WatchWow, most mortgages were only 20-25 years in the 1950's, and they had interest rates even lower than today. Sounds like this generation is going to have much more trouble with debt than the previous ones unless prices come down and incomes go up.
Alan Zibel, AP Real Estate Writer, On Thursday August 5, 2010, 10:47 am EDT
WASHINGTON (AP) -- Mortgage rates dropped to the lowest level in decades for the sixth time in seven weeks, offering the most attractive opportunity for those who qualify to refinance or purchase a home.
Government-controlled mortgage buyer Freddie Mac said Thursday that the average rate for 30-year fixed loans this week was 4.49 percent, down from 4.54 percent last week. That's the lowest since Freddie Mac began tracking rates in 1971.
The average rate on the 15-year fixed loan dropped to 3.95 percent, down from 4 percent last week and the lowest on record.
Rates have fallen since spring as investors seek the safety of U.S. Treasury bonds. That has lowered the yield on Treasurys. Mortgage rates tend to track those yields.
The last time home loan rates were lower was during the 1950s, when most mortgages lasted just 20 or 25 years.
Low rates have sparked some activity in the weak housing market, but not a massive boom in refinancing.
Applications to refinance loans increased 1.3 percent and those to purchase homes increased 1.5 percent, according to the Mortgage Bankers Association.
Nevertheless, high unemployment, slow job growth and tight credit have made it difficult for many to purchase homes. The housing industry received a boost this spring when the government offered homebuying tax credits, but housing activity has plummeted since they expired in April.
The number of buyers who signed contracts to purchase homes plunged in June to the lowest level on records dating back to 2001, according to the National Association of Realtors.
To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
Rates on five-year adjustable-rate mortgages averaged 3.63 percent, down from 3.76 percent a week earlier. Rates on one-year adjustable-rate mortgages fell to an average of 3.55 percent from 3.64 percent.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for all loans.
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toothfairy says
Housing prices were at a record high in 2004.......2005.......2006.....So just because the Titanic is taking on water, doesn't mean it's sunk......yet.
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Jeremy says
One of the most meaningful little words in the English language.
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RayAmerica says
especially for investors.
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Most people in coastal California are signing up for a $1 million trip, when you add up all of the payments. That's a lot of money to rent, for nothing but a place to live.
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schmitz_kris says
Yes.
schmitz_kris says
Absolutely.
schmitz_kris says
Never, which is why I don't fall in with those who make empty negative statements like "the Titanic is going down" or "America is toast" or "Freedom is at a crossroad" or other pithy, neat-o sounding nonsense. I'm partial to facts and figures.
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Nomo just keeps Ray honest. It's like Siskel and Ebert .. with benefits.
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You are confused. The negativity did not precede the facts and figures - it's vice versa. Events in the financial markets CAUSED the negative opinions and sentiment to form, not the other way around.
There is nothing empty about any statement reflecting the seriousness of the present-day US economy. The situation is dire, and that is why money is flowing in the direction it is flowing.
Perhaps you are in possession of positive financial news the markets do not have? IF SO, FOR GOODNESS SAKE PLEASE GIVE IT TO THEM - we would all like to see US equities higher now than in 1998 or so and interest rates at the local bank at 7%.
Why do you think the FF rate is at 0-0.25? Why are we seeing treasury yields like this? Why are we seeing nearly ALL of the indicators that I mentioned (and many more that I did not go into)? It is because the situation is NEGATIVE.
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It also happens to be stable.
The economy is dynamic and self-correcting to a certain extent. Even before the fed, even before national debt and trade deficits, even before the new deal and minimum wages, even before Social Security and unemployment, there were economic depressions followed by recovery.
It's unreasonable to assume that doomsday is here simply because interest rates are low and unemployment is relatively high. Things were much more dire in 1983 and the rebound was pretty quick. Even after 1929, the bottom was reached in less than 4 years and the recovery commenced right after.
