Any Educated Guesses to where 30 Year Fixed Mortgage Rates will be in 2009/2010?

During the 80s employers made an effort to keep their employees almost

up to inflation. How is that gonna happen now. In the early 80s prices in Fla

plopped down for a year or 2 and then gradually resumed their upward march

until August 8-9th, 2007.



I think all those rules made up in normal times will not apply as these are

not normal times.



If housing is going down, and inflation is going up xx%, that mean everything

except housing is going up even faster than anticipated.



Into this witch's brew is mixed the value destruction of houses and loans,

which means money is being destroyed. .4 trillion has been written off; some

like my house is invisible, since I owe nothing, and don't intend to sell for at

least 5 years. Surely there is at least as much to write off to come as what's

already been written off. And it could be as high as 6 trillion.



I think there is nobody in the world who can predict where we will be in a couple

of years.



My only prediction is that it will be very very bad.
 
Are higher prices predominantly due to increasing raw costs? You read that increased demand from large developing countries is fueling rising prices and that speculation is also playing a role. I know that the cost of finding and getting out higher quality oil is going up and that the petro chemical industry is tied to so many products and cost of shipping, but haven't been able to ascertain just how much this is weighing on inflation vs increased demand, speculation and supply of cheap money. The whole stagflation thing is mind boggling, but at some point something has to give, right? Nominal wages have to go up or prices have to come down or a combo of the two?



Isn't true inflation when nominal wages are going up to keep up with rising prices like a dog trying to chase its tail? The kind that comes from overheated demand and/or cheap money? A lot of arguments have been made that too many years of cheap money here contributed heavily to our last two bubbles. Weren't the exotic loans just another form of cheap money?



And what is the deal with real wages not going up? We have increased productivity more than real wages have grown over the last 30 years. Globalization of the labor pool? If we increase our productivity even more, will real wages increase or stay relatively stagnant? If we spawn revolutionary green technologies with alternative energy and massively increased efficiency, would we be on the map again for producing innovation AND see real wages increase? Or, are we really looking at not just a world of haves and have nots, but an America of have a lots and have a little?
 
[quote author="stepping_up" date=1213740975]Are higher prices predominantly due to increasing raw costs?</blockquote>


And labor.



And rising expectations. I can remember a time in the recent past when nobody had granite or SubZero or Viking appliances.
 
Insofar as inflation is caused by resource constraints (e.g. peak oil) it won't help homeowners. That's pretty much a bad for everybody (except oil companies and countries.) Insofar as it's caused by increases in the money supply, that *will* drive up wages, because there will be lots of dollars sloshing around.



Right now consumer inflation is about 50/50 money driven/resource driven. (CPI + Food/Energy = 4%, CPI - Food/Energy = 2.3%) However, there are limits to how much more inflation can come from resource constraints - we're now to the point where we're seeing use cutbacks. In any case, it can't drive inflation to 10% for an extended period - that would require *real* increases in food/energy of 50-100% every year and of course that's not going to happen. To get substantial inflation, it must mostly come from monetary inflation -



I'll concede the very real possibility that housing (or at least what's been built) is overpriced and will see extended real price declines in the future. We've just gone through 20 years of asset price bubbles and assets in general may be due for correcting. That would make it basically impossible to do a "safe" bet on increasing interest rates - although, if the general investor class starts trying to escape declining asset values, that in turn will hold down interest rates because they will be desperate to have a place to put their money.
 
[quote author="stepping_up" date=1213740975]Are higher prices predominantly due to increasing raw costs? You read that increased demand from large developing countries is fueling rising prices and that speculation is also playing a role. </blockquote>


It's hard to say how much speculation has to play in inflation, but it does have an impact.



Don't confuse higher demand in other countries, with demand in US. The inflation in US is due to increased costs because other countries wages and goods are now more expensive causing rapid inflation in US.



[quote author="stepping_up" date=1213740975]The whole stagflation thing is mind boggling, but at some point something has to give, right? Nominal wages have to go up or prices have to come down or a combo of the two? </blockquote>


I am not so sure, I think the future "average" standard of living in the US might not lower than what it has been in the past. It is hard to think that the US will keep it's current supremacy over the world. People will have to make hard choices and decide what they can afford and what they really need.
 
