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Great Economic News: Recession is Over!
OK, Chuck, I apologize. The *interest* paid each month is in fact 20% more
when the rate jumps from 5% to 6%. We are both right, as you say...since the *total payment* jumps just under 12%. Joe, on the other hand, doesn't seem to have a clue. He concluded we were *both* wrong...when in fact we were *both* right. Does that make him twice as wrong? ;-) "Gould 0738" wrote in message ... Actually, you're *both* wrong--although you are closer with respect to the 15 year mortgage. Joe Parsons Actually we're both right, that is if NOYB check his amortization chart before typing away. We are speaking about two completely different concepts, however. I didn't ever say the monthly payment went up 20%, just that 6% money is 120% the cost of 5% money. Math was never my strongest subject, but I would invite anybody to show me where 5 X 1.2 doesn't equal 6. NOYB said I lacked a brain because the monthly payment doesn't go up 20% at the higher rate. No, it doesn't. Part of the money paid back each month reduces the principal balance. I thought the guys on the right were supposed to be such financial geniuses! I guess the tax cuts should have been the first clue. :-) |
Great Economic News: Recession is Over!
"jps" wrote in message ... "John Gaquin" wrote in message ... "jps" wrote in message I've heard our increased productivity is indeed due to longer hours and reduced time off. (sigh) Learn the words. What you've described above is "production". Increased _production_ is due to longer hours and reduced time off. Productivity is a rate. Units per man-hour; giga-units per year; however you want to measure it is up to you, but it is a rate. JG Could also be measured by output per man hour paid. Whatever way you try to spin it, *productivity* has nothing to do with working the same workers extra hours. |
Great Economic News: Recession is Over!
"Harry Krause" wrote in message ... NOYB wrote: "Harry Krause" wrote in message ... It's a giggle to watch you grasp at any passing straw as you try to rationalize the failures of your dumb-as-a-post president. Grasping at straws, eh? "Household employment is up 1.19 million so far this year, compared with the decline of 437,000 in nonfarm payrolls." That's a net gain for you mathematically impaired. Uh huh. Perhaps you ought to stop sucking down so much laughing gas. This president has lost more jobs per month than any other president since Herbert Hoover. That's an interesting line you keep repeating...too bad it won't be true by the time 11/04 rolls around. |
Great Economic News: Recession is Over!
Sorry, but it doesn't work quite that way. Loans are amortized by a fairly
complex equation, and your last statement is untrue. When the interest rate changes for the same principal balance and term, both the interest and principal components of the payment will change. Joe Parsons Hoo boy. :-( Where are you coming from with this? You're trying to make a very simple idea unduly complex. If I borrow $500,000 for any number of years, 500,000 of the dollars shown on the total of payments line of the disclosure will be used to repay the principal portion of the loan. Not a few less if the rate is X, vs a few more if the rate is Y- or vice versa. It costs 500,000 plus interest to pay back a 1/2 million dollar loan. The *only* variable that can enter into the "total of payments" math is the interest cost of the money, (including fees, etc). We would agree, I'm sure, that a loan for $500,000 from Bank X for a certain term should have the same monthly payment as a loan for an identical amount, at an identical rate, for an identical period of time, from Bank Y. If we compare two $500,000 loans from the same bank, one at 5% and one at 6%, the 6% loan will have a higher payment than the 5% loan and it is *not* because the contract calls for any principal amount other than $500k to be paid back. The difference in monthly payment is generated exclsuively by the difference in interest rate if the term is identical. Look at an amortization book. There are only four variables that combine to determine a monthly payment: Principal balance, interest rate, periods at which the payment is collected and term of contract. When the principal balances are the same and the term is the same, (and if the periods of scheduled collection are the same) if there is a difference in payment between two contracts it can only be because the interest rate is different. |
Great Economic News: Recession is Over!
"Joe Parsons" wrote in message ... On 07 Sep 2003 01:33:50 GMT, (Gould 0738) wrote: Just when it seems that you do indeed *have* a brain, you post something like this. If a mortgage rate goes up from 5% to 6%, the monthly payment on a 30 year mortgage goes up by a little under 12%...not 20%. Sorry, but I'm not the one who needs to see the Wizard about a brain. When money costs 6%, it *is* 120% as expensive as when it costs 5%. "So, why doesn't the payment go up by 20?" inquires NOYB. Good question, Doc. It's because your monthly payment includes principal as well as interest, and the prinicpal portion of the payment doesn't increase, only the interest. Sorry, but it doesn't work quite that way. Loans are amortized by a fairly complex equation, and your last statement is untrue. When the interest rate changes for the same principal balance and term, both the interest and principal components of the payment will change. But the interest amount in each payment changes exactly the same as the percent change in the rate on a 30 year mortgage. If the rate jumps from 5% to 7% (a 40% increase), the amount of interest paid in each payment also increases by 40%...even though the total payment increases by a much smaller amount. That means Gould was right and I was right. |
Great Economic News: Recession is Over!
