patrick.net

that's the problem with the idea that house prices go down when rates go up.

rates and housing prices will probably go going up at the same time. Just like they went down at the same time.

I predict low rates 4eva.

http://www.topstockanalysts.com/index.php/2011/07/14/could-mortgage-rates-fall-50-from-here/

Bernake just told Grandma and savers to piss off.
Welcome to Japan, we seem to be making the same mistakes they made. Keep zombie banks alive and rates low.

DrPepper says

Bernake just told Grandma and savers to piss off.
Welcome to Japan, we seem to be making the same mistakes they made. Keep zombie banks alive and rates low.

Great.

Heres what I wanted Obama to say at the State of The Mess speech:
"Hey grandma you should lock in your 1% CD rates for 10 years cuz rates is only going lower for the rest of your life so we can bailout the banks. We must spread the wealth."

DrPepper says

Bernake just told Grandma and savers to piss off.

LOL. We as a nation done fucked ourselves up, 2000- 2008, and here's the chart that illustrates how:

http://research.stlouisfed.org/fred2/graph/?g=4xD

That is our leverege, debt over income.

Adding the prime rate:

http://research.stlouisfed.org/fred2/graph/?g=4xE

you can see the higher our leverage goes, the lower the lending rate gets.

Yes, 日本へようこそ

PockyClipsNow says

"Hey grandma you should lock in your 1% CD rates for 10 years cuz rates is only going lower for the rest of your life so we can bailout the banks. We must spread the wealth."

What you are failing to understand is that yield only comes from someone else paying that interest to you.

Those "someone elses" have reached the end of their rope.

If you want more yield from them, YOU WILL GET NOTHING, NOT EVEN YOUR PRINCIPAL BACK.

Return on principal, or return OF principal -- pick ONE.

Good point Bill. I think if they had liquidated the bad assets, foreclosed on everyone delinquent and enforced the bank accounting laws (mark to market and liqudate or cram down instead of extend/pretend)THEN whover is left standing (most people would be left) would be able to pay 6% on a mortgage at the new lower prices they would be paying.

Of course that didnt happen. Now everyone that has bought an overpriced asset (house or large commercial property) for a crazy high prices can only pay those loans if they are 3% loans due to 'overpaying' which means the banks can only pay 1% - I suppose on deposits.

The ZIRP trap will probably exist so long it becomes normal like in Japan. A person who is 40 years old in Japan probably cannot remember a time when mortgage rates were over 3% in thier memory! Get ready for that here.

I wonder what a good investment was in Japan over the last 20 years?

Thats why owning a house is a good idea - in 20 years you have paid it off with these super cheap rates and then you are rent free. If we just stay flat right here...you loose by renting. The only time you win by renting is when prices on purchases go down quicker than what you pay in rent every year. 2010 didn't do that, 2011 didn't do that, 2012 sure won't do it (election year), 2013 won't do it (post election year).

3 years of renting my own house would cost me 96k(!!) - but my house did not drop in value 96k. Gettit?

There is only one reason to not buy a house right now. And that is - if you can't qualify for the loan because a) no downpay b) no job c) not enough income for the house you want. But if you are not buying because you are waiting for 1975 prices, you are an idiot in my humble opinion and you will dearly regret it.

GameOver says

Cool. I was worried that rising interest rates would force me to buy before I felt I was ready to.

Yes, and you are not the only one who came up with that realization. Most others won't be buying any houses, because they know that there is no rush to lock in the interest rates. In the meantime, the boomer sellers are getting more and more antsy to unload.

SubOink says

The only time you win by renting is when prices on purchases go down quicker than what you pay in rent every year.

You are an idiot. You win on renting every time it's cheaper to rent than to pay the mortgage. Even if prices don't fall at all, you are still better renting, because it's cheaper to rent than to pay the mortgage. Also, it depends on what you do with your money. If you keep your "cash" in gold, rather than US dollars, you are 10x better off, than holding a depreciating asset like real estate.

SubOink says

There is only one reason to not buy a house right now

Depends on the market and the future.

If we ever decide to stop kicking the can on everything you can expect home prices (and rents) to fall by half.

Not that I think that's going to happen, but there are other futures that are equally unpleasant for housing (eg. $10 gasoline).

There are also possible futures that make buying now the most insane deal on the planet.
I can't see what is coming in the future, alas.

PockyClipsNow says

I think if they had liquidated the bad assets, foreclosed on everyone delinquent . . . THEN whoever is left standing (most people would be left) would be able to pay 6% on a mortgage at the new lower prices they would be paying.

In that case anybody who had money in a bank would no longer have had money in a bank.

Net mortgage lending went from $200B/yr during the 1990s to over $1T/yr in the teeth of the bubble.

http://research.stlouisfed.org/fred2/graph/?g=4yf

Much of that was cash-out refis, ie. 100% losses.

People are under the mistaken impression that banks print money. They do not, they lend out people's checking and savings. When you deposit money in a bank, you become one of the bank's CREDITORS.

SubOink says

3 years of renting my own house would cost me 96k(!!)

$2666.67/month rent? I'd say that you don't know how to shop.

$2100-2300/mo gets you a modern upgraded smallish(~1250 sq ft) house in Burbank or Glendale.

$2800/mo gets you 4bd/2ba 1600 sq ft home in those locations.

Such as:

http://losangeles.craigslist.org/sfv/apa/2804843311.html

http://losangeles.craigslist.org/sfv/apa/2815200081.html

Not sure why Tarzana or Encino would command the same rates considering the schools are lacking.

Perhaps you are overestimating what you could get in rent.

