“The average 30-year rate dropped to 5.2 percent from 5.32 percent, mortgage buyer Freddie Mac of McLean, Virginia, said today….The 15-year rate averaged 4.69 percent.”
U.S. Mortgage Rates Drop to 5.2%, Freddie Mac Says [Bloomberg]

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Comments from “Plugged-In” Readers

  1. Posted by anonn

    Where are all the doom and gloomers from June? LOL. No account.

  2. Posted by Rillion

    They are waiting for it to tick back up then they can mention how much it has risen since July!

  3. Posted by Rillion

    Then a few months later when it drops again, you’ll try to call them out. Rinse, repeat every time the interest rates move. Just like we do with sales/price info. Everyone mines the data for support for their position then argues about it endlessly. Then the name calling starts, then we get some new data to shift through and a new round starts.

  4. Posted by anonn

    No, I doubt it. This site has changed fundamentally. There is precious little plugged in r.e. professional input, and it’s a glaring difference. These caustic little loops from anonmymous no accounts have grown too boring. I’ll let the snakes crinkle their heads to death next time.

  5. Posted by Brian

    What difference does it make when the banks aren’t lending?

  6. Posted by Sb

    Sounds good. That beats post after post about how SocketSite ain’t the feel-good place it used to be.

  7. Posted by location

    I don’t doubt it, and I haven’t noticed the fundamental change in this site that you’ve mentioned more than once. What I have noticed is that these “boring” “anonymous no accounts” keep you (and me) coming back to read this site day after day.
    As for the question of where rates are headed, here is an interesting quote from the article for those who didn’t read it:
    “If I were trying to refinance, I wouldn’t wait very long,” said Dana Johnson, chief economist at Dallas-based Comerica Bank. “I don’t think mortgage rates are going to stay down here very long.”

  8. Posted by tipster

    Business conditions continue to deteriorate. That means mortgage rates are going to fall. I expected them to rise earlier, but I was flatly wrong.
    There’s no safe place for all that money to go when everyone sees business conditions deteriorating as rapidly as they are right now.
    Mortgage rates kind of have to fall in an economy that continues to shed 600,000+ jobs per month.
    But it’s kind of like Noah’s (the guy with the Ark) next door neighbor being happy that it’s started raining because he’s a farmer. Housing is going to suffer in this environment, just like everything else. Real estate is driven by J-O-B-S first, interest rates second. Not the other way around.

  9. Posted by FormerAptBroker

    anonn wrote:
    > No, I doubt it. This site has changed fundamentally.
    > There is precious little plugged in r.e. professional input.
    As a California Real Estate Broker who has been licensed and working full time (part time as an under grad and grad student) buying, selling, managing and financing real estate since 1982 do I count as a “r.e. professional” or do only Realtors ® count at “professionals”?
    > and it’s a glaring difference. These caustic little loops from
    > anonmymous no accounts have grown too boring.
    You don’t have to be a “r.e. professional” putting cinnamon in a pot on the stove at an open house to know that if mortgage interest rates have been higher than they are today 99% of the time for the past 100 years (below is a graph for the past ~38 years).
    http://www.fairloanrate.com/2009/07/04/mortgage-interest-rates-trends-historical-graphs-for-30-year-frm-1971-2009/

  10. Posted by anonn

    the fundamental change in this site that you’ve mentioned more than once.
    OK. Point out the next time someone who actually knows something about real construction costs or nuts and bolts r.e. processes in San Francisco says something on this BBS then, would you? Or why nobody answers the basic questions that less jaded SS neophytes throw out any more, such as “Can you do an inspection before a foreclosure auction?”
    There used to be a helpful wing of folks who would chime in with advice. I do not see that any longer, and it’s easy to understand why.

  11. Posted by Rillion

    >and it’s easy to understand why.
    They’re busy looking for jobs in a different industry?
    Sorry, I just too hard to pass up slow pitch softballs.

  12. Posted by chuckie

    “There used to be a helpful wing of folks who would chime in with advice.”
    Yeah, where is paco these days?

  13. Posted by anonn

    They’re busy looking for jobs in a different industry?
    Sorry, I just too hard to pass up slow pitch softballs.

    Foolio = Rillion? LOL.
    No, I was thinking more like those folks bailed because of the easy rote snideness you just illustrated.