Thanks Chuck a clear explanation & to us with a few miles up pretty bloody obvious; now about you write something on how we can get our daughters & sons'-inlaw to actually believe it, rather than believing the spruiker real estate agents??? K Gould 0738 wrote: That's not an acceptable answer even if it does happen to be true. In politics it ALWAYS has to be someone's fault, and it's ALWAYS the other guy. If the economy is really so bad, I'd like to know who these people are bidding up the price of housing to stratospheric levels. The Federal Reserve. Home buyers are the ultimate "payment buyer." The percentage of folks writing out a check for $468,900 to move into a rickey-tickey cul-de-sac clone 40 miles from town in "New Westchester Estates" (or some other pretentiously named community) is likely to be in the low single digits. Even if you can afford to pay cash for housing, the interest rates make it more atractive to borrow. Housing prices are no more logical than were the prices of stocks in 1999. "It's worth it because that's what the last guy paid for the same offering, and it's going up in value so fast we have to buy now or we'll never afford it again!" While declining interest rates have allowed payment buyers to pay some very high prices for housing of late, those same interest rates cannot continue to fall. My wife recently mentioned to me that the overnight Fed Funds rate is hovering around 1 percent. That has to be about the bottom, unless investors are going to be willing to pay to have their money stored for them. :-) When those interest rates start to rise, as they will to cover the cost of the Iraq invasion and attract investors to cover our record national debt, housing prices could be a short-term victim. People might want to move to a newer, nicer, house but if stepping up $100k in mortgage balance at a higher interest rate changes that just barely doable $2500 a month mortgage note to $4100, a lot of people will decide to "stay put" instead. At that time, those who *must* sell will have no choice except to dump the price as low as they can manage to go, and that will bring the price of all similar houses down as well. Higher end houses in areas with a lot of unemployment have not appreciated at all, and have declined in supposed "value" in many cases. Seattle is a good example. Our own place is a humble little tarpaper shack, of course, but our run down dump is surrounded (by outraged neighbors) in one of the priciest districts in town. We couldn't afford to buy even our meager little hut if we moved to Seattle today, but we have lived at our present address about ten years. As the dot.com boom roared on, housing prices in our neighborhood of 100-year old wood frame houses blew clear up into the seven digit category. We were shocked when prices crept up to this level, but the houses sold fairly quickly and in many cases before there was an advertised reduction in the listing price. Some of those "Million dollar" houses have since resold. The one on a corner a block away started at $1.1mm, dropped to $950k, dropped to 895, 875, 845, 825, and finally $795k before the "SOLD" sign went up. $795k was less than we remember the house advertised for when it last sold- so it's likely the latest reseller sacrificed some of his initial down payment just to get rid of the house at this point....and of course just forget any "appreciation." Some houses in the neighborhood have started extremely high, dropped a few steps, and then been withdrawn from sale. Low end houses (meaning in the low six-figure category in W. Wash) have held their own and shown some appreciation in this region, but there is a lesson to be learned from the decline in prices for the highest priced homes....the price of a house is not supportable unless it is affordable to enough buyers to create competitive demand. When the mortgage rates rise much faster than wages, something has to give way. Price is usually that something. Remember that when 5% mortgages go to 6%, the interest rate has gone up only 1% but the cost of money has increased by a factor of 20%....(6 being a number 120% as large as 5). With workers having to strike to get 2, 3, or 4% annual raises these days, (and many others willing to forego any sort of raise and just grateful to be working at all) an overnight 20% increase in the cost of *anything* will put a damper on demand for that item. |
Great Economic News: Recession is Over!
I can show you a loan, Chuck, that would have your head spinning. The one I
have for my dental practice is a ten year note. The only way they would lend me 100% right out of school with no co-signer was with very unfavorable loan terms. My payoff in the first 3 years was the fully amortized amount of the loan! In years 4 through 7, my payoff is the "net present value discounted by prime". Essentially, what this means is that my interest "penalty" (althought they won't call it that) is higher when prime is lower. If prime was around 8%, my penalty would be about 5% of the outstanding simple interest payoff. With prime around 4%, my "penalty" is about 20% of the simple interest payoff. In years 7-10, the loan reverts back to a simple interest payoff...so I'm essentially stuck in the loan for 3 more years, since I've paid 4 years already. When I signed the note, they showed me a simulated payoff amortization schedule...but they estimated prime at 8.5%. In retrospect, this was deceitful as hell. With prime currently at 4%, my payoff now is almost 20%higher than I believed it would be. I still have the original simulated payoff amortization schedule on their letterhead, and I'm researching my options to legally get out of this loan. I doubt I really have any, however. Essentially, it's the dental loan equivalent of a rule of 78's auto loan...but much worse since prime is at an all-time low. "Gould 0738" wrote in message ... Sorry, but it doesn't work quite that way. Loans are amortized by a fairly complex equation, and your last statement is untrue. When the interest rate changes for the same principal balance and term, both the interest and principal components of the payment will change. Joe Parsons Hoo boy. :-( Where are you coming from with this? You're trying to make a very simple idea unduly complex. If I borrow $500,000 for any number of years, 500,000 of the dollars shown on the total of payments line of the disclosure will be used to repay the principal portion of the loan. Not a few less if the rate is X, vs a few more if the rate is Y- or vice versa. It costs 500,000 plus interest to pay back a 1/2 million dollar loan. The *only* variable that can enter into the "total of payments" math is the interest cost of the money, (including fees, etc). We would agree, I'm sure, that a loan for $500,000 from Bank X for a certain term should have the same monthly payment as a loan for an identical amount, at an identical rate, for an identical period of time, from Bank Y. If we compare two $500,000 loans from the same bank, one at 5% and one at 6%, the 6% loan will have a higher payment than the 5% loan and it is *not* because the contract calls for any principal amount other than $500k to be paid back. The difference in monthly payment is generated exclsuively by the difference in interest rate if the term is identical. Look at an amortization book. There are only four variables that combine to determine a monthly payment: Principal balance, interest rate, periods at which the payment is collected and term of contract. When the principal balances are the same and the term is the same, (and if the periods of scheduled collection are the same) if there is a difference in payment between two contracts it can only be because the interest rate is different. |
Great Economic News: Recession is Over!
