Mortgage Histories I Learned
Many of my acquaintances are talking about houses. Some talking about catching the lowest rate in 30 yrs, some having their house warming parties, some talking about buying just for investment. Below is what I learned from other people, plus my-own rant:
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I can see that if I bought houses in 1982, I would almost have to be rich by now.... See the historic mortgage rates:
http://www.bondtalk.com/global.cfm?S=charts&SS=spread_history&curve=mort_30yr
If I bought a house back in 1982, the houses would be so cheap because no one can afford to pay the interest for a high principle mortgage loan. The mortgage interest in the first couple years would be backbreaking; but I would have simply gotten an adjustable mortgage or keep on refinancing it. Over time, the monthly payment would decrease because of the lower rates, and the value of the houses would keep on going up because the potential buyers can get loans at lower and lower rate (assuming good up-keep and neighborhood/area). This means bigger and bigger mortgage the buyers can borrow to pay me (the seller), with the same monthly payment that they could afford.
If I did that, I can now brag about houses being "the best investments ever", like many older guys I know. Too bad that I didn't buy then, I was just a kid. And now, I wouldn't dare to bet the rate would keep on decreasing like previous years -- not unless I bet the economy is going down the tube at the same time.
If anything, I would bet the rates are going up. If that were the case, I would think about selling the house and cash out -- too bad that I don't have a house that I can sell now. Looking forward, I see the housing market flattening out at best, if it doesn't start to head down.
But then, it would be an uneducated guess, because I have no idea where the crazy people came from -- these are the crazy people who keeping on buying all the low-yield long-term mortgage-backed securities and keep the mortgage rate down in the first place! Can someone help me answer that? Would those people keep on buying these bonds?
Actually, if I bought a house in the area three years ago, I could still have made out like a bandit. I asked myself, "would I have bought a house back three years ago?" Ans.: Not likely -- for similar reasons as now – This shows that my timing was terrible. "Would I buy now?" -- probably too late. Today, my questions are: "when are the baby-boomlets going to start buying houses?" "When are the baby-boomers going to retire?" "When are they going to move to their retirement destination..., where?"
Looking further back in time, I felt sorry for those guys who bought their houses in mid-1970s. I heard from some retired guys that people were throwing their house keys back at the bank because their house worth so much less than the mortgage, as a result of the interest rate skyward leap in late 1970s and early 1980s. I can see why. But what's up with time period? One of the older guys I talked to say that the economy was slow and Greenspan of the FED (http://www.federalreserve.gov/) proposed to boost foreign investment in the U.S. by raising interest rate sky-high to do that.... Was it the same Greenspan that some people saying, "In Greenspan we trust"? Wow!
======
I rest my case here.
Stanley
======
I can see that if I bought houses in 1982, I would almost have to be rich by now.... See the historic mortgage rates:
http://www.bondtalk.com/global.cfm?S=charts&SS=spread_history&curve=mort_30yr
If I bought a house back in 1982, the houses would be so cheap because no one can afford to pay the interest for a high principle mortgage loan. The mortgage interest in the first couple years would be backbreaking; but I would have simply gotten an adjustable mortgage or keep on refinancing it. Over time, the monthly payment would decrease because of the lower rates, and the value of the houses would keep on going up because the potential buyers can get loans at lower and lower rate (assuming good up-keep and neighborhood/area). This means bigger and bigger mortgage the buyers can borrow to pay me (the seller), with the same monthly payment that they could afford.
If I did that, I can now brag about houses being "the best investments ever", like many older guys I know. Too bad that I didn't buy then, I was just a kid. And now, I wouldn't dare to bet the rate would keep on decreasing like previous years -- not unless I bet the economy is going down the tube at the same time.
If anything, I would bet the rates are going up. If that were the case, I would think about selling the house and cash out -- too bad that I don't have a house that I can sell now. Looking forward, I see the housing market flattening out at best, if it doesn't start to head down.
But then, it would be an uneducated guess, because I have no idea where the crazy people came from -- these are the crazy people who keeping on buying all the low-yield long-term mortgage-backed securities and keep the mortgage rate down in the first place! Can someone help me answer that? Would those people keep on buying these bonds?
Actually, if I bought a house in the area three years ago, I could still have made out like a bandit. I asked myself, "would I have bought a house back three years ago?" Ans.: Not likely -- for similar reasons as now – This shows that my timing was terrible. "Would I buy now?" -- probably too late. Today, my questions are: "when are the baby-boomlets going to start buying houses?" "When are the baby-boomers going to retire?" "When are they going to move to their retirement destination..., where?"
Looking further back in time, I felt sorry for those guys who bought their houses in mid-1970s. I heard from some retired guys that people were throwing their house keys back at the bank because their house worth so much less than the mortgage, as a result of the interest rate skyward leap in late 1970s and early 1980s. I can see why. But what's up with time period? One of the older guys I talked to say that the economy was slow and Greenspan of the FED (http://www.federalreserve.gov/) proposed to boost foreign investment in the U.S. by raising interest rate sky-high to do that.... Was it the same Greenspan that some people saying, "In Greenspan we trust"? Wow!
======
I rest my case here.
Stanley
posted by Stanley Poon at 4/15/2005
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