The housing recovery without mortgage originations is coming to its inevitable conclusion. The Fed, Wall Street bankers and the US Treasury have been able to increase national home prices by 30%, with 50% to 100% in some bubble markets, using 0% interest rates, a massive buy and rent scheme, withholding foreclosures from the market, encouraging foreign cash buying, and allowing flippers back into the market. In a real free market would home prices go up by 30% while mortgage originations remained flat for the last four years?
Thirty year mortgage rates have been falling for the last 30 years. They bottomed at 3.35% in late 2012. Since then they rose as high as 4.4% in early 2014. They fell to 3.6% by early 2015 and are now hovering in the 3.8% range. Everyone who had a high interest mortgage loan, including those with underwater mortgages, have refinanced to a lower rate. The economic boost to the economy from the lower mortgage payments is over. The Obamacare costs have spent the mortgage payment savings. The combination of declining real household income, overpriced homes, millennials with massive levels of student loan debt, and now rising mortgage rates are putting a halt to this fake Fed recovery scheme.
The Fed believes they must increase rates by .25% in December to regain a semblance of credibility. Mortgage rates will immediately rise. The government is now desperately trying to keep the balls in the air by allowing low income buyers to purchase homes with only 3% down. Freddie, Fannie and the FHA are guaranteeing these loans with your tax dollars. All three agencies are already insolvent, so what’s another few hundred billion of losses hoisted on the backs of taxpayers? Anything to keep the farce of an economic recovery story line alive for a little while longer.
At this point there is no scenario that turns out positive for the housing market. If the Fed has the guts to raise rates, the housing market will tank because mortgage rates will rise. If the Fed chickens out again, it will be because the economy is clearly in recession and demand for overpriced homes will plummet as unemployment rises. Home prices have risen so far above fair value at this point, the market is already beginning to topple.
Flippers are getting stuck with houses they can’t flip for a profit. Hedge funds have stopped buying and have begun selling. Anyone dumb enough to have been lured into this market in the last few years will be underwater in no time. The foreclosure train will be leaving the station shortly. We’ve been here before. It was ten years ago. Some people never learn. I wonder what the oligarchs will pull out of their hats after housing bubble part deux pops.
Buy the dip. It is a bull market. Trust me. Really.
I hope all the “Realtors” starve.
I do not believe they will allow the stock market or housing market to take a significant hit.
Buy the dip.Its a bull market. Trust me. Really.
Forget the housing bubble.
Here’s a sign that the stock bubble is ready to pop:
“Why 100% of your investment portfolio should be in stocks”
http://www.marketwatch.com/story/why-100-of-your-investment-portfolio-should-be-in-stocks-2015-11-11
Things are moving along quickly for Ms Freud and me. Yesterday the buyers signed the sale contract for our house. It’s under attorney review, their $30k deposit is due in 4 days, and they are already working with their bank on the mortgage. They want a move-in date of Jan 15th, which gives us enough time ourselves to find a rental place, and do the move.
We settled on $450k. It’s just a ranch, you’ve seen pictures.
My mom asked me yesterday — “Would you pay that much for the house?”
Took me half a second to say “NO!”. Almost half a million for a fuckin’ 50 year old ranch?? Are you fuckin’ kidding me??
Timing couldn’t be better. Also this week, we got notification from the mortgage company that our interest rate is going up almost a half percent ….. yea, when she bought the house (BS — Before Stucky) she took an adjustable rate. How/why in the fuck are rates gong up at this point in time … I do not know.
Keeping our fingers crossed that everything proceeds smoothly. It will be a HUGE RELIEF to get out from this White Elephant. Didn’t even need to bury Saint Joseph. BTW, we got exactly just one hit from the forsalebyowner website. WTF?
I have a new respect for Realtors … at least ours.
A very very aggressive Realtor called on us — “just to talk” — within a couple days after the home appeared on the gorsalebyowner website. I told him he’s wasting his time … that I don’t like Realtors, and I’m confident in selling it myself. He ignored me, came over anyway, and game me his A-game pitch. Had a whole sheet of paper with a list of about 20 active things he would do to find a buyer. “Aggressive Marketing” he called it; whereby he makes COLD CALLS (really???!!) to previous prospects, and how he’ll contact his network of Realtors to present our home to them, blah blah blah. I’m thinking “this guy is full of shit!”.
So, he presses REAL HARD to get the listing on the same day as the presentation. I told him; “I told you you weren’t going to get a listing BEFORE you even came here, and you’re NOT!”. So, he left empty handed. After a week of zero hits on the FSBO site I called him and asked him two simple questions. How long do you REALLY think it will be before you sell the house? He said “one month” with extreme confidence. Ookaay — will you take 4%? Yes? OK, come on over. This past weekend we had about 8 people walk through the house … and one turned into a genuine offer.
I like my realtor.
We will be soooooooo relieved to get the fuck outta here, before the shit hits the fan and we wind up underwater.
Stucky- Glad to hear things worked out for you and Ms Freud. You could have just done a refi on the house but that would not change the 12K tax problem you faced each year. I know you are relieved and can now go back to fighting with me and Flash.
Mortgage rates rise for second straight week, Freddie Mac says
By Steve Goldstein
Published: Nov 12, 2015 10:00 a.m. ET
WASHINGTON (MarketWatch) — Mortgage rates climbed for the second straight week amid anticipation of a Federal Reserve interest rate hike and a strong jobs report, mortgage provider Freddie Mac said Thursday. The 30-year fixed-rate mortgage averaged 3.98% in the week ending Nov. 12, up from 3.87%. The 15-year fixed-rate mortgage averaged 3.20%, up from 3.09%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.03%, up from 2.96%, and the 1-year Treasury-indexed ARM averaged 2.65%, up from 2.62%.
A friend of mine just sold a 900sf crapshack in the undesirable area of Portland, OR (near MLK Avenue of course) for $325K.
I wouldn’t have paid $100K for that POS.
I hope his sale goes through next month.