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America since 2007 has been following in lock step Japan and their economic malaise. Schmitz is absolutely correct to point out that the Fed Funding rate is near zero for a reason, i.e. the economy is in the tank and continues to be unresponsive to these historically low rates. Japan lowered their rate to zero as well and found out that when people have lost confidence in the economic system, they won't borrow to expand their business no matter how cheap the money is.
In just about every sector, the news is negative but the attempt is made to put a positive spin on things. Example: Obama last week went to Detroit to announce (took credit) that “for the first time in 6 years all 3 American auto companies are turning a profit.” Great news, right? There’s only one problem (actually more than one). That same sector has shed over 1 million American jobs in order to reach this questionable plateau. Questionable because continued profitability is anything but assured. By all accounts, those 1 million jobs will never return. Nomo/Iwog probably views that as a good thing, kind of like the glass being “half full" thingy.
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If the economy is self-correcting, doesn't the constant government "help" only gum things up more?
We're still in the recession, and it has been 2.5 years and counting.
http://www.nber.org/cycles.html
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EastCoastBubbleBoy says
Right on. The Government doesn't solve problems, government is the problem. Ronald Reagan hit it out of the park with that one because it is so full of truth. The TARP money went to the banksters to cover their toxic loans. The American people were told it was all about freeing up the credit markets. What a joke. Granted TARP started under Bush, et all (voted for by McCain & Obama), but it is being managed under Obama. This was nothing other than a money grab from taxpayers to pay off the banks for all their sloppy and often illegal lending practices and their multi-layered derivatives.
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EastCoastBubbleBoy says
No, government helps stop depressions completely. We had one in 1873, we had one in 1893. We had one in 1911. Then we had one in 1929.
So what happened?? The New Deal and progressive taxation happened. For 70 years the banks stopped failing and depressions disappeared. The average American was able to work, afford a home, afford a car, afford a TV, and live a reasonable life.
Then around 1981, someone by the name of Ronald Reagan decided that this country had gone without an entrenched aristocracy for long enough. He started dismantling the New Deal, government regulation, progressive taxes, and tariffs.
Now it's 2010 and the job is complete...........and guess what? A depression!!!!!!! Oh sure technically it's just a very deep recession, but we're just getting started. If you want to know what the United States economy will resemble from this point forward, just examine the 20 year boom-bust cycle that was the norm until the New Deal.
I'm certain things will get going again, just as I'm certain they will fall apart again. The key now is picking the bubbles, and watching what the rich people do to manipulate the world. Do I like it? Hell no.....but then I've never voted for the ultra-rich in this country to pay an average of 16% tax while a waitress must pay nearly 50%. That was sold by the Republicans (and some Democrats) to a nation of suckers who thought they were voting for the right to carry a gun, or against abortion, or some other inane bullcrap that hasn't changed for 40 years.
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I read somewhere that the FED indicated that they would rather err on the side of too much stimulus rather than too little.
So FF rate will not go up until the recovery is well underway.
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toothfairy says
That's what Bernanke promised in his book. He always was a loose money guy.
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EastCoastBubbleBoy says
The economy is not self-correcting.
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I got that Greenspan book as a gift when it came out. Makes a good doorstop.
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Portland, OR
"So what happened?? The New Deal and progressive taxation happened. For 70 years the banks stopped failing and depressions disappeared. The average American was able to work, afford a home, afford a car, afford a TV, and live a reasonable life."
Iwog, you might note that period of 70 years, or really 1945 to 1981 was a period following a world war, a war where the US was the only major industrial nation intact and able to sell sell sell goods to rebuild the war torn countries.
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Madison, WI
The only house I ever owned I purchased in 2000, with a 30-yr fixed rate of 8.5%. (I sold in summer of 2004 and started renting.)
Nothing seems so fundamentally different about the world now that rates couldn't go back to 8.5%. They were in that range for years, and it was no big deal. It would be no big deal again. If it happens, it will drastically cut how much of a loan people can qualify for.
I can't imagine how people with modest net worths can purchase a house now without being afraid of that. I have no idea whether rates are going to rise significantly from their current all-time lows, but it seems very possible. Owning a house now seems like owning a house without insurance against fire.
