The Economy: Small Problems Can Become Big Ones (Part 2)
In my last column I highlighted some of Dr. Ed Seifried’s comments at a Farm Credit-sponsored Executive Producer Roundtable in Spokane, WA. The following are further highlights:
The Housing Market
Forty-eight percent of first time home buyers and 25 percent of all buyers have no down payment.
Thirty percent of all housing loans are interest-only. In 1990, residential housing was 3.25 percent of the economy. Today it is 6 percent.
Dr. Seifried says the housing bubble burst is a “hiss” rather than a “pop” and that an orderly adjustment in housing prices is taking place worldwide.
His predictions on interest rates are the following. In the period from 2006-2010, expect Fed Funds rates to range from 2 to 5 percent and 30-year mortgage rates to range from 5 to 8 percent.
The wild card in this situation is if central banks around the world stop buying U.S. dollars. Traditionally, foreign banks had an 80/20 ratio of U.S dollars to Euro. This has dropped to 60/40 ratio of U.S. dollars to Euro recently. Only time will tell.
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Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups.
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