A worsening picture for housing markets
Posted by Frugal on October 20th, 2008
I just checked the mortgage rates over the weekend. Just before the stock markets start to drop 7% everyday, the rates were pretty good at 5.875% for 30 years, and 5.375% for 15 years. Now the rates are about 6.25% for 30 years, and 6% for 15 years-fixed.
Housing markets are going to be so dead if rates continue to go up. Unfortunately, with the printing press at full steam at Federal Reserve, the long term treasury bond yields have been creeping up. If the monthly new purchase of 40 billion toxic mortgages by Fannie Mae and Freddie Mae cannot alleviate this situation, I think stock markets going forward will have quite a bumpy ride.
Boy, I really hate to believe that we may be into a depression, but rather a stagflation/high inflation era. But hope is just NOT an option right now.
Scary times indeed.
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October 20th, 2008 at 5:35 pm
I on the other hand think that housing markets are getting better and better. With each price drop they are becoming more and more affordable. Soon the median house will even become affordable to the median household!
The less people spending on housing the better. I’d much rather people were spending 25% of income on housing and the rest on other things (good for a diversified economy) than 60% of income on housing leaving not much for anything else.
October 21st, 2008 at 5:37 pm
Stagflation is “high inflation” with no economic growth. We have economic growth, why does everybody think we don’t?
See?
I’m kind of getting tired of people using economic terms all out of whack.
What we have now is a screwed up post-housing-bubble financial market, which of course can throw us into a recession, or stagflation, or a depression (but hasn’t). We need some new terms rather than redefining current ones.
October 21st, 2008 at 6:02 pm
Now that a fair share of companies have reported earnings, I don’t think the economic situation is all that gloomy as depicted to be. In fact, the majority of s&p 500 companies have met or exceeded analyst estimates in most sectors besides energy, basic materials and retail. With Obama becoming the likely president, it is increasingly probable that a large stimulus package will be passed along with an alternative energy (next bubble?) infrastructure program to generate jobs. Combined with dovish comments from the Fed and a diminishing outlook on inflation, another rate cut may be in the cards as well.
We’re also in an extremely oversold condition with an important election around the corner. And seeing how the market is 35% from the highs,it may be good time to start rebalancing the portfolio and putting new cash to work.
October 21st, 2008 at 8:02 pm
wow! Gloom and doom!
Yes – the market is likely in for a bumpy ride in the next few quarters. My primary concern is not about depression – which appears to me to be completly unlikely – it is about inflation and a strong decline in the value of the Dollar, which is why I am increasing the weight of our international investments.
October 22nd, 2008 at 10:06 am
Same thing in Canada. Prime is dropping but mortgages aren’t. My unsecured line of credit is lower than a mortgage!
October 22nd, 2008 at 8:58 pm
housing will worsen in California because of tougher lending requirements. 20% down payment and income verification will put a lot of buyers out of the market