Aug272013
Rising mortgage interest rates negatively impact the housing market
Since interest rates suddenly and unexpected rose nearly 35% in a two-month period, the mainstream media and bullish housing market analysts have been busy assuring everyone that rising interest rates would have little or no impact on efforts to reflate the housing bubble. Since this is what most people want to hear, an eager public readily accepted the market spin.
Unfortunately, early signs are that rising interest rates are negatively impacting the housing market — just as anyone with common sense would think they would. Is it rational to think that raising the cost of any commodity 35% in two months would not impact sales? And for financed buyers, particularly those using FHA financing putting only 3.5% down, a 35% rise in mortgage interest rates translates into a significant increase in the cost of ownership. As one would expect, this will hamper first-time homebuyers the most as they are the ones most likely to use FHA financing.
FHA Loan Applications Plummet 49% in June
Applications for FHA single-family loans dropped off a cliff in June as a regressive mortgage insurance policy kicked in early in the month and potential borrowers were dealing with rising mortgage rates.
In a monthly loan production report issued Friday, the Federal Housing Administration reported that loan applications fell nearly 50% in June from the prior month.
The new report shows that FHA applications fell to 93,700 in June from 182,400 in May. Applications for FHA purchase mortgage loans fell to 57,650 in June, down 43.5% from the prior month.
That is a huge drop, but mortgage interest rates were not the only factor.
The drop was accentuated by a spike in May applications as borrowers rushed to avoid the June 3 implementation date of a new policy that makes FHA loans more expensive longer-term. Going forward, the annual premium on new FHA loans can no longer be canceled when the LTV ratio hits 78%. FHA borrowers must pay a 1.35% annual premium over the life of the loan. (With private MI, the annual premium is cancelable.)
This makes FHA financing very undesirable. Most people became accustomed to refinancing every couple of years, so many won’t grasp the problem this creates. In a falling interest rate environment, refinancing can get you out of a bad loan, but in a rising interest rate environment, the borrower is stuck. It makes no sense to finance out of a 3.5% FHA mortgage into a 5% conventional. The savings from eliminating the FHA fees will be more than offset by the higher interest rate.
FHA application volume has been very volatile this year.
On April 1, FHA raised the annual premium 10 bps to 1.35%. And loan applications filed in April fell to 118,200 from 221,600 in March.
If you consider the combined effect of these changes and higher interest rates, FHA mortgage applications are down almost 75% from 221,600 in March to 57,650 in July. Now that’s falling off a cliff.
FHA has increased premiums five times over the past two years and “we are clearly at a tipping point here,” Galante testified. “If we increase them more, we would actually shut out additional homebuyers,” she testified.
That boat already sailed. Between the higher fees, higher interest rates and higher prices, many first-time homebuyers are priced out of home ownership. This explains much of why the first-time homebuyer rate has fallen from 40% to 29%.
Dour July Sales Might Cool New-Home Prices
By Kris Hudson — August 25, 2013, 5:10 PM
… To be sure, the July figures didn’t cheer many people. The Census Bureau reported that July sales of new homes amounted to a seasonally adjusted 394,000, down by 13.4% from the revised June rate of 455,000 … The 13.4% sequential decline was greater than most who track the housing industry expected.
The chart below compares the long-term rate of household formation to the level of building activity. Note the decline over the last several months on both.
Most analysts pointed to rising interest rates as the leading culprit,… The rate for a 30-year, fixed-rate mortgage stands at 4.58%, up from 3.59% two months ago.
Mark Zandi, chief economist at Moody’s Analytics, called the July decline “worrisome” for the broader economy. “The question is whether (home buyers) are going to adjust to the higher mortgage rates or just go away,” Mr. Zandi said. “I’m hopeful that buyers are just trying to wait and see where rates will shake out before they sign on the dotted line. But it needs to be watched.”
What really annoys me is that this question was answered by everyone. There was an emphatic refrain from economists, housing market analysts and financial reporters proclaiming that rising mortgage interest rates would have no impact on the housing market (like this one: Home prices across the US defy gravity, despite rising rates). But here we are.
The impact of rising rates has hurt first-time buyers the most, many economists and analysts say, because they are more sensitive to increases in monthly mortgage payments than are more established buyers looking to purchase their second- or third-generation home. The National Association of Realtors has reported that first-time buyers accounted for 29% of purchases in the past year, compared to their typical rate of 40% in past years.
