Posted on 06/28/2004 3:13:16 PM PDT by BurbankKarl
Edited on 07/19/2004 2:14:41 PM PDT by Jim Robinson. [history]
June 28 (Bloomberg) -- Washington Mutual Inc., the biggest U.S. savings and loan, slashed its 2004 profit forecast because it failed to cut costs fast enough as interest rates slashed mortgage income. Its shares fell 12 percent.
The Seattle-based company said it will probably earn between $3 and $3.60, down from $4.21 last year. Analysts surveyed by Thomson Financial were expecting it to earn $4.24.
(Excerpt) Read more at quote.bloomberg.com ...
DH and I just signed a contract to build a house. It should be done by Thanksgiving. I'm wondering if we should lock our rate?
Let's hope this isn't a sign of things to come for other financial stocks. With Greenspan probably raising interest rates on Wednesday this could be a very interesting couple of weeks. So many people have adjustable rate mortgages and can barely afford their payments, that ANY increase in payments could force MANY defaults. Hold on to your hats!!
Not only are the adjustable mortgages going to go up, so will the credit card rates on everyone carrying a balance.
I think WaMu grew on the back of their mortgage business, and not only will the interest rate hikes affect them, but the tightening at Fannie Mae and Freddie Mac. They won't have as easy a time packaging their mortgages for purchase by those organizations.
I am seeing more REDUCED signs around the Los Angeles area. I know, the prices will NEVER fall....hahahaha.
WaMu is going to be a GREAT buy, but I don't disagree with what you say. As long as they don't keep using their own capital to buy mortgages they can't pass on, they won't ultimately come to harm in a real estate downturn. However, there may be a significant earnings valley to wade through.
The effects of prices actually coming down will affect many things besides WaMu (which should only be hurt temporarily by an earnings dip due to a decrease in mortgage originations). Hey, maybe I can finally get a vacation camp.
I have moved my balances into "fixed-rate" balance transfer offers wherever possible. I get only a few fixed rate offers a year but always take advantage of them. These tend to be at mortgage-like 5-8% APR.
The thing people really want to avoid is going into a 0% or other low interest teaser rate which will skyrocket to 19 - 25, even 29% when it reverts to a market (i.e. usurious rate).
Another thing you have to be careful with is the on time payments. Even one day-late payment, for any reason including postal or electronic screw-ups, will default the account to a higher rate. You can plead to have the original rate restored but without a guarantee of success.
I take classes with folks running the appraisal department of WAMU and they see rates going up, have fired 1/4 of their residential appraisers and see people selling their homes now in California speculating that they can take their profit at the top, wait a year or two and come back into the market for far less money.
Don't know the future, but I would get the lowest rate of a fixed nature and pray the materials & labor for building your house don't go up another 50%.
Re your chart in post 6: If I said I bought in 2000, would you believe me?
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