Yes, the Fed matters a lot; nobody disagrees with that.

[scaredyclassic]

[quote=bewildering][quote=sdrealtor]Not close to as bad, not the same planet, not the same universe. In 08/09 we were dealing with loans from folks that couldnt payback what they borrowed at 0% interest. The existing loans out there are nearly all very high quality. Any future loans made will be also. There is still massive demand for homes from high quality credit folks. What is out of whack at the moment is affordability. This is simply a pricing issue for loans, MBS and homes that will work itself out over the next few years without a crash[/quote]

Thanks.

Yeah, I am guessing that existing loans are fine as people have priced in with very low-interest rates. although I guess the banks that held on to those loans are now losing money?

What I am curious about is how a bank would fund a mortgage at 6% when inflation is at 9%. I guess that the banks are thinking that inflation will drop eventually and the 6% loan will make money?

I am originally from Europe where people do not get fixed loans for 30 years. Precisely because the banks would lose real money if the inflation gets above the interest rate. My sister is concerned at her monthly mortgage going up by ~$500 when she next renews the mortgage (every few years it gets adjusted with her partilar typ eof laon).[/quote]

The bank sells the loan. Some entity buys it for some weird reason. It is bewildering.

[sdrealtor]

[quote=scaredyclassic][quote=bewildering][quote=sdrealtor]Not close to as bad, not the same planet, not the same universe. In 08/09 we were dealing with loans from folks that couldnt payback what they borrowed at 0% interest. The existing loans out there are nearly all very high quality. Any future loans made will be also. There is still massive demand for homes from high quality credit folks. What is out of whack at the moment is affordability. This is simply a pricing issue for loans, MBS and homes that will work itself out over the next few years without a crash[/quote]

Thanks.

Yeah, I am guessing that existing loans are fine as people have priced in with very low-interest rates. although I guess the banks that held on to those loans are now losing money?

What I am curious about is how a bank would fund a mortgage at 6% when inflation is at 9%. I guess that the banks are thinking that inflation will drop eventually and the 6% loan will make money?

I am originally from Europe where people do not get fixed loans for 30 years. Precisely because the banks would lose real money if the inflation gets above the interest rate. My sister is concerned at her monthly mortgage going up by ~$500 when she next renews the mortgage (every few years it gets adjusted with her partilar typ eof laon).[/quote]

The bank sells the loan. Some entity buys it for some weird reason. It is bewildering.[/quote]

The banks have capital like our checking and savings accounts. They pay interest on that capital but lend it out at higher rates. Simplified version of how they make money

[Anonymous]

[quote=bewildering][quote=deadzone]I think we are clearly on the road to things being worse than 2008/2009. Regarding mortgage market, it has been completely manipulated via Fed involvement (through printing money to directly purchase MBS) non-stop since 2009. So in reality we never truly recovered from the 2008 crash or else why has the Fed been continuously purchasing MBS?

Now with inflation out of control, the Fed has no choice but to remove some of their support for the mortgage market and US treasury market. So we will soon find out if there is anything underneath after they pull their rug of support, or does the entire house of cards collapse?

I definitely expect within the next 5 years, there will be an entirely new set of movies, documentaries, etc. Like Margin Call, all over again to explain this crash.[/quote]

I assume that existing homeowners will be fine with priced-in loans. What happens to mortgage brokers and other financial employees is more worrying. My own company is a start up that will be attempting to raise money in 2023. I am guessing it will be harder to raise money now. Although so many investors are sitting on piles of depreciating cash I guess that things might be still ok.[/quote]

Well in theory, those homeowners who have fixed low interest rate mortgages will be fine, as long as they don’t lose their jobs in the upcoming recession. And as long as they didn’t take on too much additional debt. But those are two big IFs, especially the second one.

One of the big concerns is how much additional debt (via HELOC, Cashout Refis and general credit card debt) do many homeowners have. This debt does not have fixed interest rate. And obviously interest rates are going up rapidly.

