Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

19 responses to “Poll: What’s the lowest 30-year fixed rates will go before hitting 619?”

  1. Jonness

    This is from Reinhart and Rogoff last year and is certainly food for thought:

    http://www.bloomberg.com/news/2011-07-14/too-much-debt-means-economy-can-t-grow-commentary-by-reinhart-and-rogoff.html

    “There is a growing sense that inflation is the endgame to debt buildups. For emerging markets that has often been the case, but for advanced economies, the historical correlation is weaker. Part of the reason for this apparent paradox may be that, especially after World War II, many governments enacted policies that amounted to heavy financial repression, including interest- rate ceilings and non-market debt placement. Low statutory interest rates allowed governments to reduce real debt burdens through moderate inflation over a sustained period. Of course, this time could be different, and we shouldn’t entirely dismiss the possibility of elevated inflation as the antidote to debt.

    Extremely Rare

    Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90 percent of GDP are relatively rare and those exceeding 120 percent are extremely rare (see attached chart 2 for U.S. public debt since 1790). Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)?

    Even absent high interest rates, as Japan highlights, debt overhangs are a hindrance to growth.

    The relationship between growth, inflation and debt, no doubt, merits further study; it is a question that cannot be settled with mere rhetoric, no matter how superficially convincing.

    In the meantime, historical experience and early examination of new data suggest the need to be cautious about surrendering to “this-time-is-different” syndrome and decreeing that surging government debt isn’t as significant a problem in the present as it was in the past. “

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  2. Howard

    Gosh, I can only hope for 3%… about the time we are ready to buy please…

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  3. Jonness

    If rates go to 6% in the near future, the interest on the Nation’s debt will approximately double. This will collapse the U.S. economy and house prices will collapse into the sewer. Ben will do everything in his power to prevent this from happening. If the Republicans win in November, I suspect their appointed Fed chief won’t have much choice in the matter either.

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  4. apartment boy

    Didn’t you recently make fun of our ability to predict interest rates…and now you’re asking for more?

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  5. ARDELL

    Had a closing on August 24th where the client was able to lock at 3.375% on July 31st with a lender credit of about $1,500, meaning the going rate on that day was slightly less than 3.375% but not a full 1/8th of a point less than 3.375%.

    Given the above, “3.49% (the low to date)” and the 11 people voting that as the lowest it will be, doesn’t appear to be correct to me.

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  6. Ira Sacharoff

    By apartment boy @ 4:

    Didn’t you recently make fun of our ability to predict interest rates…and now you’re asking for more?

    Gotta love it. Seattle Bubble readers are asked to predict interest rates, and then get made fun of for being stupid and wrong….Later, they are once again asked to predict interest rates, and they enthusiastically participate. Just goes to show the lack of correlation between education and intelligence. Seattle Bubble readers are educated.

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  7. Kary L. Krismer

    RE: ARDELL @ 5 – I assume Tim is going by the rates mentioned in this post.

    http://seattlebubble.com/blog/2012/08/27/people-stink-at-predicting-interest-rates/comment-page-1/#comment-176396

    And BTW, Apartment Boy, I wouldn’t describe Tim as making fun of the prior results, just pointing out that the results weren’t very good.

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  8. StillRenting

    RE: ARDELL @ 5

    I think he his talking about Freddie Mac’s weekly mortgage survey. It is an average of all the banks’ lowest rates/points offered that week, so some banks might offer something lower. The low point of the average (3.49% w/ .7 point) was reached the week of July 26, the week before your clients locked their loan. We locked our loan at the same time and were able to lock in a rate/rate credit combo below the average as well.

    Freddie Mac’s weekly data for 2012:
    http://www.freddiemac.com/pmms/

    Freddie Mac’s monthly data since 1971
    http://www.freddiemac.com/pmms/pmms30.htm

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  9. blurtman

    Easy money is the way to go. What could possibly go wrong? Bernanke is a total clown, seeking to bail out his owners, the investment banks. It will take a lot more pain for the average American to catch on, but he is being boiled slowly, like the lobster. Gradualism is the key. This is why people continue to smoke. If folks want a better, fairer economy, they will have to start killing the bankers.

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  10. Ira Sacharoff

    RE: blurtman @ 9
    They don’t have to kill all the bankers. Just a few very prominent ones, publicly executed on cale TV. Think of the ratings! That should get the others to toe the line.

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  11. Kary L. Krismer

    RE: blurtman @ 9 – Why so much dislike for Bernanke, and no mention of Geithner?

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  12. Blurtman

    RE: Kary L. Krismer @ 11 – Using similar language regarding Tim Geithner or Hank Paulson would likely result in a knock on my door, and not by Mary Kay representative. Geithner was the head of the NY Fed when major fraud was being committed by Wall Street. You may recall his defense during his confirmation hearing, when he said that he did not do his job as regulator of Wall Street, because he did not see that as his job.

    This country is in terrible shape, betrayed by our leaders, who are in the pocket of the monied class, and incompetent as well.

    Where is Joseph Heller when you need him?

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  13. Jonness

    By Ira Sacharoff @ 10:

    RE: blurtman @ 9
    They don’t have to kill all the bankers. Just a few very prominent ones, publicly executed on cale TV. Think of the ratings! That should get the others to toe the line.

    As long as we can throw some politicians into the mix, count me in. But who are we going to get to pull the lever that opens the trap door? Perhaps that should be done by lottery. Think of the sales! We might be able to balance the budget after all. :)

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  14. ChrisM

    RE: Kary L. Krismer @ 11 – Not that I’d ever condone such activity, but there are some “interesting” YouTube recordings of people essentially stalking Paulson and asking him about his bazookas predictions.

    Apparently Paulson still enjoys Secret Security protection.

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  15. Lo Ball Jones

    Marketwatch has reported that the Fed might be considering negative interest rates (rather than inflation) as a form of stimulus.

    So interest rates below 2% or even 1% (I believe they were that low in the 1940s and 50s) would not be impossible.

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  16. Kilen

    By Ira Sacharoff @ 6:

    By apartment boy @ 4:
    Didn’t you recently make fun of our ability to predict interest rates…and now you’re asking for more?

    Gotta love it. Seattle Bubble readers are asked to predict interest rates, and then get made fun of for being stupid and wrong….Later, they are once again asked to predict interest rates, and they enthusiastically participate. Just goes to show the lack of correlation between education and intelligence. Seattle Bubble readers are educated.

    Ah, but it is interesting to see how far people get before deciding to stop thinking. From talking points, to basic logic models, to citing past events, finally to (gasp!) looking at the real data. Luckily, this blog has none of the last category; the comments section is purely for entertainment.

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  17. Jonness

    By Lo Ball Jones @ 15:

    Marketwatch has reported that the Fed might be considering negative interest rates (rather than inflation) as a form of stimulus.

    So interest rates below 2% or even 1% (I believe they were that low in the 1940s and 50s) would not be impossible.

    I didn’t read the article, and I’m not certain of the context you are using “negative interest rates.” To me, it means, the Fed is considering imposing negative interest rates on the $1.5 trillion in excess reserves the banks have parked at the Fed. This would force them to lend the money to consumers. If this occurred, we would see rapid inflation as all that money poured into consumer loans and competed for assets.

    Could you link the article you cited? I’m curious of the context negative rates are being used.

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  18. Rhonda Porter

    Tim,
    With your poll, are you basing the rate on credit scores of 740 or higher and 20% down payment? Priced at par or with discount points?

    Thanks, Rhonda

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  19. Howard

    So with the Feds announcement of 40billion a month of printing money… How low are interest rates going to go?

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