My guess assuming 20% down and 30 yr fixed



By end of 2008

- 6.75% 30 yr

- 7.25% 30 yr jumbo



By end of 2009

- 7.75% 30 yr

- 8.50% 30 yr jumbo



By end of 2010

- 8.25% 30 yr

- 9.00% 30 yr jumbo
 
[quote author="optimusprime" date=1213747993]My guess assuming 20% down and 30 yr fixed



By end of 2008

- 6.75% 30 yr

- 7.25% 30 yr jumbo



By end of 2009

- 7.75% 30 yr

- 8.50% 30 yr jumbo



By end of 2010

- 8.25% 30 yr

- 9.00% 30 yr jumbo</blockquote>


That is very exact! I actually like the chart a lot. Tho I think 2009 will be more like your 2010 and 2010 will be lower double digits.
 
Honestly, I think that 30 year conforming interest rates will range between 7-8% in 2009/2010 (this is assuming that inflation does not get out of control due to the slowing economy). I don't think some of you guys realize what kind of massive chaos 10%+ mortgage interest rates would have on real estate throughout the US (many other job sectors would be adversely effected besides real estate).
 
[quote author="usctrojanman29" date=1214302975]Honestly, I think that 30 year conforming interest rates will range between 7-8% in 2009/2010 (this is assuming that inflation does not get out of control due to the slowing economy). I don't think some of you guys realize what kind of massive chaos 10%+ mortgage interest rates would have on real estate throughout the US (many other job sectors would be adversely effected besides real estate).</blockquote>


Reality Check for the Fed. They are stuck between a rock and a hard place. There is many other factors behind raising rates. "Fed stays there remains to be seen, but don't expect rate hikes any time soon, even with all the inflation ugliness." Bankrate.com.



Pretty interesting perspective.http://bankrate.com/brm/news/fed/federal-reserve-update.asp
 
[quote author="irvinebullhousing" date=1214303760][quote author="usctrojanman29" date=1214302975]Honestly, I think that 30 year conforming interest rates will range between 7-8% in 2009/2010 (this is assuming that inflation does not get out of control due to the slowing economy). I don't think some of you guys realize what kind of massive chaos 10%+ mortgage interest rates would have on real estate throughout the US (many other job sectors would be adversely effected besides real estate).</blockquote>


Reality Check for the Fed. They are stuck between a rock and a hard place. There is many other factors behind raising rates. "Fed stays there remains to be seen, but don't expect rate hikes any time soon, even with all the inflation ugliness." Bankrate.com.



Pretty interesting perspective. http://bankrate.com/brm/news/fed/federal-reserve-update.asp</blockquote>
And what is the major cause for inflation? More dollars chasing the same number of goods. The problem with hyber inflation in the US is that I have a hard time believing that nominal wages will increase at a double digit pace. I do understand that emerging economies like China and India having increasing demand for food, oil, and other resources but remember their growth is partially due to their export business to the US. So if the US ecomony starts falling off the cliff, don't think that the rest of the world won't feel the pain and start sliding towards a global recession. Then you can beg your booty that there'll be more of a deflation worry than an inflation worry. Double digits interest rates means the real estate market will be hammered as well as the stock market so there will be very few places for capital to hide (one place would be bonds which would lower rates).



Btw, do you really think that a Fed Funds rate of 4% versus 2% will bring oil prices and food prices down? Such commodities are outside of the Fed's control. If the utilization capacity keeps falling due to the weakening economy, I just don't see how inflation could keep climbing upward. Just remember, if oil stays at $140/barrell and food prices remain around the same levels next year as they are today that would translate to almost no inflation in the future. Do you honestly see oil and food prices doubling, let alone tripling from here by next summer (baring any global chaos)?
 
The trend in the last year is towards asset deflation and price inflation. My guess is that this trend will continue, especially as B-52 Ben does exactly what he said he will do.
 
[quote author="awgee" date=1213499632]10% to 15% in 2010</blockquote>


Haha. I know this was meant to be a joke. Asking for a prediction is often useless, predicting something that you have no clues, priceless.
 
