Ask an Economist #3
- Thread starter JerichoHill
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Since I just spent a fair amount of time with at my university this weekend it's not much different than everything else. Budgetary issues at the state level being cut university along with the slowing contributions of foundation donations and investment returns.
JerichoHill
Bedrock of Knowledge
You forgot higher demand for a college education Whompers!
carmen510
Deity
My meaning was that:
If interest rates are lowered, would that have a detrimental effect on investor confidence, who may see these lowering interest rates as a large sign of economic weakness?
If interest rates are lowered, would that have a detrimental effect on investor confidence, who may see these lowering interest rates as a large sign of economic weakness?
Interest rates are the cost of borrowing money. Lower interest rates means that businesses can borrow money for less cost. Meaning that they can undertake investment for less money. Or lower the cost of borrowing to have more money left over for other purposes. So in and of itself lower interest rates are not something that discourage or worry investors. Now the reasons behind why interest rates are raised or lowered, that is something that can worry investors.
innonimatu
the resident Cassandra
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The same that drove housing prices up: loans. Those well-intended student loans, meant to make education affordable for everyone...
Mise
isle of lucy
This is what happens when my post gets lost on the bottom of the previous page!
Any thoughts, clever cloggses?
Any thoughts, clever cloggses?
Buying a house is an investment in having a place to live. In the long run it may save you enough money to invest elsewhere. In the shorter run, it can take all the money you have. Given the unsettled nature of the markets, there are companies you can hunt out that are bargains. But there's no certainty. If you really want a house, put your money in a short maturity CD with a locked in interest rate before rates go any lower. Investigate if home prices have bottomed, or when are they expected to bottom, and plan your purchase for that time frame. Ideal timing would be to hit when home prices bottom out, but fixed long term mortgages have not started back up too severely. If you are in a possition to take advantage of that, it could well be your best long run option.
Mise
isle of lucy
Hmm, well, most people expect the market to turn in about a year's time, and for prices to be 15% lower than they are now (they've already fallen 15%, and IMO 30% fall is about right). However, I want to buy before it hits the bottom, because in a falling market, the buyer has far more power than in a rising or bottomed out market. That is, I can buy after prices have fallen, say, 10%, and demand a further 15% decrease in price, because the seller is fearful of further falls and is desperate to sell. Whereas, if I bought at the bottom, the seller will see that prices are on the rise, so will not be as willing to negotiate downwards.
The problem I have is that I need to have the cash available quickly for a deposit, which means that fixed rate, fixed term savings bonds / accounts are undesirable. But the variable rate accounts have such low interest rates that it hardly seems worth it!
Frankly, I'm in no rush to buy -- I'm happy renting and it wouldn't kill me to rent until 2012 or so when I've saved more of a deposit and can afford a nicer place (and when the Olympic village in London gets sold off). But it seems that there's no point in saving money right now, because interest rates are so freaking low! It seems like a better idea would be to either take a punt and buy some stocks, or take advantage of the stupidly low interest rates and buy a house sooner rather than later.
Bah, it seems like every government policy is designed to screw over the millenial generation in favour of the baby boomers
ravensfire
Member of the Opposition
Learn to fly a biplane - that way, you'll be in the final assault on the alien mothership.
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Homie
Anti-Lefty
Exactly. It seems you have answered your own question. I also backed this idea on the previous page, in case you missed it. Low interest rates and low housing prices, you couldn't pick a better time.Mise said:
But is it necessarily better for my investments if I help defeat the aliens? What if I let them carry out their agenda. That was part of my question to the resident economist.
Mise
isle of lucy
I noticed
I just wanted as many opinions as possible.I think the question needs more questions answered...Mise said:
What's the short, intermediate and long term goals?
Is it to buy a flat in the next couple of years? If so then I think your investment options appear limited. Risking the down payment in long term bonds, stocks or other asset classes seems to be a bad option if you have a short term goal for the funds.
What percentage of your down payment are you willing to wipe out? Would it extend your timeframe for making a down payment or could you make it up in future savings?
What about a significant other? Will she boot you out of your closet or tell you your stuff really doesn't make sense now that you're in a flat doesn't fit both of your stuff?
What about London?
How much will the Olympics and the considerable layoffs, lack of bonuses and collapse of the hedge fund industry impact price?
Leverage is painful when prices decline and rental rates are reasonably stable.
I think this is a fantastic calculator to help in decision making.
http://www.nytimes.com/2007/04/10/b...RAPHIC.html?_r=2&oref=slogin&ref=patrick.net#
Here's another that helps determine whether being a landlord is worthwhile.
http://www.forbes.com/fdc/rentorsell.shtml
Mise
isle of lucy
Well, my goal is to own a house at some point - the question is when. I'm not in a hurry to get on the property ladder, and I don't mind waiting. I just don't really know what I'm waiting for...
If I decide (for personal reasons, or w/e) that I want to buy a house, I'd want as big a deposit as possible, because the size of my deposit is really the sole determinant of what I can afford. So if I decide to buy a house, I won't risk any of my savings on the stock market. Which is why I'm deliberating between investing in the stock market, and "investing" in rising house prices.
I don't have a sig other so it's all good!
Well, I've told myself that the market will fall by about another 25%, and that even in a rising market you can expect to take off up to 5% off the asking price, so whatever house/flat I choose to make an offer on, I'll be offering about 25-35% less than the asking price, and if they don't accept I'm just going to walk away. As I said, I can wait, so the short term falls due to recession etc doesn't concern me so much.
This is EXACTLY what I'm after!! I tried putting something together in Excel, but this covers a LOT more variables!!
Thanks!
JerichoHill
Bedrock of Knowledge
Well, i was going to recommend the same thing as Whompers. Nice link!
Right now Mise you can dictate what you buy and at what price. A co-worker of mine, Jon had saved up a nice sized Down Payment (about 15% I think) and basically had it as a cashier's check as he looked at condos. He's a single guy and doesnt want to live in a big place and didnt want a lawn, so a condo made sense for him (condos here in DC tend to be in the more happening places). He made lowball offers on several condos and was rejected by owners who thought they could sell at their asking price. They learned they couldn't. I think on lowball offer #5 the dude took it, turned out he was very much desperate to avoid foreclosure.
Now's the time to get a bargain.
Right now Mise you can dictate what you buy and at what price. A co-worker of mine, Jon had saved up a nice sized Down Payment (about 15% I think) and basically had it as a cashier's check as he looked at condos. He's a single guy and doesnt want to live in a big place and didnt want a lawn, so a condo made sense for him (condos here in DC tend to be in the more happening places). He made lowball offers on several condos and was rejected by owners who thought they could sell at their asking price. They learned they couldn't. I think on lowball offer #5 the dude took it, turned out he was very much desperate to avoid foreclosure.
Now's the time to get a bargain.
What are some ways of operationalizing the concept of search costs (in the labor market)?
I'm doing some research on unemployment in South Africa, and I'm trying to estimate search costs in different regions of the country (that's not the main part of my research, just a small part of it), and the best thing I can think of is looking at statistics on the quality of communication infrastructure (how many people have radio access, cell phones, etc.) and transportation costs. But hopefully there are better proxies I can use.
I'm doing some research on unemployment in South Africa, and I'm trying to estimate search costs in different regions of the country (that's not the main part of my research, just a small part of it), and the best thing I can think of is looking at statistics on the quality of communication infrastructure (how many people have radio access, cell phones, etc.) and transportation costs. But hopefully there are better proxies I can use.
SS-18 ICBM
Oscillator
Is a high personal savings rate detrimental to an economy?
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