Housing market is too far gone.

aloe

OT Supporter
Aug 26, 2002
148,128
Dallas, Tejas
That's going to be a difficult forecast to come true...inventory is still low which is still forcing bidding wars, even as rates rise. It may slow down the rate of appreciation, but I don't think you will see a similar 2008 "bubble burst." As for people underwater, most buyers are not doing 100% financing combo-piggyback negative amortization pay-option ARMs. They are generally standards "vanilla" loans with money down. And within a few months, even if they put down a minimal down-payment, the markets are appreciating so much that they already have decent equity. It would take a BIG pop in order for people to get underwater, and I just don't see it. There is more equity in homes now than ever.
And even if someone loses their job and is underwater, there are plenty of buyers on the sideline waiting to scoop up that house for market value (ie no significant discount)
 

saabguy

Saab-free since 2013. Mortgage guru
OT Supporter
Aug 11, 2003
26,094
Loserville. Population: 1
We’re they thinking an enormous servicing portfolio would save the day?
I don’t believe they were even servicing their loans. I think they thought they could collect a ton of customer data from their files and that would be valuable later.

I think they underestimated the costs to run a profitable mode. I don’t think their intent was to lose $325m. But it takes a lot of manpower and salaries to process files and get them closed. Overhead, technology, website, marketing…adds up quickly.
 

monolith

Hey, Herbie! How's life? Taking forever.
OT Supporter
May 9, 2004
44,582
Southern California
I'm officially under contract - fucking finally. This house looks like it's going to be worth the wait and torment.

How do you guys feel about buying points to reduce your rate right now? Part of me expects rates to drop in the next year due to recession where I could refi - but I'm kinda stupid on this subject.
We bought a couple points because after doing the math since we plan on being in the home a lot longer than it will take to break even so the cost savings made sense.
 
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zizi

OT Supporter
Jan 11, 2005
9,810
I mean, of course it will, rate increases are already cooling the market off. But the supply issue persists and cannot be alleviated quickly, and rents have appreciated as fast or faster than home prices. There is no affordability advantage to renting in most local markets.

High rents will effectively establish a price floor for housing. Investor demand for hard assets is high and increasing.

They’re not saying it out loud but institutional investors pouring money in to housing feels like a flight to quality to me, and it’s far from over.
Let's see how much institutional demand is there when fed fund rates are at 2-4% compared to the ridiculous 0% fed rates they got to buy up all these homes with.
 
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saabguy

Saab-free since 2013. Mortgage guru
OT Supporter
Aug 11, 2003
26,094
Loserville. Population: 1
how does it work as it relates to mortgage rates
It doesn’t. Fed funds rate is basically what banks charge each other for overnight lending. Terms for less than a day. Some consumer lending and other “short term” loans will be more directly impacted. Mortgage rates are indirectly impacted as the change in fed funds rate has broader implications, I.e., inflation, money supply, growth or contraction of the economy, employment, etc.
 

intro_vert13

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Feb 26, 2005
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an offshore haven somewhere
It doesn’t. Fed funds rate is basically what banks charge each other for overnight lending. Terms for less than a day. Some consumer lending and other “short term” loans will be more directly impacted. Mortgage rates are indirectly impacted as the change in fed funds rate has broader implications, I.e., inflation, money supply, growth or contraction of the economy, employment, etc.
so it affects mortgage rates, albeit indirectly

got it
 

saabguy

Saab-free since 2013. Mortgage guru
OT Supporter
Aug 11, 2003
26,094
Loserville. Population: 1
I must've just been imagining these recent mortgage rate hikes :rofl:
The day the fed raised rates 50 basis points, mortgage backed securities improved 50bps (I.e., mortgage rates improved).

An increase in fed funds rate does not mean mortgage rates also increase, and a decrease doesn’t mean the same either.
 

zizi

OT Supporter
Jan 11, 2005
9,810
That’s not how the fed funds rate works…

That's how companies are able to buy up so many homes for cheap, with the fed fund rate at 0 or near 0.

How can a person with no home equity, aka first time buyer, compete with a company getting billion dollar loans with a 1.4% interest rate?

Invitation Homes can borrow money for far less: It’s getting billion-dollar loans at interest rates around 1.4 percent. In practice, this means that Invitation Homes can afford to tack on an extra $5,000 to $20,000 to the purchase price of every home, while getting the house at the same actual cost as a typical homeowner.


 

intro_vert13

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OT Supporter
Feb 26, 2005
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an offshore haven somewhere
The day the fed raised rates 50 basis points, mortgage backed securities improved 50bps (I.e., mortgage rates improved).

An increase in fed funds rate does not mean mortgage rates also increase, and a decrease doesn’t mean the same either.
except rates have broadly increased for residential since then, no? i think that's what his point was
 

zizi

OT Supporter
Jan 11, 2005
9,810
The day the fed raised rates 50 basis points, mortgage backed securities improved 50bps (I.e., mortgage rates improved).

An increase in fed funds rate does not mean mortgage rates also increase, and a decrease doesn’t mean the same either.

The fed fun rate increases the cost of borrowing for corporations trying to buy up homes far more than mortgage rates which are linked to the 10 year treasury though that will likely go up as well with the fed dumping mortgage backed securities.
 

saabguy

Saab-free since 2013. Mortgage guru
OT Supporter
Aug 11, 2003
26,094
Loserville. Population: 1
except rates have broadly increased for residential since then, no? i think that's what his point was
Rates have increased sharply ever since the end of December. Recent surges have more to do with
1) inflationary concerns
2) fed policy to taper purchases of mortgage backed securities
3) fed indicating they will be “offloading” about $95b per month in treasuries and mortgage backed securities.

A lender earning a fixed rate of return on a 30-year mortgage does not like inflation because it erodes the return on their asset.

Fed going from buyers to SELLERS of MBS tanks the price of those bonds, and sellers of those securities need to make them more appealing to attract buyers (appeal = higher rate of return = higher mortgage rates).
 

intro_vert13

∞/21M
OT Supporter
Feb 26, 2005
35,941
an offshore haven somewhere
Rates have increased sharply ever since the end of December. Recent surges have more to do with
1) inflationary concerns
2) fed policy to taper purchases of mortgage backed securities
3) fed indicating they will be “offloading” about $95b per month in treasuries and mortgage backed securities.

A lender earning a fixed rate of return on a 30-year mortgage does not like inflation because it erodes the return on their asset.

Fed going from buyers to SELLERS of MBS tanks the price of those bonds, and sellers of those securities need to make them more appealing to attract buyers (appeal = higher rate of return = higher mortgage rates).
yes, the selling pressure of MBS increases rates

this is a weird semantic thing you're doing here. no one is saying it's 100% causation
 

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