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FED to Hike Rates to 7% by mid-2011....


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2009 Aug 11, 12:32pm   13,040 views  54 comments

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http://www.cnbc.com/id/32372518

We think we’ll be at 5 percent by the end of 2010 and continuing higher into 2011,” she said. “The Fed is going to be very cautious to make sure the economy is on solid footing before they hike.”

In the meantime, Lekas said the Fed would have already begun to raise interest rates if it weren’t for Bernanke’s tenuous position re being reappointed.

“We do think they’ll signal that they’d like to raise and probably begin so toward the end of this year,” said Lekas.

“We think the Fed will take [interest rates] to almost 7 percent by the second quarter of 2011. That’s based on weak GDP and continuing deterioration of the dollar, which is inflationary.”

************

I’ve heard lots of housing bottom predictions for 2011-2012… Anyone with a brain that needs to sell their house in 5 years or less… NEEDs to sell NOW and sell at a reasonable price… OTHERWISE they’ll be taking a much bigger loss in a few years when interest rates rise.

If the FED hints at this interest rate rise... and the news gets out… Prices should start falling hard this Fall....

#housing

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1   Jeremy   2009 Aug 11, 2:22pm  

No chance, period.
Interest rates will be continually manipulated and maintained at an extremely low level. At least through the entire Obama Administration. After that, who knows. But there is 0% chance of hyperinflation (or any inflation for that matter), and 0% chance of the fed raising interest rates any time in the next 3 years. In fact as there is no limit to Obama's manipulative debt enslavement forced on all Americans, new and greater incentives will be given to buy stuff, use credit and give up our freedoms, look for more government incentives to buy cars, buy houses, use credit cards, get loans, etc.... 8,000 for first time homebuyers?? Instead of expiring, my guess is something like 10 - 15k "tax incentive" for buying a house, whether you're a first time home buyer or not.

2   Jeremy   2009 Aug 11, 2:25pm  

I would look for that "tax incentive" sometime in November. If nothing else, it's a sure thing that the first time home buyer tax credit will be extended indefinitely. Also, depending on the remaining response to cash for clunkers, I would expect that to be extended as well.

3   zzyzzx   2009 Sep 2, 5:19am  

I would love to see 7% interest rates, but it's not going to happen by then. Maybe if the Chinese dump all their USD reserves, or something.

4   homeowner_for ever_san jose   2009 Sep 2, 6:46am  

Interest rate will be raised when housing will start to recover. and it will be done in a way which makes sure that housing does not go lower due to inerest rate hike.

5   P2D2   2009 Sep 2, 7:35am  

homeowner_for ever_san jose says

Interest rate will be raised when housing will start to recover. and it will be done in a way which makes sure that housing does not go lower due to inerest rate hike.

What were the interest rates in past two years? Did it stop housing from sliding down? But yes, rapid hike in interest rate will make thing worse and Fed is unlikely is going to do that.

6   dont_getit   2009 Sep 2, 8:41am  

I want the higher interest rate as well, this helps me in two ways:
1) to bring down the house price and
2) Get good return on my saved money(currently getting 0.5%)

But, its not gonna happen, we all know that will be the last thing Ben would do. Sigh.

7   Patrick   2009 Sep 2, 9:22am  

To bring down housing prices and let you get a good return on your saved money might liberate you from a lifetime of doing what your boss says. That cannot be allowed.

But even if it happened, without health care reform you are always just one illness away from bankruptcy. So they can take everything you ever saved, and your house. Even if you have insurance (50% of policies are rescinded if you make large demands on them).

So you're a slave then too.

Two things must happen to liberate you:

1. an end to the Federal Reserve system
2. universal health coverage (no cost for that if you pay taxes instead of premiums)

8   marcus   2009 Sep 2, 6:21pm  

In fact, the fed doesn't set the prime rate, but they sort of do do indirectly. They set the fed funds rate. But they also enter into the treasury market buying or selling short term treasuries. Ultimately what they do is very convoluted, and too complicated for most to comprehend.

