Federal Reserve: signs abound that housing market is entering bubble territory

[Anonymous]

Anonymous wrote:

Anonymous wrote:25% all cash buyers is an lol statistic. If you’re not a moron you’ll realize that within this 25%, a lot of those transactions are still leveraged but are counted as all cash because at the settlement table there is no mortgage. Still the buyer used a portfolio loan, proceeds from refinancing another property, or some other form of indirect leverage etc.

+1 very few buyers are true cash buyers, would be a dumb financial move not to take advantage of low interest rates. There is almost always leverage at play somewhere (in addition to what PP said, people get a loan later, use services that front you the cash in exchange for a subsequent mortgage on the property at a higher interest rate, etc). Coming in with “cash” is just a bidding tool.

Plus having a mortgage is a tax strategy.

[Anonymous]

Anonymous wrote:You think Jerome Powell has the nerve to shake up the housing market? No way. He was supposed to be a hardcore right wing rates guy but dropped to zero so fast it made your head spin. Then a few tweets from Trump and he didn’t touch rates for two years. He will raise twice to three times and that’s it.

He’s not going to do it on purpose. Trump wasn’t facing double-digit inflation, and the opposite is happening here. Biden is screaming at Powell to get inflation under control before the mid-term elections. The concern is that we’re already in the situation we were in in the early 80’s, when the Fed waited so long to act, that by the time Volcker did what he had to do, the cure was very painful.

Interest rates alone aren’t what is worrying. The amount of QE the Fed has to unwind is unprecedented. This is an oversimplification, but the problem is that the Fed has been buying up to $120 billion worth of Mortgage backed securities and Treasuries a month for years. That was $$ off the books of the banks, which allowed them to loan more $$. In May, they’re going to start letting $95 billion worth of those roll off as they mature. It’s not clear that they’ll meet that target, nor that simply letting the bonds roll off will do the trick. They may have to actively sell bonds, and no one has any idea what impact that will have on the loan market, other than not good. Banks will buy those bonds, but that will entail using cash that then won’t be available to loan out as mortgages.

Here’s the doomer perspective, which I don’t necessarily subscribe to, but it’s not outside the realm of possibility:

https://seekingalpha.com/article/4488903-another-housing-bubble-fed-holding-pin

[Anonymous]

Anonymous wrote:

Anonymous wrote:You think Jerome Powell has the nerve to shake up the housing market? No way. He was supposed to be a hardcore right wing rates guy but dropped to zero so fast it made your head spin. Then a few tweets from Trump and he didn’t touch rates for two years. He will raise twice to three times and that’s it.

He’s not going to do it on purpose. Trump wasn’t facing double-digit inflation, and the opposite is happening here. Biden is screaming at Powell to get inflation under control before the mid-term elections. The concern is that we’re already in the situation we were in in the early 80’s, when the Fed waited so long to act, that by the time Volcker did what he had to do, the cure was very painful.

Interest rates alone aren’t what is worrying. The amount of QE the Fed has to unwind is unprecedented. This is an oversimplification, but the problem is that the Fed has been buying up to $120 billion worth of Mortgage backed securities and Treasuries a month for years. That was $$ off the books of the banks, which allowed them to loan more $$. In May, they’re going to start letting $95 billion worth of those roll off as they mature. It’s not clear that they’ll meet that target, nor that simply letting the bonds roll off will do the trick. They may have to actively sell bonds, and no one has any idea what impact that will have on the loan market, other than not good. Banks will buy those bonds, but that will entail using cash that then won’t be available to loan out as mortgages.

Here’s the doomer perspective, which I don’t necessarily subscribe to, but it’s not outside the realm of possibility:

https://seekingalpha.com/article/4488903-another-housing-bubble-fed-holding-pin

well that's terrifiying

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ok this is from a FB video I watched this morning, but I’d it true?

For those who bought at the peak of the market, if the house loses value they’ll have negative equity. If the economy then winds up in a recession, that could work out very badly for the housing market. Is that super off-base?

It depends entirely on a number of factors.

If they bought all-cash they've already got 100% equity and value is basically irrelevant. If they put 20% down there's very little chance they will see a 20% drop in values. If they put less down it depends entirely on if they or a working spouse lose their jobs. An underwater house isn't a big deal unless you're forced to move.