Prior to the spike in interest rates, the most affordable markets were appreciating the fastest. This was due to a combination of all-cash investors and first-time buyers fighting over limited inventory. With prices high enough that hedge funds are losing interest, they are also too high for many first-time homebuyers to afford. Sales volumes and rates of appreciation should drop off significantly in many of these sub-markets over the next few months.
This year, new-home prices have risen partly because of a lack of lots ready for residential construction. In addition, some builders have “metered” sales, meaning they have intentionally limited their output of new homes to reap better profits as long as demand pushes prices higher. Now, with interest rates rising and sales dipping in July, builders likely will feel pressure to rein in prices to keep people buying.
The Irvine Company is masterful at this ploy. If prices go down, they stop building.
“Maybe a little,” said David Crowe, an economist with the National Association of Home Builders. “The problem has been that (builders) are being forced to raise prices because they’re paying more for their ingredients. To the extent that is beginning to taper, I the builders also can afford to modify the increases they’ve had so far.”
Nonsense. Builders raise their prices because they can. It is fallacious economic thinking to believe costs drive finished goods product prices. Demand drives prices. If the costs escalate to where producers can’t make a profit, then they stop producing. If there is sufficient demand, prices will rise and they will start producing again. The idea that cost inputs is what drives builders to raise their prices is nonsense. It’s a weak cover story for builders responding to demand and raising prices to make more profits. Apparently, Mr. Crowe (who knows better) doesn’t think it politically correct to tell the truth in this instance.
Prices “still will go up, but they might not go up at the same pace,” he added. …
“In the last 45 days, (rates) went up quickly enough that people said, ‘Wait a second, what is this?’ ” Mr. Bowman said. “If they were going to come out in the summer, they’re now going to come out in the fall because they figure the train has left the station on low rates.
I believe he is right. I believe many unsatisfied buyers will become active again this fall and winter.
My belief is that there is a general consensus that while (rates have) run up they’re not going to do so again.”
Really? Why? Other than taking brief rests to consolidate, the bond market selloff will likely continue. Perhaps rates won’t rise as quickly as they did in May — a 35% jump in six weeks is rare and remarkable — but we have no reason to believe rates will stay where they are. They might go up, or they might go down, but given the circumstances and investor sentiment, bond prices will keep falling and rates will more than likely continue to rise. It was recently reported that Mortgage rates hit two-year highs on Fed taper talk. What reason to we have to believe this trend will abate?
July existing home sales are up. Why?
Why are existing home sales rising while mortgage applications are falling and new home sales are tanking? It’s a matter of the timing of reporting.
The mortgage application data is compiled each day, so the data is near real-time. New home sales are reported when contracts are signed, so we have this information within 15 days of the end of the previous month. Existing home sales are not reported until the close of escrow. The deals closed in July were put into escrow in May and June. This sales activity in July and August that will be impacted by the higher rates won’t be reported for another 30 to 60 days. Be prepared for headlines about existing home sales also dropping off. Some of this will be seasonal, and the MSM will undoubtedly dismiss the entire decline as seasonal, but if the number is larger than a normal seasonal variation, which it will be, the drop will be due to rising interest rates.
[raw_html_snippet id=”newsletter”]
[idx-listing mlsnumber=”PW13167024″ showpricehistory=”true”]
7 GARDENIA St Ladera Ranch, CA 92694
$620,000 …….. Asking Price
$956,000 ………. Purchase Price
3/28/2006 ………. Purchase Date
($336,000) ………. Gross Gain (Loss)
($49,600) ………… Commissions and Costs at 8%
============================================
($385,600) ………. Net Gain (Loss)
============================================
-35.1% ………. Gross Percent Change
-40.3% ………. Net Percent Change
-5.7% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$620,000 …….. Asking Price
$124,000 ………… 20% Down Conventional
4.61% …………. Mortgage Interest Rate
30 ……………… Number of Years
$496,000 …….. Mortgage
$147,426 ………. Income Requirement
$2,546 ………… Monthly Mortgage Payment
$537 ………… Property Tax at 1.04%
$433 ………… Mello Roos & Special Taxes
$129 ………… Homeowners Insurance at 0.25%
$0 ………… Private Mortgage Insurance
$163 ………… Homeowners Association Fees
============================================
$3,809 ………. Monthly Cash Outlays
($567) ………. Tax Savings
($640) ………. Principal Amortization
$214 ………….. Opportunity Cost of Down Payment
$98 ………….. Maintenance and Replacement Reserves
============================================
$2,913 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$7,700 ………… Furnishing and Move-In Costs at 1% + $1,500
$7,700 ………… Closing Costs at 1% + $1,500
$4,960 ………… Interest Points at 1%
$124,000 ………… Down Payment
============================================
$144,360 ………. Total Cash Costs
$44,600 ………. Emergency Cash Reserves
============================================
$188,960 ………. Total Savings Needed
[raw_html_snippet id=”property”]
@ reotorentalfortheloss……….