NOYB wrote:
$100,000 mortgage at 5% for 30 years is $536.83 per month. $100,000 mortgage at 6% for 30 years is $599.55 per month. Using your numbers: $536.83 x 360 pmts = $193258 Cost of 5% money in your example is $93,258. $599.55 x 360 pmts = $215838 Cost of money in your 6% example is $115, 838 Here's an interesting observation: The 20% cost differentiation only applies when working the numbers from the top down! It's *greater* when working the numbers from the bottom up. $93,258 divided by $115,838 equals .80 (so there's the 20% I've been talking about) However, expressed as a percentage of increase the number is somehow larger than 20%! Proof: 93258 x 1.2 = 111,909, a few grand short of the actual new cost number at $115,838. (Again, I'm just taking your figures at face value without checking them.) From that perspective, 6% money can be shown to even *more* than 120% the cost of 5% money, not less. The mortgage payment at 6% is 11.683% more than the payment at 5%. How am I wrong? You're not "wrong" exactly, you're just using an increase in total payment to argue that *interest costs* don't increase as much as I have claimed. There is no number of 11.683% or even 12% that comes anywhere close to expressing the increased cost of the money when borrowing at 6% vs 5%. |
Great Economic News: Recession is Over!
"jps" wrote in message ... "NOYB" wrote in message m... No, the proof is in the unemployment rate. Surveyed businesses layoff workers, yet the unemployment rate goes down. Why? Because the unemployment rate surveys households...and that means the people in those households are working somewhere. Where are they working? Obviously in businesses not tracked as closely by the payroll data (ie--small businesses). And I had understood the jobless rate was determined by claims made at unemployment offices. Are you using Fox News surveys? That is new unemployment claims. That is a different statistic. Unemployment is done by survey. del cecchi |
Great Economic News: Recession is Over!
I can show you a loan, Chuck, that would have your head spinning. The one I
have for my dental practice is a ten year note. The only way they would lend me 100% right out of school with no co-signer was with very unfavorable loan terms. My payoff in the first 3 years was the fully amortized amount of the loan! In years 4 through 7, my payoff is the "net present value discounted by prime". Essentially, what this means is that my interest "penalty" (althought they won't call it that) is higher when prime is lower. If prime was around 8%, my penalty would be about 5% of the outstanding simple interest payoff. With prime around 4%, my "penalty" is about 20% of the simple interest payoff. In years 7-10, the loan reverts back to a simple interest payoff...so I'm essentially stuck in the loan for 3 more years, since I've paid 4 years already. When I signed the note, they showed me a simulated payoff amortization schedule...but they estimated prime at 8.5%. In retrospect, this was deceitful as hell. With prime currently at 4%, my payoff now is almost 20%higher than I believed it would be. I still have the original simulated payoff amortization schedule on their letterhead, and I'm researching my options to legally get out of this loan. I doubt I really have any, however. Essentially, it's the dental loan equivalent of a rule of 78's auto loan...but much worse since prime is at an all-time low. No doubt, but such a loan does not reflect the type of terms incorporated into residential home mortgages. Our discussion was, I believe about how rising interest rates could affect the affordability of housing and dampen the current market. "Gould 0738" wrote in message ... Sorry, but it doesn't work quite that way. Loans are amortized by a fairly complex equation, and your last statement is untrue. When the interest rate changes for the same principal balance and term, both the interest and principal components of the payment will change. Joe Parsons Hoo boy. :-( Where are you coming from with this? You're trying to make a very simple idea unduly complex. If I borrow $500,000 for any number of years, 500,000 of the dollars shown on the total of payments line of the disclosure will be used to repay the principal portion of the loan. Not a few less if the rate is X, vs a few more if the rate is Y- or vice versa. It costs 500,000 plus interest to pay back a 1/2 million dollar loan. The *only* variable that can enter into the "total of payments" math is the interest cost of the money, (including fees, etc). We would agree, I'm sure, that a loan for $500,000 from Bank X for a certain term should have the same monthly payment as a loan for an identical amount, at an identical rate, for an identical period of time, from Bank Y. If we compare two $500,000 loans from the same bank, one at 5% and one at 6%, the 6% loan will have a higher payment than the 5% loan and it is *not* because the contract calls for any principal amount other than $500k to be paid back. The difference in monthly payment is generated exclsuively by the difference in interest rate if the term is identical. Look at an amortization book. There are only four variables that combine to determine a monthly payment: Principal balance, interest rate, periods at which the payment is collected and term of contract. When the principal balances are the same and the term is the same, (and if the periods of scheduled collection are the same) if there is a difference in payment between two contracts it can only be because the interest rate is different. |
Great Economic News: Recession is Over!
I feel that the total payment (P+I) indicates the true "cost" of living in a
house. That's why I'm saying that a jump in the rate from 5% to 6% "only" increases the cost of ownership by a little less than 12%. Of course, I'm looking at this from the perspective of someone that won't be in their house for anywhere near the full term of the loan. In that case, I ask myself "how much will this house *cost* me per month"? I think most people think that way when buying a house. "What's my note?" "Gould 0738" wrote in message ... NOYB wrote: $100,000 mortgage at 5% for 30 years is $536.83 per month. $100,000 mortgage at 6% for 30 years is $599.55 per month. Using your numbers: $536.83 x 360 pmts = $193258 Cost of 5% money in your example is $93,258. $599.55 x 360 pmts = $215838 Cost of money in your 6% example is $115, 838 Here's an interesting observation: The 20% cost differentiation only applies when working the numbers from the top down! It's *greater* when working the numbers from the bottom up. $93,258 divided by $115,838 equals .80 (so there's the 20% I've been talking about) However, expressed as a percentage of increase the number is somehow larger than 20%! Proof: 93258 x 1.2 = 111,909, a few grand short of the actual new cost number at $115,838. (Again, I'm just taking your figures at face value without checking them.) From that perspective, 6% money can be shown to even *more* than 120% the cost of 5% money, not less. The mortgage payment at 6% is 11.683% more than the payment at 5%. How am I wrong? You're not "wrong" exactly, you're just using an increase in total payment to argue that *interest costs* don't increase as much as I have claimed. There is no number of 11.683% or even 12% that comes anywhere close to expressing the increased cost of the money when borrowing at 6% vs 5%. |
Great Economic News: Recession is Over!
