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Hurry! Hurry! Because Mortgage Rates are Going...
invite response
2010 Oct 8, 4:37pm 22,199 views 86 comments
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That looks like some kind of price index. Are there actual numbers somewhere?
That looks like some kind of price index. Are there actual numbers somewhere?
Yes its a price index and is fairly approximate to prices as well.
You would have seen prices in say 1996-97 for a home for 225K or so.
Same home went to 450K by 2000 and then 650K by 2006. Same home! Seen
similar homes today down to 500K.
So now what the price inflation of 100% as it relates to 1998-2000 years ?
That looks like some kind of price index. Are there actual numbers somewhere?
Yes its a price index and is fairly approximate to prices as well.
You would have seen prices in say 1996-97 for a home for 225K or so.
Same home went to 450K by 2000 and then 650K by 2006. Same home! Seen
similar homes today down to 500K.
So now what the price inflation of 100% as it relates to 1998-2000 years ?
Ok, I get that, but what was the median for the south bay? I can find the median for the whole bay area without issue. Not trolling, I genuinely want to know.
bubblesitter
2010 Oct 10, 2:07pm
That looks like some kind of price index. Are there actual numbers somewhere?
Yes its a price index and is fairly approximate to prices as well.
You would have seen prices in say 1996-97 for a home for 225K or so.
Same home went to 450K by 2000 and then 650K by 2006. Same home! Seen
similar homes today down to 500K.So now what the price inflation of 100% as it relates to 1998-2000 years ?
Ok, I get that, but what was the median for the south bay? I can find the median for the whole bay area without issue. Not trolling, I genuinely want to know.
Why don't you just go backward using today's median with 3% inflation. Put your calculator to work.
Ok, I get that, but what was the median for the south bay? I can find the median for the whole bay area without issue. Not trolling, I genuinely want to know.
There are a number of sources...
(1) FHA data http://www.fhfa.gov which used as data points on the chart
(2) published data at Dqnews.com http://www.dqnews.com/Articles/archive.aspx
(3) just general search in historical Google (timeline)
(4) http://www.archive.org/web/web.php
using archive.org + dqnews only back to Dec2000 data..
http://web.archive.org/web/20010304002000/www.dqnews.com/ZIPSFC.shtm
loads slow! so be patient...
Sorry, maybe I'm not clear -- I can't find median house prices for the *south bay* specifically, from 1975. Greater bay area, and current data for the south bay is easy to find.
I definitely know my way around Google ;)
The data from 1996 is a reasonable point, but I already saw that and pointed out that we're already back at that level, at least for most of the counties.
Much of the SB data was published by newspapers San Jose Mercury news and would require a fee to access the info. Was not on the internet. Or pay dqnews.com for data directly.
Much of the archived data requires paying some fees to someone these days.
Nadda, not even close to 1996 or 1997 plus inflation today. You most likely would laugh at prices then... take 2000 prices and cut in half will get you 1997 prices.
Starting in mid 70s, New York apartments started going up, yuppies appeared and mortage rates went sky high.
Between 1980 and say 1989-90 we (Santa Clara County) saw a genuine economic boom in tech. Employment/salaries went up across all income levels and so did home prices. By mid 90s they corrected for number of reasons. Even though we had fall in interest rates, raise in new construction, prices didnt boom over 75-100% compared to the after 1997 as prices inflated by 300%...
1975 would be a far stretch for Santa Clara County.
yuppies appeared and mortage rates went sky high
Hell of a coke habbit them yuppies! but thats New Yorker Yuppies for you!
So where did they go after 2000, look no further than tech companies and south bay!
God I hope they leave one day!
Nadda, not even close to 1996 or 1997 plus inflation today. You most likely would laugh at prices then… take 2000 prices and cut in half will get you 1997 prices.
The numbers I'm finding say 1997 prices were 250-320k depending on county. That puts us at 320-430k adjusted for inflation, which is right around the current bay area median sale price.
Yeah, Santa Clara and San Mateo are still a bit off from that, but really not that much. Remember Santa Clara includes the shitty parts of sunnyvale and san jose, and San Mateo includes EPA.
It wasnt unusual to have seen fairly priced, affordable homes in South Bay (Santa Clara County) back in 1995-96.
Well, I’m a lot older than you, but this is what I remember.