American Homes 4 Rent Said to Fire Employees After Loss
The company, owner of almost 20,000 single-family homes, has cut about 15 percent of its workforce this year, including an earlier round of terminations before its initial public offering last month, said the person, who asked not to be identified because the information is private. The Malibu, California-based company, which raised $705.9 million in the IPO, had a net loss of $14 million, or 15 cents a share, on revenue of $18.1 million in the quarter ended June 30, according to a statement this week.
Single-family landlords have struggled to turn a profit while acquiring homes faster than they can fill them with tenants. Hedge funds, private-equity firms and real estate investment trusts have raised more than $18 billion to purchase more than 100,000 rental houses in the past two years. American Homes 4 Rent, founded by B. Wayne Hughes, is the largest single-family landlord after Blackstone Group LP’s Invitation Homes, which has spent more than $5 billion on 32,000 homes.
American Homes 4 Rent owned 19,825 properties for an investment of $3.4 billion as of July 31, according to its earnings statement. About 56 percent of the company’s homes were leased as of June 30.
—————————————————————————————-
The liquidation sale of the century is coming.
We will more likely see the bargain rental sale of the century as they work feverishly to rent the other 44% of their houses.
IR, how can you say that? We all know that the cash buying “investors” are the smart money.
Their timing was excellent. They managed to acquire 20,000 houses between 2011-2013. This will prove to be near-perfect timing. Their management of those rentals has been less than stellar.
I dunno. I tend to think that those who bought with a positive cash flow are investors and will do just fine. Those who bought and leveraged up with the need for appreciation, … well who knows? The Federal Reserve and the federal government really botched up the the weeding out and recovery process and who knows how long it will take now?
Liquidity is abundant until it isn’t 😉
Who says the federal govt will not bailout the larger house investors/funds?
Remember Mexico funds for large investor c.a. early 1990’s?
Case-Shiller Nears Five-Year High
Home prices rose in June to their highest levels in nearly five years, increasing 2.2 percent, according to the Case-Shiller Home Price Indices released Tuesday. The 20-city index was up 12.1 percent from a year earlier, and the companion 10-city index was up 11.9 percent.
Economists surveyed by Bloomberg had expected the 20-city index to increase 2.3 percent from May and 12.2 percent year-over-year.
Case-Shiller’s National Index, reported quarterly by Standard & Poor’s, was up 7.1 percent in the second quarter to 146.32, its highest level since third quarter 2008.
All 20 cities included in the survey improved both month-to-month and year-to-year.
The two surveys have improved monthly and yearly for 13 consecutive months.
Bob Shiller Warns “None Of This Is Real; The Housing Market Has Become Very Speculative”
With the Case-Shiller 20-City index up double-digits for the 4th straight month, Bob Shiller has some choice words for the CNBC interviewers about the ‘housing recovery’. “Housing is a market with momentum,” he notes, “and right now, the momentum is up;” as he notes that while house prices are ‘recovering’, he remains much less sanguine about this recent move. But it is once he has explained the potential concerns that may weigh on the housing market that Shiller comes into his own as he explains “none of this is real, the housing market has gotten very speculative.”
Housing goes through “big cycles,” he chides, noting that California “has gone up and down like a roller-coaster for decades but doesn’t get anywhere… that’s what these markets have become.” Perfectly summarizing the current situation, Shiller concludes, “for the long-term buyer, the fact that [prices] are going up now doesn’t mean anything for where it will when you sell.” Must see clip as Shiller scoffs at the current sentiment, the resurgence of ‘flipping’, and that the housing market is “driven by irrational exuberance.”
