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%.

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. :-)

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.

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.

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%.

"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!

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.

"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?

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%.

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.