So clearly the housing market is getting killed now from lack of demand point of view due to interest rates. But the wildcard is how much stress will occur due to other debt, job losses, huge losses in stock portfolios, etc.

[bewildering]

[quote=deadzone] But the wildcard is how much stress will occur due to other debt, job losses, huge losses in stock portfolios, etc.[/quote]

Yes. I do wonder about households. Hopefully, most people didn’t overextend to buy properties. My worry is that a serious recession will hurt families that needed two wage earners to afford even the low-interest mortgage.

[sdrealtor]

The housing market is not getting killed. Inventory is still a small fraction of what it traditionally is. Lots of homes selling every week albeit less than a couple months ago but more choices is helping meet the unfilled demand. It’s a market coming back into balance. I pour over data many hours a week. I’m not seeing sign a ton of equity withdrawal this time around like 17 years ago. DZ has never owned a home, never participated in the housing market and knows very little about it. If you want a weekly blow by blow follow the two weekly housing monitor updates i post. That’s what is going on around here

BTW in SD overall we had 15% less homes listed in May 2022 than May 2021.

[Anonymous]

[quote=bewildering][quote=deadzone] But the wildcard is how much stress will occur due to other debt, job losses, huge losses in stock portfolios, etc.[/quote]

Yes. I do wonder about households. Hopefully, most people didn’t overextend to buy properties. My worry is that a serious recession will hurt families that needed two wage earners to afford even the low-interest mortgage.[/quote]

I think the reality is many people did over-extend and continue to be up to their eyeballs in dept. That is the American way. That’s why we are in a bubble and when bubbles pop there is no such think as a “soft landing”.

[sdrealtor]

[quote=deadzone][quote=bewildering][quote=deadzone] But the wildcard is how much stress will occur due to other debt, job losses, huge losses in stock portfolios, etc.[/quote]

Yes. I do wonder about households. Hopefully, most people didn’t overextend to buy properties. My worry is that a serious recession will hurt families that needed two wage earners to afford even the low-interest mortgage.[/quote]

I think the reality is many people did over-extend and continue to be up to their eyeballs in dept. That is the American way. That’s why we are in a bubble and when bubbles pop there is no such think as a “soft landing”.[/quote]

No one cares what you “think” you have no data to support that

[Anonymous]

[quote=sdrealtor]The housing market is not getting killed. Inventory is still a small fraction of what it traditionally is. Lots of homes selling every week albeit less than a couple months ago but more choices is helping meet the unfilled demand. It’s a market coming back into balance. I pour over data many hours a week. I’m not seeing sign a ton of equity withdrawal this time around like 17 years ago. DZ has never owned a home, never participated in the housing market and knows very little about it. If you want a weekly blow by blow follow the two weekly housing monitor updates i post. That’s what is going on around here

BTW in SD overall we had 15% less homes listed in May 2022 than May 2021.[/quote]

Believe what you want but the shitshow is just beginning.

[Anonymous]

[quote=sdrealtor][quote=deadzone][quote=bewildering][quote=deadzone] But the wildcard is how much stress will occur due to other debt, job losses, huge losses in stock portfolios, etc.[/quote]

Yes. I do wonder about households. Hopefully, most people didn’t overextend to buy properties. My worry is that a serious recession will hurt families that needed two wage earners to afford even the low-interest mortgage.[/quote]

I think the reality is many people did over-extend and continue to be up to their eyeballs in dept. That is the American way. That’s why we are in a bubble and when bubbles pop there is no such think as a “soft landing”.[/quote]

No one cares what you “think” you have no data to support that[/quote]

There is plenty of data out there, not just my opinion.