“Housing goes through “big cycles,” he chides, noting that California “has gone up and down like a roller-coaster for decades but doesn’t get anywhere”
What a preposterous thing to say. matt138 needs to put this mother in his place.
The “cycle” you speak of is nothing but market noise within a big cycle.
Had the Fed not bought down interest rates, this larger cycle would be evident to even the layman.
Case/Shiller LA/OC
Jun 2006: 273
Jun 2013: 202
Even despite 7 long yrs, mort fraud, accounting fraud and $trillions upon $trillions upon $trillions worth of printed fiatsco™ pumped into housing + macro, and LA/OC still unable to recapture, let alone sniff the previous high. down -26%.
You need to be more patient. All of the stimulus you listed out has been in effect for less than 5 years, and LA/OC has already recovered over half the loss according to your index, Case/Shiller. The truth is you’ve been a RE bottom-denier for 4 1/2 years now and didn’t see the dramatic increases in price coming.
Same thing with gold. You want to seize upon a statement I made less than 2 months ago and point to short term price action as if it has any bearing on the long term outcome. Your patience is lacking.
Dude, get a grip…. QE has pulled future price gains forward to today and created a marketplace where
investorsspeculator ‘muppets’ are engaged in bidding wars due to expectations of future price gains. LOL!!Enjoy!
btw, the truth is: the rate of growth of the monetary base is destroying true wealth, NOT creating it.
Almost missed this ‘lil gem……
————————————————————-
MR says: LA/OC has already recovered over half the loss according to your index, Case/Shiller.
————————————————————-
Nonsense!
The LA/OC low was 159(May09), and the high was 273(Sep06), so the spread is 114.
Current level is 202.
If LA/OC actually ”recovered over half the loss” as you claim, the current level would be sitting @ >216, NOT 202.
Oops!
Ah, my bad. I had a math error when looking at the numbers.
LA/OC has already recovered over one third of the loss according to your index, Case/Shiller.
They can mask the real estate bust in nominal terms via money printing.
Prices will continue to fall in real terms, aka priced in real money – the shiny yellow metal that the comrade cannot print.
Real terms will see deflation
Nominal terms, it depends on how much they print.
Let them eat paper.
From the article:
“The home values improved too despite higher mortgage rates which could have both a positive and negative impact: rising rates themselves might bring prices down as buyers look for affordable monthly payments, but also increase demand as buyers try to lock in rates before further increases. The increased demand against weak inventories would send prices up.”
Amazing. How could this “reporter” put a better spin on the data? A few thoughts:
1) The Case Shiller index is a 3-month rolling average of closed sales. This means that the June number, which is the latest reported, is an average of closed sales in April, May, and June. These are for contracts signed in February, March, and April — before the rates started to rise. But, here we are on August 27, and this “reporter” is saying that the CS numbers have gone up despite the rise in rates? The rates don’t even factor into these numbers.
2) Higher rates will never have a positive impact on prices. They may generate a short burst of activity for those with 30-day locks. If that happened, it happened back in late may or early June. Those days are long gone, and yet the “reporter” uses the future tense, as if the rising rates are going to drive up prices in September. Please just stop reporting on things you don’t understand. Hack.
3) The inventories aren’t weak – demand is. Why do you think that pending sales have dropped despite the fact that half of the homes have price reductions?
“Still the increase in home values, according to economic theory, should mean improved consumer spending. The “wealth effect” theory holds that consumers spend based on increase in net worth, not income. Home values accounted for about 25 percent of the increase in net worth in the first quarter, according to the latest data from the Federal Reserve.”
1) Economic Theory. There are a lot of economic theories, most of them bad. Notice that the operative word is theory, and not fact. The fact is that these theories mostly don’t comport with reality. If they did, they wouldn’t be called theories, they would be called… wait for it — facts. In the hard sciences a theory is never elevated to the level of a principle or even a rule unless it is proven convincingly and repeatably. This author isn’t even convinced by his own BS: he uses the word should instead of will. “Still the increase in home values, according to economic theory, should mean improved consumer spending.” Should it? How? Please, lay out your theory in minute detail demonstrating how this seemingly implausible sequence of events will transpire. Then, test your economic theory in light of rising mortgage rates, a sluggish economy, rising taxes, and falling government spending. Oh and the stock market is down how much this month?