[quote author="Look4house" date=1257059496][quote author="awgee" date=1213499632]10% to 15% in 2010</blockquote>


Haha. I know this was meant to be a joke. Asking for a prediction is often useless, predicting something that you have no clues, priceless.</blockquote>


Looking4house, I wouldn't laugh at Awgee quite yet. We are still in 2009 and a lot of stuff will happen in 2010.
 
[quote author="PANDA" date=1257061485][quote author="Look4house" date=1257059496][quote author="awgee" date=1213499632]10% to 15% in 2010</blockquote>


Haha. I know this was meant to be a joke. Asking for a prediction is often useless, predicting something that you have no clues, priceless.</blockquote>


Looking4house, I wouldn't laugh at Awgee quite yet. We are still in 2009 and a lot of stuff will happen in 2010.</blockquote>


Isn't that what you said in 2008. We are still in 2008 and a lot of stuff will happen in 2009. Yes, I agree, stuff will happen. Stuff will definitely happen in 2010.
 
[quote author="PANDA" date=1257061485][quote author="Look4house" date=1257059496][quote author="awgee" date=1213499632]10% to 15% in 2010</blockquote>


Haha. I know this was meant to be a joke. Asking for a prediction is often useless, predicting something that you have no clues, priceless.</blockquote>


Looking4house, I wouldn't laugh at Awgee quite yet. We are still in 2009 and a lot of stuff will happen in 2010.</blockquote>
Panda, I seriously doubt that mortgage rates will even go above 6% in 2010. The powers-to-be will not allow for it. My current predication is that mortgage rates will range between 5-6% in 2010.
 
[quote author="USCTrojanCPA" date=1257063105][quote author="PANDA" date=1257061485][quote author="Look4house" date=1257059496][quote author="awgee" date=1213499632]10% to 15% in 2010</blockquote>


Haha. I know this was meant to be a joke. Asking for a prediction is often useless, predicting something that you have no clues, priceless.</blockquote>


Looking4house, I wouldn't laugh at Awgee quite yet. We are still in 2009 and a lot of stuff will happen in 2010.</blockquote>
Panda, I seriously doubt that mortgage rates will even go above 6% in 2010. The powers-to-be will not allow for it. My current predication is that mortgage rates will range between 5-6% in 2010.</blockquote>


Trojan, the market is above the powers-to-be. The inflation will be out of control and Bernanke will not succeed to pulling back the money supply. Again, I am not fortune teller (as you can tell, I've been wrong on my timings on some of my calls) but the rates will spike up really fast sometime from now until 2012. This will be the time when Irvine homes prices will get crushed and employment rates will rise to 15% in OC. What we've seen so far from 2007-2009 is only the appetizer, the main dish will arrive sometime in 2010-2012.
 
The Fed is supposed to stop buying MBS in Feb. Whether they will or not is debatable. But if they do, who knows where rates will go.



I predict a downturn in the economy and another stock market crash will keep rates low in 2010.
 
[quote author="Look4house" date=1257059496][quote author="awgee" date=1213499632]10% to 15% in 2010</blockquote>


Haha. I know this was meant to be a joke. Asking for a prediction is often useless, predicting something that you have no clues, priceless.</blockquote>


Most thought I was joking when I said we were selling our home in the summer of 2005.

Most thought I was joking when I said how far house prices would fall.

And most thought I was joking in 2005 when gold was $420 per ounce and I said it was going to $1000.

But I have no clues.
 
[quote author="awgee" date=1257071941][quote author="Look4house" date=1257059496][quote author="awgee" date=1213499632]10% to 15% in 2010</blockquote>


Haha. I know this was meant to be a joke. Asking for a prediction is often useless, predicting something that you have no clues, priceless.</blockquote>


Most thought I was joking when I said we were selling our home in the summer of 2005.

Most thought I was joking when I said how far house prices would fall.

And most thought I was joking in 2005 when gold was $420 per ounce and I said it was going to $1000.

But I have no clues.</blockquote>


I wish i met Awgee in 2004 :(
 
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