GIGANTIC drop in MBS rates week over week.
New lows reached on 15's and 30's and the 10 year is still no where near the cycle lows reached in Nov.
Still think the 50 BP FED cut will translate into 50 BP of spread in the portfolio?
PS REFIs will begin to explode again in Q1.
Read the ANH news, management there is just being honest.
<<i stood at auctions on eastern Long Island and bid on houses at 40% of 1985 levels and watched a generation of bankrupt developers look on in horror .........>>
Great poetry! Recalls Allen Ginsberg's "Howl" I saw the best minds of my generation destroyed by madness, starving, hysterical,naked....
Also Walt Whitman who was from Long Island
<< Residential real-estate will not be allowed to clear in a market equilibrium fashion >>
e-ball steps up to plate with another 20 something slacker 'king of stupidity' statements ............
but given he was about 8yrs old in late 1980's when home prices around the country were getting beaten to a pulp and in Texas hit 50-60% drops , we see his level of experience....
i stood at auctions on eastern Long Island and bid on houses at 40% of 1985 levels and watched a generation of bankrupt developers look on in horror .........
the same thing happened back in mid-late 1970's as real estate got crushed all over the US and in NYC , people were selling townhouses for $1 to get out from under the maintenance costs ..............
nope......real estate NEVER clears at market prices .......... and the Internet really will revolutionize the world too :)
You are correct to infer that all means will be used to bring us out of the funk. I�m just not convinced that the government has enough juice to do it quickly, and I certainly don�t believe that it is at all possible for mortgage rates to fall as low as you suggest. But I�ve also said before that I never fall in love with my own ideas.
Tell you what I�ll do: I�ll bet you a bowl of grits that mortgage rates don�t fall as much as you think. Bet? (-:
Incidentally, I don�t see a nationwide implosion in home prices. We haven�t gotten the big jump up in prices here, and will probably not see any decline unless it�s some unexpected local issue. I�m sure the same is true in other locations as well. I do see pain perhaps coming in equity REITS. I�m in good company on that one; BD sees that as well.
Actually, E, it would be best for me for the economy to stay sluggish for a long time to come because I�m so heavily invested in MREITS. But that would cause too much pain for others, so I really don�t wish that to happen.
I do feel strongly though that those still heavily invested in growth stocks, especially tech, are in for a good deal more pain. They just keep getting sucked back in and beaten up again and again. I know some doing it now.
Did you happen to catch the news piece about Wal-Mart selling low end PC�s with Linux operating systems? I think the PC�s also have AMD processors, but don�t remember for sure. Think about it, Wal-Mart becomes Microsoft�s biggest competitor. Nothing is forever, and I would bet my money on Wal-Mart.
E, tomorrow is my birthday. I�ve noticed in the past that a lot of folks that I don�t even know are out celebrating it. If you�re one of them keep yourself safe, ok? Same to everyone else out there.
PS <<Res ipsa loquiteur.>>
Looks like Latin, but it has been almost 40 years since I�ve took it. Please clue me in.
You got me there. Point taken.
But TV is not in danger (at this point) of being overvalued, If it was, you are 100% right--they would REALLY pull out all the stops to keep the plates spinning.
Not only are high home prices not stimulative, they can (and will) actually hurt the economy if they remain the "holy" 3rd rail they have been for 50 years.
Ridin, how many of our elected officials (or those they appoint) do you think would survive a 25% decrease--across the board--in the value of US home prices?
I am not talking about the financing of homes in some abstract economic sense, where REITs and originations at the margin are concerned, Ridin.
The FED(s) are terrified of deflation because home prices (which are the REAL measure of whether or not we have deflation)are the metric by which the VOTING public in America determines it's wealth and economic well-being.
Why do you think there are no capital gains on residential real estate?
Why do you think homeowners can write off mortgage interest on their taxes?
Why do you think the Government guarantees the debt of FNMA and FRE, both privately held for-profit Corporations?
BECAUSE HOME-OWNERSHIP IS THE MOST "AMERICAN" OF ALL VALUES.
Residential real-estate will not be allowed to clear in a market equilibrium fashion.
This is why the FED is still cutting rates AT ALREADY NEAR ZERO LEVELS with growth at a decent 3% and unemployment at a mild 6%. That is why they are talking about buying 10 years in the open markets.
It has nothing to do with Corporate profits, tech stock prices, or the budget deficit.
Res ipsa loquiteur.
<<The point is that everything that can be done to keep home prices up (no matter where they really belong in a given economic context) will be done.>>
Home prices staying up is not simulative to the economy. The rise in home prices was simulative when coupled with falling interest rates, but only because of refis. Don�t you think that we�ve about reached the end of the road for increasing home prices?
<<If that means taking the 10 year down to 2% that is what they will do.>>
And that would leave MM rates and LIBOR where? You�ve already stated your opinion that short rates will not go lower. And how will the Fed force mortgage rates down that low?
You are forgetting the economic principal of substitution. Why wouldn�t an investor put money in European bonds instead, thus getting a higher yield as well as a translation benefit from a weakening dollar? A lot of smart money has already done this. I�ve just been too dumb to follow suite.
By the way, one of my friends with the OTS told me last August that S&L�s with which he was directly familiar had not been booking fixed-rate mortgages all year. In fact, many were shrinking their balance sheets. Purely a reaction to the fear of IRR.
<<Goerge Will once said "if you want to make someone a Conservative, buy him a house.">>
But what we are really talking about for the most part is the financing of homes, not the homes themselves. There are some things that I think you just can�t make happen, and one of them is trying to force investors to hold mortgages at very low rates of interest.
<<What he should have said was "if you want to make someone a voter, buy him a house.">>
New home sales generate only incrementally small increases in new mortgages. There is obviously some economic stimulus from new home construction. I just don�t see that much stimulus left to the economy from that source.
Don�t get me wrong. I�m very heavily invested in MREITS, and will be happy to hold them for the foreseeable future. But if mortgage rates go to 2%, I will not accept the IRR exposure.
Fortunately, I don�t see rates going anywhere near that low, so I feel ok right now.
I heard that if you want to make a person into a conservative, have him spend a weekend in the drunk tank.
Many things may make me change my way of thinking, but I will not change about holding dividend payings stocks throughout this bear market, and I will gain more resolve when tax laws are changed so that divis are only taxed once and capital gains are lowered or eliminated.
The point is that everything that can be done to keep home prices up (no matter where they really belong in a given economic context) will be done.
If that means taking the 10 year down to 2% that is what they will do.
Goerge Will once said "if you want to make someone a Conservative, buy him a house."
What he should have said was "if you want to make someone a voter, buy him a house."