2) Housing resulted in 25% of the increase in net worth during the first quarter? I assume this means that the other 75% increase was in stocks? So, financially, it’s 3 times better to hold stocks than own a house. Sounds about right. Oh, and I can realize my gains by selling the stocks without having to pay a 6% commission, pack my bags, and move? And the rise in home values just increased your property tax bill and insurance. Maybe you can take out a HELOC to cover that too.
3) The “Wealth” Effect. Stupid is as stupid does. Let’s see, I think I’ll go out and buy a bunch of stuff I can’t afford just because some freaking realtor is telling me that my house, which I have no intention of selling, is worth more on paper. Since my income hasn’t gone up, I’ll have to charge all those goodies on my credit card. I mean, 29% interest isn’t really that much if you just pay the minimum monthly payment. Right? And, since I just filled my housing ATM with all those new things, it is starting to look a little shabby… I think I need to renovate. I know, I’ll get one of those home equity loans my neighbor got. I can afford it since I am now 25% more wealthy this quarter! If the house goes up the same next quarter, then I can just refinance and pull cash out to make up the difference in my monthly payments. And so it begins again…
“The “Wealth” Effect. Stupid is as stupid does. Let’s see, I think I’ll go out and buy a bunch of stuff I can’t afford just because some freaking realtor is telling me that my house, which I have no intention of selling, is worth more on paper.”
Even though the Wealth Effect does not really have firm reasoning, it get S to spend more than what they earn and spend their way out of debt. They are following the leader, i.e., the federal govt.
Foreign Buyers Drive Florida’s Housing Recovery
Nicole Kenaston’s dreams of owning a home in Miami keep getting dashed. The 32-year-old federal government worker says she’s bid on at least five houses in the past three years and each time lost out to an overseas buyer paying cash. “I’ll find a place I like and can get financing for, and the all-cash buyers will come in and pay above market for it,” says Kenaston. “It’s heartbreaking.”
Foreign investment in Florida real estate—a perennial favorite for Canadian snowbirds and wealthy South Americans—has been on a tear since the end of the recession, according to a March report by the National Association of Realtors. Overseas home buyers accounted for 7.3 percent of statewide residential sales by dollar amount in 2007; the figure climbed to 19 percent in the 12 months ended June 2012, the most recent data available. Florida accounted for a quarter of all U.S. residential real estate sales to foreigners during that period, the highest level nationwide. “It feels like 2003 in South Florida,” says Peter Zalewski, owner of Condo Vultures, a brokerage and consulting firm based in Miami, looking back to the early days of the state’s housing boom
Buyers from overseas have spent $50 billion-plus on more than 250,000 properties in Florida since 2009, the Realtors’ data show. Daniel Arguelles, 33, a stockbroker in Bogota, has bought three houses in the Miami area over the same period. “You have cheap prices, a cheap dollar, and low interest rates. And that’s a scenario that you haven’t seen in about 50 years,” he says. Arguelles, like many international buyers, is renting out his properties. Others are using them as vacation homes.
FHA to Get Second Opinion on Insurance Fund Shortfall
After last year’s actuarial report on the financial health of the Federal Housing Administration’s Mutual Mortgage Insurance Fund, the Department of Housing and Urban Development is seeking a second opinion, the agency said in its quarterly report to Congress.
The FHA may be in need of a nearly $1 billion taxpayer bailout, housing officials announced in April after the agency’s annual actuarial report showed the Fund had a negative economic value of $16.3 billion. The FHA’s reverse mortgage portfolio was in the red with losses of $5.2 billion, contributing to the Fund’s $943 million shortfall.
The fiscal year 2012 report, released last November, was prepared by the Integrated Financial Engineering Group.
For the next report, Summit Consulting, LLC and Milliman, Inc. have been hired to provide “an additional independent analysis” of the MMI Fund’s financial health, the FHA disclosed in the foreword of its third quarter report for fiscal year 2013.
“This second assessment will provide another view of the health of the MMI Fund, giving HUD a new independent analysis and a second actuarial model,” said Frank Vetrano, FHA deputy assistant secretary of risk management and regulatory affairs, in the report to Congress. “This will enable FHA to view the MMI Fund through another lens, informing future policy decisions, as the agency continues work to develop more sophisticated and refined internal capabilities.”
MMI Fund balances at the end of fiscal year 2013′s third quarter were $33.1 billion, according to the report, a decline of $3 billion from the previous quarter.
