Conversation with another friend in the “innards” of the mortgage industry

[cr]

With values dropping I bet most people who bought at a teaser rate within the last 3 years are upside down, unless they had at least 5% down or took all their equity from a previous home. So even if rates go back to 2% or even 1%, it won’t make an iota of difference to someone who can’t refi cover the original loan, right? Unless the bank eats the equity loss, banks aren’t in business for charity, and now the buyer has to qualify under new standards.

Point being lower rates will do little to no good, and in the bigger picture will only cause more problems: i.e. devalued dollar.

Lowering rates is throwing gasoline on the mortgage fire. It’s just going to have to burn out. Unfortunately for most, the fire is still spreading.

[Bugs]

There is no such thing as a “static” market; it’s either going to be expanding or contracting. Right now we’re in contraction and headed toward a correction of some extreme distortions.

Those distortions were enabled by the east credit, but that wasn’t the primary cause – the primary cause was the investors and flippers and ladder-climbing home buyers who saw short term profits to be made. This is where the additional demand came from, and when this additional demand left the market there were no GF buyers to take their place – hence the current surplus of inventory.

The only way the current contraction reverses is if these investors come back into the market and the only way they’ll do that is if they can see there is a buck to be made over the short term. In other words, even if we could “stabilize”, it couldn’t hold because stable isn’t increasing and without increasing there is no upside, and hence no investors to absorb all that surplus inventory and create shortages that would lead to further increases.

Even if we could get back to the profit incentive necessary to reverse course, an increasing trend cannot continue indefinitely – sooner or later it will have to correct to correspond to the underlying fundamentals. Many people (myself included) would argue that this current trend wouldn’t be so bad for so many people had it happened 4 years ago when we were only 25% above the long term trends. It was the hyperextension of that uptrend that led to the extreme distortions that are only now being reversed.

I’m sure everyone here is familiar with the term “The bigger they are the harder they fall” ??? We have had an unprecedented spike, who here can envision anything other than a correspondingly extreme correction to that spike?

[Bugs]

There is no such thing as a “static” market; it’s either going to be expanding or contracting. Right now we’re in contraction and headed toward a correction of some extreme distortions.

Those distortions were enabled by the east credit, but that wasn’t the primary cause – the primary cause was the investors and flippers and ladder-climbing home buyers who saw short term profits to be made. This is where the additional demand came from, and when this additional demand left the market there were no GF buyers to take their place – hence the current surplus of inventory.

The only way the current contraction reverses is if these investors come back into the market and the only way they’ll do that is if they can see there is a buck to be made over the short term. In other words, even if we could “stabilize”, it couldn’t hold because stable isn’t increasing and without increasing there is no upside, and hence no investors to absorb all that surplus inventory and create shortages that would lead to further increases.

Even if we could get back to the profit incentive necessary to reverse course, an increasing trend cannot continue indefinitely – sooner or later it will have to correct to correspond to the underlying fundamentals. Many people (myself included) would argue that this current trend wouldn’t be so bad for so many people had it happened 4 years ago when we were only 25% above the long term trends. It was the hyperextension of that uptrend that led to the extreme distortions that are only now being reversed.

I’m sure everyone here is familiar with the term “The bigger they are the harder they fall” ??? We have had an unprecedented spike, who here can envision anything other than a correspondingly extreme correction to that spike?

[Bugs]

There is no such thing as a “static” market; it’s either going to be expanding or contracting. Right now we’re in contraction and headed toward a correction of some extreme distortions.

Those distortions were enabled by the east credit, but that wasn’t the primary cause – the primary cause was the investors and flippers and ladder-climbing home buyers who saw short term profits to be made. This is where the additional demand came from, and when this additional demand left the market there were no GF buyers to take their place – hence the current surplus of inventory.

The only way the current contraction reverses is if these investors come back into the market and the only way they’ll do that is if they can see there is a buck to be made over the short term. In other words, even if we could “stabilize”, it couldn’t hold because stable isn’t increasing and without increasing there is no upside, and hence no investors to absorb all that surplus inventory and create shortages that would lead to further increases.

Even if we could get back to the profit incentive necessary to reverse course, an increasing trend cannot continue indefinitely – sooner or later it will have to correct to correspond to the underlying fundamentals. Many people (myself included) would argue that this current trend wouldn’t be so bad for so many people had it happened 4 years ago when we were only 25% above the long term trends. It was the hyperextension of that uptrend that led to the extreme distortions that are only now being reversed.

I’m sure everyone here is familiar with the term “The bigger they are the harder they fall” ??? We have had an unprecedented spike, who here can envision anything other than a correspondingly extreme correction to that spike?

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