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AltonS says
I've heard that explanation more times than I can count and I'm sure it has a certain amount of validity to it, however the effect only lasted about 5 years. After 1950 our trade surplus never exceeded 1% of the total GDP. This means that 99% of the GDP was good old American production and consumption NOT the result of exports to the rest of the world.
By the 1960s, Japan and Germany were economic powerhouses in their own right, yet the United States still maintained a high standard of living for workers, bank failures were almost unheard of, and 20-year depressions simply did not happen anymore. We were under a progressive tax schedule, a high minimum wage, and government regulations to prevent abuses of corporate power. Anti-trust was active and effective. Not only did we pay for all the schools, build the interstate system, and fund new government programs but we even had enough spare wealth to conduct two fake wars against communism.
Everything and I do mean EVERYTHING went to hell after Reagan. Tariffs disappeared. Trade laws disappeared. Industry fled the country for slave labor overseas. Rich people discovered they could cheat the income tax by being paid in capital gains. The trade deficit blew up. The national debt blew up. Deregulation caused the Savings and Loans to blow up, and eventually would cause the 2008 depression/recession. 1000% interest rate loans used to land you in prison but thanks to free-market lunatics they became legal. Gambling went from being confined to Nevada and Atlantic city to being in nearly every state in the country. Anti-trust enforcement disappeared. Federal oversight disappeared. Mark to market was invented and quickly allowed abominations like Enron and Worldcom.
During this three decade long disaster, Americans were defrauded into believing things were okay. $10 trillion dollars (1000% of the national debt in 1980) was borrowed and then spent into the economy to keep things moving along, mostly by Republicans. It was not borrowed during a time of crisis like we have now, it was borrowed by people greedy for tax cuts even while we couldn't pay our bills. Social Security was insolvent but no one cared. Medicare was REALLY insolvent but no one cared. People demanded lower taxes and Republicans delivered.
Now the New Deal is gone. Progressive taxes are gone. Government regulation is all but gone. Tariffs and quotas are all but gone. Banks do whatever they want. Wall Street does whatever it wants. Any job that could be outsourced WAS outsourced and now even professionals are suffering. Haliburton took $400 billion in American cash paid to them during the Gulf War and moved their corporate headquarters to Dubai so they wouldn't have to pay any taxes on it. It's a sick twisted perverse little free market dream we've got here, and things fell apart.
No big surprise. Now we find out what life was like before the New Deal. I only hope they don't make it legal for 8 year old children to work in coal mines again.
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iwog says
I commend you sir. You couldn't be more correct.
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iwog says
Talk about negative thinking on steroids. Funny, you blame everything on Reagan. We had 8 years of Clinton. Why didn’t the Wonder Boy change everything back to pre-Reagan days? Why isn’t the “chosen one” doing the same? He has a Democrat House & Senate. It seems to me that should be a relatively easy task to just change things back to the New Deal. Why doesn’t he just do it? He can if he wants to, after all, he coined the phrase: “Yes we can!” LOL !!!
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RayAmerica says
You're wrong, I didn't blame everything on Reagan. I said everything went to hell after Reagan. Clinton had his part to play in deregulation and dropping our trade barriers too.
Why doesn't Obama change things back? Because he can't. You and Clusterfox and your proxies in the Senate wont let him. I mean look what happens when he suggests we can roll back the tax cuts to 1993 and capital gains taxes to 20%? He's crucified. Unfortunately propaganda works, and there are too many Americans who don't realize how much they are digging their own grave.
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I'll rather pay 12% than pay 4% at the current prices in the bay area.
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iwog says
Me? I won't let him? LOL!! Funny thing you keep denying: Obama controls both houses, and you make it sound like Fox and people like me just "won't let him" .... hillarious!! Absolutely hillarious!!
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Iwog .... did public opinion stop ObamaCare? Just curious as to why they pushed, i.e. FORCED that down our collective throats but a "return to the New Deal" is just out of the question. WHY is that??
Maybe Obama should change his "Yes we can" to "Yes we can't."
