Rates are the lowest they have been in decades. Of course they are not too low. People are just spoiled. They over extended themselves and used the equity in their homes as credit cards thinking the party of increased values would last forever. Nothing lasts forever.
They just don’t get it.
People can’t spend their way out of this one.
What is needed is VERY tight regulation.
Who is going to bell the cat?
Wake up America!
You can’t spend your way out of debt.
No debt is good.
Debt is ALWAYS BAD
Refinancing was a major source of the problem. People refinance and pulled hundreds of thousands out of their homes.
It is bad business to refinance an upside down loan. However, the goal of the refinancers is debt forgiveness, i.e. bailout!
That is blatantly unfair to everyone who used commonsense.
Much of the foreclosures are due in large part to refinancing.
I’ve seen on average $200,000 pulled out of homes.
Why in the world should this type of greed and carelessness be rewarded?
Anyone who pulled $50,000 or more out of their homes deserved to loose it.
great idea…althogh it should also apply to refinancing…more money in people’s pockets – more spending…wouldn’t that stimulate the economy?
RATES ARE TOO LOW,
NOT TOO HIGH!!!
The problem we are in was caused by this simple fact, and now they want to continue to stick the finger in the eye of simple economics. Sure, property tax revenues will remain high but these properties are overvalued. Why can’t the “brightest of our economists strategists figure out what my 7 year old can?
I agree, the rate is incidental to the real problem…Inability to pay. It is more than just mortgage rates that need to be reset in our new world. Indeed, everything that we all thought we knew about finance has been changed forever.
The only fair and sustainable means to calculate the value of a home is to equate it to ones income. On a national scale, that means we are “done” with the declines when a “median” home sells for about 3x the “median” gross wage. This is a good thing for the “free-market” guys to remember… If you wipe out the middle class, EVERYONE falls with them.
The average house price needs to drop to the $120,000. Then the homes will be affordable and effects of the rates won’t matter s much
This column reminds me of the weather “experts” who always say, “It won’t help” whenever it rains in the middle of a drought. It certainly won’t hurt! If lower mortgage rates allow some people to refinance or purchase a home, it may not be the final answer, but it certainly helps. Those people can get about stimulating the econimy in other ways. Everything gets moving again.
mortgage rates aren’t the answer. neither is saving all the troubled homeowners who are at risk of foreclosure. say what you want, but the foreclosures must happen, and inventory must grow. i feel bad for everyone with a PHD in economics. a waste of time and money. when you boil everything down it is the most basic concepts of a market economy that are at hand.
YES, YES, YES, MORTGAGE RATES ARE TOO high!!!! Prices, too.
I am currently looking and I have excellent credit.
I am one of those who sat out the irrational exuberance of the inflated housing market.
I chose to go without while everyone celebrated their great “Fortune” (at the time). It was not easy. I wanted a home for my family like everyone else. I just could not stand to pay those outrageous prices irregardless of so-called market prices.
And now they’re feigning ignorance. Huh! Give me a break! Yesterday they celebrated.
we have an excess of houses, an excess of automobiles, and an excess of unsold retail items. Who doesn’t understand that houses, autos and retail items are not selling because the majority of us CITIZENS DO NOT HAVE MONEY, OR JOBS!!!! Have you seen the prices of food lately?? And forget medical insurance, we can’t afford to even see a doctor or dentist because THEY CHARGE TOO MUCH!!!
You have a good article on CNN. I am a Realtor here in Phoenix, AZ. I continue to see what a mess this housing mess really is. Since there are way more homes than there are people to buy them, even at 4.5% mortgage rate, I think I have the solution.
Have towns target those homes that are old, have been vandalized or just not maintained their value. Bring in the bull-dozers and tear them down. First it will reduce the number of homes in an area and reduce the inventory. Second, those working on the demolition of homes and the cleanup of the debris have jobs. Old homes that need too much work will be plowed down. The land will then be open for new construction.
While this sounds easy, it comes with a cost. A house sitting vacant for years is not getting an occupant who would be paying taxes on the property. New construction would generate work for builders and probably higher tax revenues for a city.
I have been touting this idea for some time and I think that some cities in Ohio are actually doing this.
LOWER RATES ARE THE PERFECT ANSWER. Loan modification programs are already under way for millions of home mortgages by the lenders servicing them. LOWER RATES TO 3% and the refinance boom with the buying boom will stabilize home values and free up income for consumer spending to buy cars the CHryslers, FORDS and GM need to sell as well as other sectors of the economy.
