Shared Top Border
sdcia_head3.jpg (14795 bytes)
SDCIA Message Board
Register Latest Topics
 
 
 


Reply
  Author   Comment   Page 1 of 2      1   2   Next
kevink

Senior Member
Registered:
Posts: 842
Reply with quote  #1 
Old-timer Richard Russell said this recently.
Robert Campbell has also mentioned in his talks that he thinks rates will be lower later this year.

What do you think?
And if rates are lowered in August, how do you see this affecting the real estate markets, both local and out of state?

momagic72

Senior Member
Registered:
Posts: 85
Reply with quote  #2 

Not sure if a few points off the rate will attract sales especially if prices are still hi and cash flow is in the red. 
taddyangle

Avatar / Picture

Senior Member
Registered:
Posts: 2,059
Reply with quote  #3 

I can't imagine it would have any impact.  How much lower, 1/4 point??

 

Even if they went lower I think it only prolongs the pain many will feel in the 3-5 years.


__________________
------
mike

Senior Member
Registered:
Posts: 607
Reply with quote  #4 

Quote:
Originally Posted by kevink
Old-timer Richard Russell said this recently.
Robert Campbell has also mentioned in his talks that he thinks rates will be lower later this year.

What do you think?
And if rates are lowered in August, how do you see this affecting the real estate markets, both local and out of state?

I personally think this is just silly. Yes i believe the fed could start dropping rates early next year, but this year is just to soon. I think those that are thinking this may be a little myopic on RE. The Fed is really taking out excess liquidity they caused. But RE is only a small part of that liquidity. The general commodity and excess debt bubbles need to be deflated as well and this is not as evident at it may appear to be in RE.

 

You only need to look back at numerous stock market crashes or other bubbles that were taken out in part by the Fed jacking rates. To assert that the Fed "can't let the RE bubble burst" because of x, y, or z doesn't make any sense, as they don't think that way. They are looking at their indicators which don't include the stock market indices or the housing price index. Also they are happy to let congress and the public deal with any messes made.

 

Even with the Fed dropping short term rates early next year it is entirely possible we will see the opposite effect that happened earlier in this rate cycle. We could see the Fed drop rates, but market forces keep long term mortgage rates high. I think even if mortgage rates drop it will not have any appreciable effect on the housing market this early on in the RE correction (aka it continues to drop). I base this on Robert Campball's own work which shows interest rates are not a primary indicator of RE market strength or weakness (aka low rates does not always equal high RE appreciation). The rates tend to accelerate or retard the market movements but not cause them.

 

Mike

 

 

 

Erik

Senior Member
Registered:
Posts: 120
Reply with quote  #5 

Quote:
Originally Posted by kevink
Old-timer Richard Russell said this recently.
Robert Campbell has also mentioned in his talks that he thinks rates will be lower later this year.

What do you think?
And if rates are lowered in August, how do you see this affecting the real estate markets, both local and out of state?

---------------------------------------------------------------

 

In his Investment Outlook newsletter, PIMCO's Bill Gross forecasts long interest rates to stay very reasonable from now through 2010.

 

Many who think the economy will soon go to hell in a hand basket predict Bernake will then lower rates in order to try to stimulate the economy. If Fed decreases lead to lower mortgage rates, I don't see how this could be a bad thing for the RE market. Unfortunately, I don't believe changing interest rates are capable of significantly changing market trends. They just exacerbate what is going on.


__________________
Only a fool holds out for the top dollar
hessj

Senior Member
Registered:
Posts: 139
Reply with quote  #6 
The dollar would decline a lot and inflation would be hell.  I'm not to sure if they can pull that trick a second time around.
Kang

Senior Member
Registered:
Posts: 229
Reply with quote  #7 

I spoke with my financial advisor last week and I broached this topic with him. I currently have about 80k invested in Franklin Floating Rate Trust Fund that is tied to short-term interest rates. As long as rates continue to rise or even stay the same, I make money. He feels the Fed is reaching for a 6.00 or 6.25 rate within the next 12-18 months. I personally feel that unless the economy goes into a serious tail spin, Bernacke will continue to raise rates in order to stifle inflation.

kevink

Senior Member
Registered:
Posts: 842
Reply with quote  #8 
"I think those that are thinking this may be a little myopic on RE."