And in fact:

http://losangeles.craigslist.org/sfv/apa/2819056687.html

http://losangeles.craigslist.org/sfv/apa/2816753886.html

http://losangeles.craigslist.org/sfv/apa/2816383801.html

At $1850-2200/mo (as well as a TON more equivalent listings in Encino vs Burbank/Glendale) it seems that indeed you are overestimating rents in Encino. Tarzana is even lower.

The notion that a house is an investment is absurd, but the lesson of Bernake saying he will keep interest rates low is you should buy more stocks if you have extra money.
An old saying is "Don't fight the Fed"=don't resist the obvious place to stick your money. Even dividends are paying much more than money in the bank or CD or money market accounts.
Look around you. Do you see lots of foreigners pushing baby strollers around during daytime hours? Do you see lots of Mexican markets? Do you see the emergency rooms, schools and jails full of them? Of course you may see cops and firemen around.
The cops and firemen need house owners to pay their millionaire pensions. The others need your property taxes to pay for their 1. education 2. medication 3. incarceration.
If you want to sign up to begin paying a lifetime annuity in the thousands of dollars to your local government, go right ahead. Delude yourself you aren't a cash cow for the others.
Some people have made fortunes in real estate. This may not be the time and California is not the place.

zzyzzx says

SubOink says

3 years of renting my own house would cost me 96k(!!)

$2666.67/month rent? I'd say that you don't know how to shop.

If the homeowner isn't insulted by your offer...you didn't bid low enough!!!

Houses in my neighborhood rent for exactly that $2500-3000

dodgerfanjohn says

$2100-2300/mo gets you a modern upgraded smallish(~1250 sq ft) house in Burbank or Glendale.

$2800/mo gets you 4bd/2ba 1600 sq ft home in those locations.

Exactly.

Bellingham Bill says

There are also possible futures that make buying now the most insane deal on the planet.

An honest question/statement:

Doesn't this seem like the least likely outcome? I keep seeing people say, buy and then pay your mortgage with inflated (or worthless) dollars. I think they're forgetting the obvious: why would banks allow this to happen?

It would seem to me the people making the economic policies of this country (aka banks) would do whatever it took to not allow that to happen. If we have high inflation (both price and wage) it seems to me the banks would stand to lose the most. Why on earth would they allow millions of people to pay back loans with inflated dollars?

Just curious as to your and others thoughts on that.

Banks would stay in business at least.

Deflationary collapse = no bank capital = no bank jobs

SubOink says

zzyzzx says

SubOink says

3 years of renting my own house would cost me 96k(!!)

$2666.67/month rent? I'd say that you don't know how to shop.

If the homeowner isn't insulted by your offer...you didn't bid low enough!!!

Houses in my neighborhood rent for exactly that $2500-3000

No they don't. I posted links proving it.

But you can simply do your own craigslist search for houses in Encino. Houses in Encino, which is where you claimed you live, start at 1800 and average around 2200 for 3bd/2ba with modern upgrades(mcgranite stainless blah blah).

dodgerfanjohn says

No they don't. I posted links proving it.

I don't know where you get that I live in encino but ok.

Please do YOUR own search in Agoura Hills/Oak Park/Westlake Village/Calabasas. I am giving you a range of areas so you see that its not just my street but all around me.

I don't need to do a craigslist search when I see what houses rent for next door and across the street. Very simple, brotha!

SubOink says

I am giving you a range of areas so you see that its not just my street but all around me.

Welcome to Fortress California. Wish I was in one : )

http://www.fresnobee.com/2012/01/25/2697313/fresno-has-a-new-top-5-car-thieves.html

Bellingham Bill says

SubOink says

I am giving you a range of areas so you see that its not just my street but all around me.

Welcome to Fortress California. Wish I was in one : )

http://www.fresnobee.com/2012/01/25/2697313/fresno-has-a-new-top-5-car-thieves.html

“Nessuna soluzione . . . nessun problema!„

Huh?

Fortress California? What does that mean?

And why are you sending a link of car thieves arrests made in Fresno???

What does that have to do with anything we are talking about?

But yeah, it is friggin' beautiful here :)

SubOink says

dodgerfanjohn says

No they don't. I posted links proving it.

I don't know where you get that I live in encino but ok.

Please do YOUR own search in Agoura Hills/Oak Park/Westlake Village/Calabasas. I am giving you a range of areas so you see that its not just my street but all around me.

I don't need to do a craigslist search when I see what houses rent for next door and across the street. Very simple, brotha!

Ah! That is entirely different than urban LA or SF

You really ought to disclose that. I'm pretty sure that even the most ardent bears on this blog agree that its not particularly bad to buy in outlying areas.

The issue for CA is and remains urban big coastal cities..SD, LA, and SF. Not places prohibitively far from major job centers.

SubOink says

Fortress California? What does that mean?

I view the Calfornia real estate market as two entities, the Fortress, and everywhere else.

The Fortress is where the PTB will draw the line and protect once we get into the Soylent Green / Omega Man type economy here.

So the Conejo Valley is definitely Fortress territory.

99.9% of the Central Valley is not.

I came to this understanding watching the System's response to two events back in in my salad days, the 1988 accidental homicide of Karen Toshima, and the 1992 riots.

In both instances I got to see what the priorities of the LAPD were, how they will defend the Fortress but not give a fuck about elsewhere.

http://www.fresnobee.com/2012/01/26/2697932/fresnos-top-car-thief-is-released.html

Considering rental rates are less than HALF the total monthly cost of ownership, why buy now? Let prices crater and buy later for 65% less.

Depends on where you live. Here in San Fran, in certain neighborhoods (not just sketchy ones either), renting and owning are pretty close to equivalent.

Good no need to rush to buy overpriced real estate then for a long time.