I think a way to get the economy rolling again would be for government to let the people keep more of their hard earned paychecks. I really believe low taxes are the key to an economic recovery. Maybe with government collecting less for itself it would have to start to downsize (what a wonderful thing that would be, fat chance of that happening however). Also another thought would be a moratorium, say for three to six months of all sales taxes on motor vehicles, just maybe that would be just the trick for people to start buying new or used cars and trucks again (once again fat chance of that happening) but if it did happen maybe just maybe we could start to get the auto industry going toward recovery, oh well just my thoughts, thanks.
Lower mortage rates are an awsome idea and will help a good majority of the population for years to come. For the people that live in NY , NJ or CA ect.,you really should move to a better part of the country. The taxes you pay and cost of living in those areas is insane!
It is not the mortgage rates, or the current house prices, it is the twisted mortgage products that pulled too many financially disqualified home buyers as well as some opportunists into the trap. The market is now correct the trand by itself.
One thing few people have said is the fact that the bust of the housing bobble was also contributed by the job losses which were triggered by the crazy energy price in the last couple of years. The big oils need to be investigated seriously.
I am a licensed Mortgage Banker have been for 6 years. I also have a Masters Degree in economics. Economic theory is very flawed hence the statements that they are just making saying we are in a recession and have been in one since last year. What type of garbage is that? My 3 year old knows we are in a recession! But up to last month they were saying no not in a recession GDP isn’t negative yet, that is the economic theory at work.
It took us a while to get into this mess there will be no magic wand to get us out over night, period. Lowering the rates is the best idea and should have been done before bailing out Wall Street and before values started plummeting, people could have got out of the ARM loans they were in.
Banks ARE lending don’t listen to the media. I do loans all day long. If you have good credit you can get a great deal if you have bad credit you can get a decent deal through FHA up to 97%. People aren’t homeless; they can get an apartment till they fix their credit, quit being dramatic (media again).
If you bought an over priced home that is your fault for buying in a sellers market I have no sympathy for you and your “keeping up with the Jones’s” mentality. If you bought a home you couldn’t afford, I have no sympathy for you either, loans aren’t made to children or the mentally challenged you are an adult act like one.
Lowering rates will help current home owners that aren’t upside down get lower payments; they won’t have to take equity out to see savings at 4.5%. Older people on fixed income with plenty of equity can refinance into lower payments. This will help with cash flow and they will have money to spend on retirement investments and in the retail sector (think home improvements etc). People that aren’t affected by the downturn (yes many people still make lots of spending money and put 50% down) will start buying vacation, investment and second homes at .70 on the dollar with low rates. New home buyers will get good deals at low monthly payments. This will slowly help the over supply and declining market areas stabilize. This in turn will help out the people who bought homes for more than they were worth with no or little money down.
Mortgage companies using tighter guidelines will do better loans, guidelines should not change they should remain tight with a little more flexibility to people with good credit. If you can’t make your car payment on time you should not own a home.
It should have been done first and I would really like to see the bail out Tab when it is all said and done to see who really owes us tax payers!
Oh yeah..
Merry Christmas Everyone!
It’s all about the monthly payment, being a combination of the mortgage amount and the related interest rate. In order to stabilize the real estate values, homes have to sell. Homes will sell if interest rates are at 5.00%, even moreso if the 30 year fixed rate is at 4.50%. Every borrower should get the benefit of the lower rate: refinancers and those who are upside down, as well as purchasers.
I’ve been in the mortgage industry for more than 20 years. Low rates will get this train moving again. Then other improvements will occur in the economy. But something needs to get positive momentum going and lower interest rates will do it and do it quickly.
Think tank “experts” have their head in the sand about this issue. Take a step back and think “Do I have a mortgage rate higher than 6.00%?” Do the numbers, for a mortgage above $200,000 it’s definitely worth refinancing. And you can get a zero closing cost loan for 5.50%.
$200,000 loan at 5.00% is $1073 per month. After deducting interest and real estate taxes when filing your 1040’s in April, its cheaper than renting a 1 bedroom apt. in most cities! And there is plenty of money to lend, and programs to finance purchases. FHA, VA, USDA, etc. are all low downpayment programs and one doesn’t have to be a 1st time buyer.
Make financing affordable and buyers will be storming real estate offices like it was Black Friday!
Put it in effect for the 1st 90 days of Barak’s term and see what it does. Can’t be any worse than all the bailout money we’ve committed elsewhere and certainly more attractive an idea than giving money to those “knuckleheads” from GM, Ford, and Chrysler who still don’t have a business plan for the $$ their asking.
In 2004 I sold my house in Southern California for 370k. A house that I paid 150k in 1993. This house was built in 1960 and was 1100sf. The pipes were rotten, the windows were old leaky wooden panes, the walls were uninsulated. I had a choice to either sell or remodel. I sold it the first weekend with over 50 people looking at it. I am a daytrader in the markets and use the same theory to trade. Buy LOW Sell HIGH. I would not buy my old house back at anything over 200k and that is with the new owners upgrades. the prices are currently at the 370k I sold it for. Looks to me like another 20-30% lower will afford my income at 80k per year.