On Sun, 07 Sep 2003 02:05:44 GMT, "NOYB" wrote:
OK, Chuck, I apologize. The *interest* paid each month is in fact 20% more when the rate jumps from 5% to 6%. We are both right, as you say...since the *total payment* jumps just under 12%. Joe, on the other hand, doesn't seem to have a clue. He concluded we were *both* wrong...when in fact we were *both* right. Does that make him twice as wrong? ;-) Okay, okay...you guys seem to be doing a reasonably good job of wiggling out of your respective ambiguous statements. :) --note smiley Joe Parsons ***group hug*** "Gould 0738" wrote in message ... Actually, you're *both* wrong--although you are closer with respect to the 15 year mortgage. Joe Parsons Actually we're both right, that is if NOYB check his amortization chart before typing away. We are speaking about two completely different concepts, however. I didn't ever say the monthly payment went up 20%, just that 6% money is 120% the cost of 5% money. Math was never my strongest subject, but I would invite anybody to show me where 5 X 1.2 doesn't equal 6. NOYB said I lacked a brain because the monthly payment doesn't go up 20% at the higher rate. No, it doesn't. Part of the money paid back each month reduces the principal balance. I thought the guys on the right were supposed to be such financial geniuses! I guess the tax cuts should have been the first clue. :-) |
Great Economic News: Recession is Over!
Actually, I said "either automation or labor"...but *intentionally* didn't
use the term "labor in the US". The idea of non-US labor could blow my theory out of the water. However, ramping up labor overseas requires a pretty large initial capital investment and doesn't happen overnight. It's much easier and cheaper in the shortrun to hire domestically in existing plants. Did you notice what segments *had* an increase in the employment numbers? I know that healthcare was one of 'em. It's time to face facts that if you're in manufacturing, you'll either be earning less, or have no job at all in the foreseeable future...as long as we don't impose large tariffs on imports. The problem with tariffs is that they increase the cost of goods at a rate that's much larger than the increase in employee income...and high inflation begins to rear its ugly head. "Gould 0738" wrote in message ... I'm pretty sure imports don't affect the productivity numbers. Those statistics are talking about *American* productivity. You are most likely right. My comments were in response to the suggestion that American companies seeking further increases in productivity will now need to invest in either automation or labor in the US. |
Great Economic News: Recession is Over!
I feel that the total payment (P+I) indicates the true "cost" of living in a
house. That's why I'm saying that a jump in the rate from 5% to 6% "only" increases the cost of ownership by a little less than 12%. Fair enough. Most people are "payment buyers" when it comes to a home. But, don't forget you're talking a 12% increase in what is, for most people, a relatively major chunk of the household budget. The example you used in a previous post examined a $100,000 mortgage and the payment went up over $60 a month. Most people are going to have a mortgage 2, 3, or more times that amount these days. Not all potential buyers are in a position to absorb 60, 120, or 180 additional dollars a month and will want some help via a larger discount in the selling price. |
Great Economic News: Recession is Over!
On Sun, 07 Sep 2003 01:59:26 GMT, "NOYB" wrote:
$100,000 mortgage at 5% for 30 years is $536.83 per month. $100,000 mortgage at 6% for 30 years is $599.55 per month. The mortgage payment at 6% is 11.683% more than the payment at 5%. How am I wrong? Actually, you're not, and I sit corrected. Joe Parsons "Joe Parsons" wrote in message .. . On Sat, 06 Sep 2003 19:34:53 GMT, "NOYB" wrote: "Gould 0738" wrote in message ... Remember that when 5% mortgages go to 6%, the interest rate has gone up only 1% but the cost of money has increased by a factor of 20%....(6 being a number 120% as large as 5). Just when it seems that you do indeed *have* a brain, you post something like this. If a mortgage rate goes up from 5% to 6%, the monthly payment on a 30 year mortgage goes up by a little under 12%...not 20%. Actually, you're *both* wrong--although you are closer with respect to the 15 year mortgage. Joe Parsons For a 15 year mortgage, the change is just a little bit under 7%. |
Great Economic News: Recession is Over!
"Gould 0738" wrote in message ... Our discussion was, I believe about how rising interest rates could affect the affordability of housing and dampen the current market. I'll agree there. We could be facing a flooded housing market (and a lot of defaults) in 3-5 years when all of the 4 to 4 1/2% ARM's come due. Imagine someone who bought the biggest house they could afford at a 4% 3-year ARM with high rate caps? Will they be able to afford that house if rates hit 8%? On a $400k mortgage, that's another $1000 per month on the same house! |
Great Economic News: Recession is Over!
It's time to face facts that if you're in manufacturing, you'll either be
earning less, or have no job at all in the foreseeable future...as long as we don't impose large tariffs on imports. The problem with tariffs is that they increase the cost of goods at a rate that's much larger than the increase in employee income...and high inflation begins to rear its ugly head. Rush Limbaugh had a guest host last week who advanced an interesting claim about tariffs. He said that Bush's tariffs on imported steel had saved 100,000 American jobs in the domestic steel industry. At that point, my 5-minute allotment of conservatism was about used up for the day and I was in the process of concluding, "OK, just more RW glorification of the Bush economic program. What else is new?.......) when the guest host said...."But, those same tarrifs that saved 100,000 American jobs in the steel industry have cost us, to date, a total of 400,000 jobs in other industries that can no longer compete when manufacturing items made from steel, and all because the tariffs have artificially raised the price of steel in the US. So, we spent 400,000 jobs to save 100,000 jobs. Not good policy!" ((I haven't checked it out to see whether the numbers are accurate.)) but.... What's this? Limbaugh's guest host criticizing Bush's economic decisions? Unless I miss my guess, it will be a "while" before Rushbo asks that guy to sit in again. :-) "Gould 0738" wrote in message ... I'm pretty sure imports don't affect the productivity numbers. Those statistics are talking about *American* productivity. You are most likely right. My comments were in response to the suggestion that American companies seeking further increases in productivity will now need to invest in either automation or labor in the US. |
Great Economic News: Recession is Over!