DC has such a huge percentage of all cash buyers (25%) that alone will insulate the market a great deal. Our job market is also probably the most stable in the country. Fed jobs aren't going anywhere, fed contractor jobs aren't going anywhere. I imagine ultimately the number of people in this area who don't have significant equity, who also see their home value go underwater, who also lose their jobs, who also don't have savings to ride a brief period of unemployment out, who also don't have a working partner who can at least cover the mortgage while they cut costs elsewhere will be low.

Omg regardless of what you think about the housing market, please do not listen to this poster. Do you have any idea what equity means? It’s just the amount that you would get when you sell. Value always matters. Even if you paid all cash, you don’t want to sell for a loss.

You're completely missing the point. if you're not selling, value doesn't matter. Your payments don't change, the house still serves as shelter. Value is just a number on a page. Having negative equity may prevent you from voluntarily selling, but from an economic standpoint someone who wants to sell but can't, but is still able to make their payments is no different from someone just living in their home like normal. The only time negative equity changes anything is if the owner is unable to make payments and is forced to sell or get foreclosed on, and as I already pointed out, in this area you'd have to fall through so many cracks to reach that situation that the overall number of people who will end up there is very low.

Also, do YOU know what equity means? Tell me exactly where you believe I misused the term. If you pay for a house all in cash and have 100% equity at the time of purchase it is mathematically impossible to be underwater regardless of future changes in value unless your property somehow achieves negative value. If you put 20% down you will have positive equity unless your house value drops 20% or more from purchase price which is very unlikely in this area.

It might not matter to you, but it matters to a lot of people!

NP. It only “matters” if you are selling, trying to refi, or trying to get a HELOC.

If you aren’t selling then it’s a “paper loss”. Just like I was a “paper millionaire” 20 years ago.

If a loss happens in a forest does it ever realize?

Why do people here think that people never need to sell their house? Death, job changes, retirement, relocation…there are lots of reasons houses need to be sold, and judging by this board, there are a bunch of people who have extended themselves to the limit to buy. Even if feds are exempt (which is questionable), a recession will hurt.

How many people have you seen on here count their home equity as part of their retirement savings? Lots counting on selling and moving to a lower LCL area and buying all cash with the DC home equity.

The current run up in home prices has been unprecedented, and if the we see a decline in prices commensurate with 2008, we can see 30-40% losses. There are people out there who bought years ago who will only lose paper profits, but, as usual, anyone who bought toward the end of the boom could get burned. Will that happen, who knows? But it is not a risk to be scoffed at.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ok this is from a FB video I watched this morning, but I’d it true?

For those who bought at the peak of the market, if the house loses value they’ll have negative equity. If the economy then winds up in a recession, that could work out very badly for the housing market. Is that super off-base?

It depends entirely on a number of factors.

If they bought all-cash they've already got 100% equity and value is basically irrelevant. If they put 20% down there's very little chance they will see a 20% drop in values. If they put less down it depends entirely on if they or a working spouse lose their jobs. An underwater house isn't a big deal unless you're forced to move.

DC has such a huge percentage of all cash buyers (25%) that alone will insulate the market a great deal. Our job market is also probably the most stable in the country. Fed jobs aren't going anywhere, fed contractor jobs aren't going anywhere. I imagine ultimately the number of people in this area who don't have significant equity, who also see their home value go underwater, who also lose their jobs, who also don't have savings to ride a brief period of unemployment out, who also don't have a working partner who can at least cover the mortgage while they cut costs elsewhere will be low.

Omg regardless of what you think about the housing market, please do not listen to this poster. Do you have any idea what equity means? It’s just the amount that you would get when you sell. Value always matters. Even if you paid all cash, you don’t want to sell for a loss.

You're completely missing the point. if you're not selling, value doesn't matter. Your payments don't change, the house still serves as shelter. Value is just a number on a page. Having negative equity may prevent you from voluntarily selling, but from an economic standpoint someone who wants to sell but can't, but is still able to make their payments is no different from someone just living in their home like normal. The only time negative equity changes anything is if the owner is unable to make payments and is forced to sell or get foreclosed on, and as I already pointed out, in this area you'd have to fall through so many cracks to reach that situation that the overall number of people who will end up there is very low.

