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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (6055)	5/10/2004 10:05:22 PM
From: CalculatedRisk	Read Replies (2) \| Respond to of 116555

I think the RE slowdown is here. This bounce from 5.4% 30 year mortgage rates to close to 6.5% is a huge damper on the market. Sure, more people will probably move to ARMs, but that is quite an increase in the most popular mortgage plan. Off the top of my head, some quick numbers: For a family making $60K (almost 50% above the median household income), they could afford about $20K in PITI. At 5.4%, that would have been around $310K (assuming 1% taxes). At 6.5%, that would be ~$260K ... a drop of 16%. Since RE is an imperfect market (sellers are reluctant to lower their prices), I expect inventories to build rapidly over the next few months, with a decrease in volume, and at least initially, a small decrease in price (5% to 10%). I do not expect to see an impact on employment until later this year or early 2005. Just some random thoughts ...