"Gould 0738" wrote in message ... I feel that the total payment (P+I) indicates the true "cost" of living in a house. That's why I'm saying that a jump in the rate from 5% to 6% "only" increases the cost of ownership by a little less than 12%. Fair enough. Most people are "payment buyers" when it comes to a home. But, don't forget you're talking a 12% increase in what is, for most people, a relatively major chunk of the household budget. The example you used in a previous post examined a $100,000 mortgage and the payment went up over $60 a month. Most people are going to have a mortgage 2, 3, or more times that amount these days. Not all potential buyers are in a position to absorb 60, 120, or 180 additional dollars a month and will want some help via a larger discount in the selling price. How about a $250, 500, or $750 increase when their 4% 3-year ARM hits 8% in 5 years? |
Great Economic News: Recession is Over!
Thanks Joe.
"Joe Parsons" wrote in message ... On Sun, 07 Sep 2003 01:59:26 GMT, "NOYB" wrote: $100,000 mortgage at 5% for 30 years is $536.83 per month. $100,000 mortgage at 6% for 30 years is $599.55 per month. The mortgage payment at 6% is 11.683% more than the payment at 5%. How am I wrong? Actually, you're not, and I sit corrected. Joe Parsons "Joe Parsons" wrote in message .. . On Sat, 06 Sep 2003 19:34:53 GMT, "NOYB" wrote: "Gould 0738" wrote in message ... Remember that when 5% mortgages go to 6%, the interest rate has gone up only 1% but the cost of money has increased by a factor of 20%....(6 being a number 120% as large as 5). Just when it seems that you do indeed *have* a brain, you post something like this. If a mortgage rate goes up from 5% to 6%, the monthly payment on a 30 year mortgage goes up by a little under 12%...not 20%. Actually, you're *both* wrong--although you are closer with respect to the 15 year mortgage. Joe Parsons For a 15 year mortgage, the change is just a little bit under 7%. |
Great Economic News: Recession is Over!
It almost makes me want to sell my house now, rent an apartment, wait for
the correction, and then find myself a deal on the water. That would make the most sense. Of course, in Naples, the housing market hasn't made sense for about 5 or 6 years now. They're still reporting housing prices increasing 20% last year again. My house's appraised value is up almost 50% since Jan. '01. That's nuts. "Gould 0738" wrote in message ... How about a $250, 500, or $750 increase when their 4% 3-year ARM hits 8% in 5 years? Exactly. Many of those folks will be trying to dump the house they own and move to a *cheaper* one, not bid prices up. |
Great Economic News: Recession is Over!
Thanks Chuck a clear explanation & to us with a few miles up pretty
bloody obvious; now about you write something on how we can get our daughters & sons'-inlaw to actually believe it, rather than believing the spruiker real estate agents??? K While I am bearish on the near and mid term potential for property values to appreciate much, and would not be the least surprised to see some short term "correction", I still believe that home ownership is a good investment for most people. A lot of people lack the self discipline to save money. I see case after case where elderly people get very sick and need to go to an expensive facility for care, and in those cases where the people have paid off a home over the years at least there is something to sell so the kids don't have to go broke as quickly keeping Mommy or Poppy alive at Golden Age Acres. To make any real money with real estate, even in a steadily appreciating market, it is important to own more property than just the piece you're living in. Short of taking up residence in a pup tent at a highway rest area, we all need a place to live. If somebody says "your place to live is worth $50,000" or if somebody says "your place to live is worth $2mm"- it's really all the same. If you sell it, you will need to do without an equally nice place to live or spend all the money you get from the sale to replace it. That's one reason that many people evaluating financial statements mentally subtract home equity from "net worth", it's too illiquid and is performing a vital, non-discretionary function. You might suggest to your daughters that they buy a little *less* house than they can afford, and put the difference into rental property. ( Caution: Don't know if that's good advice in Aus. or not, though). In just a few decades, they'll have built up a pretty decent net worth and be able to live in their all-time dream home.....if they still have a mind to. There are some good buys right now in multi plex properties in areas, like Seattle, where rents are seriously (but hopefully temporarily) depressed. These properties formula price based on their ability to generate gross rental income, so prices are way off lately because they can no longer be justified with the dot.com boom era rent rates. These properties will bounce back some when rents go back up, but maybe not as fast as rents increase. If rents increase at the same time interest rates increase, the rising interest rates put a bit of a damper on the price of a multi plex. Like a bond, a multi unit property produces an income stream and the capitalized value of any given stream is higher when interest rates are low. (When you can make the same return just parking your money in a CD, the attractiveness of an investment with "risk" declines.) |
Great Economic News: Recession is Over!
"del cecchi" wrote in message
... I've heard our increased productivity is indeed due to longer hours and reduced time off. I'd like to see your sources and what measures they're really using. two minutes on google turned up the Federal Reserve Bank of NY discussing productivity in terms of output per hour. So whoever you heard the contrary from had a lying political agenda. I understand your perspective, but, if workers are putting in extra hours without additional pay, and output on an hourly basis didn't change because of the extra hours, that'd also show up as "productivity" increases. Right or wrong? jps |
Great Economic News: Recession is Over!
|
Great Economic News: Recession is Over!
