The housing run-up post-COVID panic was so absurd that even highly qualified buyers with loans made using traditionally sound lending standards are in the cross-hairs as prices simply revert to mean.
Great research. Another potential issue that I would love to hear the numbers on: many short-term-rental (i.e. airbnb) buyers used hard money and private lending to purchase properties - thus feeding the "cash" buying frenzy. I've seen offers to get approved for a large DSCR loan with nothing but an airDNA rentalizer estimate, and there are numerous facebook groups and so-called "mentors" for hire connecting up these amateur investor/hoteliers with services to set up their LLCs and get bridge loans for the down payments. Dodd Frank carved out provisions for real business investors to take on risker loans for property assets, but it appears folks have figured out they'll just teach yesterday's sub-prime buyers how to be "real business investors," at least on paper. Not to mention, these are businesses reliant on: 1) residentially zoned properties and the whims of municipal governments to decide how or if they can be used for hospitality purposes, and 2) that the travel industry and demand for short-term rentals somehow remains robust through a continuing pandemic, inflation, political unrest, highest than ever gas prices, airline pilot shortages, and a likely recession...
The reasoning that everyone keeps using that this housing price mania will continue is that there's such a backlog of folks who want homes. I've been rather confused about that though, as I just can't fathom so many people organically deciding to buy a house at the same time. Sure, Millennials have been late to the home buying party, but the jump just doesn't make sense without considering the extra money coming from stimulus measures and quantitative easing.
I don't have the monetary chops to figure out how much of an impact it is, but buying $1.3 Trillion in mortgage backed securities is going to throw the market for a loop. The MBS indexes I've been able to find were all flat between March 2020 and ~December 2021, when they started dropping. I would be really curious to see how much of the Jumbo Loan issues have been directly because of the Fed's intervention.
This article flew over my head. I'm lost. Doesnt this just mean that house prices can afford to drop by 25% and owners can still sell the house and break even? Isn't it a lot more scary if home prices didnt go up and we face a possibility of 25% drop?
A Real Mean Reversion
Great research. Another potential issue that I would love to hear the numbers on: many short-term-rental (i.e. airbnb) buyers used hard money and private lending to purchase properties - thus feeding the "cash" buying frenzy. I've seen offers to get approved for a large DSCR loan with nothing but an airDNA rentalizer estimate, and there are numerous facebook groups and so-called "mentors" for hire connecting up these amateur investor/hoteliers with services to set up their LLCs and get bridge loans for the down payments. Dodd Frank carved out provisions for real business investors to take on risker loans for property assets, but it appears folks have figured out they'll just teach yesterday's sub-prime buyers how to be "real business investors," at least on paper. Not to mention, these are businesses reliant on: 1) residentially zoned properties and the whims of municipal governments to decide how or if they can be used for hospitality purposes, and 2) that the travel industry and demand for short-term rentals somehow remains robust through a continuing pandemic, inflation, political unrest, highest than ever gas prices, airline pilot shortages, and a likely recession...
Congrats on the MarketWatch mention
The reasoning that everyone keeps using that this housing price mania will continue is that there's such a backlog of folks who want homes. I've been rather confused about that though, as I just can't fathom so many people organically deciding to buy a house at the same time. Sure, Millennials have been late to the home buying party, but the jump just doesn't make sense without considering the extra money coming from stimulus measures and quantitative easing.
I don't have the monetary chops to figure out how much of an impact it is, but buying $1.3 Trillion in mortgage backed securities is going to throw the market for a loop. The MBS indexes I've been able to find were all flat between March 2020 and ~December 2021, when they started dropping. I would be really curious to see how much of the Jumbo Loan issues have been directly because of the Fed's intervention.
This article flew over my head. I'm lost. Doesnt this just mean that house prices can afford to drop by 25% and owners can still sell the house and break even? Isn't it a lot more scary if home prices didnt go up and we face a possibility of 25% drop?