Both Russell and Campbell are very bearish on RE.
RobertCampbell

Senior Member
Registered:
Posts: 7,146
Reply with quote  #9 

Kevin,

 

Old-timer Richard Russell said this recently.
Robert Campbell has also mentioned in his talks that he thinks rates will be lower later this year.

What do you think?
And if rates are lowered in August, how do you see this affecting the real estate markets, both local and out of state?

 

You have identified an important and magnificant topic for intelligent discussion. 

 

Note I use the word "intelligent" and not hostle, deprecating, childish, or "sexually or morally perverted" - and we all know the discussion board "pervert" that I'm talking about.  This guy/girl/girlie-guy (?) is really starting to creep me out, you know? 

 

That said, I won't be sharing my comments (which are very insightful - ) about interest rate trends and the impact I feel they will likely have on the real estate market.

 

Great topic!

 

Robert Campbell

 

PS:  Kevin, do you get Russell's investment newsletter (Dow Theory Letters)?  Do you know it has the distinction of being the longest running in the United States?  40 or 50 years, I think, which speaks volumes for Russell and his investment guidance - he's obviously very wise.

 

PSS:  Why are people so hostile and angry today?  We're seeing it everywhere in America, and not just on this discussion board.  It's because the cost of living is rising faster than incomes, and the home appreciation cash ATM machine - the main driver for the U.S. economy for the past 4 or 5 years - is shutting down as real estate values start to correct downward.  In my view, this isn't going to be a soft landing.

 

 

taddyangle

Avatar / Picture

Senior Member
Registered:
Posts: 2,059
Reply with quote  #10 
Quote:
Originally Posted by RobertCampbell

 

You have identified an important and magnificant topic for intelligent discussion. 

 

That said, I won't be sharing my comments (which are very insightful - ) about interest rate trends and the impact I feel they will likely have on the real estate market.

 

Great topic!

 

Robert Campbell

Where will you be sharing your comments?

 

 

 


__________________
------
Gekko

Avatar / Picture

Senior Member
Registered:
Posts: 777
Reply with quote  #11 

-

 

My guess is one more 1/4 point move up and then they will hold steady at that level for 6-9 months.  But this is just a wild guess - just like trying to predict the weather.

 

If you really think that you can accurately and consistently predict the movement of interest rates, there is a 7 figure job awaiting you on Wall Street.

 

 

RobertCampbell

Senior Member
Registered:
Posts: 7,146
Reply with quote  #12 

Taddy,

 

Where will you be sharing your comments?

 

It will be the main topic of my July 14, 2006 Timing Letter, which you are subscribed to.

 

Robert Campbell

taddyangle

Avatar / Picture

Senior Member
Registered:
Posts: 2,059
Reply with quote  #13 
Quote:
Originally Posted by RobertCampbell

Taddy,

 

Where will you be sharing your comments?

 

It will be the main topic of my July 14, 2006 Timing Letter, which you are subscribed to.

 

Robert Campbell

 

Good, I am looking forward to reading it. 

 

Anyone read any good books lately?  I am going on vacation in 2 weeks and need to stock up on some good reads.  I have already read about 30 real estate books, so kinda looking for something a little different.


__________________
------
Geoffrey

Senior Member
Registered:
Posts: 177
Reply with quote  #14 

You asked for it. 

 

You can buy the books, or print out the rest:

 

http://www.constitutionalincome.com/

 

http://www.realityzone.com/creatfromjek.html

 

http://irobyou.info/SynapticSparks_Info/oldsite/tax/16th.html

 

http://irobyou.info/pdf/Peter_Grace_Report.pdf

 

http://video.google.com/videoplay?docid=-466210540567002553&q=%22federal+reserve%22

 

http://www.whatistaxed.com/

 

http://irobyou.info/TaxableIncome_Net/report/TI_15Apr02.pdf

 

http://irobyou.info/861Evidence_Com/main/history.htm


__________________
Always lookin!
RobertCampbell

Senior Member
Registered:
Posts: 7,146
Reply with quote  #15 

Hey Geoffrey!

