like when they hiked in 81, however it just seems to early. I think Friedman is wrong in his video. I think the economy needs periods of inflation, to lay the foundations of the prosperity during the deflationary periods. So far we seem to be halfway through, and not yet at the other end, however that could turn out to be wrong.

[ThePythonicCow]

Re: so... when do 30 yr mortgage rates hit 5.5% and then what for housing?

Any takers for the notion that the Fed won't hike short term rates as long as job losses continue?

Not me. I'll avoid wagering any actual money either way, but I'd rather expect a modest short term rate increase. They'd do this not so much out of real independence or concern, but rather to duck the tsunamai of blame they expect to well up as things take another turn for the worse. They might even do something else at the same time, like tweaking reserve ratios or something more obscure, to nullify the affect of the rate increase. Take with one hand (publically) while giving with the other (privately).