Atificially lowering the mortgage rate is ridiculous. When rates go up it will put major pressure on prices again and we will be right back where we are. If they ar drawn down by market demand that’s another thing. It’s very possible w could be in a sustainable low rate environment. Tath won’t work if we push to get back to leverage levels we have been at in recent years. There’s a reason we call it a CORRECTION.
Our leaders have not come to the realization that there is a whole lot of people who are upside down. ie “they owe more on their homes than they will appraise for. If you cannot get the appraisal for the amount owed you cannot get a loan period no matter how low the interest rate. Until people whose mortgage are under water is “cramed down” to existing home values the only people who will be helped out will be the Banks. They will find more buyers for their REO owned properties.
At this point in time lower rates may not correct the financial mess we’re in, but it would be great balm. Lower rates would put a lot more money in consumer pockets. What I don’t understand is why this step was not taken at the beginning of the melt down. If everyone that had a toxic mortgage were given and opportuinty to get out of it, even at governmnet cost, we could have eliminated a hust part of the problem early on. Low rates are grrrreat!!!!!
Frank Raffaele
My wife and I took out a mortgage at more than 12% to buy a house in 1984. We could afford it because we bought a house well below our “means,” and paid it off less than 15 years later (after one re-finance to a lower rate).
4.5%, as the Treasury is supposedly proposing, is truly nuts and will only encourage the kinds of speculation that got the country into the current mortgage mess.
Lower rates are the answer! If Ben B. had lowered rates last year, this mess would have never happened. If mortgage rates are lowered to 3% this mess will pass by June 2009. The new money will find the bad money where ever it may be hiding. Like an antibiotic finds the infection in a human body, the “new money” will find and destroy the “toxic illiquid” asset, making it “whole” again. This is a simple answer to address this mess and re-inflate the economy. Simple econ 101, jezzzzzzzzz!!!
Lower rates will help those of us that can refi.
Buying a home is not the right thing to do for everyone. Those that have been selling “the American dream” for the past 50 years are responsible for our current problems. The real estate industry, government, and the banks.
It’s not rates that are the problem. You can lead a horse to water but can’t make him drink if he’s not thirsty.
More and more programs from the Fed etc. will erode any confidence that we have in them now. They have very little credibilty now as it is.
The Neg Am Loans and Interest Only Payment programs made it possible for almost anyone including low income families to qualify for a house and anyone that already owned was able to buy a bigger home or a rental, pull cash out for home improvements (remember the flyers that kept coming from the lenders and brokers?) This caused the Values of home to become inflated. Builders were offering more incentives to include into the sales prices. It pushed the supply and demand up…and therefore the values increased. So people own homes that should have never been priced that high to begin with.
All borrowers and low-income families were buying homes at inflated sales prices that would not have occured if everyone had to put a downpayment down and qualify at the fixed rate.
They should roll down the loan to the current values which is more realistic AND lower the rate to offer some relief until we can all recover from this mess.
Now people are losing their jobs due to the economic instability and do not qualify for the new rates or the new sales prices currently available. They do not have the credit to qualify. We are at a stand still because you can’t lose your house and buy down…even if you get a new job.
They need to put a moratorium on the foreclosures and evictions for 6 months.
Modify all the loans and admit they screwed up by allowing this to happen.
The borrowers that are current on their mortgages should be rewarded with the 4.5% rate with out having to qualify. Send them a modified note and lower their payment automatically.
The values are not sufficient per the current guidelines to refinance.
With the lower payments it will increase the cash flow in families which will in turn improve the economy…and stabalize the jobs.
They don’t want to see the bottom line losses is why they are taking so long make a decision.
It’s sad…my 12 year old figured this out…and is frightened by the fact that those we trusted with our savings for college and retirement have failed us.
I’ve found myself agreeing with LaMonica more and more. Something must be wrong. Seriously, lower interest rates will help only if you’re buying a home or are able to refinance.
Unfortunately, many of us are “upside-down” with respect to loan to value, and there is no way to get to the lower rate. Our home is now worth less than what we paid for it 10 years ago due to the foreclosures around us.
It’s not the mortgage rate, it’s the sky high price!
Yes, houses maybe dirty cheap by Detroit, but the Metro-NYC area is still expense to buy a house – a middle class income can not afford middle class house.
I don’t know who invented the idea – house price can only go up and not allow to come down. If oil price can come down to earth, why not housing?
That’s because the American consumer has enjoyed the inflated the house price and already spend the money by re-finance and cash out, so they can’t “afford” to have house price come down.
The government now is like a hostage, have no choice but printing more money, diluting everyone’s wealth and “maintain” the housing market. Yes, the $800k house may still “stay” at $800k, but inflation adjusted.