Before the mid 70s people didn’t talk about “real estate†as finance. You got a house, and you lived in it. Starting in mid 70s, New York apartments started going up, yuppies appeared and mortage rates went sky high. Life in my parents middle class family changed forever, as what seemed like a gradual uphill path, turned into doing the dog paddle to keep from drowning.
In my view, all of the housing inflation starting from 1974 on is only justified as a bubble.
Hence, prices will return to those levels.
It's good to know that you believe that housing is immune to inflation (because building materials grow on trees and labor is free!). Housing is only slightly higher than where it should be going on inflation data alone (national should be ~$168k, but it's actually $180k right now...about 8% over valued)
Shit, and that's using the official government inflation numbers.
But keep on beating that drum. I'm sure if you just keep on waiting you'll be picking up that lovely 4 bedroom in PA for $50k before you know it. And everyone else will apparently be out of a job, but that won't result in unrest worse than 1930s europe. Either that or everyone will still have their jobs, but will for some reason not want to buy houses that they can afford with their annual bonuses.
Good luck!
But keep on beating that drum. I’m sure if you just keep on waiting you’ll be picking up that lovely 4 bedroom in PA for $50k before you know it.
You were saying:
http://goo.gl/4eXW
5BR/1BA Single Family House - Pottsville5 beds: $50,000
Palo Alto, not Pennsylvania. Jesus.
What you don’t understand is that at one point in this country people were not working all week long just to pay the rent or mortgage.
Which is pretty much where we ended up.
There was a very brief period in this country where that was true, from about 1945 until 1980. It had very little to do with house prices.
Not having a job all the time, but owning a house, could make us a better and more independent country.
The kind of country where a guy could spit at bigwig or politician and not fear losing everything….because he still had his land, his business, his home…
Party like it's 1799 man.
The numbers I’m finding say 1997 prices were 250-320k depending on county. That puts us at 320-430k adjusted for inflation, which is right around the current bay area median sale price.
Yes! thats about right! and $32OK would be the high end in Mill Valley and Palo Alto/San Jose...
Crazy times after 1997!
Nov-96 Nov-97 Chng.
Alameda ................................$207K $230K 11.1%
Contra Costa...........................$197K $210K 6.6%
Marin.........................................$343K $349K 1.7%
Napa.........................................$175K $180K 2.9%
San Francisco .............................$270K $307K 13.7%
San Mateo .................................$285K $339K 18.9%
Santa Clara.................................$259K $311K 20.1%
Solano........................................$138K $147K 6.5%
Sonoma.....................................$185K $199K 7.6%
Bay Area....................................$229K $260K 13.5%
Inflation cal... http://www.westegg.com/inflation/
What cost $200000 in 1996 would cost $270706.09 in 2009.
What cost $25000 in 1996 would cost $338382.61 in 2009.
What cost $300000 in 1996 would cost $406059.13 in 2009
What cost $350000 in 1996 would cost $473735.65 in 2009.
But not yet there!
LAO
2010 Oct 12, 4:07am
So it’s your theory that banks are somehow forced to make loans at some arbitrary rate based on LIBOR or the 30 yr treasury?
The mortgage rate, in fact, is tied to the 30yr T-bill, or Libor rate, which sports an artificially low interest rate
Thank you for asking the questions that have bothered me for a couple of years now! WHY do mortgage rates vary with Fed decisions, or LIBOR? I still don’t understand the exact connection.
If a bank thinks inflation is going to go up, it should lend at a high enough rate to compensate for that inflation. Also, if a bank thinks a mortgage is risky, it should tack on points to compensate for that risk.
Given that inflation may rise, and that mortgages are very risky now, why would any bank lend for 30 years at only 4%? It just doesn’t make sense. Except for the case where the bank can quickly dump the risk onto Fannie/Freddie/FHA, etc. Which may be exactly what is going on.
Come to think of it, jumbo lending is completely dead from what I hear. That would fit perfectly with the banks not lending at all in the case where they can’t push the risk onto taxpayers.
On the third hand, Wells Fargo is offering 5% jumbo loans:
https://www.wellsfargo.com/mortgage/rates/
Why would they do that if they can’t stick the rest of us with the risk?
