Friday, May 08, 2009
Refi'ing A Bubble
Right now, there over 70 homes in the tony town of Hingham, Massachusetts listed for sale at $1 million or higher.
But in the last six months, only 8 homes have sold over that price point.
I talked to a local broker and she confirmed that *the high end is dead*.
But she told me that the low end, the 400k stuff is going bananas. She said, "These homes are selling in like one day."
"But who wants to live in 1,600 square feet?" I asked.
"More like 1,400, if you're lucky," she corrected me.
My general rule of thumb is that if something is selling *like in one day*, it's the last thing in the world I want to be buying. Supposedly foreclosures under 100k are getting scooped up that fast as well in places like Cape Coral, FL.
Again, I say wait. For a long term investment/gamble you want to buy junk that's bidless, not bidfull.
There's plenty of supply on the way. Just wait.
Recently there's been this ridiculous run to bid up stocks, *cheap foreclosures*, and chicken-shack homes in places like Hingham. I guess the bear market stock rally, the warm weather, lower interest rates (for the creditworthy), and hopeful delusion are ruling the day.
People are getting complacent again - especially the big banks. Look at this chart that Calculated Risk put up today:
Now it's great that banks can essentially borrow at 0% in the short-term and lend at 5% to mortgagers. I mean it's great that they can generate some sorely-needed profits that way. But do they really have to squander the windfall of cheap money by selling 4.5% mortgages as they've been doing this past month?
In other words, look at the chart, they've reduced the *spread* on their mortgage lending back to normal levels. I submit they should not be dropping mortgage rates; what they're doing is arrogant; and it's what got them in trouble in the first place.
Can y'all believe they said that ???!!! link
Drudge also had, which I can't find now, a pic of Ben Bernanke giggling on his site the other day.
So everyone is giddy about *refi's* - the banks, some real estate lawyers I know, probably appraisers,....
They need to bear in mind, that once the US Treasury market starts to fall apart - and that could be very soon as I'm now out of my short - there might not be any more refi's for a decade.