As for long term rates (such as mortgage rates) that is really determined by the market for long term securities (treasury bonds, mortgage backed securities) and there have been times when the fed lowering rates was percieved to be so infationary that long term rates went up. So historically the fed doesn't really have a way of determining long term interest rates. Except for now, when they actually enter into these long term securities markets because they feel they need to, to prevent disaster.

9   marcus   2009 Sep 2, 6:59pm  

Patrick I usually agree with most of what you say. E.g. I thought you were right on in "The psychology of American Fascism." But the cynical sort of "it's because 'they' want to keep you a slave," I don't buy. That is the net effect, but I don't see that as the intention.

They aren't going to allow prices to come down as much as the market would take them, because that would be an unparalleled disaster to too many, and a perceived disaster to so many other real estate owners. Really it's just that everyone screwed up, including the bankers in the belief that real estate values would stay up (relatively high). It's a new world where we don't inflate wages, when we (or they) are virtually trying to inflate everything. Assets were inflating like crazy from the credit bubble, but wages weren't because of cheaper labor elsewhere.

Maybe that's an oversimplification. But there are many interests being protected when prices are artificially held up now. Or maybe it's just using artificial means to prevent them from overshooting the downside due to the lack of credit market functioning and so on, and also due to a negative feedback loop of more and more people being so far under water that they walk.

So they prop it up. Funny how people don't get easily bothered by markets over doing it to the upside. That's just another example of the beauty of free markets. But over doing it to the downside ? That's another story. Actually understandable when everyone is so leveraged.

Anyway, I just can't get behind the conspiracy idea that the bankers or whomever needs to keep us enslaved to get more work out of us. When you look at the majority of the 7 billion people in the world, I would say at least 5 billion of them get far less for their work than we do. And I think it's by looking there, to the rest of the world, that one can understand the pressures (toward some kind of equilibrium in the long run) that unfortunately but naturally put some downward pressure on our average standard of living.

10   StillLooking   2009 Sep 3, 1:24am  

The Federal Reserve directly effects mortgage rates when they buy mortgage backed securities from the banks.

11   knewbetter   2009 Sep 3, 9:09am  

So,,,,,,,,,, its low interest rates that are keeping us slaves? What happened to the other way around? If money was worth something again the evil overlords will just pay you less.

Face it people: Buying a house is taking a risk. Some of you are just too chicken.

12   homeowner_for ever_san jose   2009 Sep 3, 9:39am  

lets take these two hypothetical cases:

assuming a home is 120K and people who live in that home can afford $1000 mortgage.

lets assume we only have interest only loans ( just to explain my point)

case1 : 10% interest

monthly mortgage = 1000 dollars

home owners can payoff 120k when they accumulate money.

case2 : 1% interest

monthly mortgage = 100 dollars
so prices will shoot up 10X over time such that monthly mortgage is again = 1000 dollars
The limiting factor is mortgage affordability so prices shoot up till they are limited by affordability.
final house price (10X) = 1.2 million

the home owners can never pay it off.

bank will get interest of 1000 both in the first case and the second case...doesn't change for them.
The only people who benefit are the one's who bought at 120K and sold at 1.2 million to the bag holders !!
real estate agents/NAR/mortgage brokers/county-revenue benefit beause thier fees increase.

13   Clara   2009 Sep 3, 12:23pm  

I agree with homeowner_forever_san jose as well. Government will manipulate housing price in order to credit an illusion of wealth for the American people, when in fact, most homeowners are just long-term renters from the bank (slaves of debts).

"Interest rate will be raised when housing will start to recover. and it will be done in a way which makes sure that housing does not go lower due to inerest rate hike."

14   Austinhousingbubble   2009 Sep 3, 12:47pm  

Who you calling chicken, turkey?...

The evil overlords (admit it! Bernanke would look great in a black cape) decided that trying to cut the public off cold turkey from the high fructose diet it enjoyed over the last decade was not in the best interests of the economy, and decided instead to ween the public from their over consumption and addiction to easy money by gigging the interest rate and flooding the market with boondoggles, thereby supplying a sort of placebo to the boom years, (which were just as illusory) but in this case, a placebo just as toxic and ultimately as fatal as the drug.

