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Updated over 11 years ago, 07/07/2013
DEAL-BREAKER!: Mortgage rate increase THREATENS BOOM!
So the 30yr mortgage rate went from 3.93% to 4.46% over the weekend! Holy cow!
Could that be the reason Mortgage rate applications fell 3%?
It would make sense!
How do you feel this will affect REI? Buying and Holding?
LINK: http://www.usatoday.com/story/money/2013/06/27/mortgage-rates-6-27/2463333/
Originally posted by Ben Hughes:
Ben Hughes Is there a point where you think it will prevent you from making money? Or when would it start to become a concern for properties you already own?
Originally posted by Robert Steele:
Threatens Boom? I wonder if this might actually increase sales activity.
This has been my thinking too. I imagine that some first time home buyers will be thinking "Last chance to buy a house before rates go up and you are locked out forever"
Originally posted by Ned Carey:
Robert Steele and Ned Carey if we've stepped into a seller's market then would now be a good time to invest in land and sell to builders? Or even build your own houses?
Taylor Jennings people were making money when rates were at 10%-15%. Doesn't affect current properties since I already got them locked in at a low rate.
How will this affect hard money lenders?
Originally posted by Taylor Jennings:
Robert Steele and Ned Carey if we've stepped into a seller's market then would now be a good time to invest in land and sell to builders? Or even build your own houses?
I am not a land or new construction guy, so not knowledgeable enough to comment.
I will say that all real estate is local. What is happening nationally is not near as important as what is happening you your market. Which is not near as important as any specific deal you are considering.
- Realtor, General Contractor, and Developer
- Redding, CA & Bend OR
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When I first got my RE License interest rates were north of 18%, and people were still buying. I never in a million years thought rates would be down to where they fell to. But.. I think it will actually motivate people to get off the fence and BUY!! because one thing is certain, RATES WILL GO UP!! and the cycle continues.
- Karen Margrave
Sure, rate increases affect everyone; however, they are increasing because the Fed is saying they will be tapering their bond purchases (printing money).
The Fed is getting ready to taper because they like where the health of the overall economy is going, particularly with the employment data.
So the way I look at it is this. While rates are increasing, that implies that the job market is strengthening, so rates may be higher, but if there are MORE people WITH JOBS in the economy, that will provide continued supply for the real estate market.
Hard to get a loan at ANY rate if you are unemployed - ya know?
looks like the rates went down again, still not under 4% but better then it was 2 weeks ago.
http://www.usatoday.com/story/money/markets/2013/07/03/mortgage-rates-7-3/2485835/
Originally posted by Karen Margrave:
What difference was there in your strategy back then versus what it is today?
Originally posted by Clay Huber:
The Fed is getting ready to taper because they like where the health of the overall economy is going, particularly with the employment data.
So the way I look at it is this. While rates are increasing, that implies that the job market is strengthening, so rates may be higher, but if there are MORE people WITH JOBS in the economy, that will provide continued supply for the real estate market.
Hard to get a loan at ANY rate if you are unemployed - ya know?
I posted a link earlier on Page two of this forum post about the predictions of the economy bombing up to 90% of the US stock value.
Then I spoke with a landlord of (18) properties who said she wants to sell (5) of her houses because she doesn't like the way the government is spending and she thinks the worst is yet to come.
THEN I talked to my Dad today and he says that among many of the successful business people he follows... they are saying that the next recession could be worst that the 'Great Depression'...
I should probably make a new forum post for this one, but do any of you feel this could very well take place? If so, what preparations should be made? (Definitely should make this into a new post...)
Taylor, I have read the Aftershock book and studied up on the ideas of the author of said book and the topic of the article you linked. I find his work to be severely flawwed. Primarily because he misunderstands the concept that the US federal government is the monopoly supplier of the US Dollar and thus a currency issuer, whereas you and I and businesses and states are all currency users. The difference between a currency issuer and a currency users are very important to understand our macroeconomic environment. He seems to insinuate the the US is teetering on the edge of collapse but I do not see that happening with strong historical evidence to back up this belief being that the US government is not at risk of being overthrown, the US economy has a massive productive capacity and is very efficient, and the national debt is all denominated in the US Dollar in which the government is the monopoly supplier of. This is not to say that their will not be a downturn but not a massive 90% drop nor will treasury rates sky rocket either.
I have done a great deal of study on monetary and fiscal policy and its macroeconomic effects and have been satified with my understanding and has lead to greater confidence and clearer vision in my real estate investing. If I believed the logic put forth by the Author of Aftershock or others like him that have been banging the same drum for years I would have missed many opportunities and be no where as near strong and have near the growth as I do at this point.
There always has been and always will be those who will tell you the sky is falling. One day, maybe they'll be correct. But, so far, they haven't been.
If you were around this website back in 2008-2009, you'll remember a lot of posters who were preparing for the apocalype...buying guns and ammo for barter, digging holes in the ground for shelter, stocking up on physcial gold, etc. They were sure that the 2008 crash was the begining of the end. Here we are today, and if those people had spent as much time and energy focused on investing as they did on "preparing for the end," they'd have made a lot of money over the past few years.
