A friend forwarded this to me from Dr. Housing Bubble. I have no opinion on it one way or the other, but, I guess only time will tell if he’s right, and at the very least, it’s entertaining:
As Housing Prices Peak Zero Down Mortgages are Back: No Down Payment Loans Available up to $1.25 Million.
“The attention span of people is slightly above that of a cat thanks to social media platforms that rewire the brain for instant gratification, including on the financial front (think of all of the meme stocks and Robinhood). All the cheerleading that is happening for real estate is largely socialism for real estate. That is, a Fed that is pumping easy money artificially into the market to inflate prices for those that already own. So not a shocker that 2.3 million California “young adults” are living at home and many are waiting until their Taco Tuesday baby boomer parents take a dirt nap from one to many street tacos until they can inherit the home. Don’t believe this? Go read some forums and you will be surprised what this distorted market is doing to people. But don’t worry! Help is on the way. As housing prices reach a peak, our good old friend, the no down payment loan is showing up to the party with a bit more alcohol and financial meth to keep things going.
Housing History Amnesia
I know 2007 to 2009 must seem like ancient history to some. 7+ million foreclosures (with only about 1.5 to 2 million foreclosures happening due to funky loans) and the majority of people that lost their homes last time happened to those with boring traditional 30-year fixed rate mortgages. Because when you lose a job, it doesn’t really matter what kind of mortgage you have if you can’t pay the monthly nut. Today, we still have millions in forbearance and other millions of renters on moratoriums. All of this seems slated to end in the fall.
Housing is so hot that it is forecast to get hotter (because you know, momentum):
So we are still likely to see higher home prices because of this:
Wait, doesn’t economics tell us that rising demand and prices would add more supply? Yes, in a truly capitalist market. But housing humpers don’t want to admit that real estate in the US is one giant socialistic operation between banks and the Fed (and this is strictly from a non-political definition). How so? First, the market is artificially depressed – forbearances and moratoriums for example. You also have the Fed with an unlimited debt printer so interest rates are incredibly low. Then all of the tax breaks given to homeownership. So with all of that, builders are building much more rental housing because they know Millennials are deep in debt and unlikely to buy in numbers like their baby boomer parents. Also, builders do have a memory of 2007 to 2009 unlike most housing cheerleaders.
So this leads us all to zero down mortgages baby!
“(OC Register) Now, even first-time buyers without a down payment can get in on the action. That means no skin in the game — just like the good old Great Mortgage Meltdown days.
No down-payment loans are available for up to $1.25 million so long as the primary wage earner has at least a 700 middle FICO credit score.
Should you not show enough income from your day job or your self-employment income to qualify, you can document your income with bank statements, averaging the most recent 24 months of personal bank statement deposits.”
That is correct. Instead of looking at things deeper for the causes, we are trying to juice this party even more. It is worth noting that lenders are competing for the razor thin inventory sales so guess what? Now that zero down is back in the market other creative instruments are only a short duration away.
And you are seeing booms and busts again. Bitcoin hit close to $65,000 this year – it is now down to $33,000. This isn’t some meme play here. This is an asset class valued at $626 billion (was over $1 trillion). Or to frame it differently, Bitcoin at its peak was valued at the total auto debt market of the US.
So going back to housing, zero down is back. Lenders are getting more creative because capital is cheap. But what happens when all of the Fed juice starts slowing down in fall? This time is different of course. In one year, the median home price in LA (with a major homelessness crisis) will be $1 million because you know, this time is truly different!”