In the final analysis, we're going to see a very much diminished standard of living for the middle class because of all this, and that's the sunny version of things. You don't have to be yeller to be able to read the writing on the wall.

15   Austinhousingbubble   2009 Sep 3, 12:51pm  

...and while we're at it, the evil overlords ARE paying us less. Welcome to stagflation!

16   Indian   2009 Sep 3, 4:01pm  

CA_Spider says

Two things must happen to liberate you:

1. an end to the Federal Reserve system
2. universal health coverage (no cost for that if you pay taxes instead of premiums)

Ahhh.. Yes..
We will be “LIBERATED” with Ghetto Healthcare from the Federal Government! Amen on the Stupid ****ing Post of the Day!

Why settle for other services from Federal Government then....like Fire Department and police...I am sure police services should be better for those who have more money....I mean how can the law and order be socialist..Shouldn't rich be able to summon police faster.... ?

17   cashmonger   2009 Sep 3, 4:47pm  

To bring down housing prices and let you get a good return on your saved money might liberate you from a lifetime of doing what your boss says. That cannot be allowed.
But even if it happened, without health care reform you are always just one illness away from bankruptcy. So they can take everything you ever saved, and your house. Even if you have insurance (50% of policies are rescinded if you make large demands on them).
So you’re a slave then too.
Two things must happen to liberate you:
1. an end to the Federal Reserve system

2. universal health coverage (no cost for that if you pay taxes instead of premiums)

Am I missing something here? After reform, wouldn't that then bankrupt the government (i.e. all taxpayers) when enough people have a serious illness? Sounds contradictory to the documented distaste most of us on this site have towards taxpayers footing the bill for the millions of housing "illnesses".

18   marcus   2009 Sep 3, 6:10pm  

It wouldn't bankrupt the government.

Medicare already pays for the most expensive end of life care for everyone that makes it beyond 64
years of age. This is something like two thirds of what this country spends on health care. If we had
"medicare for all" to pay for major medical and hospital stays etc, along with private supplementary
insurance or HSAs (health Savings Accounts) provided by employers, maybe also high copays to
keep people from wasting doctors time, it wouldn't cost that much more in taxes.

It would be a far better deal than what we get with the insurance companies.

But those same insurance companies and those who wish to see Obama and the democrats fail refuse
to comprehend what would otherwise be obvious.

Maybe as a clue consider that we are the only country that does it this way, and yet all of our health statistics are far from number one. Probably not even if you just considered only the rich.

Wake up right wingnuts !

19   marcus   2009 Sep 3, 6:11pm  

Not sure what happened on my formatting there.

20   knewbetter   2009 Sep 3, 9:23pm  

Some Guy says

knewbetter says

So,,,,,,,,,, its low interest rates that are keeping us slaves? What happened to the other way around? If money was worth something again the evil overlords will just pay you less.

Face it people: Buying a house is taking a risk. Some of you are just too chicken.

Did Patrick say ANYTHING about interest rates in that post? Are you too stupid to read and comprehend?

I didn't know I was reading from a script. Why don't you tell us all what to say so you don't get lost in the conversation. Or maybe you're just upset because I'm cheering in the wrong section?

You're posts suck.

21   cashmonger   2009 Sep 4, 12:26am  

marcus says

provided by employers

"provided by employers" = your wage going lower

Some Guy says

If you’re worried about the financial state of the government, I’d suggest we stop giving trillions of dollars to banksters and then get the fuck out of Iraq

I couldn't agree with you more. While we are at it, lets get the hell out of Afghanistan as well.

I find it interesting that while nearly zero of us trust our government with financial matters (i.e. them bailing out banks), a large segment of people here want to trust the government with their health care. The current situation in health care needs to change - much like the situation in housing should have changed back in 2003-2005 when things were out of control, but Barney Frank and his cronies said, "There is no bubble." It is a mind-numbing tit for tat, back and forth between these two parties and their ideals.