Nobody knows where the economy is headed, and even economic geniuses can't account for the non-monetary factors that influence national and global markets. So, is this the beginning of the end? Maybe? But probably not. And based on history, if you make your financial decisions on the assumption that everything around you is going to crumble, you're going to miss a lot of opportunities between now and whenever that might (or might not) happen.
Taylor, you cite a lot of anecdotal evidence. Look at the macro picture. Stock market soaring, homes selling like crazy, home prices up, 195k new jobs created last month, corporate profits healthy, consumer sentiment at multi year highs, etc, etc. You can ignore the data at your own financial peril. As J Scott points out the doom and gloom crowd may be correct one day but it hasn't happended yet. My advise is find some good cash flowing properties and invest for the long term.
Originally posted by J Scott:
... And based on history, if you make your financial decisions on the assumption that everything around you is going to crumble, you're going to miss a lot of opportunities between now and whenever that might (or might not) happen.
I agree. (I still bought guns and ammunition though!)
I heard about this economic forecast initially a year ago and have only heard the concern more frequently now. Regardless of what is going to happen, I'm ok with leaving it in God's control.
To your point, this prediction creates a high sense of urgency for me to get in the game and start turning properties. It's been a huge motivator for me starting out.
Originally posted by Albert Hasson:
J Scott and Albert Hasson My question is, if you knew that this was going to occur without a doubt, then how would your strategy change in preparation?
(Buying and holding properties with a 70-80% refi wouldn't be recommended if there was a huge economic fall out I'm sure.)
Originally posted by Kyle Hipp:
I'm glad to hear that you decided to forego the fear and find success! I believe it was Buffett that said, "Buy fear and sell greed."
Then again, Buffett has been selling off a ton of his stocks last I heard?
Originally posted by Taylor Jennings:
J Scott and Albert Hasson My question is, if you knew that this was going to occur without a doubt, then how would your strategy change in preparation?
If I knew it was going to happen, I'd "retire" early -- I'd liquidate everything, move my family to another country where people are less focused on material things and are more self-sufficient and I'd start on my long list of books that I've been meaning to get to.
No matter how you shake it, the cream always rises to the top. There's money to be made whether rates are high or low.
I remember WAY BACK in 2006, there was a bank near my house that was paying 5.5% interest on a savings account if you had at least $100K in the account. I kept getting credit card offers (almost daily) for 0% interest for 12-15 months. I ended up borrowing on five different credit cards for a total of $170,000 and put that money in that bank. I then sent the credit card companies their own money back monthly and kept all the interest. Good times.....
Originally posted by J Scott:
Originally posted by Taylor Jennings:
J Scott and Albert Hasson My question is, if you knew that this was going to occur without a doubt, then how would your strategy change in preparation?
If I knew it was going to happen, I'd "retire" early -- I'd liquidate everything, move my family to another country where people are less focused on material things and are more self-sufficient and I'd start on my long list of books that I've been meaning to get to.
Hahaha nice! Sell everything you have and jet.
I think I would buy a ton of land somewhere and start a farm. Not sure if I would leave the country for sure.
I think I would consider Ireland or Australia.
Originally posted by Rob K:
I remember WAY BACK in 2006, there was a bank near my house that was paying 5.5% interest on a savings account if you had at least $100K in the account. I kept getting credit card offers (almost daily) for 0% interest for 12-15 months. I ended up borrowing on five different credit cards for a total of $170,000 and put that money in that bank. I then sent the credit card companies their own money back monthly and kept all the interest. Good times.....
Ha is that even legal?
Originally posted by Taylor Jennings:
Yes. What would be illegal about it? I remember being on the phone with Chase Bank getting approved for $58,000. There were other people on the line listening in and several people asking me questions about my ability to pay the money back. I told them I was using the money for "investments" and they approved it. These were in the days of loose lending before the whole financial meltdown. I'm hoping to do it again one day.
Taylor, there is a 100% chance of another recession coming at some point. Problem is nobody knows when that will be including the guru's, pundits and talking heads on the networks. Unless you day trade stocks or flip homes for a living then don't worry about it. Sell your guns, ammo and gold and buy quality dividend paying stocks and/or cash flowing real estate. Might the prices of those assets go down at some point? Yes, they certainly will. Might they recover in price? Yes, they certainly will. This is the definition of an economic cycle. If it makes you too nervous to think of losing money at some point down the road then put your money in a short term CD. Good news about rising interest rates is that CD and money market rates will go up as well helping those on fixed incomes.
For every market Bear, you can find a market Bull. The world was supposed to end back in the late 2000's, and here we are now still kicking and alive.
The only 'true' protection is diversification among all asset classes.
Originally posted by Rob K:
Originally posted by Taylor Jennings:
Yes. What would be illegal about it? I remember being on the phone with Chase Bank getting approved for $58,000. There were other people on the line listening in and several people asking me questions about my ability to pay the money back. I told them I was using the money for "investments" and they approved it. These were in the days of loose lending before the whole financial meltdown. I'm hoping to do it again one day.
That's pretty slick and hilarious no doubt! I hope you, and I, can do it again one day.
Originally posted by Albert Hasson:
WHoA! Slow down there Albert... Let's not get carried away...
I'll agree with buying the cash flowing real estate, but selling your guns may be a little too far!
Also believe you're right about nobody truly knowing when the next recession is going to come. We do know however that it will.
It's a motivator for sure.
Thanks for taking the time to reply!
