Where will the 30 year mortgage rates be in December 31st, 2009

[quote author="qwerty" date=1242135403]



My thoughts exactly - China not buying treasuries would completely devalue their current holdings, so they must continue to keep on buying.</blockquote>


I hear this all the time but I don't completely agree that it's a reason to be comfortable with the situation. While it's great for us in the states that our nation is the leader in the world, you can bet that other countries would rather take our place. It might be a pride thing but I will bet that no strong nation ever likes to be "led".



China has amazing earnings power and if it make sense for them to kill their holdings just to become the global leader like the U.S., it is very tempting. The reason why they don't do this right now is because they are still so heavily dependent on U.S. consumption. Decades later when its own country's consumption is enough to be a powerhouse and it doesn't rely so much on exports, they won't keep their currency low and the treasury issue will be a big problem.
 
<a href="http://www.bankrate.com/funnel/graph/default.aspx?cat=2&ids=1&state=zz&d=30&t=Line">http://www.bankrate.com/funnel/graph/default.aspx?cat=2&ids=1&state=zz&d=30&t=Line</a>



Shooby, Congrats on your recent lock. I think rates are starting to rise slowly.
 
I like to echo Curious? comments on yesterday?s astute observations on the main post; does anyone know of a graph or chart that shows a correlation between interest rates and home values.



In trying to apply the numbers to Woodbury here are some rough calculations correlations?



Roughly for every .1% increase in interest rates; there is a $10/month increase in total home costs.



Inversely, for every $1,000 decrease in home value, there is a $7 decrease in monthly home costs.
 
What is the highest increment can the FED raise rates? 50 basis points? 100? How many more times are they going to meet this year to decide interest rates?
 
[quote author="roundcorners" date=1242173292]What is the highest increment can the FED raise rates? 50 basis points? 100? How many more times are they going to meet this year to decide interest rates?</blockquote>


The FED can do whatever they want. They treated us to a surprise 75 point drop between sessions recently. Typically, they meet every 6 weeks, and they rarely change interest rates by more than 25 basis points.
 
[quote author="roundcorners" date=1242173292]What is the highest increment can the FED raise rates? 50 basis points? 100? How many more times are they going to meet this year to decide interest rates?</blockquote>


This link shows a history of fed fund rate changes <a href="http://www.federalreserve.gov/fomc/fundsrate.htm">http://www.federalreserve.gov/fomc/fundsrate.htm</a>
 
[quote author="qwerty" date=1242135403][quote author="graphrix" date=1242134498][quote author="awgee" date=1242128943][quote author="IrvineRenter" date=1242124006][quote author="PANDA" date=1242119331]I am a little suprised that most believe that mortgage rates will remain low in the 3-5% range by Dec 31, 2009.</blockquote>


What would cause them to go up? The economy is in a shambles, so there is little or no chance of the FED raising the Federal Funds Rate. Investors worldwide are still buying dollars because it is still safer than other currencies, so we do not have to compete with other countries for dollars. The only pressure on mortgage interest rates is the risk premium that is basically controlled by the government now through the GSEs. So I ask again, what would cause mortgage interest rates to rise before the end of the year?</blockquote>


China and Japan deciding not to buy treasuries.</blockquote>


I've been hearing that one for the past year and a half too. One week foreign buyers are weak for newly issued treasuries, and everyone comes out screaming "See! The Chinese aren't buying our bonds! We're all gonna die!" Then the next week, foreign buying is strong even though rates are lower, and everyone comes out saying "Well... due to the slight rise in the dollar and the convexity of the Euro to the Pound but the blah blah blah is why there was a strong foreign participation." IMO, they will keep buying our bonds, and they won't sell them either... because they are screwed if they do, and they know it. Gotta roll over the expiring bonds, whether you like the rate or not, and they do.</blockquote>


My thoughts exactly - China not buying treasuries would completely devalue their current holdings, so they must continue to keep on buying.</blockquote>
I think your opinion is in agreement with about 90% of folks who you ask about this who have an opinion on the subject.
 