I think the the banks "have to loan at lower rates" because if they didn't offer these rates, then the market would tank harder.. and they'd have more foreclosures and they'd be worse off. If banks started offering 7% loans tomorrow... literally tomorrow. Home sales would crash harder.. and home prices would follow. Putting more people underwater, causing banks more foreclosures... The banks are in a sense forced to keep rates enticingly low. Right now they can do so without risk of too many people taking the bait.. which is kinda what they want.
tatupu70
2010 Oct 14, 10:58am
How’d that work out for IndyMac or Countrywide?
IndyMac was a savings and loan, not a bank really.
Countrywide was spun off from IndyMac as a separate
http://en.wikipedia.org/wiki/OneWest_Bank
Small Fry who weren’t part of either the banker’s cabal or Wall Street — but both groups made out like bandits for the ‘collapse’ thereof.
Either way, their depositors where made whole and the golden parachutes paid out. So, where was the risk to the folks in charge who made the decisions?
Was anyone prosecuted? If so, then I’d have to revise that statement for THESE particular cases. Otherwise, I stand firm.
Well, IndyMac owners didn't do too well, did they?
Or Countrywide owners?
http://www.advfn.com/p.php?pid=qkchart&symbol=NY%5ECFC (click on 5 year graph)
So, unless you think the employees wanted to bankrupt the company and lose all of their owner's money, I think you're off base.
Eventually, the gov-t will be the lender of last resort for 100% of the mortgages, and, as foreclosures increase, they will be the owners of all the worthless real estate.
Wrong, the American public will be the owners of all the worthless real estate.
Thank you for asking the questions that have bothered me for a couple of years now! WHY do mortgage rates vary with Fed decisions, or LIBOR? I still don’t understand the exact connection.
banks are in the business of borrowing money from one party in order to lend it to another. If libor is 5% and they lend at 6% that's a winning proposition. Often the party a bank is borrowing from to lend to somebody else is another bank that doesn't have good use for their loanable funds (thus the INTERBANK part of london intererbank offered rate.)
Either way, their depositors where made whole and
Its a myth that some depositors are made whole...
FDIC slashes estimate of IndyMac's uninsured deposits
August 12, 2008 | 6:04 pm
From Times staff writer E. Scott Reckard:
It’s looking like substantially fewer big depositors will end up losing money in failed IndyMac Bank.
John Bovenzi, who was named to head the Pasadena bank when the Federal Deposit Insurance Corp. took control of it July 11, said in a memo to the staff today that "it now appears that there were about $600 million in uninsured deposits" when the government seized the lender.
So, unless you think the employees wanted to bankrupt the company and lose all of their owner’s money
It's not that they wanted to. It's just that bankrupting the company you work for is irrelevant if you are personally profiting. Just ask Andrew Mozillo.
You all are right to some degree, about the many detailed elements engineered to create SOCIALISM! It's like a baker's conference convention, arguing about how many eggs, salt, flour, temperature, yeast, yolks went in to make the end result THE CAKE (Socialism).
It's all perspective. I don't even know how much it cost to use a pay phone these days; do they still have them? My father always stressed, keep a dime tucked away in your wallet, and at the very least, you'll be able to call someone if you need help. Now, you have a good idea of my age!
Regardless of rates, what a potential buyer must be comfortable with, aside from obtaining a non-clouded title, is how much further the drop will continue. I live in the suburbs of Maryland, so I have been extensively looking at the right-coast values. In my opinion the fall is 2/3's complete, on average these properties have fallen 32%, and I feel 50 - 53% will be the settling point here. With the newest twist in the scandal, most likely, as with all market corrections, the bottom will be overshot, and then ultimately begin a steady appreciation, at a point 53-55% down from 2006 highs!
Based on the area a prospective buyer is looking, based on the assumption of a home currently in the 200k range, even if you could get 3% fixed for 30 years, is now the time to pull the trigger? I still say; NO. The downward pressure could erode 30-40K from the value over the next 2 years. At 3%-30 with 20% down, P&I is $675. Effectively you are also financing the loss, which pushes the carrying cost to $823 per month, P&I. Keep in mind taxes and insurance were omitted. So, realistically it is effectively costing $823 per month to borrow $125K - 200K Purchase -40K DP -35K potential further loss. That 3% loan is now 6.87%+/-!
tatupu70
2010 Oct 15, 2:06am
And those two entities were not banks, as I said. Patrick was talking about banks…and by reference I took to mean the big ones, too. That is the context in which I responded.