The FHA is hopeful an alternate opinion will be useful.
”I believe that a second independent view of the Fund’s expected value will provide valuable insights and look forward to making these findings available to you later this year,” Vetrano said.
PS.
Average FICO score for an FHA loan is now 693 in the second quarter. The lowest in 4 years.
California program assists homeowners with downpayments
The California Housing Finance Agency launched a new fixed-rate mortgage program for low and moderate income, first-time homebuyers. The program will provide thousands of dollars in downpayment assistance, the agency said in a statement.
CalPLUS is an FHA-insured, 30-year fixed mortgage that includes a special zero interest junior loan for as much as 3.5% of the first mortgage loan amount to assist borrowers needing funds for a downpayment.
Additionally, the Zero Interest Program downpayment loan does not have to be repaid until the home is sold, refinanced or paid in full.
“Since its inception, CalHFA has focused on helping Californians become homeowners, strengthening communities and neighborhoods,” said Claudia Cappio, executive director of CalHFA. “Downpayments continue to be one of today’s biggest obstacles for first-time homebuyers. This new program is aimed at bridging that gap for California families.”
Housing Market Quiz: (for the astute analysts at OC Housing, the nation’s best housing blog)
1–The Fed will make a surprise announcement that it plans to INCREASE its monthly purchases of MBS in order to push mortgage rates down and save the housing recovery from imploding? (although the Fed will trim $15 per month from its US Treasury purchases)
Yes or no?
yes, MBS up $5B, T down $15T
(oops, Treasury buying down $15*B*/month)
Nope – unfortunately for the Fed, their metrics all show the that housing is well on its way toward the Promised Land.
Instead what I see happening is QE-off through end of 2013, watch GDP go flat or negative and housing completely stall out, then QE back on for early 2014.
September Taper still on as planned…
Maybe.
If there is one thing I’ve learned the last five years, it’s to never underestimate the lengths to which the FED will go to manipulate the housing and stock markets. That said, I don’t think the FED will increase MBS purchases to save the housing market because they can accomplish the same goal by merely postponing or reducing the tapering amount.
The fact is that even if the FED “only” buys $65B worth of UST/MBS they are still removing a lot of risk from the market. Is it possible that the rate rise was an overreaction and that rates may drop over time as the FED continues to buy at $65B/mo.? Certainly. The FED has their hand on the controls and can effectively meter out any amount of QE that accomplishes their goals of full employment, low inflation, and housing market stability.
I think that the tapering announcement was a result of the FED looking at housing data, and deciding that the market was overheating. When they realized that QE3 was fueling this speculative boom resulting in unsustainable price inflation, they decided to pull the plug and let the liquidity drain a little bit from global financial markets. By announcing a course change, they have already accomplished much of what they set out to do. Now, all they have to do is choose a taper amount that is appropriate. They can always increase or decrease or keep the taper amount the same as conditions warrant. My thought is that they should keep the reduction the same and see how the rates react after the taper is put into effect.
I would score it like this:
50% chance they keep the taper at $65B/mo.; (35UST/30MBS)
25% chance they drop the taper and buy $75B/mo. (40UST/35MBS)
10% chance they make the UST and MBS equal at $70B/mo. ($35B each)
10% chance they keep it at $85B/mo. (45UST/40MBS)
5% chance they increase the QE to “save” the housing market. (45UST/50MBS)
I think the Fed will increase and I don’t give a patuty what the Fed says the reason will be, because it will not be about housing or mortgages. The Fed can not stop buying at POMO because the price of T’s would go down and T’s are how the member banks hold their capital reserves. Those reserves have all been rehypothecated as collateral for loans to purchase corporate securites, (stocks), and a whole bunch of other stuff, (like that technical term, stuff; I don’t have time to go looking up their assets).
The Fed can not stop buying directly from the Treasury because the federal government needs currency to pay the interest on the debt.
And the Fed will have to increase it’s purchases from both the Treasury and POMO in an effort to keep a lid on interest rates because if they don’t the interest rate swaps market will implode. The Fed will fail and the IRS market will implode.
That’s an interesting thought.
However, I wonder if such a move would have the opposite effect. If the fed announced they were going to buy even more MBS pools, investors would be even more skittish about buying them because when they finally do taper, the carnage will be that much worse.
I did not say the Fed would announce it.