<em>"The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new White House estimates. Budget office figures released Monday would add $89 billion to the 2009 red ink ? increasing it to more than four times last year?s all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.



The unprecedented deficit figures flow from the deep recession, the Wall Street bailout and the cost of President Barack Obama?s economic stimulus bill ? as well as a seemingly embedded structural imbalance between what the government spends and what it takes in."</em>





By ANDREW TAYLOR, Associated Press Writer

Monday, May 11, 2009
 
By Deborah Levine

May 11, 2009, 11:05 a.m. EST





NEW YORK (Marketwatch) ? <em>The Federal Reserve Bank of New York bought $3.51 billion in Treasurys maturing between 2026 and 2039 on Monday. The buyback is part of the central bank?s program to keep borrowing costs lower and spur economic activity. Dealers offered $10.426 billion to be purchased. Ten-year note yields /quotes/comstock/31*!ust10y (UST10Y 3.17, -0.12, -3.50%) , which move inversely to prices, remained lower by 8 basis points to 3.21%. U.S. debt was supported by the Fed purchases and declining stock markets.</em>
 
Foreigners, holding our treasuries, know full well what is going on. They are all playing chicken. Hang on until the last minute, jump out of harms way to less risk. They are trying to figure out how to fit 1,000 people out a door all at once. Once a few people start pushing, everyone gets trampled. Inflation is the catalyst. The majority of americans I talk to are still worried about Deflation and want money pumped into the system still. They don't have a clue.



This may be a dumb question but if I hold a bond, bill, or note; can I sell it at a discount to someone else prior to maturity?
 
If you own something, you can sell it.

If you own a bond, you may sell it, at market price. The market determines the price.









No way. Haven't you been reading everyone on here? The Chinese can not sell their US Ts because they will be shooting themselves in the foot.







And the agreements they are making with Brazil and India and Indonesia to use yuan as settlement are just a figment of everybody's imagination.







The ten year hit 3.39% at one point today. Dollar index is at 80.50.
 
More than half the people on this poll voted that mortgage rates will be between under 4% or between 4-5% by year end, which obviously will not happen. How likely is it that we may hit 7% or higher for a 30 year fixed by year end? I think somewhere in the 6% range is for certain.
 
Awgee might have a point. The Chinese may not need to buy treasuries to offset their current account surplus since we aren't buying from them anymore.
 
I know that all of us here will be really excited when a SFR in Woodbury goes on sale for $250 ppsf, but what if mortgage rates are at 15% then? Are you going to be still excited?



Get Ready for Inflation and Higher Interest Rates

The unprecedented expansion of the money supply could make the '70s look benign.



One quote by Arthur Laffer-

?It's difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed's actions because, frankly, we haven't ever seen anything like this in the U.S. To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn't a pretty picture.?



<a href="http://online.wsj.com/article/SB124458888993599879.html">http://online.wsj.com/article/SB124458888993599879.html</a>
 
[quote author="no_vaseline" date=1244803276]Awgee might have a point. The Chinese may not need to buy treasuries to offset their current account surplus since we aren't buying from them anymore.</blockquote>


Thanks for the acknowledgement.

And maybe the Chinese can buy anything they want with their surplus of USD, like iron ore, oil, gold, oil company stock, Hummer, manganese, zinc, etc.
 
[quote author="PANDA" date=1244804476]I know that all of us here will be really excited when a SFR in Woodbury goes on sale for $250 ppsf, but what if mortgage rates are at 15% then? Are you going to be still excited?



Get Ready for Inflation and Higher Interest Rates

The unprecedented expansion of the money supply could make the '70s look benign.



One quote by Arthur Laffer-

?It's difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed's actions because, frankly, we haven't ever seen anything like this in the U.S. To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn't a pretty picture.?



<a href="http://online.wsj.com/article/SB124458888993599879.html">http://online.wsj.com/article/SB124458888993599879.html</a></blockquote>


Laffer is a fool.
 
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