Here Come The Shills
The Schiller shills, in this case.
What led this one? The MBA survey:
WASHINGTON, D.C. (September 15, 2010) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 10, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 8.9 percent on a seasonally adjusted basis from one week earlier. This week's results include an adjustment to account for the Labor Day holiday. On an unadjusted basis, the Index decreased 27.4 percent compared with the previous week.
27% eh? That's pretty impressive! Do we call that "cliff-diving" yet?
This, despite....
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.47 percent from 4.50 percent,
In other words, rates are at or near all-time lows. It doesn't matter.
In response to this, Schiller was trotted out by CNBS, in which he said.... (listen in!)
Here's the problem with ths crap: It won't work.
And be careful listening to Mr. Schiller claiming that "this might not be a bad time to buy." Oh really?
What happens to real estate valuations when - not if - rates go up?
You don't buy things that are subject to financing when borrowing costs are low - you buy them when those costs are high!
Why?
Because it's the only way you can profit from capital appreciation linked to financing expense. When financing expense rises the capital value of an asset that is commonly financed falls.
This is finance 101 - something you should have been taught in High School and would have been, if it wasn't literally "High School" and instead was a place where you were expected to learn the skills necessary to succeed in life.
Incidentally, being rooked by this sort of "advice" is exactly what happened to all those bubble buyers who listened to Alan Greenspan in 2003 and ran out to buy - they too bought into the premise that "with historical low rates it's a great time to buy a house - with an ARM!" A few years later the tears were theirs and Greedscam skates, rather than being held to account for his terrible and in fact wealth-destroying advice.
Sleazer, er, Beazer Homes cut guidance on hew home sales in their trip to the confessional - should we be expecting a deluge of this in coming weeks?
