Feds raise US interest rates again

[Tiervexx]

correct me if anyone has reason to believe otherwise but it seems like the fed and the government sort of did the "quick fix" type economics to get out of the 2000 recession (pumped a bunch of money in by several diffrent means) and pretty soon we are going to pay for it.

 

[PBR]

Rates do not directly effect prices. However, under current economic understanding, raising the prime rate should lower demand for housing, thus LOWERING home prices.

This is what Greenspan has been trying to accomplish for a few years now. Raise the fed funds rate, driving up the cost structure for commercial banks. Banks pass this on in the form of higher interest rates. This raises the cost of investment to companies and individual investors, in turn decreasing investment. Less individuals looking to invest is represented by a decrease in the demand for housing (a shift downward or to the left for those familiar with a basic Supply and Demand graph). This results in a lower price.

Greenspan, and anyone with any sense, knows that there is a bubble in the housing market. He doesn't want to retire having left a bubble about to pop on his watch. So for years now he has been trying to control housing prices by upping the fed funds rate. It sure isn't fear of inflation that's been driving it up.

What he and many others can't figure out is why it hasn't been working. And personally, I am holding off on buying a home because the last thing I want to be sitting on is a 300K house with a 750K mortgage. And in So. Cal, I believe that the bubble is large enough that those numbers could end up in reality.

SoCal is insane right now....youre figures are correct...AZ and Las Vegas are next inline...the prices of homes have tripled in a matter of months...the Foreclosure rate is expected to be astronomical in Cali...investors have created a false market in AZ and LV....Cali folks have strung themselves out so deep buying into 700K plus homes- just for a simple track house....

 

[SoreArms]

SoCal is insane right now....youre figures are correct...AZ and Las Vegas are next inline...the prices of homes have tripled in a matter of months...the Foreclosure rate is expected to be astronomical in Cali...investors have created a false market in AZ and LV....Cali folks have strung themselves out so deep buying into 700K plus homes- just for a simple track house....

my parents just bought a house in AZ for about 50% less than they would have paid in Ca (specially the LA area). They are increasing rapidly over there too, house prices where up $15,000 - $35,000 from what they had seen just 2 months a go.

 

[PBR]

my parents just bought a house in AZ for about 50% less than they would have paid in Ca (specially the LA area). They are increasing rapidly over there too, house prices where up $15,000 - $35,000 from what they had seen just 2 months a go.

bro you can say that again...AZ housing is off the chart....the heat right now is slowing buyers from cali....looking at RE in 115' weather is not appealing...some AZ peeps are trying to relocate and buy up, while Cali is taking a break from the heat...a couple of months ago, homes were on the market there for 24-36 hours before biding wars started...two homes that i know of set record highs for 50+ bids in each home!!!! AZ homes at this moment are staying on the market for a couple of weeks...go right now if you want a good deal...as soon as it cools off- Cali peeps will be back in full force.
actually its a shame, i think....AZ peeps hate cali's for driving their market to the heights its currently at...

 

[-SD-]

REal estate is a long term investment. It doesnt get thrown around like stock.

 

[Tadow]

REal estate is a long term investment. It doesnt get thrown around like stock.

For most families this is true - real estate is probably the largest investment they will ever make. But the recent rise in the real estate market has brought in serious cash from serious investors. If you think that people/investment firms with big time money to throw around are going to ignore the real estate market when it posts 30% gains in a single month (like has happened in So Cal) then you are not looking at the whole picture.

A big part of the problem is the fact that real estate is attracting this type of money. It's to the point where in many parts of the country families can't realitically afford to live in the communities where they work.

 

[calveless wonder]

Rates do not directly effect prices. However, under current economic understanding, raising the prime rate should lower demand for housing, thus LOWERING home prices.

This is what Greenspan has been trying to accomplish for a few years now. Raise the fed funds rate, driving up the cost structure for commercial banks. Banks pass this on in the form of higher interest rates. This raises the cost of investment to companies and individual investors, in turn decreasing investment. Less individuals looking to invest is represented by a decrease in the demand for housing (a shift downward or to the left for those familiar with a basic Supply and Demand graph). This results in a lower price.

Greenspan, and anyone with any sense, knows that there is a bubble in the housing market. He doesn't want to retire having left a bubble about to pop on his watch. So for years now he has been trying to control housing prices by upping the fed funds rate. It sure isn't fear of inflation that's been driving it up.

What he and many others can't figure out is why it hasn't been working. And personally, I am holding off on buying a home because the last thing I want to be sitting on is a 300K house with a 750K mortgage. And in So. Cal, I believe that the bubble is large enough that those numbers could end up in reality.

alright bro's...the fed has little corrolation with mortgage interest rates. Mortgage interest rates are based on the secondary mortgage market, where investors trade mortgage backed securities. the stock market effects interest rates more than the fed does.

it's pretty funny that most people panic

 

[SoreArms]

alright bro's...the fed has little corrolation with mortgage interest rates. Mortgage interest rates are based on the secondary mortgage market, where investors trade mortgage backed securities. the stock market effects interest rates more than the fed does.

it's pretty funny that most people panic

I have no idea what you just said

 

[UA_Iron]

So Cal may not get hit as hard as you all think

industry and jobs are diverse - I think it would require a major falling out of one of those to effect the market to where it slumps.

either way, I wont be able to afford to live there anytime soon.

 

[SoreArms]

So Cal may not get hit as hard as you all think

industry and jobs are diverse - I think it would require a major falling out of one of those to effect the market to where it slumps.

either way, I wont be able to afford to live there anytime soon.

with my parents in the Az area, I'll probably be over ther now and then. I'll hit you up, you better not flake.