Monday, April 17, 2006

Assorted Ramblings

People Under The Stairs releases its new album, Stepfather, tomorrow!
http://www.putsonline.co.uk/news.htm

***

Today is the deadline to file your taxes. Dad and I have already prepared over 325 returns and there will be at least 100 more on extension. It's been quite an educational ride. You learn so much about a person by doing his taxes. You find out whose honest, a liar, a procrastinator, organized, scattered. And, I have a new found appreciation for the IRS. If we abolish all other government agencies and allow the IRS to run other public services, we might finally get some efficiency around here.

***

In a discussion about the economy, a family friend pointed out that the price of gold is skyrocketing these days. He explained that the surge in gold prices generally signals inflation; that the demand for gold has an inverse correlation to the demand for dollars. If the demand for dollars goes down, the fed will likely raise interest rates to keep investors from fleeing.

So here lies the rub - raise interest rates and keep those investors here, but what happens to the 34 percent of home mortgage holders with adjustible rate mortgages?

http://news.ft.com/cms/s/b5dca1a8-ca13-11da-852f-0000779e2340.html
http://news.ft.com/cms/s/d89efdd4-ce01-11da-a032-0000779e2340.html

21 Comments:

At 10:51 AM, April 17, 2006 , Blogger mrsleep said...

Look out!!! That's why the Sleepmeister has always had a fixed rate mortgage.

 
At 11:19 AM, April 17, 2006 , Blogger bombsoverbaghdad said...

Maybe next year I should get you to do my taxes!! But I don't want you snoopin' through my shet. :-) I'm semi-organized, but my taxes are extremely complicated because of co-ownership of property with wifey and brother, LLCs, parent dependants, and a child. I don't even try to do mine because it's too confusing.

I had an investment property that I sold because it was on an adjustable mortgage. I made a bad decision and I figured it was better to get out while I was ahead. I think all of these people on those "exotic" mortgages are gonna go belly up--big time. Wierd thing is that I know people that are STILL looking for "Properties" to invest in on these mortgages. I try to warn them . . . But I'm gonna buy a ton of property in about 5 years...when the market bottoms out.

 
At 2:47 PM, April 17, 2006 , Blogger Intellectual Insurgent said...

Both of you are smart.
BOB, we'll do your taxes. We can probably give you a better price too. You were smart to sell. Notwithstanding the propaganda about the economy, the indicators for the housing market are not looking good. As for the people who are still looking, hopefully they will listen, but evolution has a way of kicking in.

 
At 12:33 AM, April 18, 2006 , Blogger The Best [ Ghostface ] said...

Homes are getting more hard to afford because there are so many people looking for homes. Houses in the ghetto even cost more now.
Too many people living in limited space this is one of the reasons the prices of homes, apartments, condos, townhouses, etc go up.

I wish eveyone out there luck.

 
At 7:15 AM, April 18, 2006 , Blogger mrsleep said...

If interest rates go up another couple of points, things will get ugly, and may get ugly fast.

You hate to be a vulture waiting in the wings, but a smart investor in those types of times, can do well.

 
At 8:49 AM, April 18, 2006 , Blogger Intellectual Insurgent said...

So true. Wait another year and there will be some gems for the pickin'. The number of foreclosures has already gone up and it's going to increase exponentially in the next year.

 
At 5:38 PM, April 18, 2006 , Blogger Possum said...

Actually, they can come to me and I'll refinance them.

Contrary to popular belief, Fed rates have almost nothing to do with mortgage paper. I can get a 6.25% fixed rate loan for 30 years today for someone with A credit and good Loan-to-value ratio. I think prime is at 7.75%?

Rates went up friday about .25 but came back down today the same .25. There is a lot more competition for the paper nowadays. Competition drives down prices.

Those people with the 2 year arms needed them. They A)made dumb choices before buying their first home that hurt their credit
B)have zero dollars to put down on a home and/or
C)drown themselves in debt and I make sure to explain exactly what they need to do to make their credit better. I always try to sell someone a 10, then 15, then 20 year note first. I want people to not have to pay a mortgage at retirement.

There are great days, and some real horror stories in my job.

 
At 6:40 PM, April 18, 2006 , Blogger Stalin the Shark said...

BTW, II, I put up an online tribute to your friend, Mahnscreecha S. Freakmaiden, here.

 
At 7:58 PM, April 18, 2006 , Blogger Intellectual Insurgent said...

Possum,

Where do you see the housing market headed?

 
At 2:04 PM, April 20, 2006 , Blogger Possum said...

That's a really good question.

There is always more ability to buy a home out there than I expect to see. Think McMansions. Obviously homes sales are tied to the ability to finance. Here are the factors I see:

The evaporation of the 80/20 combo loan due to heavy losses on liquidating the 10%-20% second mortgage in the financial maket. (I speculate this is tied to 2nd and third tier insuance bondholder liquidation post Katrina but nothing confirms that.)

The bottom line for 100% financing is moving back up from a low of a 560-580 range back to the 600-620 credit score.

Fannie Mae has tightened the reigns on some programs that were pretty lax in the past 3 years.

Virtually no one wants to finance wobbly boxes anymore (mobile homes).

Those factors make it harder to buy, or more costly. These make it easier:

Now I'm seeing a 45 year term product that a 600 score borrower can qualify for. Other aggressive products with unusual guidelines are out there as well.

Fannie Mae is testing a B-C paper guideline product for purchases.

Rates while higher, are still low considering the previous 30 year history.

Companies that geared up for the refi boom are over committed on their lines and don't get enough paper to cover their forward commitments. They are discounting and aggressively seeking paper to fill that void.

People generally are thinking more away from credit toward investment. A home is consistently a smart investment.

All in all, there can be location factors. California has had some tremendous equity growth leading to the question of a bust. (1 million for a 1200sq ft ranch on .3 acre? My favorite:Doublewide, 5 acres, 3 million?)

Other areas like middle Tennessee, Virginia, Texas, and the Carolinas haven't seen the high point yet.

Our economy is still growing in spite of what anyone tells you. Growth equals jobs, jobs equal housing. It ain't over yet.

 
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