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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 660.08-0.8%Nov 18 4:00 PM EST
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To: Zeev Hed who wrote (69600)2/20/2001 9:11:09 AM
From: reaper  Read Replies (1) of 99985
 
Zeev

I want to take issue with one point that you made; $10-12B in lower potential costs for those buying a new home.
Maybe this is not true elsewhere in the world, but in Boston (where housing demand is high) lower rates immediately translate into higher home prices (since buyers can "afford" bigger loans), so there is no "opportunity cost savings" from lower rates (again, at least not here).

Also, was curious to gain your opinion re: the zero sum game aspect of lower rates, in the case that lower mortgage payments are accompanied by lower interest payments to holders of fixed income securities. Surely (as the paper points out) the mortgage holders have a higher propensity to consume, but still, the fact remains that at the same time I am today paying less on my mortgage (thanks to a re-financing) the fixed income portion of my retirement portfolio is earning a lower return (as is the money in my savings account).

Again, this all ignores the equity cash out portion, which is the biggest factor, but also probably the most dangerous, since this is not extra "income" for people but is instead a liquidation of equity (and future wealth) to fund current consumption.

Cheers
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