  14. Posted by tipster

    They aren’t the only ones getting out. No surprise, Smith and Hawkins is shutting down.
    http://www.smithandhawken.com/

  15. Posted by Mud

    I’ve been pretty open about not being plugged in to anything about real estate… but I do talk to the snr mgt of companies in the area on a regular basis, and all are resigned to recovery not being anywhere close.
    Across sectors (semiconductors, high tech, retail, internet co’s…) all feel that stable growth, on a slower path is 2011 and out, and their consumers will be structurally deleveraged relative to the past (e.g., lower credit card debt, home mortgages etc).
    Given that, seems to me that interest rate fluctuations are just short-term noise. Interesting to talk about maybe, but as much as the dogs may bark, this overall economy caravan is moving headlong down a mountain, into a long, slower grind back up.

  16. Posted by anonn

    I don’t know if you heard or not, but GM and Chrysler are in trouble too. wtf?

  17. Posted by EBGuy

    No surprise, Smith and Hawkins is shutting down.
    Don’t worry, their headquarters is in Novato so SF real estate prices won’t be affected. In fact, I’m sure those folks will find jobs in Ess Eff and want to buy a condo in SOMA.
    I’m guessing that the Three Mustketeers must have closed?

  18. Posted by anonn

    Don’t worry, their headquarters is in Novato so SF real estate prices won’t be affected. In fact, I’m sure those folks will find jobs in Ess Eff and want to buy a condo in SOMA.
    I’m guessing that the Three Mustketeers must have closed?

    Chad Muska bought a condo in SOMA?

  19. Posted by Legacy Dude

    anonn, I’m not sure what point you’re trying to make up top there. Mortgage rates remain at artificial lows, solely through government action. This is not news. The situation is unsustainable over the long run, as FAB’s chart points out. Eventually they have to go up, although it’s admittedly difficult to accurately gauge when they will. Do you disagree with this idea?

  20. Posted by The Milkshake of Despair

    It seems as if the government and the bankers want to keep mortgages low long enough to ensure that a significant amount of capital is locked up in loans that would be hard to walk away from.
    A mass walk away would be a nightmare situation.
    I’d expect that when the triggers are reached, the rates will begin to rise and hopefully the number of walk aways will be controlled.

  21. Posted by dub dub

    The banks are lending just fine to solvent homeowners, and I doubt rates will rise too much (unless they screw this up). Rates are artifically *high* now, not low. The job market is the only thing that worries me.
    Low rates + a zombie system entices solvent purchasers to buy near current prices, which is fantastic news for taxpayers, these buyers, and everyone in the RE profession. It aids price discovery in all forms of levered assets (on the backs of the solvent) while they deflate.
    Note solvent purchasers generally don’t want houses in Bayview or the Oakland flatlands (which have taken more serious hits to date).
    In fact, I’m now in the camp that rates “should” be virtually zero across the spectrum, and they would be if policy were not subject to capture (zombifying banks instead of explicitly nationalizing them).
    I’m just as stupid as anyone here (maybe even more so), but here’s some quick numbers to show just how in control the Fed could be, if they want.
    === FUN WITH DATA ===
    The fed could buy all existing foreign-owned debt for a mere 3.26T (about 23% GDP). Buyer’s strike shmeyer’s strike.
    http://www.treas.gov/tic/mfh.txt
    Or they could use that 3.26T to pay off 30% of “everyone’s” SFH mortgage (less than 11.0T as of Q1, little-chaged from Q3 2008, by the way!), and seriously tighten underwriting requirements (e.g., 25% down, etc). Homeless hypersavers are used to getting knocked around :)
    http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm
    I believe the resulting public debt/%GDP would still be under post WWII levels, hence (presumably) the currency could survive it.
    Incidentally, consumers have not really reduced their debt levels yet
    http://www.federalreserve.gov/releases/g19/hist/cc_hist_sa.html
    (this debt obviously does not include the larger mortgage debt above). I have no idea where this level “should” be, but it seems late 2007/early 2008 levels are not low enough, given the system is now cracked.
    The fed could pay off this consumer debt too, but I think that is obviously inflationary :)
    === END DATA ===
    This stuff was unthinkable before the system blew up of and the old-reality GDP growth is off the table.
    The higher rates we see now allow banks to recharge their zombified balance sheets (and pay bonuses). This works against the economy, and they have to be careful, because the GDP could implode.
    I still don’t know where the private-sector jobs are going to come from (it’s the only thing that worries me). The private economy can’t reorganize around the new normal as easily while its financial systems are zombified.
    If deflation gets moving, you’ll find the new normal is about more than downloading the zipcar iphone app, or taking muni to first Tuesdays as SF MOMA! But we’ll survive, if they don’t screw up.
    Enjoy your life, and your new home, everybody! It won’t be that bad — remember Japan produced Iron Chef in the 90’s, so how grim could it be? :)