 

How about those Padres?  7 games above .500 at the break.  Maybe my presence brought them some good luck.  (grin)

 

Thanks again for your great company and generosity.

 

Robert Campbell

Geoffrey

Senior Member
Registered:
Posts: 177
Reply with quote  #16 

My pleasure! 

 

Yeah, they're pulling away from the pack at the halfway mark.  You really seemed to have put a spark in their ***!


 

 

 


__________________
Always lookin!
Jeff

Avatar / Picture

Senior Member
Registered:
Posts: 1,559
Reply with quote  #17 
Quote:
Originally Posted by taddyangle
Quote:
Originally Posted by RobertCampbell

Taddy,

 

Where will you be sharing your comments?

 

It will be the main topic of my July 14, 2006 Timing Letter, which you are subscribed to.

 

Robert Campbell

 

Good, I am looking forward to reading it. 

 

Anyone read any good books lately?  I am going on vacation in 2 weeks and need to stock up on some good reads.  I have already read about 30 real estate books, so kinda looking for something a little different.

 

The last GREAT book I read was "Lamb : The Gospel According to Biff" by Christopher Moore.

 

About as FAR as you can get from RE investing...


__________________
Please God, make the second million easier...
taddyangle

Avatar / Picture

Senior Member
Registered:
Posts: 2,059
Reply with quote  #18 

Jeff,

 

Blasphemy, actually it looks like it is right up my alley. 

 

Geoffrey, got pass on your recommedations I want to relax on vacation.

 

Any others?


__________________
------
Geoffrey

Senior Member
Registered:
Posts: 177
Reply with quote  #19 

Taddy,

 

You've got to be kidding!  Half that stuff will put you to sleep faster than pills! 

 

Have a great time!

 

Geoffrey


__________________
Always lookin!
Jeff

Avatar / Picture

Senior Member
Registered:
Posts: 1,559
Reply with quote  #20 
Quote:
Originally Posted by taddyangle

Jeff,

 

Blasphemy, actually it looks like it is right up my alley. 

 

Geoffrey, got pass on your recommedations I want to relax on vacation.

 

Any others?

 

Blasphemy!?  Don't worry...I got you covered...

 

"And every one who speaks a word against the Son of man will be forgiven..." (Luke 12:10 RSV).

 

"Truly, I say to you, all sins will be forgiven the sons of men, and whatever blasphemies they utter...(Mark 3:28-30 RSV).

 

Plus, it is really, really funny...


__________________
Please God, make the second million easier...
RobertCampbell

Senior Member
Registered:
Posts: 7,146
Reply with quote  #21 

 

Taddy,

 

Have you read "Into Thin Air" or "The Perfect Storm?"

 

Both of these are great, great books!  Two of my all-time favorites - all about having respect for the greater force ... in this case nature.

 

Robert Campbell

momagic72

Senior Member
Registered:
Posts: 85
Reply with quote  #22 
Check out "Cradle to Cradle" by William McDonough. The book is even water proof so you can read it in the pool!!!
taddyangle

Avatar / Picture

Senior Member
Registered:
Posts: 2,059
Reply with quote  #23 
Quote:
Originally Posted by Jeff

 

Blasphemy!?  Don't worry...I got you covered...

 

"And every one who speaks a word against the Son of man will be forgiven..." (Luke 12:10 RSV).

 

"Truly, I say to you, all sins will be forgiven the sons of men, and whatever blasphemies they utter...(Mark 3:28-30 RSV).

 

Plus, it is really, really funny...

 

I have got to really start memorizing those, you would'nt happen to have a cheat sheet with many of the biblical sayings I would happen to need when I am spreading the word...

 

I was actually ordained in May 2004.  I even preformed a wedding ceromony last year.  I don't get a chance to spread the word since RE investing has been keeping me so busy, but as the RE market slows I might start, so that cheat sheet would come in handy.  Only need the ones that mock other religions, or say it is okay to sin.