Let the house market crash and everyone learn a hard lesson!
If we truly are interested in improving the economy. Lower interest rate across the board to let say 4% fixed for those with adjustable or who asked for refinance. Imagine what someone who pays his monthly mortgage at 6 to 9 percent would do with the savings realised by the 4% mortgage. The banks and their investors need to cut their loses now to help the economy grow.
“After reading lots of comments, I’ll add that lower home prices are not the answer,. Build and buy something within your means. If some fool would give me a lot more for my house than I paid I’d sell wouldnt you? Things are only worth what people are willing to pay.
Posted By ML, OH: December 4, 2008 4:41 pm
”
ML: You are right in that regard. But don’t be a fool. Don’t forget that people were willing to spend other people’s money creating a “false” money supply chasing those homes. If you took away peoples ability to obtain funds that they didn’t create then the house is only worth what they are willing to pay with “real” hard earned cash.
It will be very expensive to prop up home prices by any means. Is an instrument this blunt the best way? I’d prefer that the fed just figures out how much they are itching to spend, divvy it up, and cut everybody a check. It makes just as much (or more) sense. What behaviors are we trying to encourage? What is the long term goal?
Empowering bankruptcy courts to order principal and interest rate adjustments a year ago would have been more effective, but the bankers had to keep up their bluff… greed, stupidity, and fear are triplets.
At this point, there are WAY too many homes on the market, and WAY too many homeless people. Jobs are more important than interest rates. The situation is far enough gone that driving interest rates down will take years to absorb the oversupply.
Incidentally, refinancing your home so you can run out and buy a new car is a perfect example of the witless behavior that caused so many mortgages to go upside-down. Your home is a place to stand, not a piggy-bank to raid like four-year-olds do.
As a home buyer (and ex-home builder) I think mortgage rates are always too high. And so are cruises and motorhomes and mountain retreats and…and…and! But the Fed should sit on its hands or do something similar to that.
Can you imagine what stupid things the home builders will do if they see mortgage rates dropping? Yep, just like they have been doing – keep on building!! If they had a lick of sense how many homes do you think they should be building now? Maybe 10% of current production?
After reading lots of comments, I’ll add that lower home prices are not the answer,. Build and buy something within your means. If some fool would give me a lot more for my house than I paid I’d sell wouldnt you? Things are only worth what people are willing to pay.
It seems to me that the only way this would do any real good is to allow refinancing in a way that reduces foreclosures.
But just lower rates? Oh sure, like lower gas prices, we all love it. Give me more, and I will be happy. Honest.
But, like lower gas prices, it is just a fix for our addiction that doesn’t solve the issues with being addicted.
And in easing our discomfort with losing our “fix” we stop working on an actual fix.
It is not possible to return to the rate of borrowing and buying we saw in 2005 without a return to the insanity that got us in this mess. Banks will (gawd I hope) still only be lending to people who can afford the loans which, by the way, is a whole lot less lending then was going on.
The only way out of this mess is through. But it looks like we have a whole lot more digging in before we will finally accept reality and start digging out.
We need, and our government needs, to accept that only time and prudence is going to cure this.
Economic theory holds that mortgage rates consist of two parts; the first is the interest rate that attaches to riskless lending (government debt) for the same expected term. [This is approximated by the yield to maturity on the ten year Treasury bond.]
The second part is the risk premium appropriate to the underlying chances of loss, late payment, etc.
We have no evidence that the private market is improperly pricing the risk premiums inherent in conventional fixed rate mortgages.
Thus, imo, the proposed program is foolishness. The few who are deemed eligible will receive a subsidy at the expense of the taxpayers.
***
Several previous posters have correctly commented that the housing market will right itself when housing becomes affordable in relation to potential buyers’ incomes.
For this to happen, by my broad estimates based on wage growth and housing prices since 1996, will require that prices fall to approximately the January 2002 level.
And that’s if the recession ceases getting worse. The farther down the economy goes, the farther housing prices will have to fall to restore balance to buyers’ ability to pay.
***
Are there potential jobs that could be made available to those who need work? [More and better paying jobs equals ability to pay.]
Of course there are — all the jobs that arbitrary rules, agreements, and regulations threw away over the past decades. Free the markets and let the them decide what is worth producing at what cost. Those jobs wouldn’t rely on taxes or protection, but would exist as long as their customers want the products.
Rates will help, but the real change needs to come from a change in the consumer mentality.
I buy a 200k home paying 6% interest, and own it for 5 years. I need to move, so I sell the house. But I can’t sell it for 200k, or even for an inflation-adjusted price, because I already paid interest on it, and it’s supposed to be an ‘investment’. So I end up selling it for, lets say, 250k. All that money ends up going to the new mortgage, though, because the person whom sold the new house to me did the same thing.
