In the past I’ve said that the sub-prime contraction will mainly affect the lower end, but that it could work it’s way up to through the market as it affects people trying to move out of starter homes, which will affect people trying to move out of second homes, and so on. It’s similar to the reason I call “first time home-buyer” programs, “second time home-buyer” programs. The person that benefits from the loan packages is the seller, not the buyer. These programs increased demand for certain houses (which is apparently what they’re supposed to do on the first time programs, since some only apply in very specific neighborhoods).

I think we agree that over the longer periods long term and short term rates will tend to move together. We’re dealing with the short term here, however. You seem to view the fact that mortgage rates haven’t dropped as some sort of a danger sign. In contrast, I view what happened in August (or earlier) as the danger sign, and view the Fed actions as part of the fix. I don’t expect mortgage rates to drop as a result of that fix. It’s not a danger sign, it’s a sign of the treatment that was given (and also could be a sign of banks’ and investors’ fear of inflation, as we’ve discussed).

BTW, the risk is that Freddie or Fannie will stop functioning, or that investors will completely stop buying new mortgage backed securities. Right now mortgage rates don’t reflect that being perceived as a likely event.

Historically speaking, when short term rates are decreased, long term rates generally move in lock step. In times that they don’t, this signifies problems in the financial markets (either risk or inflation).

Do you agree or disagree? How is any of this incorrect? If it is, please prove it with data and not just your opinion.

“Why are mortgage rates moving upward while the Fed cuts its target rate? The reason that mortgage rates haven’t shot to the moon is due to the fact that the Fed is cutting rates at an extremely rapid pace. Yet despite the cutting of the FFT, mortgage rates have moved very little, and in fact have actually moved up. This should scare you.” (Post 29)

Then we went into the reasons why the mortgage rates would move up when the fed lowers rates. Then you tried to dispute that.

It’s just one wrong point after another, and pointing out that you noted mortgage rates move with long term rates (after a third party pointed that out BTW), doesn’t change that.

Are you reading any of my posts or simply trying to make circular arguments for the sake of arguing?

My initial point was this: The recent increase of mortgage rates at a time when the FFT is being slashed in half, is a rarity.

Nowhere in any of my posts did I say that mortgage rates do not follow the 10 year or prime rate closer than they follow the FFT. In fact, I said that right off the bat.

Look at the charts and they clearly demonstrate that the majority of the time, when the Fed is cutting rates, mortgage rates are moving lower. You were arguing the contrary, and the charts clearly show that you are wrong.

Argue all you want, data is on my side. The fact that mortgage rates are moving up while the FFT is being slashed is an anomaly and demonstrates strain on the financial markets, which was my point the whole time.

Is this like that thing where you shouldn’t change if Monte Hall offers to let you change to Door #2 after showing you Door #3?

Imagine the following scenario:
Tomorrow a local TV station run a prime time show where 10 random real estate professionals were asked to predict the home values at the end of the year. Immediately after the show the same professionals were gathered in a closed room and were informed that they will compete in a secret home value prediction contest with a one million dollar price for the one that comes closest. They are given the option to either stay with the prediction they made on the show or change it. If they gave honest unbiased predictions noone would change it. My guess is that all would change it. I might be the only one who thinks that but if not that’s a pretty serious credibility issue. I’m sure they are mostly good people in general but the industry has a bad rep. for spin and imo deserves it.

Kary, you are using history to say if it’s true or not for the future. You could have a month of depreciating markets and then the world ends. This scenario is a future with no market correction and no cyclical pattern. Not very likely but not impossible. So it’s not facts when it comes to the future it’s predictions.

You are doing exactly what you say you shouldn’t. Making predictions from what is likely to happen. I say you should do such predicitons and that they are helpful in planning your life in general and in specifcs as a home purchase.

I appreciate your thougthts. My thoughts? I really do not think anyone here is being dishonest. I think it may have to do more with a passion invested in one’s perspective.

Early in the conversation, this was my thought, ” It’s too easy for people to read from an emotional level –from their individual perspectives and market paradigms to support their point of view.”

Another way of saying, if your writing (prediciton/ perspective/idea/you make it)agrees with my perspective, I like you. If not, you’re dishonest?

For instance, I don’t always agree with Ardell, nor Kary. I think them both very honest people, communicating from their perspectives. And I might add, I learn things from both of them.