  22. Posted by Mud

    @ Dub Dub re: consumer debt
    Our analysis suggests consumers needs to unwind by 50%+

  23. Posted by Legacy Dude

    Not sure if I fully agree with you, dub dub. I’m not looking at where rates should be given everything the government has done, but more at what they might be absent government intervention altogether. Where would rates be if Fannie and Freddie had been allowed to fail, or had their portfolios cut in half?
    One thing I’d love to see, if anyone has access to the data, is how mortgage spreads have performed over the last 2 years compared to corporate bond spreads. Both are based on treasuries, so I’d love to see the delta in both spreads and default rates on these classes of debt. My guess is they’ve diverged from historical trendlines, but I could be wrong there.
    I’m guessing LMRiM may have an opinion here, but I don’t believe the Feds could take debt/GDP to WWII levels today given the creditor mix is different. Would China buy as much debt today as Ma & Pa Kettle did in WWII? Maybe. But I bet it’d be inflationary.
    I do, however, fully agree with you on the need to praise the solvent folks jumping into today’s market with big downpayments. True patriots.

  24. Posted by anonn

    anonn, I’m not sure what point you’re trying to make up top there. Mortgage rates remain at artificial lows, solely through government action. This is not news. The situation is unsustainable over the long run, as FAB’s chart points out. Eventually they have to go up, although it’s admittedly difficult to accurately gauge when they will. Do you disagree with this idea?
    I’m trying to make the point that the brief rate surge of a month ago spurred numerous armchair economists on here to predict an imminent, sustained northward interest rate climb. I find it typical and telling that they’re nowhere to be found. Of course it’s a manipulated scenario. It was then, and it is now.

  25. Posted by FormerAptBroker

    Legacy Dude wrote:
    > I don’t believe the Feds could take debt/GDP
    > to WWII levels today given the creditor mix
    > is different.
    Don’t forget that most of the world’s manufacturing facilities are not destroyed like they were after WWII and everyone is not forced to buy manufactured goods from the USA…

  26. Posted by anon

    “Can you do an inspection before a foreclosure auction?”
    One of the great unsolved mysteries mankind still faces. Only giants like fluj will be able to find the answere.

  27. Posted by LMRiM

    Mortgage rates are artificially low. The easiest way to test that is simply to remove the Fed’s (and Treasury’s) support of the mortgage market. It should be obvious I’d think what would happen.
    Of course, the need for artificially low mortgage rates is simply the flip side of artificially high prices of houses. That is, once prices fell to levels at which incomes would support the prices, then rates would quickly fall as well. We are in a mildly deflationary environment in which private savings are naturally going to rise, and this would lead to lower equilibrium rates for the mortgage market once the obvious risk factor that people cannot afford the prices (absent ponzi dynamics) is removed.
    Anyway, though, the subtext of dub dub’s post is what worries people like me. It seems to me that dub dub implicitly acknowledges that the proper role of the government/Fed partnership is to set rates. That’s the logical extension of the idea that 0% rates or 5% mortgage rates are too high – in this deflationary environment, someone should knock those down, and that’s the role of the omnisicient, genius Fed! (At least that’s how I imagine the thinking goes.)
    Once you cede that the proper role for the Fed and the USG is to come in and artificially force rates, well, then all the decisions will be subject to the political process in which the last thing on anyone’s mind is going to be the “average” American. No “free” repayment of US mortgages, dub dub, even if it wouldn’t cost too much. The suckers are there to keep paying into the pockets of their betters. Remember the apocryphal Jefferson quote: “First by inflation, then by deflation” is how people are hoodwinked out of their savings.
    BTW, public debt is not what usually causes currency crises – although of course it has happened before, especially when public debt is denominated in a foreign currency. Japan, Italy, the US during WWII, etc. have all run larger public debt/gdp ratios before, and in some cases (Japan, particularly), not only was there no currency crisis but actually a strengthening. Conversely, some countries with low public debt ratios have blown up (particularly during the ASEAN crisis, for instance). Here’s a gif that I bookmarked a while ago that is a nice picture of US debt:
    http://www.optimist123.com/.shared/image.html?/photos/uncategorized/debt_burden_history_20050204_1.gif
    If I had to generalize (with a little guessing in there), I’d think that the best “predictor” of currency crises are high total (public and private) debt/GDP ratios combined with a large external financing need, represented by large and persistent current account deficits. Since we do have those conditions in the US, I hope I’m wrong! Anyway, they’re probably necessary but not sufficient conditions for a currency crisis.