__________________
------
kevink

Senior Member
Registered:
Posts: 842
Reply with quote  #24 
Quote:
Originally Posted by RobertCampbell

Kevin,

Old-timer Richard Russell said this recently.
Robert Campbell has also mentioned in his talks that he thinks rates will be lower later this year.

What do you think?
And if rates are lowered in August, how do you see this affecting the real estate markets, both local and out of state?

You have identified an important and magnificant topic for intelligent discussion.

Note I use the word "intelligent" and not hostle, deprecating, childish, or "sexually or morally perverted" - and we all know the discussion board "pervert" that I'm talking about. This guy/girl/girlie-guy (?) is really starting to creep me out, you know?

That said, I won't be sharing my comments (which are very insightful - ) about interest rate trends and the impact I feel they will likely have on the real estate market.

Great topic!

Robert Campbell

PS: Kevin, do you get Russell's investment newsletter (Dow Theory Letters)? Do you know it has the distinction of being the longest running in the United States? 40 or 50 years, I think, which speaks volumes for Russell and his investment guidance - he's obviously very wise.

PSS: Why are people so hostile and angry today? We're seeing it everywhere in America, and not just on this discussion board. It's because the cost of living is rising faster than incomes, and the home appreciation cash ATM machine - the main driver for the U.S. economy for the past 4 or 5 years - is shutting down as real estate values start to correct downward. In my view, this isn't going to be a soft landing.



Hey Bob,
Thanks, I try to stay away from the perverted mindless jabber!

Yes I read Russell whenever I have the time. My dad is a long time subscriber and in late-1999 was telling me this guy Richard Russell said to get out of tech stocks as there was an inevitable crash coming. Since I knew it all at age 28 and was up like $20k on paper I said this guy is too old and out of it, he doesn't know about the "new economy". Of course I lost everything and eventually began to listen to Russell and his years of wisdom.

Russell doesn't have a crystal ball but I think he's about as close as you can get when it comes to the market! I like his commentary on world events and government as well.

Cheers,
Kevin

p.s. anger just may get worse as house values drop and people are forced to give up their homes- many will look for a government bail out, but will be extremely disappointed
momagic72

Senior Member
Registered:
Posts: 85
Reply with quote  #25 
Kevin,
Do you have a link to Russell's web site?  I may want to look into his publication.

Fortunately I almost bought at the top of the tech bubble, but something told me not to.  I saved quite a bit of money.  I think housing in the pricey areas will see a pretty nice correction. 
johndoe

Avatar / Picture

Junior Member
Registered:
Posts: 21
Reply with quote  #26 
Quote:
Originally Posted by kevink
Old-timer Richard Russell said this recently.
Robert Campbell has also mentioned in his talks that he thinks rates will be lower later this year.

What do you think?
And if rates are lowered in August, how do you see this affecting the real estate markets, both local and out of state?



Hi Kevin,

I also see it as a likelihood that the Fed could lower the overnight rates, however this won't do much for mortgage rates which will likely head higher for some time.  This is the reason:

Normally, there is a risk premium attached to lower quality paper (like mortgage notes) compared to Federal Reserve backed notes.  You can see in a technical analysis that I did some time ago :

http://socalbubble.blogspot.com/2006/04/why-are-mortgage-rates-so-low.html

That they average spread between fed funds rates and 30 year mortgage rates is 3.33%.  today, we stand at about 1.25.  In other words, following the reversion to mean principle, mortgage rates should actually be closer to 8.5% (5.25+3.33)  REMEMBER, this is just an average, so for every action there is an equal and opposite reaction.  In other words, we have seen risk premiums as high as 5.5%.  If the Fed moves to 5.5, which I still think is likely in August, the historical 30 year mortgage should be 8.75 or so, but could easily move as high as 11%.  Essentially, risk premiums are substantially lower than they have historically been.  Which, if I remember right, Greenspan said something about the topic:
But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.
This is precisely what most economists are worried about.  The FED is saying that they expect a reversion to the mean on risk premiums, but if that were to happen, the housing market would truly crash (imagine 9% interest rates for all of those marginal buyers)

I did an article on this back in Nov 2005 titled "Interest Only - Creative Financing  or Harbinger of Deflation?"  here:
http://socalbubble.blogspot.com/2005/11/interest-only-creative-financing-or.html

Both good reads, if I do say so myself.
kevink

Senior Member
Registered:
Posts: 842
Reply with quote  #27 
Quote:
Originally Posted by momagic72
Kevin,
Do you have a link to Russell's web site? I may want to look into his publication.