[an]

[quote=deadzone][quote=sdrealtor][quote=deadzone][quote=bewildering][quote=deadzone] But the wildcard is how much stress will occur due to other debt, job losses, huge losses in stock portfolios, etc.[/quote]

Yes. I do wonder about households. Hopefully, most people didn’t overextend to buy properties. My worry is that a serious recession will hurt families that needed two wage earners to afford even the low-interest mortgage.[/quote]

I think the reality is many people did over-extend and continue to be up to their eyeballs in dept. That is the American way. That’s why we are in a bubble and when bubbles pop there is no such think as a “soft landing”.[/quote]

No one cares what you “think” you have no data to support that[/quote]

There is plenty of data out there, not just my opinion.[/quote]
What’s the % of home owners are over-extended and up to their eyeballs in debt? Last I check, it’s much harder to get a loan today than 15 years ago. No liar loans, no no-docs loan, have to have a good LTV and cash reserve. So, would love to see data on this statement.

I sincerely hope you’re right and we’ll see another 2008 style crash. Although, it seems like you think it’ll be even worse. Fingers cross that you’re right.

[sdrealtor]

[quote=deadzone][quote=sdrealtor][quote=deadzone][quote=bewildering][quote=deadzone] But the wildcard is how much stress will occur due to other debt, job losses, huge losses in stock portfolios, etc.[/quote]

Yes. I do wonder about households. Hopefully, most people didn’t overextend to buy properties. My worry is that a serious recession will hurt families that needed two wage earners to afford even the low-interest mortgage.[/quote]

I think the reality is many people did over-extend and continue to be up to their eyeballs in dept. That is the American way. That’s why we are in a bubble and when bubbles pop there is no such think as a “soft landing”.[/quote]

No one cares what you “think” you have no data to support that[/quote]

There is plenty of data out there, not just my opinion.[/quote]

I know. Im the one who actually looks at it every day

[gzz]

“ What I am curious about is how a bank would fund a mortgage at 6% when inflation is at 9%.”

They borrow at 0% in checking and 3% in savings accounts, loan at 6%.

There’s no human right to get a return on your savings above inflation. China has had inflation that is double savings account rates for about 30 years now.

All the recent drama is making people forget the long term worldwide trend is aging demographics and a glut of savings.

[an]

[quote=gzz]“ What I am curious about is how a bank would fund a mortgage at 6% when inflation is at 9%.”

They borrow at 0% in checking and 3% in savings accounts, loan at 6%.

There’s no human right to get a return on your savings above inflation. China has had inflation that is double savings account rates for about 30 years now.

All the recent drama is making people forget the long term worldwide trend is aging demographics and a glut of savings.[/quote]
Talking about demographics, millenials have started their house buying later the previous generations, so a huge chunk of them are getting to their mid 30s, so they’ll be looking to buy. It’s still extremely difficult and costly to build here in CA, so simple econ 101 (supply vs demand) tells me either they can’t buy here, or they’ll have to reduce their expenditure somewhere else to buy here. Or, they can choose to rent here, which will continue to drive up rent as their move out of their parents’ homes.

There are more millenials than baby boomers. Also, another fact to consider is, people are living longer and they don’t downsize like the used to. So, the supply will continue to be constraint, unless those baby boomers sell. Something tells me, they are sitting on a paid off home with very low tax rate. So, economic crash wouldn’t matter to them.

[sdrealtor]

Not paid off quite yet:)

[Anonymous]

[quote=an]
What’s the % of home owners are over-extended and up to their eyeballs in debt? Last I check, it’s much harder to get a loan today than 15 years ago. No liar loans, no no-docs loan, have to have a good LTV and cash reserve. So, would love to see data on this statement.

I sincerely hope you’re right and we’ll see another 2008 style crash. Although, it seems like you think it’ll be even worse. Fingers cross that you’re right.[/quote]

Revolving credit at all time high, jumped 20% in April. Meanwhile interest rates going to the moon. Not a good recipe for housing market or economy in general.

https://www.cnbc.com/2022/06/09/credit-card-balances-spike-after-stimulus-checks-helped-reduce-debt.html

[Author]

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