Now you're talking!
I can buy part of that argument. This weaker housing market, especially if it drags employment down, can be a principle factor to prompt the fed to cut rates, IMO.
Housing #'s down 3.9%%%% 848,000 didnt get the 7% jump
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Now you're talking!
I can buy part of that argument. This weaker housing market, especially if it drags employment down, can be a principle factor to prompt the fed to cut rates, IMO.
It's positive I guess...but you have to also remember that the lending standards are tightening and a lot of those who want to buy houses won't be able to. All this does is make houses cheaper for people with money to buy things at discount.
I'd say the inventory is there...the problem is people aren't willing to lower their selling prices...once the price wars kick in then it'll be ugly I'd say. You'll see a lot less building soon though, and that will hurt the economy no doubt.
I don't think cutting interest rates will help the housing market to tell you the truth...the only thing that will help that is prices to drop, a lot. And when the price dropping starts it will be competitive and UGLY! JMHO...cheers.
IMHO, housing is going to get much much worse in the next 2-3 years, but certainly this Spring will be awful. There is a glut from existing homes and news homes, plus foreclosures. And prices are still too high making the situation even worse. As prices drop in a panic, consumers will tapped out and the markets will drop far more than anything we have seen. I do not think cutting rates will help at this stage, it just has to play out. Just my thinking and obviously doesn't have to happen this way, anything is possible in the markets/economy. Will Bush let this happen? I doubt it, I wonder what surprises he has in store...
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There's the other side of the coin.
Great debate is happening here. This can't be ET, can it?
+ Lower interest rates (possibly)
- Tighter lending standards
+ Price cuts
- Job cuts
(These are just a few examples)
Does it equal a wash, or is it still negative or positive net/net?
Bush has no control over the housing market.
Historically real estate has always been a good investment.
I think it can't wash. The problem is this...you have most of the gluttonous homebuying in a few places. That would be CA, FL, AZ, NV.
The percentage of Alt-A loans in those markets was like 80% almost last year...that's a lot! And something like 60% of those were piggybacks and most companies don't qualify with the consideration of piggybacks.
CA and FL will SLOW DOWN to a snail's pace this year because of tightening lending standards and most of the growth in the country was from those places...so you can imagine what happens when the only wanton borrowers are being cut off by increased lending standards and the bubble is finally dying. Those markets were the bubble...we'll see A TON of ARM loans resetting this year.
If the Fed cuts interest rates...fine. But if you look at a company like Countrywide(largest lender in the US), they qualified people for Alt-A loans(80% of loans in bubble markets) using the TEASER rate, not the fully indexed rate.
You can put all of this shit(tightened lending, Alt-A loans, high prices, high inventory, speculators galore, etc.) in a blender and it tastes like shit....if you decide to sweeten it with a little bit of whip cream(.50% rate cute), does it still taste like shit? I think so!
When a house is foreclosed on it breaks the normal cycle where a family sells a smaller house in order to buy a bigger house. A foreclosure just puts a unit on the market (supply increase) and takes one person out of the market (demand decrease)
With tightening credit policies fewer people will be able to qualify for mortgages.
People with lots of cash and/or credit will be a great position to scoop up bargains once the housing market has finished correcting which appears to be to be just beginning, not finishing up.
I don't think there are that many ordinary people who have been sitting waiting for housing prices to drop to get in. With the proliferation of so-called exotic mortgage products pretty much anybody with a pulse who had a desire to buy a house in the past few years has gotten one, even if they really couldn't afford it (hence the situation we now face)
How much demand can there be left from people on the sidelines?
GTS, great post. The one thing I might add to that is that even if there are people on the sidelines...the housing market has been SO NUTS that regular people waiting to buy will probably now, just wait even longer...prices have gone up so much that people are likely to be very apprehensive about buying until they see strong rebounds and inventory depleting.
It's easier for people to be greedy and want to make money on a house in a rising market than for nervous folks to buy one in a market that might be dropping further.
It's easier for people to be greedy and want to make money on a house in a rising market than for nervous folks to buy one in a market that might be dropping further.