22   Patrick   2009 Sep 4, 12:46am  

BTW, badraig == Patrick. I use badraig sometimes for testing.

Another user deleted: CA_Spider is gone, with all his posts and comments for this insult:

"Amen on the Stupid ****ing Post of the Day!"

So again, to be clear, the rule is no insults. You can express any opinion you like, as long as you do it politely.

23   Patrick   2009 Sep 4, 1:09am  

marcus says

Anyway, I just can’t get behind the conspiracy idea that the bankers or whomever needs to keep us enslaved to get more work out of us

To be honest, I agree. I don't think there is any explicit conspiracy. But I do think there is a kind of naturally-evolved conspiracy which happens without any need for people to whisper to each other, where the rules subtly chage to benefit banks because they have the political power to keep bending the rules to their interest. So to speak.

24   pkowen   2009 Sep 4, 1:52am  

BTW, badraig == Patrick. I use badraig sometimes for testing.
Another user deleted: CA_Spider is gone, with all his posts and comments for this insult:
“Amen on the Stupid ****ing Post of the Day!”
So again, to be clear, the rule is no insults. You can express any opinion you like, as long as you do it politely.

Thank you Patrick. I wonder how many such raging attacks would occur if this were face to face? Some people are very big and tough - from behind a keyboard. Then again, in the past week I have been almost run off the road twice by dudes in huge trucks w/lift kits and monster mudders, and then flipped off and yelled at for having the audacity of existing on the same road.
There are some angry little people out there.

25   Mikejay   2009 Sep 4, 2:03am  

homeowner_for ever_san jose says

lets take these two hypothetical cases:
assuming a home is 120K and people who live in that home can afford $1000 mortgage.
lets assume we only have interest only loans ( just to explain my point)
case1 : 10% interest
monthly mortgage = 1000 dollars
home owners can payoff 120k when they accumulate money.
case2 : 1% interest
monthly mortgage = 100 dollars

so prices will shoot up 10X over time such that monthly mortgage is again = 1000 dollars

The limiting factor is mortgage affordability so prices shoot up till they are limited by affordability.

final house price (10X) = 1.2 million
the home owners can never pay it off.
bank will get interest of 1000 both in the first case and the second case…doesn’t change for them.

The only people who benefit are the one’s who bought at 120K and sold at 1.2 million to the bag holders !!

real estate agents/NAR/mortgage brokers/county-revenue benefit beause thier fees increase.

You're leaving out higher property taxes and homeowners' insurance premiums. They put limits on how high real estate prices can go. Eventually, you'd get to a point where your taxes and insurance cost another $1,000 a month or more.

26   Mikejay   2009 Sep 4, 2:11am  

masayako says

I agree with homeowner_forever_san jose as well. Government will manipulate housing price in order to credit an illusion of wealth for the American people, when in fact, most homeowners are just long-term renters from the bank (slaves of debts).
“Interest rate will be raised when housing will start to recover. and it will be done in a way which makes sure that housing does not go lower due to inerest rate hike.”

And I agree with the others that you'll see the homebuyer tax credit extended past November. I think the Obama administration will keep that quiet for now, so as to let the pressure of the deadline work its magic, but I think we'll hear about the program being extended, probably sometime this November.

27   MAGA   2009 Sep 4, 3:25am  

chrisborden says

I will never fathom Americans’ zeal for debt slavery, and the government is doing and will indeed do all it can to facilitate it, even if it means destroying the country. Looks as if that strategy is working just fine. So many dumb people…

I have always lived a conservative life style. I look for discounts and don't need the latest and greatest. My co-workers kid me about my cell phone (NOT an iPhone) and my 8-year-old Honda Civiic (35 MPG) when they are all driving sports cars.

Hey, I'm debt free, have money in the bank, and both my car and house (Texas) are paid for, My military pension kicks in late 2012 and I have an IRA.