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RayAmerica says
Obama does not control both houses and I'm not sure why you think it's necessary to lie about it. The Republicans have a nearly 100% filibuster rate and the ONLY legislation Democrats are getting through the senate are bills that have at least several Republicans signing on.
Anyway what point are you trying to make? That things DIDN'T go to hell after Reagan? That the country didn't speed down the road to a laissez faire economy? That you didn't get everything you wanted over the last 30 years and the economy went to hell anyway?
No of course not. Your trite little comment was "OH YEAH? WHY DOESN'T OBAMA FIX IT THEN?"
WTF does that have to do with anything I wrote?
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RayAmerica says
I already told you. Because propaganda has convinced too many people to vote against their own best interest. There are full time WalMart employees on food stamps who can't insure their kids voting to let leeches like Paris Hilton keep a few more million in the bank. Propaganda works. Hitler knew it. Stalin knew it. Rupert Murdoch knows it.
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With 1/8 the US population on food stamps I would suggest doomsday is approaching.
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iwog says
It may appear to you that everything went south after Reagan. I would ask you to look at the real reason we're in the mess we're in now and that is Nixon closing the gold window in 1971 which established the true fiat currency, along with, as you say a "laissez faire" economy. The banks went absolutely wild when that happened. All restraints were removed and the party was on that eventually resulted in the biggest credit bubble in history and its ultimate collapse. Not only did this happen here, its result was felt in every market in the world. Why? Because as the world's reserve currency, the dollar was linked to gold. This was all part of the Breton Woods Agreement of 1944, which effectively linked all other currencies to gold via the dollar. When that was removed, again, the banks went wild. The Fed continued to lower the reserve requirements which further created multi layered derivatives, etc. The end result is that the entire civilized world took part in this historic credit bubble that was all based on the thin air of fiat currencies. If you really want to get technical as to when everything headed south, it is the year 1913 with the creation of the Ponzi scheme knows as the Federal Reserve, which of course is nothing other than an international conglomerate of the ultra rich banking families, i.e. Rothschilds, Rockefellers, Morgans, etc.
I find it interesting too that you appear to blame only Reagan and the GOP. I absolutely do blame them but hold Nixon as the biggest culprit, but this is where you and I part company. I also blame the Democrats as well. My position has always been that both parties are to blame for the mess we are in. Without recognizing that fact, there is no way to ever get out of this.
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robertoaribas's website
what a bunch of economic nonsense! we had multiple balance budget years under Clinton, and a decade of growth, but IWOG which stands for In the World Of Goofballs claims "everything went to hell after Reagon..."
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Yes I would like to buy an overpriced house. But only if it is magnificent and the entry way says "come on in daddy" - well that would be my criteria for buyin an overpriced house - cuz I could - and cuz I can
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I'd rather rent than buy a 600K piece of crap at 4%.
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robertoaribas says
You've got two years of a balanced budget and 28 years of deficit spending. Furthermore the trade deficit was never balanced, outsourcing never stopped, banks continued to become more fragile, and wealth disparity continued to increase.
I credit Clinton with balancing the federal budget but NAFTA and the deregulation bills he signed were horrible for the country and a continuation of Reagan's legacy.
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thunderlips11 says
This I agree with. Debt is almost always bad, and in the 70's and 80's federal and private debt began to grow essentially exponentially. That is the core of our problem, we became a debtor nation and people.
thunderlips11 says
I say let them go, anyone who trades freedom for "security" deserves neither and shall lose both. (btw how to you define "many"? haven't heard of mass migrations to the frozen north)
If you really want to understand when America was at the height of power and prosperity I suggest you look at "The Rise and Fall of the Dollar" posted today by Patrick.
?source=patrick.net
The height of American Power and prosperity in the past 100 years was roughly 1940-1950. After that debt and the warfare-welfare state forced the destruction of the dollar to the point where now husband and wife each working two jobs is often barely enough to get by and consumer and federal debts are crushing us all. In reality presidents and leaders on both sides of the aisle from FDR to present day have been leading America to destruction by debt and debasement of our currency.