Nope; simply because looking back, it would appear its role is to help create crisis, not prevent them.
just say’n.
Although still a sample size of one, but I’ve only had one listing on my MLS watch list go pending over the past 3 weeks, and my list of matches is the longest in months.
Mark Hanson on CNBC for the first time.
He’s making the bear case with Rick Santelli right now on the Case-Shiller numbers just out.
Go BubbaBear!
got a link on the Hanson interview?
I’m not seeing anything at cnbc.
Hey, and when are we gonna see Irvine renter or mike on cnbc???
Huh?
LOL!
I know Larry done a lot of print interviews. I’m just the guy that links articles.
I think the Mark Hanson interview is here.
Here
Hanson ~ “then again in 2011 on operation twist, Qe, 2. 3, rates created 20% more affordability out of thin air. over the last 20, 22 months, house prices have responded to that. now that’s gone again. we’re back to 5%.”
Okay … that sums it up. Unless mortgage rates collapse again, Orange County home prices face major challenges in the coming months.
Proposed QRM rules, 30% down payment and you are automatically in no matter the type of mortgage?
QRM – tomorrow; More on Fingerprints; Changing LO Comp; Purchases Worth More than Refis
“Did the CFPB or any other regulator announce the QRM news yet?” No – it is expected tomorrow from the FDIC, and the several other organizations that participated in formulating the “skin in the game rules.” All indications point toward equating it with the QM rules (which is a good thing) with the possible addition of a 30% down payment twist (perhaps any loan with 30% will fit inside the QRM box and other attributes won’t matter).
Dodd-Frank created the CFPB with the promise that financial services regulation and supervision would be centralized and concentrated in one entity, making it easier for the industry to know who their regulator was and what the rules are. So much for that thought! Even more government bodies are in on the action, including state AGs, and it’s a bigger mess than before. Dodd-Frank really is the “Full Employment for Financial Services Attorneys Act”!
If they announce a 30% down payment requirement, it will be housing Armageddon. Plus, the government will never get out of housing finance because the FHA and GSEs are exempt.
This sounds all wrong. The original draft on QM had NO DOWN PAYMENT REQUIREMENT…NONE
Just a ridiculous “ability to repay” clause.
You think a bank would take that kind of risk with its own money?
No way.
Banker: Well Mr Joe Blow, do you think you’ll be able to repay the $400,000 gov insured loan we are about to issue you today on your salary as a landscaper??
Mortgage applicant Joe Blow: Sure, no prob. I’m expecting the money to start rolling in any day now as soon as I get my leafblower back from the shop.
The CFPB is a farce that bends to the whims of the big banks.
We’ll see tomorrow, I guess.
Anyway, Hanson does great on Santelli Take a look:
http://video.cnbc.com/gallery/?play=1&video=3000193241
The original draft had a 20% down payment requirement. It was dropped in a more recent proposal, but there has been no official word as of yet.
“Mark Zandi, chief economist at Moody’s Analytics, called the July decline “worrisome” for the broader economy. “The question is whether (home buyers) are going to adjust to the higher mortgage rates or just go away,” Mr. Zandi said.:
“…or just go away”?????
No. Maybe market prices fall a little and the home buyers eventually circle back again saying “Hey, that’s a little better”.
I mean if it were solely all about mortgage rates, then nobody would have ever bought homes at 11.5% mortgage interest back in 1983.
Somehow over the last 20 years we’ve learned to focus on the means (borrowing) well before the ends (price).
If more and more people believe mortgage interest rates are going up..and up, buyers aren’t the only ones affected by this. What about sellers?
Seems like the media assumes that sellers are fully insulated from all of these changes.
“The question is whether (home buyers) are going to adjust to the higher mortgage rates or just go away,” Mr. Zandi said.
Here’s where economists & REALTORS have it all wrong. The real question is whether home sellers are going to adjust to higher mortgage rates.
Bingo. And some sellers will be defiant of the new reality because they are financial hosed (underwater).
Great point. Somehow the talking heads always miss that angle. But, I don’t think the question is whether home sellers will adjust, but HOW MANY will adjust. The home sellers that do adjust to the rising rates will sell their houses. The ones that don’t adjust, won’t sell. The one’s that do adjust will set the comps for the area. The question in my mind is how long will it take before the relevant comps start to drag down appraisals and affect financing. Since investors are jumping ship, appraisals are going to be more important from now on.