Who is laughing now?

28   Patrick   2009 Sep 4, 4:15am  

Me too. No debt, no credit card interest, I pay cash for a used car when the old one dies. I got a used iPhone (thanks Craigslist!) that's been unlocked so I can use it with my cheapo TMobile account. Money in the bank. Quite a while to go before retirement, but I think it will work out OK.

pkowen says

There are some angry little people out there.

So true. I wish they could see how their anger is being used against them in politics. I bet most of them are in debt, and that's part of the anger, but it's not totally clear.

29   LowlySmartRenter   2009 Sep 4, 5:33am  

Excellent post Some Guy.

30   pkowen   2009 Sep 4, 6:38am  

Some Guy says

cashmonger says


marcus says

provided by employers

“provided by employers” = your wage going lower
Some Guy says

If you’re worried about the financial state of the government, I’d suggest we stop giving trillions of dollars to banksters and then get the fuck out of Iraq

I couldn’t agree with you more. While we are at it, lets get the hell out of Afghanistan as well.
I find it interesting that while nearly zero of us trust our government with financial matters (i.e. them bailing out banks), a large segment of people here want to trust the government with their health care. The current situation in health care needs to change - much like the situation in housing should have changed back in 2003-2005 when things were out of control, but Barney Frank and his cronies said, “There is no bubble.” It is a mind-numbing tit for tat, back and forth between these two parties and their ideals.

Why does everything have to be partisan? Can you not look at a situation and use your own brain to decide if it’s a good idea or not, like I do? You don’t HAVE to go along party lines on everything. I don’t. I part with the democrats when they say it’s necessary to bail out the banksters. Why can’t you look at healthcare, see that it needs to be fixed, and part with the republican line that says, “Let’s just oppose anything Obama is in favor of and keep our system the same even though it’s broken.” Instead you, almost reflexively, mention a democrat. Believe me, I’m no fan of Barney Frank, but were “he and his cronies” the only ones who denied the bubble? Really? There weren’t ANY republicans who denied the bubble?
Unless you are in favor of total anarchy, I think it’s hypocritical to say that you are against ANYTHING the government does.

I heard a snippet of an interview with a journalist who interviewed and wrote something on Paulson (ex-treasury secretary). Guess who Paulson thought were the best politicians to work with? Nancy Pelosi and Barney Frank. This made me pause with regard to all three of these people.

I am neither crazy against any of them, nor a fan. I am with Someguy on this one - I go by the issue and the policy and tire (beyond sick of it) of the knee-jerk partisanship. Let's fix policies and speak to our values and issues. I know, rationalism, it's a foreign concept nowdays. Interestingly, it sounded like Paulson of the Bush admin and Pelosi and Frank of the 'liberal' side were willing to work together in a crisis. Nice if that were true, and nicer if that were true for some critical mass of the populace and our elected officials.

The latter certainly is NOT true, as far as I can tell.

31   ch_tah2   2009 Sep 4, 4:02pm  

zetabeos1 says

Listen to the Democrats mislead, distort, and otherwise lie about the Iraq War. The party of appeasement and defeat eschews democracy in favor of hypocrisy.

Wasn't the justification for the Iraq War by George W. that we are spreading democracy in the Middle East (after the whole WMD thing fell apart)? And then didn't Palestine democratically elect Hamas as their controlling government? And then didn't George W. say that we wouldn't recognize them because of who they elected? Talk about hypocrisy...

They are all liars and hypocrites in government at this point, and they are the same party. If the bank bailouts didn't teach you that (started by Bush/Paulson and continued by Obama/Geitner), I guess nothing will.

32   cashmonger   2009 Sep 4, 4:19pm  

First time I've ever been called a wingnut. Read my other posts (cream of) Some (young) Guy, I am the fuck who is paying $15k a year for health insurance for my family and am sick of it. I want reform - more than you realize. So far I have not been sold as to how the current proposals are going to make things better. I'm hearing some good things, but nothing great just yet. I mentioned the political parties for one reason alone - both contradict themselves in the various positions they take.