The person I sold my first house to then turns around 5 years later and decides to sell it, but they want a profit. So they sell it for 300k…. and so on and so on.
What a vicious snowball that becomes. Can it be stopped? I doubt it.
You people are unbeleavable. You dont have any problem for the gov give trillions to the ceo and other big companies. which is essentially the money given by the poor home owners like us. They made this mess and you dont have any problem in giving them more bail out and bail out. the rate to banks are low and very low. And now finally the government is doing something to help the people who make the government moving by paing taxes. This plan to lower interest to mortgage is going to benefit a little bit to the general population who is still trying to hold the house and hope the bank will take it away and leave it there to be abandoned. If the rates really goes down which I think shuld have been the first step to be done provided the root cause of this mess was the problem in housing. And its UNBELEAVABLE for a media like money not to stand on the side of the general public in this time of uncerteinity
I feel sorry for buying your magazine for all these years
Lower mortgate rates will help because people like me will finally refi my house and the banks make a ton of profit with their non sense fees of $2000 or more when their costs are probably under $500 to do a refi.
They most certainly are.
The price and the interest rate determine the monthly payment. The lower the monthly payment, the more buyers that qualify, no matter how tight the qualifications. The more buyers we have, the more homes – new, existing & bank owned – that will sell. The more sales, the faster the glut will move.
That is, by the way, how “The Market” will more quickly solve the RE problem with the least government intervention.
Do you find it odd that many of U.S. do not understand the “market” system that they say they support.
If they’re going to lower rates for new purchases they need to lower rates for refinances and modifications. It’s been great to see rates drop over the last week. I don’t know how they can force rates to be lower. Who will buy them in the secondary market, the government?
The H4H (Help for Homeowners) program has been a joke. It’s a great program but I’ve yet to find a lender who is underwriting it. The current investors refuse to write down the principal even though there is a condition that requires shared equity appreciation. They sure didn’t turn down the huge fees they collected when they were written. That’s how they got their bonuses. It’s time for them to take the hit. They’ll still make money on the remaining balance with interest over the long term.
I’ve been in the mortgage business for over 25 years. I was outraged when the wholesale representatives of the likes of Lehman, Bear Stearns, Merrill and others showed up in my office trying to push subprime loans with no income documentation and LTV ratios of 100%. I threw them out. Unfortunately most people don’t realize that it wasn’t Fannie Mae and Freddie Mac that was buying the majority of those mortgages. It was the private investors.
The one and only thing going to fix our problem is to let house values decline to historical levels that fall within the fundamental purchasing power levels of the avg consumer. I know a lot of the readers are hurting right now with price declines and whining. Honestly your house is probably still worth more then when you bought it 15 years or more ago. The problem is all the dumb home equity lines issued for purchasing consumer products like cars and toys. Shame on you baby boomers!!!! You made all our lives a little harder including your own!
Will lower mortgage rates help banks loosen the hold they have on our money? No. Will it make more money readily available to lend? No. Banks have adopted a knee-jerk reaction to their foolish ways of the last 5 years by tightening restrictions so much that even creditworthy applicants can’t qualify for a mortgage. As one other poster illustrated, unless refinancing comes at no cost then it is not worth it as the time it takes to recover the cost of a refinance is not worth the month to month savings less the up-front cost to refi. Plus refinancing does absolutely nothing about the glut of existing home inventory, which is driving down prices. For that you need buyers and a lack of consumer confidence = zero buyers. What will make us confident again? Personally, I dread the next 3 years as I think we are in for a prolonged recession which will weigh heavily on the economy as a whole. Anyone remember 1980, when the prime rate was over 20%, unemployment was over 10% and no one was able to buy a house? That was mild compared to where we are heading. The last time I bought gas for under $1/gal was July 2001. That time is coming again, within 4 months. The huge global economic correction that I have been predicting to all my friends is upon us. Consumer spending makes up over 70% of the GDP, so put some damn money in our pockets and watch the economy roar to life. $700 billion for Wall Street??!! How about $700 billion for the taxpayers of this country? Does the new administration have the guts to do what’s right??
Rates are not high. Anyone that thinks so is spoiled and greedy. Just 20 years ago, a fantastic rate was 12%. What do you think people would say if that was the rate now? Rates are about as low now as they have ever been. If you can’t afford a payment on a house in your area at the rates we have now, you should not be buying a house.
Interest rates are not the problem, FORECLOSURES are the problem. REO’s are driving down property values. These REO’s are a money pit for the banks, not a profit center. Sorry to all of us who have paid our bills, but we will have to suck it up and find ways to help our neighbors stay in their homes.
