Basic Finance

30-Year FRM Rates: Who Says Lower Rates Won't Do Much Good?

Are new mortgage applications really a good measure of buyer demand? I signed my contract for a new condo almost a year ago, but didn't actually finalize the financing until today (at an amazing 4.375 with 3/8 points). I'm certainly happy about the lower rates, but it had NO impact on my buying decision. I think weekly fluctuations in mortgage applications are really just surges from a pool of buyers who have already decided to buy, but who are trying to time the rates, not from "new" buyers.

How Ivory Tower Economists Created the Housing Bubble

Why did everyone ASSUME that house prices would continue to appreciate? If you take that assumption out, the rent/buy equation would have told people to stop buying a long time ago, even if interest rates were not properly adjusted higher to counter higher inflation. So..ultimately it is NOT the economists who are to blame, but those housing speculators who never even bothered to do the rent/buy calculation you describe. Right now I rent an apartment for $3000/month that would cost me $1,000,000 to buy. How low would interest rates need to be to justify that buy decision? The numbers so heavily favor "rent", I'm not sure tinkering with the inflation numbers and its associated rise in interest rates makes any difference (or would have made any difference 3 years ago). All your solution would have done is to change a RATIONAL rent/buy decision from "you are an IDIOT if you buy" to "you are a TOTAL IDIOT if you buy."