On Sun, 07 Sep 2003 03:33:09 GMT, "NOYB" wrote:
My house's appraised value is up almost 50% since Jan. '01. That's nuts. My county appraisal went up over 40% last year. The effect of these sharply escalating prices is to make one a captive of the house they currently own. If I sell my house, and buy a house of equal value, in the same city, my taxes will go up by about 300%. I'm fortunate that I live in a house I don't mind staying in, and that I happen to own two houses in the same neighborhood, but the situation is rediculous. Is it really fair that the person who buys the house next door to me pays 300% of the taxes I pay, and receives the same services for it? bb |
Great Economic News: Recession is Over!
On Sun, 07 Sep 2003 03:10:18 GMT, "NOYB" wrote:
"Gould 0738" wrote in message ... Our discussion was, I believe about how rising interest rates could affect the affordability of housing and dampen the current market. I'll agree there. We could be facing a flooded housing market (and a lot of defaults) in 3-5 years when all of the 4 to 4 1/2% ARM's come due. Imagine someone who bought the biggest house they could afford at a 4% 3-year ARM with high rate caps? Will they be able to afford that house if rates hit 8%? On a $400k mortgage, that's another $1000 per month on the same house! A couple of bits of information: first, when ARMs are underwritten, they are typically underwritten with the "indexed rate" in mind; some ARMs (but not so much any more) have jaw-droppingly low "teaser" rates, and those initial rates are below the value of the index (typically the LIBOR index or 1 year Treasury, among others) plus the margin. When the underwriter crunches the numbers on a loan, she'll use the "actual" rate (what it would be if it were adjusting today) as the qualifying rate, irrespective of the start rate. Second: All ARMs have certain limitations on how they can adjust. For intermediate term adjustables (3 or 5 year, for example), the initial "cap" is typically 2% over the start rate for the initial adjustment, with subsequent annual limitations of 2% (up or down) and lifetime limitations of 5% to 6% over the start rate. I have never seen an adjustable rate mortgage hit its life cap--even in the 70s, when rates were, well, ridiculous. Someone who got a 5 year ARM at 6% based on the LIBOR index five years ago is adjusting now to 4%--and they'd be going to 3.7% were it not for the 2% "floor." Assuming the borrower in your example was a typical creditworthy borrower (as most are), the worst case would be that the rate on their 4% 3 year ARM could go to 6%--and that's not too far off what the underwriter would have qualified them for in the first place. In order for their ARM to hit 8%, the index (the LIBOR, for example) would have to move very quickly to nearly 6%--and that's territory that hasn't been visited for a number of years. Joe Parsons |
Great Economic News: Recession is Over!
On Sun, 07 Sep 2003 02:24:52 GMT, "NOYB" wrote:
"Joe Parsons" wrote in message .. . On 07 Sep 2003 01:33:50 GMT, (Gould 0738) wrote: Just when it seems that you do indeed *have* a brain, you post something like this. If a mortgage rate goes up from 5% to 6%, the monthly payment on a 30 year mortgage goes up by a little under 12%...not 20%. Sorry, but I'm not the one who needs to see the Wizard about a brain. When money costs 6%, it *is* 120% as expensive as when it costs 5%. "So, why doesn't the payment go up by 20?" inquires NOYB. Good question, Doc. It's because your monthly payment includes principal as well as interest, and the prinicpal portion of the payment doesn't increase, only the interest. Sorry, but it doesn't work quite that way. Loans are amortized by a fairly complex equation, and your last statement is untrue. When the interest rate changes for the same principal balance and term, both the interest and principal components of the payment will change. But the interest amount in each payment changes exactly the same as the percent change in the rate on a 30 year mortgage. If the rate jumps from 5% to 7% (a 40% increase), the amount of interest paid in each payment also increases by 40%...even though the total payment increases by a much smaller amount. That means Gould was right and I was right. Let's use your example of a $500,000 loan at 5% and at 7%. A $500,000 principal at 5% will amortize to 0 in 30 years with a monthly payment of $2,684.11. This payment includes $2,083.33 interest and $600.78 principal--but ONLY for the first payment. The same principal balance at 7% will amortize to 0 in 30 years with a monthly payment of $3,326.51. This payment includes $2,916 interest and $409.84 principal--for the first payment. (The payment increase from 5% to 7%, by the way, is a tad under 24%...just thought I'd mention that. :) ) Now, fast forward five years. The balance for the 5% loan will be $459,143. That $2,684.11 payment will include interest of $1,913 and principal of $771--but ONLY for the first payment of year five. Compare that with the 7% loan: the balance will be $470,657. The monthly payment of $3,326.51 will include $2,745 in interest and $171 in principle--but only for the first payment of year five. See what I mean when I say it's not quite as simple as it appears? It's a moving target. And I've always found absolute words like "exactly" or "always" to be dangerous. Don't get me started on the tax aspects... :) Joe Parsons |
Great Economic News: Recession is Over!
My house's appraised value is up almost 50%
since Jan. '01. That's nuts. My county appraisal went up over 40% last year. Many people feel that state and local taxes are rising faster than federal taxes are falling. |
Great Economic News: Recession is Over!
