Didn't housing prices go up as mortgage rates went down? Wouldn't the opposite happen now?
Wouldn't prices drop enough to encourage buying? I knew people who purchased houses during the late 1970s stagflation. I swear I remember the mortgage interest was more than 20 percent at that time. They survived. The rest of us survived.
No one is saying that's going to be easy.
I don’t know about 20%, but I knew a couple who bought a house with an 18% mortgage.
and I remember the inflation rate at 21%.....
you work...you save...you invest a little....and now what do we do.....
bought more tomato sauce and spaghetti today....meant to buy dry milk....
“Didn’t housing prices go up as mortgage rates went down?
Wouldn’t prices drop enough to encourage buying? I knew people who purchased houses during the late 1970s stagflation. I swear I remember the mortgage interest was more than 20 percent at that time. They survived. The rest of us survived.
No one is saying that’s going to be easy.”
You bring up a good point but I’d fill in a couple of missing points. First, homes had not blown up in price so far outside of their long term price envelope, roughly equal to 3x median income. Secondly, qualifying for loans back then was quite conventional, requiring solid down payments. Most homes during that era were sold with seller-financed second mortgages. When rates later came down, there was ample opportunity to refi to lower rates. I think I was paying 13% on a first mort and 11% on a seller second on a home I bought in 1983.
Why the current situation is different is because: Despite their recent decline, homes are still selling for prices outside that 3x median income benchmark, and with rates already so low, there is likely to be no great opportunity to refi. Indeed, mort rates have actually risen in response to the Fed lowering rates just recently.
What happens if we stop buying Chinese and even pay them in full? That's less than one thousand dollars per citizen over there.
It's going to take a lot more than that to stave off revolution with millions more out work and all the corruption and other state-threatening problems in Red China.
The euro blasted higher anyway, driven by hot money flows. The funds are beguiled by Germany's "Exportwunder", for now. It cannot last. The demented level of $1.57 will not be tolerated by French, Italian and Spanish politicians. The Latin property bubbles are deflating fast.
I believe it's true, no group of sovereign countries have ever shared a single currency successfully.
Either they combine into one country or give it up. It's been a picnic now there's trouble abrewing. Will the Euro survive? No. I bet.
(Though some like the Euro's protection against an individual country's currency being devalued.)
The northern countries are not happy with the southern countries performances, I believe. Real trouble abrewing.
Our agent told us there were deals to be had, but that if we wanted to buy a home in foreclosure, we had to be prepared to deal with a LOT of red tape, misc paperwork, extra hoops, etc. Plus it would take a lot longer than a conventional purchase. Plus since the good ones had already gone, many were in pretty tough shape. We didn't buy a repo.
Fast forward to today, and I think the prevailing logic is that people currently trying to sell are going to have to start competing with the perceived foreclosure prices. Agents and brokers will push all those notions, of course. It will take a bit of time to sort out. The thing is, pricedropping is only one half of the story. The other half is that the seller still holds the mortgage at the original price.
It's my understanding that the bad subprime loans have been sold so many times, it's kind of tough to even figure out who the mortgage holder *is* in some cases, which will add even more time to the process. (That is, if Steve Kroft's 60 Minutes reporting is to be believed, and I'm not saying that it is.)
Another major difference this time is the sheer number of these foreclosed homes. I'm talking about California, but, of course, this is happening all over.
Here's an article from today's SF Chronicle: Mortgage crisis is creating new 'slumburbs'
So I thought I'd throw my two cents in, from the practical man-on-the-street standpoint. In the long run, what you said is true, I think. There is a lot of back-and-forth in the process.
The rate was about 16% but the cost of a house that would go for $400,000 today was $70,000.
You are right about interest rates...and in the 1970’s we had THIRTY YEAR CD’s paying eighteen percent...ah, the good old days.