  28. Posted by NoeValleyJim

    The interest rate the matters is the real interest rate, which is the nominal rate minus inflation.
    The real interest rate is not particularly low by that standard, though it all depends on inflation expectations.

  29. Posted by anonn

    One of the great unsolved mysteries mankind still faces. Only giants like fluj will be able to find the answere.
    Helpful as always, and the poster boy (girl?) for Socketsite, truly. Now run along and stick your face on a hot waffle iron.

  30. Posted by dub dub

    “dub dub implicitly acknowledges that the proper role of the government/Fed partnership is to set rates”
    Not really.
    If you are getting an unnecessary operation from a poor surgeon, it’s probably best to let him finish first, rather stopping him halfway through.
    Like it or not, the fed exists, it’s already intervened greatly, and these tools are legally available to it today. Indeed, they’ve done things that were unthinkable only a year ago.
    If we can’t get rid of Goldman Sachs, what hope is there to reform the Fed (assuming that’s even the correct thing to do)?
    There are too many variables, and nobody really knows what’s going to happen — as I say, the only thing I worry about are the private sector jobs (and to a slightly lesser extent the deficits, which of course have to eventually be addressed, somehow).
    Thanks everyone for their comments, they are useful so far. That’s definitely enough for me on this thread!

  31. Posted by San FronziScheme

    Wanna have more fun with data?
    http://www.usdebtclock.org/

  32. Posted by EBGuy

    I’d expect that when the triggers are reached, the rates will begin to rise and hopefully the number of walk aways will be controlled.
    Hopefully they will have loan programs in place for the willing (but unable?). We need to lock these folks in before 2012.
    With more than $300,000 in combined annual income, tens of thousands of dollars in the bank and credit scores that top 800, Jennifer France and her partner would seem like ideal candidates for a mortgage refinance. But when they applied to swap an interest-only loan on their nearly $1 million San Carlos home for a 30-year fixed that locked in today’s low rates, they were summarily denied. The reason: effectively, because both operate their own businesses.

  33. Posted by dub dub

    Sorry, one brief comment on EBGuy’s sfgate article.
    LOL! My guess is they have no downpayment or equity, are possibly unemployed or U-6 right now, and thus do not qualify for the solvency tax.
    We recently refied ourselves, so I am familiar with the requirements of the new normal.
    It’s indicative of how debased our credit system is when the word “equity” or “downpayment” appears nowhere in an article like that, even now!
    As a taxpayer, I hope they continue paying their current interest-only liar loan. If they are smart, they would walk away immediately, or maybe try to parlay their “suffering” into a book deal like that NYT guy! :)
    Now I’m done on this thread, I swear :)

  34. Posted by FormerAptBroker

    EB Guy posted from the SF Gate:
    > With more than $300,000 in combined annual
    > income, tens of thousands of dollars in the
    > bank and credit scores that top 800, Jennifer
    > France and her partner would seem like ideal
    > candidates for a mortgage refinance.
    If you read the article the $300K in income is not documented so they are either not making that much or are tax cheats (my guess is that it is a combination of not making that much and under reporting taxes on their income). The home was easy to find since it is in both Jennifer and her partners name. They put very little down and Zillow has it valued about $100K under what they owe. I know a lot of people that live in the area and it is probably worth $150-$200K less than the current debt if they needed to close in 30 days. Lack of equity is the main reason that they can’t re-fi (but this is not mentioned in the article)…

  35. Posted by Rillion

    The article was horrible. They may not be tax cheats cause the article implies that the deductions from their business reduces that $300,000 as well. So its a bit disingenous for the article to claim that they have $300,000 if that is before any of the business expenses.

  36. Posted by avwh

    “Lack of equity is the main reason that they can’t re-fi (but this is not mentioned in the article)…”
    “The article was horrible. They may not be tax cheats cause the article implies that the deductions from their business reduces that $300,000 as well. So its a bit disingenous for the article to claim that they have $300,000 if that is before any of the business expenses.”
    Typical SF Chron article, then – make a hand-wringing point by leaving out as many facts as possible…

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