I agree that most people got themselves into this mess, but now its becoming MY MESS and YOUR MESS because we own homes that are plummeting in value! Wake up people, we are all in the same boat now! This is no different than financial “immunizations”, a little bit of pain suffered by all to stop the spread of disease……I didn’t like getting my flu shot, but you bet your fanny I got it, because I like the flu even less!
So now, to protect what little I have left of my biggest investment, I say STOP THE FORECLOSURES! We have got to find a way out of this for homeowners, not just wall street banks.
And yes, going forward, we must go back to the idea that not everyone should own a home. Down payments are a good thing. Good credit is a good thing….and so on and so on and so on.
Even if they lowered the rates you will still need $4000-$6000 for closing costs and if most of these people had it they would not be facing forclosure
Well of course they are if you don’t have a job! That’s like asking a heart transplant patient if he thinks he needs a manicure
No, they are not too high. Very very affordable when you look at the rates in the early 80’s. My first home was purchased at a 16% interest rate. Granted the house price was much lower than today, but it is all relative. My income has thankfully increased since the early 80’s as well !
The problem is so complicated, but the driver is NOT current rates, but the fact that the banks don’t want to lend any money unless your credit is perfect and you have lots of cash in the bank. If I had the cash, I wouldn’t need them, but they don’t quite get that. They went from being conservative in their lending criteria years ago, but balanced. Then lots of people saw a way to get rich, loan underwriters, mortgage brokers, realtors, appraisers to name a few, and common sense went out the window. For those of us who bought what we could afford and have always met our monthly obligations, we saw this train wreck coming.
If the government is going to continue bailing out banks and purchasing mortgage-backed securities, with my tax dollars no less, then the banks who take the money should be required to go back to reasonable lending practices and start loaning again. NOT just using the bail-out funds to sure up their balance sheets to compensate for THEIR past irresponsibility. New loans under acceptable moderate criteria need to be accessible. And for those who were “stung” by false promises of being able to afford a home, the banks should be mandated to work with these homeowners to seek all re-financing options. People don’t want to lose their homes, but most are given no alternative.
In the end, there is no one solution, or two, or three. We, as a nation, must be reasonable and patient. But there should also be accountability, from the government, the banks and the borrower. Finding that perfect balance is the biggest challenge of all!
Well, from reading some of the latest comments here, it seems that Congress is doing what its constituents want. The People want to keep the party going–lower mortgage rates, lower credit card rates–lower all loan rates to get people borrowing again. Tell me–when shall we pay the piper? Why should I, as an investor, accept a lower rate of return on my capital just because The People demand lower mortgage/credit card/other loan rates?
Jon of bordentown, n.j.is spot on, period. My only difference of opinion
after 22 yrs in mtg bus and 3- 4 refi
mkts is that it is not too late, almost
though.
Mark Whitehall, Wachovia, Clearwater, Fl.
What if the Fed paid half of the $11 trillion of home mortgages in the USA? We’ve already given $7 trillion to banks in return for securities, and they are responsible for this mess in the first place!
Imagine what people could do with all of THEIR freed-up money, Start a company, buy machines, hire an employee… After all, WE THE PEOPLE are going to be paying off this debt! Shouldn’t WE benefit from OUR stimulus???
Get out Mr. Government. Let the market control. Otherwise real estate will be worth nothing.
On a separate note, I want to thank those mega-home building companies for building neighborhoods with hundreds of houses while having no buyers. To fill them up, rather than lowering the price, they conspired with real estate agents, mortgage brokers and banks to engineer and offer criminally negligent loans to people who made $50K a year so they could buy a $500K house. Interest only loans, 100 year mortgages, 3, 5 and 7 year ARMs with obscenely low entry rates and obscenely high back-ends. What did everyone think was going to happen? People making low annual salaries who took those loans are morons and those who gave them should be held criminally liable. Now there are vacant neighborhoods all over the place, and I have even seen these guys continuing to put up $600k homes with no one living in the 15 they already built. The grass has grown over the first floor windows. As far as I’m concerned, these people are directly responsible for the financial collapse. Although this does play right into the new administration’s dream of socialism since every gasoline pump attendant will be able to own a mansion and not have to pay for it.
YES. Lower rates equates to consumer purchasing power. This means more large ticket purchases. Actions such as Finishing the basement, putting in the pool, adding the back deck, etc., are able to be discussed by the Homeowners because refinancing becomes not only possible, but attractive. Also, those who seek to purchase a home, especially first time buyers, have more buying power and therefore become more aggressive in their offers thus helping home values.