33   cashmonger   2009 Sep 5, 2:35am  

Some Guy, with all due respect, you might need to get a life if you are on this forum at 3 a.m. on a Saturday morning (I do realize that the bars close around 2 a.m., so this makes a little sense). Let me spell it out for you - "George W. Bush and his cronies", "Bailout Ben and his cronies"...I don't give a shit which party they are in, there are distinct clusters of fucks in our goverment setting policies that end up hurting us.

I'm waiting with baited breath to hear something that makes sense for health care. I WANT HEALTH CARE REFORM. I am getting fleeced. I think that the discussions need to continue and not get pushed through overnight.

Some Guy says

Um, you didn’t mention “the political parties”,

"It is a mind-numbing tit for tat, back and forth between these two parties and their ideals." This is a copy and paste from the same post that I mentioned Barney Frank. You are reading what you want to read.

34   homeowner_for ever_san jose   2009 Sep 5, 4:37am  

Bap33 : you are looking for true ( real) reform which will benefit everybody... you are at the wrong forum ( infact in a wrong country)
Everybody here wants a reform which benefits ONLY them. democrats for the not-have's and republicans for the have's.

35   cashmonger   2009 Sep 5, 12:40pm  

Some Guy,

To the casual observer, you come across as angry and sensitive as the "wingnuts" that you and I both despise. What could I possibly say to get you to understand that I AM NEITHER A REPUBLICAN OR A DEMOCRAT?

W (little Bush) was the worst thing to ever happen to this county. PLEASE MAKE SPECIAL NOTE THAT THIS IS A "REPUBLICAN" THAT I AM BASHING.

Barney played a very big role in setting policies that blew (pardon the pun) up the housing bubble. Maybe it is the word crony that you have a problem with - the definition of crony is simply "a close friend especially of long standing". Frank and then Fannie Mae executive Herb Moses were having sex with each other while Frank shaped policies that fed Fannie its business. This kind of stuff has gone on since the beginning of time, so I'm neither gay bashing or taking a moral stance here. And we all know how good Fannie and Freddie have been to the housing situation, but I am Monday morning quarterbacking here. It is human nature to look for someone to blame, but at the end of the day it is futile...so I will try hard to not waste my time anymore.

Lastly, did you really mention Rush? Ha! I flipped through the radio the other day and heard that fat, babbling, druggie talking and immediately changed the station back to NPR.

36   cashmonger   2009 Sep 5, 1:34pm  

Good point. I've only showed this thread to one other person - not quite enough to make such a general statement. Enjoy the rest of your weekend. I hope yours is as action packed as mine is about to be...I'm signing off to have some hott sex with the mrs - taking full advantage of having the kids stay at the grandparents house tonight. (Enter porn music.) A good sense of humor conquers all.

37   P2D2   2009 Sep 5, 1:46pm  

Stop, stop stop. We don't want to hear anything more. :)

38   lviars50   2009 Sep 6, 11:55am  

100% CORRECT
Well Said
Lois

To bring down housing prices and let you get a good return on your saved money might liberate you from a lifetime of doing what your boss says. That cannot be allowed.
But even if it happened, without health care reform you are always just one illness away from bankruptcy. So they can take everything you ever saved, and your house. Even if you have insurance (50% of policies are rescinded if you make large demands on them).
So you’re a slave then too.
Two things must happen to liberate you:
1. an end to the Federal Reserve system
2. universal health coverage (no cost for that if you pay taxes instead of premiums)

39   Okigan   2009 Sep 6, 1:43pm  

Hey Patrick,

does (your) new forum system allow to mark a poster friend/foe (see slashdot.com for example)?

With all the flame wars i'd like to turn off some posts(ers) automatically
(i am sure some others as well)... and later on you could run some interesting stats.

-Okigan

40   Patrick   2009 Sep 6, 3:14pm  

Good idea. I'm also planning on a "rude post" link for each comment, where I can get notified that someone needs their account deleted...

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