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Monday, March 15, 1982

03.15.2007 - Thursday Open Thread

This is your open thread for Thursday, March 15, 2007. You may post random links and off-topic discussions here.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

17 comments:

Terry said...

Ineresting article. I'm not sure that I agree with all of it though.

War and Property Inflation

Lukasz said...

"Housing Drop May Spur Recession Unless Fed Cuts Rates": http://bloomberg.com/apps/news?pid=20601087&sid=aYtEcwn_eunw&refer=home

Slinky said...

From MSNBC:

http://www.msnbc.msn.com/id/17609930/

"But some are beginning to offer a darker forecast. New York University economist Nouriel Roubini thinks the housing market is headed for another drop this year, creating a downturn that will spill over into other parts of the economy. He sees a recession coming by midyear.

“It is not just housing,” he said. “That is crucial. Now we have an auto recession, we have a manufacturing recession. … We have two consecutive months of retail sales being flat. So even the consumer is on the rope.” "

Finally, they're starting to get it.

Matthew said...

Inflation report today shows inflation much higher than expected... I would think that is pretty much going to destroy any chance of a rate cut for a while.

Terry said...

Hey Peter, don’t sugar coat it, just say it like it is-

....The bottom line is that far too many Americans, not simply those with low credit scores, have borrowed more money than they are realistically capable of repaying...

...The bursting of the technology stock bubble of the 1990s was simply the opening act. What we are about to experience with the real estate bubble is the main event. In that respect, though it may be March 2007,it sure feels a lot like March 2000. However, instead of a mild recession, this collapse will be followed by the most severe recession since the Great Depression.

The main risk is that Ben Bernanke and his buddies at the Fed panic, producing something far worse: a hyper-inflationary bust similar to the one experienced by the Weimar Republic in Germany. Let's hope that cooler heads prevail--but get your wheelbarrow ready just in case.



From Subprime To The Ridiculous

Matthew said...

good article terry

B said...


Why Your Home Is Not The Investment You Think It Is


"Mr. Crook is editor of The Wall Street Journal Sunday and author of "The Wall Street Journal Complete Real-Estate Investing Guidebook."

I'm confused. Can we get a Professional(R) opinion on why the writer should not be listened to or even allowed to discuss investing strategies, since he is not a Licensed(R) Real(R) Estate(R) Professional(R)?

It's a Priority!

(R)

T,V & Mr.B said...

Question. If the fed lowers the interest rate, what affect will that have on housing? It won't keep peoples ARMS from readjusting, though maybe by not as much, but prime + what-ever, will still be higher than the teaser rates they bought into.
It won't affect the mortgage rate, being tied to other things.

Am I correct on this lien of thought?

T,V & Mr.B said...

Obviously, I don't think the Fed will, especiall after today, I was just wondering.

Terry said...

Low interest rates will support high housing prices.

Prices are set by what the market will bear. Alot of people do not care what they pay for a home as long as they can make the monthly payments. (Obviously, some people do not even care if they can make the monthly payments on a long term basis, as evidenced by the increasing default rate.)

darth_s said...

Terry said: “Low interest rates will support high housing prices.”

It is not necessarily correct – Look at the case of Japan, they have 0% interest for years and their housing price is still 60 % lower compared to 1990.

They are multiple factors that effect housing prices:
- Interest rate
- Lending standards
- Greed and expectation
- Supply and demand
- Affordability
- Etc.

For me, expectation is the most important factor. If people change their expectation about housing investment – meaning if housing is not perceived as a good investment, compared to other alternatives - then no matter how low the interest is, no one wants to buy real estate.

Remember the dot com bubble, at its peak, people were willing to pay 80$+ for Lucent shares – At the bottom, no one wanted to buy them at 60 cents!

T,V & Mr.B said...

Terry,
My point was that lowering the prime interest rate wont save the people who hope prices will stay high. With low itnerest rates, foreign money will be less interested in lending. No matter what, liquidity is drying up, and liquidity is the only true basis for rising house prices.

Terry said...

darth_s & tv & mr.b

Points taken.

Let me rephrase - In a stable market and given all other influencing factors (such as expectations, lending standards, etc.)remain unchanged; lowering mortgage interest rates will result in increased housing prices.

I was looking at the situation from a simple "affordability" perspective. For a given monthly payment, if less is going toward interest more can go toward principle, thusly resulting in upward pressure on prices in the mass market.

MisterBubble said...

"given all other influencing factors (such as expectations, lending standards, etc.)remain unchanged; lowering mortgage interest rates will result in increased housing prices."

Yes, but that wasn't TV&MB's question. He wanted to know if a lowered Fed Funds rate would boost home prices. The answer: unlikely.

Read this, for a good discussion of the relationship between mortgage rates and the funds rate.

Also, here's a good plot, showing that there's only a very weak relationship between the Fed rate and mortgage rates.

Terry said...

misterbubble

Agreed that federal funds rate / prime rate are different and independent from mortgage interest rates. Thanx for correcting my lack of attention to detail.

EconE said...

AB...

per your other post.

500k for a waterfront place...with moorage?

please...elaborate.

Crashcadia said...

The only way to inflate ourselves out of this is through wage inflation. I don't see this happening when you have a world of workers to compete with.

Printing more money at this point would just yield more asset inflation. We have plenty of that already and we see what that has given us.