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I think something big is happening. Me and 4 other friends that have offered on short sales on different dates, negotiating with different banks, were all responded to TODAY. It's strange. Do they know something that we don't?
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Why is it that every time there is a discussion about the future collapse of the US economy, it's all about finger-pointing and blame-shifting? Does it really matter who caused the problem? Does it matter what policies caused the problem? Does it matter who is in control of the government right now? No! All that matter is that something has to be done about it and soon.
The real story is the total failure of the government to make the hard decisions that will get us out of this mess. It's not a failure of the democrats or the republicans or the president or the supreme court, it's a systemic failure. And by extension, it's a failure of we, the people, because we elect the government.
As Johnny Rotten once said, "No one is innocent." So how about we get over the partisan bickering and start a meaningful discussion about how we are going to solve our problems? How about well-reason and rational suggestions instead of dogmatic bullshit that's been proven not to work? And finally, how about we take JFK's words to heart and "ask not what your country can do for you—ask what you can do for your country." instead of the "me-first" attitude that is rampant in today's society?
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tatupu70 says
The economy IS self-correcting, it's just that the self-correction process generally involves war, death, slavery and servitude, rioting, and eventual redistribution of wealth. In other words, it doesn't self-correct in a nice, happy, conservative pollyannic way.
Liver cancer self-corrects too. The disease spreads, consumes the organism, and causes intense agony until death ensues. The corpse is then fodder for decomposition until entire situation has self-corrected through the carbon cycle. Most folks don't consider certain types of self-correction to be acceptable and prefer judicious intervention.
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I-man says
Unfortunately, the private banksters of the Federal Reserve and the gangsters on Wall Street don't agree with any of that.
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I-man says
It matters because the only way we'll find a solution is to understand what caused it in the first place, and more importantly the only way to sell the solution to the voters is to have THEM understand what caused it.
The solution really isn't that complicated. A return to progressive taxes including a return to treating capital gains and dividends as income. A return to trade barriers including removing 3rd world nations from favored nation status. We also need most of the New Deal banking regulations put back and we need to go back to enforcing anti-trust laws that are already on the books. Finally we need a controlled devaluation of the dollar so the Chinese don't hold an axe over our head.
These are the only true solutions, but they are impossible solutions. Obama wants to return taxes for the top tax brackets to what they were in 2000. He also wants to tax capital gains at 20% instead of 15%, and I assume he wants to let the estate tax return.,
For this and other minor moves in the right direction he's called an evil Marxist by the right wing propaganda machine. Too many Americans have accepted these lies and now I doubt we're going to see any reforms at all before the Republicans reassert themselves in congress.
There's going to be a recovery, and then a depression far worse than the one we've just experienced. At that point the nation goes in one of two directions:
1. FDR type Democrats will take over again, and this time a thoroughly beaten down people will finally accept needed reforms.
2. The aristocracy will be too powerful. Through propaganda and changes to election laws, they will permanently change this country into a plutocracy. You're either born with money, or you're born to work for those with money. The standard of living for all workers will be bare sustenance and the revolution of 1776 will be over. Nobility will be back in charge.
This may sound partisan but it's not. It's gospel to any economist alive in 1933, in fact it formed the basis for ALL United States economic policy from 1946 to 1980. Every free-market revision since is nothing more than a lie created by rich people to sell the country back into slavery. It just happens that more of these people are Republicans than are Democrats, but the truth is the truth no matter who wants to spin it to a political advantage.
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Both parties and all Americans think alike. From Liberal bay area residents to Redneck Texans. Their views are all identical. From the most liberal to the most conservative. Everything we do is hair splitting to differentiate them.
If you want to see different values and systems go to the remote mountains of Pakistan or Afghanistan. Those are different cultures. Those people have different views.
Our problems will correct themselves when they become emergencies. We're good at dealing with emergencies. Everything else is ignored. If we didn't ignore it, then every person on every street corner would be out there promoting their beliefs and what is wrong and we would be trying to "fix" ourselves. We only fix ourselves when it's an emergency, but when there are claims of said emergency, not when we appear to be heading towards said emergency, but when we're actually there.