LOWER THE RATES! Even at 6.00% rates are too high taken into consideration everything else that is higher because of energy costs which is still too high (remember the feeling you had when gas prices went from $1.25/gallon to $1.99/gallon? It was still a budget breaker). Low mortgage rates will lead to heavy sales volume and sales will lead to stabilization of prices. I have borrowers waiting for 5.00% and they’ll move fast before other buyers beat them out. Help out those who are behind in their payments to stave off foreclosure. Keep people in their homes. It’s still cheaper than foreclosure expense. The cost savings from lower monthly mortgage payment will be spent on other items because we spend rather than save.
ALSO, LOWER CREDIT CARD INTEREST RATES AND FIX THEM AT 5.00%. THE CREDIT CARD COMPANIES ARE GOUGING ON RATES AND LATE FEES. How can you pay off credit card debt if your rate is over 8% when you pay on time and 25% if you pay them 1 time beyond their pay date but before its 30 days past due? They make a bundle of money this way and it ensures the customer is never out of debt.
Want to know how to solve the problems? Talk more to more people on the street and leave the eggheads and their boneheaded, head in the sand opinions in their cubicles.
Too little too late. The time to get rates to %4.5 was back when Bernanke took over from greenspan. He knew the predatory mortgage products that were being sold, he knew the mortgage backed securities were being priced based on returns tied to teaser-rate-expiration… what he didnt know was that stepping up fed funds rates time and again would throw a noose around credit as refinancing was off the table. Bernanke killed the economy trying to mimic Greenspan’s smokescreen of stability years ago.
Out of all the plans, this seems like the best one so far. It’s a good balancing act of propping up home values, while not contributing to the moral hazard of helping owners that should have never brought in the first place. I really do not like the idea of helping all these homeowners close to foreclosure, because if you really want to be honest about it, probably around 80% never should have brought in the first place. If you buy a house and after less than a year, you are already in trouble and it’s not because of a job lost or other situation, why are are we helping you out?
I don’t know anybody going into foreclosure, so maybe I am missing something. But I do hear a lot of whispers from people who know people who plan to not pay their mortgage even though they can afford it, so the banks will reduce their mortgage. Doesn’t seem fair to me.
The problem with the housing market isn’t the housing market. In my humble opinion, tt’s the jobs picture. No one can pay their mortgage if they have no job. Job losses have outpaced job creation every month so far this year.
30 year fixed mortages should be at or around 6%. The price of the average home should be much lower, that is the real problem. In the suburbs of DC people were paying 10 to 20 times their yearly income for houses. Whoever wrote those loans should be put in jail, along with the risk rating agencies that gave them AAA ratings. JAIL I say.
What kind of idiots do we have running this country?
This disaster was caused by banks lending too much money to too many people who did NOT qualify for it. As another poster here astutely pointed out, housing prices have a LONG way to fall before they’re within the historically affordable range. The way I see it, the government can either spend trillions to prop it up and delay the inevitable hard landing or they can let the chips fall where they will and do what they can to create a soft landing (infrastructure investments, public policy that actually encourages job creation in THIS country, etc.). Unfortunately, it seems that they’re going with the former.
What Americans need to do is return (permanently) to saving 10%+ of their incomes. Until we stop, as a nation, living on credit, there will be no true recovery. Also, until we take job creation in THIS country seriously (and stop pretending like offshoring millions of jobs is OK), there will be no recovery.
Just my $0.019 (deflation-adjusted).
Housing prices will most certainly continue to fall well below their “appropriate value” in this market just like stocks have.
A temporary lower rate is an intelligent mechanism to compensate for the hoarding of money by banks.
Foreclosures should in fact be facilitated not forstalled! Keeping people in houses they cannot afford is financial suicide. The quicker these units change hands the quicker the market will stabilize.
Stop the insane over-leveraged securitzation as well – the lender holds the mortgage thereby incentivizing proper underwriting.
It’s simple – just like the old days – this will result in stable home appreciation and end the bubbling!
Lower Mortgage rates don’t mean a thing
if the consumer does not have the ability to pay for a home over the long term. If consumer spending accounts for 70% of the American economy then there is only one economic metric that matters: consumer income. This is what ‘fuels’ consumer spending. As consumer earnings have stagnated more consumer spending has been ‘leveraged’ through the use of home equity loans and credit cards. Those ‘leveraged’ sources of spending have been maxed out. At this point one of two things has to happen. Wages and salaries have to rise to meet existing price levels (inflationary pressure). Or price levels have to fall to meet the existing level of wages and salaries(deflationary pressure). The average consumer…..not unlike the average financial institute….needs to ‘de-leverage’ before he can again ‘re-leverage’ i.e take on more debt of any kind such as a mortgage.