What exactly is your point? IndyMac had $32Billion in assets. In what universe is that not considered "big"? And why distinguish between savings and loans and banks? Is there some reason why a bank would feel safer than a savings and loan w.r.t. government aid?
How about WAMU? Are they "big"?
I’m pretty sure that securities market is completely dead now. I think no one at all is buying mortgage-backed bonds made from jumbo loans, because they can’t be guaranteed by Fannie/Freddie/FHA.
Hmmm…I thought Congress re-authorized those limits just a few months ago. Maybe not. I haven’t been following it closely but I recall reading about it back in the summer that it was in the works
Congress just extended the limits a couple weeks ago. So, until at least September of 2011, the conforming loan will continue to enjoy a cap of $729k in so-called high cost areas (like SF, NYC, LA, etc.)
dunnross says
Eventually, the gov-t will be the lender of last resort for 100% of the mortgages, and, as foreclosures increase, they will be the owners of all the worthless real estate.
Wrong, the American public will be the owners of all the worthless real estate.
I disagree. Is there nothing scary to you about the gov't holding the title to 20%+ of US residential property? I dare the "American public" to knock on the door of the White House and claim our due. Gov't will socialize the liabilities and taxes and privatize any future asset values.
It'll be Louis XIV landlording the swamps to the peasantry.
Japan has been trying for almost 2 decades to create inflation; albeit... Unsuccessful! There will be no inflation in the US for a LONG; Time. Just because the treasury is burning out the bearings on the money printers, it is in, and of itself, not inflationary. I'm convinced the banks will look back five years from now, and view the mortgages created now as having very attractive yields. Americans continue to be very gullible, in that the fear and consume mentality is still very much in play. Influenced by big ad dollars, main stream media beats the drums, influenced by players as Bank of America, for example, splashed all over MSNBC, FOX, and the likes, and those networks play up the thrust of their message that rates are headed up, and inflation is on it's way; this is simply not the case. It's just propaganda, in an attempt to stoke consumption. The fact that consumption increases are not occurring, in not that Americans have learned their lesson, and are now savers, it's simply they are tapped out! The only way for inflation to be injected into the equation, would be a huge ramp up in jobs. There would have to be record breaking job creation, and not even that would assure re-inflation, let alone inflation, or hyper-inflation. The longer this takes; job creation, the smarter Americans will become. From pain, comes gain. Americans will make it through this carnage, and when they do, will have learned their lesson, and force the government to actually build an economy that is not heavily dependent on consumer spending, to be successful.
It’s all perspective. I don’t even know how much it cost to use a pay phone these days; do they still have them? My father always stressed, keep a dime tucked away in your wallet, and at the very least, you’ll be able to call someone if you need help. Now, you have a good idea of my age!
Regardless of rates, what a potential buyer must be comfortable with, aside from obtaining a non-clouded title, is how much further the drop will continue. I live in the suburbs of Maryland, so I have been extensively looking at the right-coast values. In my opinion the fall is 2/3’s complete, on average these properties have fallen 32%, and I feel 50 - 53% will be the settling point here. With the newest twist in the scandal, most likely, as with all market corrections, the bottom will be overshot, and then ultimately begin a steady appreciation, at a point 53-55% down from 2006 highs!
Based on the area a prospective buyer is looking, based on the assumption of a home currently in the 200k range, even if you could get 3% fixed for 30 years, is now the time to pull the trigger? I still say; NO. The downward pressure could erode 30-40K from the value over the next 2 years. At 3%-30 with 20% down, P&I is $675. Effectively you are also financing the loss, which pushes the carrying cost to $823 per month, P&I. Keep in mind taxes and insurance were omitted. So, realistically it is effectively costing $823 per month to borrow $125K - 200K Purchase -40K DP -35K potential further loss. That 3% loan is now 6.87%+/-!
that's where my head is at as well. i'm in the sf bay area, i'm not certain the declines will be as steep as in your example, but i anticipate declines nonetheless. it's interesting to see what interest rates will be roughly equivalent to a 5% drop in housing prices.
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...Down!
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/08/AR2010100800371.html
Remember all this year, when the argument from almost everyone was the other way round?
#housing