Fortunately I almost bought at the top of the tech bubble, but something told me not to. I saved quite a bit of money. I think housing in the pricey areas will see a pretty nice correction.


Momagic,
here ya go: http://ww2.dowtheoryletters.com/
mike

Senior Member
Registered:
Posts: 607
Reply with quote  #28 

Quote:
Originally Posted by johndoe
Quote:
Originally Posted by kevink
Old-timer Richard Russell said this recently.
Robert Campbell has also mentioned in his talks that he thinks rates will be lower later this year.

What do you think?
And if rates are lowered in August, how do you see this affecting the real estate markets, both local and out of state?



Hi Kevin,

I also see it as a likelihood that the Fed could lower the overnight rates, however this won't do much for mortgage rates which will likely head higher for some time.  This is the reason:

Normally, there is a risk premium attached to lower quality paper (like mortgage notes) compared to Federal Reserve backed notes.  You can see in a technical analysis that I did some time ago :

http://socalbubble.blogspot.com/2006/04/why-are-mortgage-rates-so-low.html

That they average spread between fed funds rates and 30 year mortgage rates is 3.33%.  today, we stand at about 1.25.  In other words, following the reversion to mean principle, mortgage rates should actually be closer to 8.5% (5.25+3.33)  REMEMBER, this is just an average, so for every action there is an equal and opposite reaction.  In other words, we have seen risk premiums as high as 5.5%.  If the Fed moves to 5.5, which I still think is likely in August, the historical 30 year mortgage should be 8.75 or so, but could easily move as high as 11%.  Essentially, risk premiums are substantially lower than they have historically been.  Which, if I remember right, Greenspan said something about the topic:
But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.
This is precisely what most economists are worried about.  The FED is saying that they expect a reversion to the mean on risk premiums, but if that were to happen, the housing market would truly crash (imagine 9% interest rates for all of those marginal buyers)

I did an article on this back in Nov 2005 titled "Interest Only - Creative Financing  or Harbinger of Deflation?"  here:
http://socalbubble.blogspot.com/2005/11/interest-only-creative-financing-or.html

Both good reads, if I do say so myself.

I agree with what you are saying. My main assertion is that it's way too early for the Fed to start lowering rates. At the most basic level, they will not want to admit they were wrong or went too far. At a professional level they are not concerned about the housing correction. Listen it will take 2 quarters more for the yoy housing data to just start showing the RE correction. So it will be at least that long before the Fed would react to a housing "crash". But as you point out, even if they reverse course it may have no effect on long term rates for a very long time.

Mike

 

 

hessj

Senior Member
Registered:
Posts: 139
Reply with quote  #29 
good post Mike. 
AlexL

Senior Member
Registered:
Posts: 298
Reply with quote  #30 

I personally don't see the Feds lowering the rates this year, raising - may be, I'd guess a couple more times, but not lowering.

 

First off, they don't want to give wrong signals, bond market is confused to hell as it is.

 

Secondly, if the economy is doing well (or even OK) with the rates at this level, why would the Feds lower it?

 

I've read some executive's statement last week, don't remember where. The guy said that once the consumers get used to paying $3/gl at the pump, there is little incentive for the gas companies to drop the price even if the market conditions allow for it. The same thing with interest rates, people will gradually get used to it as long as the other market conditions are good, and the 4.5% 30-year mortgages will become part of the American Mythology.

 

I could be wrong, as always...

 

Previous Topic | Next Topic
Print
Reply

Quick Navigation:

Easily create a Forum Website with Website Toolbox.

Policy