For the time being, yes, mortgage rates are too high. How goes housing so goes the economy. Direct, indirect and wealth effect expenditures related to the housing sector are 20% of GDP! It is the most imortant sector of the economy. Our houses have been burning and we have been watering the lawn with hurried bailouts for banking, insurance and automobile industries whose problems are only ancillary to the true issue. The only way to stimulate housing and in turn save the economy is to facilitate the sale of our excess inventory. Lower rates, proper underwriting, and meaningful tax credits ($20,000) for a limited time period are at this point mandatory (providing of course that the rates and credits are NOT available on new home construction). Doing nothing is a “head in the sand approach” that will only serve to prolong the recession as we fumble with misguided bailouts and stimulus packages thereby maximizing the debt we will leave to our children.
I’ve negotiated a house down 11% and saved up a deposit. The sellor is ready. Drop the rate and I will buy.
NO. Home prices are still too high. Period. Mortgage rates can only compensate so much. Bring prices back to affordable levels in line with incomes and people will buy again. Period.
Yes, mortgage rates are too high! That’s one of the reasons that those who had/have mortgages, especially adjustable rate mortgages, could not afford their homes anymore. If the banks were smart, they would agree to the lower rates and, at least, refinance anyone who asks, especially those in jeopardy of defaulting on their mortgages. Furthermore, they should accept the lower rate and still make money on loans, rather than letting these ridiculous foreclosure rates continue; specifically, they should be willing to cut their loses instead of taking them head on and asking the govt to bail them out…this should of been one of first things addressed when the foreclosures started happening in high numbers causing a curtail in the housing market: one of leading causes to this crisis we’re in now.
No. Mortgate rates should be about 6% long term,or a little bit higher than the Treasury rate of 5% long term; this compensates mortgage lenders for their slightly elevated risks; they can use the extra 1% to buy insurance, such as FHA/GNMA. We may need to set up a new second federal bank to lend directly to borrowers, if the commercial banks continue to sit on their butts and our money.
We still need housing prices to come down to affordable levels, or about 4x the average income: $40k/yr x 4 = $160k average price. We should be encouraging sellers to do a lot more short sales and pressuring the lenders to approve them and take the writedowns immediately. It takes time; just let it happen.
We need homebuilders to cut production; at 750k new starts per year vs. 450k new sales per year, they are still building empty home inventory at the rate of 300k units per year !!!
Finally, stop subsidizing housing and banking. We’re wasting tax dollars on a sector that is already an over-inflated bubble. Instead, let’s put tax dollars building the productive part of the economy: agriculture, automotive, education, energy, health care, infrastructure, transportation, etc., sectors that create good, onshore jobs.
They are missing the point. The problem is foreclosure that drives down market prices and is the main cause of all this problem. Focus efforts to solve this foreclosure problem and help unburden the banks with this issue.
Even as Treasury Bonds have fallen precipitously, mortgage rates have only tiptoed downward. So yes anything to reduce this huge spread between the two would be rather helpful to prospective homebuyers of which I am one. Temporarily low mortgage rates would also help stop the deflationary cycle (”I’ll just wait longer until home prices stop dropping”) that is at the root of the housing and thus economic crisis.
I can’t believe I agree with LaMonica.
Low rates are indeed not the answer.
LOWER HOUSE PRICES ARE THE ANSWER.
Let them fall back in line with historic valuations using rent vs. own costs and income multiples calculations.
Duh.
Feds need to come up with some kind of program to allow current owners to refinance at current rates at no cost. Whether is going to be a rebate, stimulus package or any other compensation it’s going to help people significantly. For example, I have a 6.5% fixed rate and refinancing cost around $3600. By getting current rate around 5.5%, I will save around $150/month on the mortgage, but it will take me about 2 years to justify to cost. One time refinance rebate per property will do much better than just lowering rates. My humble opinion.
Mortgage rates are perfect where they are. Lower rates will not and can not help our situation. Everyone needs to butt out and let the natural markets prevail. We cant all own homes -End of story.
What we are experiencing is the beginning of our collapse. Our rise to freedom, democracy, innovativeness, and growth has peaked. We are reverting backwards now. We will become a dictatorship or communist counrty in the future if we do not step in soon!
Yes, we need lower mortgage rates, and also need to re-adjust the true value of real estate and the loans on them. Mortgages should be pro-rated to reflect new principle values. If you’ve been paying on your mortgage for 8 years and half of your house payment is going to pay interest, then it should remain so on your new, low rate, real value loan. Adjusting property values and lowering interest rates would help bring monthly payments down, and adjusting property values would also reduce state property taxes, but more people would be able to pay them. I live in a state where property values have fallen by about 50% (more in some areas). In addition to that, my job was cut from full time to half time. That resulted in me having to pay a portion of my health insurance costs, out of half the amount I made before. I’m single, so there is no spouse to help pick up the bills. I’m still making my mortgage payments, but just barely. What is in the stimulus package that will help people like me? Is it fair that people who were greedy and took equity out of inflated property get help, and folks like me that are still working but making less, get no help?