interest rates -- predictions?

anyone can predict ultimate direction of rates -- WAY up. but nobody can predict the timeframe

more than 6 months --- less than 24 months?

i don't think the uncertainty is so much in when they'll rise, although that's not clear. the more important issue is the slope of the increase.

another alternative is to delever and just languish like japan. china wouldn't be happy, and is doing its best to have this scenario avoided, but it could happen for awhile. but it would imply reduced government spending, which is a tough one to envision.

they selling 75b/week -- nothing preventing any one auction from going bad before 6 months timeframe... on the other side, hard to believe they can get away with it for 2 years but they do own a printing press

take a look at this...

http://www.federalreserve.gov/releases/h15/data/Monthly/H15_TCMNOM_Y10.txt

would seem like 5 -6% is not unreasonable.

sanghyun10: translation of my original post: since nobody can predict the timeframe of change, the default is no change over six months. strong reason: if they did know, instead of telling you they would be placing significant bets on that directional change.

Since there appears to be sufficient volume of economic activities, there is no compelling reason to expect a rate reduction. At the same time, they wouldn't want to slow things down by raising. So, "reasonably stable with a slight tendency for a slow-but-steady increase" would probably be the likely scenario for the next year, assuming that there will be no dramatic changes in the way the economy appears to be getting less chaotic.

Rate reduction? that would be clever. who knows what will happen, but i could see a rate increase under certain circumstances. i could see low rates interminably as well, which would not portend well for the economy.

So it appears that unless there's a massive slow-down in the economy, interest rates will remain steady or rise.

And as a prospective buyer, I guess I'm hoping for the economy to tank -- so both prices and interests rates will go down. (Until I'm ready to sell).

Sorry for the elementary analysis, I'm not involved at all in the mortgage/finance world.

The bigger question is what to shop for now, given the uncertainty that lies ahead. Lets assume for a moment that you or your building don't qualify for a 30yr fixed term mortgage. What out of the various ARM options should you consider? For example:

3/3 at 3.8% (2% adjustment cap, 6% lifetime cap - adjustment rate based on 2.5% margin on 3 yr treasury)

5/1 at 4.3% (2% adjustment cap, 5% lifetime cap - adjustment rate based on 2.5% margin on 1 yr treasury)

7/23 at 5.3% (6% lifetime cap - adjustment rate based on 2.5% margin on 10yr treasury)

"And as a prospective buyer, I guess I'm hoping for the economy to tank -- so both prices and interests rates will go down. (Until I'm ready to sell)."

Would you still hope for the economy to tank if it took your job with you? Seriously, I am so sick of buyers hoping for the world to go to shit just so they can save 50%. If the economy goes off a cliff, you can kiss your job BYE BYE.

and to answer the original question, rates will either go up, down, or remain the same. I hope that helps, but my Chinese made crystal ball was recalled since it had high amounts of lead paint.

El_P... if you look at jobs and financial security as rungs in a ladder... the higher up the ladder/food chain... the farther you are away from the rising tide of Unemployment/Bkrcpties... you can also go further up the ladder by living within your means and savings a ton....

me thinks the Hummer line worker/ RE broker/ 25 pairs of Ferragamo GS secretary/ etc... are being "hurt"... but "hurt" is a necessary evil as are recessions... it's only that the powers that be in 2001 when we were by all rights heading into a milder recession (whereby young kids in college could have made the natural decisions to go into medicine/research/and other more productive areas of the economy.. they all ended up becoming Yoga instructors/Dog Walkers/Re Borkers/ Mortgage bankers/ "I-Bankers") that we just Greenspan starting "fluffing" the RE angle that got us into this 10 yrs... train to NOWHERE... so it's gonna take the "pain" we avoided in 2001, add in massive deleveraging of BUBBLE and another ho hum recession that should have started in 2010 (if 10 yr cycles are correct)... to get us back to PAR.

That's why I believe NYC RE is headed to 1999-2001 levels... I've said it on my first post.. and nothing's changed..... it's even gotten more hilarious..... IMHO....

"my Chinese made crystal ball was recalled since it had high amounts of lead paint"

that is what's known as a layup... anyone?

wheres' my post go! ? f'k.. you gotta be kidding me... m'okay.... UWSmynabe... only an insane person would recommend an ARM at this time with the spread between a 30 yr fixed and ARM at a negligible 100bps. Why hang yourself high and dry when IR is BOUND to go thru the roof in the next 5 years? BETTER yet.. .what do you think happens to RE as IR rises to 10% in a soft RE market with supply > demand... could it be that the new mortgage "cost" is borne by buyers or sellers... that's it class.... think about that and I'll expect a 10 page report tomorrow morning... now don't start the keg party at Andrew's until you've completed the assignment...

se10024... that is the funniest line no SE today... until someone else tops it :)

only he can top himself

We took a 5/1 ARM over a 30-yr fixed on our refi because we know we'll outgrow our place at that point. In the meantime we save 100 bps and cash to pay down or off the mortgage if rates jump too high before we move.

Wow w67thstreet your brilliance has no bounds!

To those who bothered to read my post... I would guess there are many situations where buyers (or buildings) don't qualify for Fanny Mae underwriting on a fixed rate loan. Given the evil ARM may be their only option, which would flavor would be the least objectionable?

renting.

I think we get it aboutready, you can't let a thread go by without inserting your painfully predictable stamp of disapproval. Ugh.

REMom, just curious, do you think the value of your home will increase enough to cover the transactional costs of upgrading?

and you, UWS, shock me with your originality each and every time you post.

REMom, if i read her post correctly, is in a relatively unique position for someone who is electing an ARM, she is able to pay off the loan in the event rates rise. if you are not in that position, or at the least taking out a mortgage that is well within your means for the long term (including the expense of potentially large increases in rates), then it isn't fiscally prudent to take out the loan at all. kind of like the purchasers of new condos not budgeting for tax increases over time.

UWSmynabe/Shrimpie... yes my brilliance knows no bounds....

REMom... your purchase was ill timed. This is my standard "happy" speak after rolling my eyes... don't worry the 4bdrm you were gonna get came down $1.5MM and you only lost $1MM on your 2bdrm so net net.. you're okay..... what my inner mind is thinking is after all the transaction cost and headaches... you could've just rented and saved yourself the $1MM and saved the $1.5MM on the 4bdrm.... thereby being UP $2.5MM.... LMAO... sorry...LMAO..sorry again....
http://www.nytimes.com/2009/08/13/business/economy/13fed.html?hp
let me get his straight shrimpie.... its' so tenuous that no traditional lender will give you the "best" plain vanilla mortgage... so you add in more risky debt... that's some advice... do you get paid for stuff like that? Oh check this out, the "economy" is doing so great the Fed is gonna stop supporting low rates.... hmmmmmmm i wonder what that'll do for NYC RE?