Gould 0738 wrote:
Thanks Chuck a clear explanation & to us with a few miles up pretty bloody obvious; now about you write something on how we can get our daughters & sons'-inlaw to actually believe it, rather than believing the spruiker real estate agents??? K While I am bearish on the near and mid term potential for property values to appreciate much, and would not be the least surprised to see some short term "correction", I still believe that home ownership is a good investment for most people. A lot of people lack the self discipline to save money. I see case after case where elderly people get very sick and need to go to an expensive facility for care, and in those cases where the people have paid off a home over the years at least there is something to sell so the kids don't have to go broke as quickly keeping Mommy or Poppy alive at Golden Age Acres. To make any real money with real estate, even in a steadily appreciating market, it is important to own more property than just the piece you're living in. Short of taking up residence in a pup tent at a highway rest area, we all need a place to live. If somebody says "your place to live is worth $50,000" or if somebody says "your place to live is worth $2mm"- it's really all the same. If you sell it, you will need to do without an equally nice place to live or spend all the money you get from the sale to replace it. That's one reason that many people evaluating financial statements mentally subtract home equity from "net worth", it's too illiquid and is performing a vital, non-discretionary function. You might suggest to your daughters that they buy a little *less* house than they can afford, and put the difference into rental property. ( Caution: Don't know if that's good advice in Aus. or not, though). In just a few decades, they'll have built up a pretty decent net worth and be able to live in their all-time dream home.....if they still have a mind to. That's sort of the problem Chuck they are buying "rental, investment" properties & they are buying them negatively geared, even at today's interest rates (tax writeoffs here & I'm guessing there??) Some younger people can't even remember back to the eighties when interest rates went up over a very short time, not saying they will repeat that but There are some good buys right now in multi plex properties in areas, like Seattle, where rents are seriously (but hopefully temporarily) depressed. These properties formula price based on their ability to generate gross rental income, so prices are way off lately because they can no longer be justified with the dot.com boom era rent rates. These properties will bounce back some when rents go back up, but maybe not as fast as rents increase. If rents increase at the same time interest rates increase, the rising interest rates put a bit of a damper on the price of a multi plex. Like a bond, a multi unit property produces an income stream and the capitalized value of any given stream is higher when interest rates are low. (When you can make the same return just parking your money in a CD, the attractiveness of an investment with "risk" declines.) I guess I have a sharp appreciation for our lack of population, due to a low birth rate & I say faulty restricted immigration policy. The result is we build more new houses or home units PA that we generate people to live in them, assuming not too many are living under bridges:-) we seem to be moving people around for no other purpose than to artificially create demand. K |
Great Economic News: Recession is Over!
On Sat, 6 Sep 2003 20:59:52 -0700, "jps" wrote:
"del cecchi" wrote in message ... I've heard our increased productivity is indeed due to longer hours and reduced time off. I'd like to see your sources and what measures they're really using. two minutes on google turned up the Federal Reserve Bank of NY discussing productivity in terms of output per hour. So whoever you heard the contrary from had a lying political agenda. I understand your perspective, but, if workers are putting in extra hours without additional pay, and output on an hourly basis didn't change because of the extra hours, that'd also show up as "productivity" increases. Right or wrong? jps And I used to think lead was dense. Jipsy, in your example, will the output per hour change? No? Then the productivity did not increase. The production increased. John On the 'Poco Loco' out of Deale, MD |
Great Economic News: Recession is Over!
"JohnH" wrote in message
... And I used to think lead was dense. Jipsy, in your example, will the output per hour change? No? Then the productivity did not increase. The production increased. If you're measuring the output of one worker who is paid for 40 hours but puts in 60, you don't reduce his hourly pay, you increase his productivity per 40 hours of pay. You'd think a math teacher would have a little better grasp. No spin my ass. |
Great Economic News: Recession is Over!
Hmm OT & all but what the hell.
Chuck you're only too happy to see the free market at work when your local marina has to reduce prices in response to the new bloke down the bay, so why the difference??? It's about loyalty and community. Typical example: Gould's widget company has produced high quality aluminum widgets in the US for 50 years. We employ 10,000 US workers, in 5 regional plants. The biggest market for our product is in the US, and we are located here because the laws of the United States favor and support organizing corporations. The physical, political and economic infrastructure of the US has allowed us to prosper and grow to be the 3rd biggest aluminum widget company in the world. Profits are $100mm a year. As CEO, the board of directors pays me $35mm in salary, and the remaining $65mm is distributed to shareholders as dividends. (oh, btw, I'm the largest shareholder). Unfortunately, the market has matured for widgets. The industry has peaked, and analysts all conclude that the future market for aluminum widgets will be smaller than the current. We may have to cut prices in order to compete. How do we accomplish this? We certainly won't start with the CEO salary. Good grief, how's a guy supposed to get by on much less than $3mm a month? We don't dare cut dividends, that will reduce the stock price, and who's going to be the biggest loser in that scenario? (The biggest stockholder, of course) With payroll taxes and fringe benefits, the average cost for each of the 10,000 workers is $40,000 a year. (Rookies get far less, supervisors far more, but that's the average). My largest annual expense? Payroll. $400mm. In the midst of the economic quandry, an opportunity arises. We can move the widget plants to Guatemala. The government of Guatemala will build us a factory, for free. We will pay no taxes for the first 10 years. The workforce is a problem; it is not as technically sophisticated nor as educated as US workers. We will need to hire 15,000 Guatemaleans to produce the same output we achieved with 10,000 Americans. The Guatemalean workers will cost $7000 US apiece every year. Payroll shrinks from $400mm to $105mm. The workers laid off in the US become the taxpayers' problem to support with unemployment benefits, welfare, vocational retraining, etc. (Yes, I did pay a tiny portion of the total taxes used to alleviate the distress of the unemployed workers) The shrinking market for widgets forces us to reduce prices to a point where, had we remained in the US, profits would have fallen from $100mm a year to only $75mm. However, by removing the manufacturing operation to Guatemala and saving $295mm a year in payroll, profits actually increase to $370mm! The largest stockholders (the folks on the board of directors) are ecstatic. They raise my salary to $100mm, and dividends are several times what they had ever been in the past. The stock price is whoring, er, I mean, soaring. What am I going to do with all the extra money? I can't possibly begin to spend it all, so maybe I'll do what the conservative economists predict and invest in yet another industry. (One thing for sure, I won't invest it in any industry in the US. I've already learned that it's cheaper to pay a worker a few hundred a month than a few thousand.) It's about loyalty and community. But I don't expect most people to agree. In real life, (where I don't run a widget company), I have come to believe that it isn't always all about money all the time. You have to watch out for us crazy-assed liberals. :-) |
Great Economic News: Recession is Over!
