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Saturday, March 6, 2010
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23 comments:
From previous bucket:
"HB said - My guess is when the 8k goes away rates will still be low."
HB,
I just don't see how this market can be sustained without further extension of current life support.
There is no reason to think private money will accept such low interest rates in mortgage market when federal guarantees expire. 30 year fixed has only been slightly above treasury rates ever since fed started intervention in MBS market - this is not realistic. Significant risk premium will come in as soon as they withdraw.
Just think about it - will you lend your own money at 5% when 30 yr treasuries are at 4.65-4.85%?
spider -
Quick and easy money for you...short the mortgage market.
Robert -
I don't speculate. But, for someone who wants to - there are easier ways, i.e just short the home builders....
Va_Investor said
It cleared LOWER-END blight. Investor's paid cash, fixed-up and sold to first time buyers (at 50%+ off peak). I forget sometimes that 95% of you don't drive thru downtown Sterling, Manassas Park or Hoodbridge on a daily basis.
By your own logic the $8k credit was not related to the alleged removal of blight (I say alleged because as you note I don't drive through those neighborhoods regularly.) If mostly investors bought up those homes then they did not qualify for the $8k because they were not first time homebuyers. Unless you are saying most of these investors were committing tax fraud.
tbw,
I think she meant indirectly. Quite a bit of 8k went to investors in a way due to temporary price blips we have noticed in summer/fall of last year.
This is one of the reason tax credits are generally a waste of public money. It encouraged more brains/resources towards a sector that needs to shrink.
yes tbw,
My mind skipped ahead fo yours. Investors sold to the 8K people. What is the cost of blighted neighborhoods?
spider,
Wasted resources encouraging something that should have been shrinking? How long would it take the gov't to turn the situation around? The gov't couldn't even get the lawns cut, let alone make these places productive, affordable homes and protect neighbors from further decline.
Bounces off the low-end are temporary? In your dreams, maybe.
What should have been shrinking? Renovated homes sold at very affordable prices to qualified buyers? Please explain it to me?
And your idea about shorting Builders is about 3 or 4 yrs too late.
"va investor said - Bounces off the low-end are temporary? In your dreams, maybe."
Sure. It is not temporary..this bounce is going to be spectacular & housing market is just fine. In that case, there was no need for any stimulus.
Or could it be that it is just wishful thinking on your part?
“When you take away all the support from the housing market, the underlying demand for housing is a lot weaker than we thought,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We clearly pushed some demand forward, and there wasn’t that much demand to pull forward anyway. The housing recovery is going to be very, very slow.”
spider,
What should be shrinking? What do you refer too?
Do you really believe we will see late '08 and early '09 prices again on the lower-end?
For what it's worth, NAHB predicts only a minor uptick in interest rates along with a roughly 15% increase in new and existing home sales for the year.
http://www.nahb.org/fileUpload_details.aspx?contentID=75231
spider,
Nice of you to delete your posts rather than admit a mistake.
Konstantin: Well said in previous bucket that Arlington market has not been as affected as other markets. Two colleagues bought places at a new condo (3113 Clarendon) last weekend. This weekend, I heard all 14 are sold. One paid $628K for a 2 bed & den and one paid $598K for a 2 bed. I am going over to see them today but they look like good space. Also, the piece of land next door with 3 rundown houses is on market for over $4 million. It is a half acre and can be developed as townhouses or condos. I think you Arlington buyers who wanted a deal missed your window of opportunity. I wish I had bought in late 2008 or early 2009 market as that was the only chance to buy low in Arlington. I just wasn't sure at the time if I was staying in the area for more than a few years. But I am happy with the deal I got on my condo.
Spider-
A 30 year mortgages and a 30 year treasury have very different durations. About ~7 years vs. ~17 years. So its not really comparable. Usually people compare the 10 year treasury to mortgage rates, because they have similar durations. Historically the spread has been about ~150 basis points. The 10 year is at 3.7%, so mortgage rates should be around 5.2%. Sure this is a little above the current rates, but I don't think this will scare many people away.
There are still plenty of buyers of MBS don't worry about that. If the fed all of a sudden sold the 1.2 Trillion I agree rates would go up quickly, because there isn't enough cash sitting around, but I think this is really unlikely for the foreseeable future.
Va_Investor said...
Do you really believe we will see late '08 and early '09 prices again on the lower-end?
Considering the props used by the govt since then that are being removed, is there any reason to doubt we'll see those prices again??
Kevin,
I'll take you up on that. You say we will see the lows on the low end. I say we hold 50% of the bump, at least.
I'm not saying that we definitely will because it has a lot to do with foreclosures and shadow inventory. But it's quite a declaration to say that we're not going to see those prices come back, especially given the temporary govt boosters that will be going away. I just don't see how you can say that those low-priced houses are gone and not coming back when the first time buyer crowd has been saturated and used by the tax credit.
VA-
I think we will see new lows in the mid to high end, but I agree with you that on the low end 250K or less we probably will not see new lows. I think the 8k did a good job getting rid of the major inventory in some of the cheaper areas
Kevin,
Try finding something under 100K. In the fall of '08 and early '09, there were plenty. Houses in Woodbridge. TH's in Herndon and S. Reston, Houses and TH's in Sterling. If those prices come back, the economy is in serious trouble. I bought property (that was in decent to great shape for 30 cents on the dollar.
If I'm wrong, I'll admit rather than delete. Same for you, I take it?
"VA Investor said - What should be shrinking? What do you refer too?"
I thought it was clear, let me make it explicit - housing sector of the economy is what I was referring to...
condo buyer,
i do not think that condo prices increased since early 2009 in arlington. they seem to be flat to me.
"If I'm wrong, I'll admit rather than delete. Same for you, I take it?"
That would be a first...
Konstantin: Depends on the condos you want to buy. Prices flattened among new buildings but they were giving better deals on closing costs, flat screens, built-ins, wood floors, and other options in late 2008 and early 2009. Staring in about Sept as inventory tightened those deals stopped. Now if you want new you have to pay the price and act quickly. Yeah, you can buy something as a short or foreclosure for way below price, but I really don't want to live in one of those places. If I were in a different position, I would buy those places as rentals.
condo buyer-
Home builders are in much better shape now than they were a year ago. They have shrunk there inventories considerable, which has helped out their cash flow and helped them deal with their debt loads. This is a big reason why they are less desperate than a year ago.
So just looking at new condos and ignoring the majority of the market isn't really a fair comparison of the Arlington condo market.
VA, I know what the market looks like, as I've clearly pointed out how govt manipulation has soaked this inventory. Manipulation which was temporary and ending soon. Change the debate all you like, but it doesn't rationalize your point of view.
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