Doug Short (June 1, 2012): The Fed's latest strategy for managing the economy, Operation Twist, has a month to go. The program was announced on September 21st of last year with the stated purpose of selling $400 billion in shorter-term Treasury securities by the end of June 2012 and using the proceeds to buy longer-term Treasury securities. The Fed assumed this would put downward pressure on longer-term rates, which would stimulate the economy through "a broad easing in financial market conditions." In other words, more loans at lower rates.
See how much the government loves homeowners? It's willing to sacrifice those dependent on fixed income (retirees and pension funds) and inflation-dependent entitlements (social security) to entice others with lower interest rates to buy houses.
Don't worry, now that the world is scared out of its mind with Europe, money is now flowing into Treasury bonds, suppressing rates even further.
Of course, low rates are only good if you can get a bank to loan you money (hint: it won't). Banks won't loan money because: (1) they've learned not to trust people buying homes (especially those that exercise their American right to walk away from mortgages); (2) they've learned that housing prices can fall (and Americans will choose to walk away from mortgages); (3) they've learned that when housing prices fall, people will stop paying their mortgages and with the effective American legal system, it will take over 600 days to foreclose; (4) the only people who want to borrow are people not worthy of borrowing (sorry unworthy people, your time to shine was circa 2000-2006); and (5) with borrowing rates so low, it's easier to borrow from the US government for the short-term, and invest in longer-term US government bonds.
The next chart shows the month-over-month changes of the Top 20 Case Shiller Index. Did you hear about those recent price gains on the news (which, by the way, were because banks were still preventing REOs from hitting the market)? Well, look at them in all their glory (those two little bars at the end):
Look at all that real estate sales activity!:
Look at all those housing starts and permits!:
Look at the Top 20 Composite Case Shiller!:
In summary, please, please, please buy a home! Don't let the Fed's good deeds of mass market manipulation of interest rates at the expense of old farts and disabled people go to waste.
Source: http://advisorperspectives.com/dshort/updates/Treasury-Yield-Snapshot.php
Source: http://www.zerohedge.com/news/march-case-shiller-misses-expectations-housing-set-quadruple-dip
Source: http://www.zerohedge.com/news/case-shiller-misses-expectations-unadjusted-home-prices-lowest-decade
Source: http://www.cnbc.com/id/45507581/Average_Foreclosure_Time_Sets_New_Record
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