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Great Economic News: Recession is Over!
On Sun, 7 Sep 2003 09:25:28 -0700, "jps" wrote:
"JohnH" wrote in message .. . And I used to think lead was dense. Jipsy, in your example, will the output per hour change? No? Then the productivity did not increase. The production increased. If you're measuring the output of one worker who is paid for 40 hours but puts in 60, you don't reduce his hourly pay, you increase his productivity per 40 hours of pay. You'd think a math teacher would have a little better grasp. No spin my ass. Hey Jips, go back and read that post. If you can make heads or tails of what it says, please translate it for me. Productivity is a rate, usually represented as a fraction, e.g. 37 widgets/one hour. Productivity is not measured by reductions or increases in hourly pay. John On the 'Poco Loco' out of Deale, MD |
Great Economic News: Recession is Over!
"JohnH" wrote in message
... Productivity is a rate, usually represented as a fraction, e.g. 37 widgets/one hour. Productivity is not measured by reductions or increases in hourly pay. What about database entry? Is that a widget too? Is productivity based only upon manufacturing? |
Great Economic News: Recession is Over!
"bb" wrote in message ... On Sun, 07 Sep 2003 03:33:09 GMT, "NOYB" wrote: My house's appraised value is up almost 50% since Jan. '01. That's nuts. My county appraisal went up over 40% last year. The effect of these sharply escalating prices is to make one a captive of the house they currently own. If I sell my house, and buy a house of equal value, in the same city, my taxes will go up by about 300%. I'm fortunate that I live in a house I don't mind staying in, and that I happen to own two houses in the same neighborhood, but the situation is rediculous. Is it really fair that the person who buys the house next door to me pays 300% of the taxes I pay, and receives the same services for it? "Save our homes" is a good policy. Retirees that have lived here for 15 years couldn't afford the property taxes if we didn't have it. |
Great Economic News: Recession is Over!
"Gould 0738" wrote in message ... My house's appraised value is up almost 50% since Jan. '01. That's nuts. My county appraisal went up over 40% last year. Many people feel that state and local taxes are rising faster than federal taxes are falling. Floridians don't feel that way...since we have no state income tax. |
Great Economic News: Recession is Over!
"jps" wrote in message ... "JohnH" wrote in message ... Productivity is a rate, usually represented as a fraction, e.g. 37 widgets/one hour. Productivity is not measured by reductions or increases in hourly pay. What about database entry? Is that a widget too? Is productivity based only upon manufacturing? Productivity is measured as Gross Domestic Product adjusted for inflation divided by the total number of hours worked. If an hourly worker is working more than 40 hours in a week, then those additional hours are being reported...and they would *decrease* productivity if GDP stayed the same. However, productivity is *increasing*...so your theory is flat-out wrong. |
Great Economic News: Recession is Over!
"NOYB" wrote in message
m... "jps" wrote in message ... "JohnH" wrote in message ... Productivity is a rate, usually represented as a fraction, e.g. 37 widgets/one hour. Productivity is not measured by reductions or increases in hourly pay. What about database entry? Is that a widget too? Is productivity based only upon manufacturing? Productivity is measured as Gross Domestic Product adjusted for inflation divided by the total number of hours worked. If an hourly worker is working more than 40 hours in a week, then those additional hours are being reported...and they would *decrease* productivity if GDP stayed the same. However, productivity is *increasing*...so your theory is flat-out wrong. Jesus ****ing Christ!!! Try to follow along here doc. If a 40 hour worker puts in additional time but the company doesn't pay for it, they don't report the worker having worked 50 or 60 hours. Everyone here seems to think that productivity only involved widgets. What about programmers? They don't produce widgets, they produce code that gets paid for when it's delivered. If workers are putting in 60 hours a week on a 40 hour a week salary, the company they work for is still going to report a 40 hour week, no? That'd net out to a productivity gain. So tell me how my theory is wrong? |
Great Economic News: Recession is Over!
"del cecchi" wrote in message
... This undereporting would have to be pervasive across the economy but undetected by anyone. It would have to be far more than a few people allegedly staying late at walmart. Whether or not you think it's happening, it is. And not just at Walmart. It's happening in every sector of the economy, including mine, which is high tech computer related. |
Great Economic News: Recession is Over!
"NOYB" wrote in message m... "jps" wrote in message ... "JohnH" wrote in message ... Productivity is a rate, usually represented as a fraction, e.g. 37 widgets/one hour. Productivity is not measured by reductions or increases in hourly pay. What about database entry? Is that a widget too? Is productivity based only upon manufacturing? Productivity is measured as Gross Domestic Product adjusted for inflation divided by the total number of hours worked. If an hourly worker is working more than 40 hours in a week, then those additional hours are being reported...and they would *decrease* productivity if GDP stayed the same. However, productivity is *increasing*...so your theory is flat-out wrong. My engineering group consists of salaried exempt employees who don't report actual hours worked. As reductions in workforce occur the remaining members pick up the slack by working more hours. These extra hours are not accounted for. jps is correct for this rather common circumstance. -rick- |
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