Also, do YOU know what equity means? Tell me exactly where you believe I misused the term. If you pay for a house all in cash and have 100% equity at the time of purchase it is mathematically impossible to be underwater regardless of future changes in value unless your property somehow achieves negative value. If you put 20% down you will have positive equity unless your house value drops 20% or more from purchase price which is very unlikely in this area.

It might not matter to you, but it matters to a lot of people!

NP. It only “matters” if you are selling, trying to refi, or trying to get a HELOC.

If you aren’t selling then it’s a “paper loss”. Just like I was a “paper millionaire” 20 years ago.

If a loss happens in a forest does it ever realize?

Why do people here think that people never need to sell their house? Death, job changes, retirement, relocation…there are lots of reasons houses need to be sold, and judging by this board, there are a bunch of people who have extended themselves to the limit to buy. Even if feds are exempt (which is questionable), a recession will hurt.

How many people have you seen on here count their home equity as part of their retirement savings? Lots counting on selling and moving to a lower LCL area and buying all cash with the DC home equity.

The current run up in home prices has been unprecedented, and if the we see a decline in prices commensurate with 2008, we can see 30-40% losses. There are people out there who bought years ago who will only lose paper profits, but, as usual, anyone who bought toward the end of the boom could get burned. Will that happen, who knows? But it is not a risk to be scoffed at.

I think the Fed is totally willing to throw people who bought in the past two years under the bus to normalize stop inflation, save the economy, and normalize the housing market. If prices drop 30% in late 2022, the only people who will be underwater are the people who bought between March 2020 and now. If you bought a house in 2019 you’d be happy as a clam because you’d still be up 10%.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You think Jerome Powell has the nerve to shake up the housing market? No way. He was supposed to be a hardcore right wing rates guy but dropped to zero so fast it made your head spin. Then a few tweets from Trump and he didn’t touch rates for two years. He will raise twice to three times and that’s it.

He’s not going to do it on purpose. Trump wasn’t facing double-digit inflation, and the opposite is happening here. Biden is screaming at Powell to get inflation under control before the mid-term elections. The concern is that we’re already in the situation we were in in the early 80’s, when the Fed waited so long to act, that by the time Volcker did what he had to do, the cure was very painful.

Interest rates alone aren’t what is worrying. The amount of QE the Fed has to unwind is unprecedented. This is an oversimplification, but the problem is that the Fed has been buying up to $120 billion worth of Mortgage backed securities and Treasuries a month for years. That was $$ off the books of the banks, which allowed them to loan more $$. In May, they’re going to start letting $95 billion worth of those roll off as they mature. It’s not clear that they’ll meet that target, nor that simply letting the bonds roll off will do the trick. They may have to actively sell bonds, and no one has any idea what impact that will have on the loan market, other than not good. Banks will buy those bonds, but that will entail using cash that then won’t be available to loan out as mortgages.

Here’s the doomer perspective, which I don’t necessarily subscribe to, but it’s not outside the realm of possibility:

https://seekingalpha.com/article/4488903-another-housing-bubble-fed-holding-pin

Wait, seeingalpha is suggesting there's a housing bubble? Stop the presses:

https://seekingalpha.com/article/2790915-2015-housing-trends-will-the-echo-bubble-continue-expanding

https://seekingalpha.com/article/4066115-housing-bubble-is-back

https://seekingalpha.com/article/4187390-u-s-housing-bubble-enters-stage-2-suddenly-motivated-sellers

https://seekingalpha.com/article/4236567-splendid-housing-bubbles-in-america-shrink

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ok this is from a FB video I watched this morning, but I’d it true?

For those who bought at the peak of the market, if the house loses value they’ll have negative equity. If the economy then winds up in a recession, that could work out very badly for the housing market. Is that super off-base?

It depends entirely on a number of factors.

If they bought all-cash they've already got 100% equity and value is basically irrelevant. If they put 20% down there's very little chance they will see a 20% drop in values. If they put less down it depends entirely on if they or a working spouse lose their jobs. An underwater house isn't a big deal unless you're forced to move.

DC has such a huge percentage of all cash buyers (25%) that alone will insulate the market a great deal. Our job market is also probably the most stable in the country. Fed jobs aren't going anywhere, fed contractor jobs aren't going anywhere. I imagine ultimately the number of people in this area who don't have significant equity, who also see their home value go underwater, who also lose their jobs, who also don't have savings to ride a brief period of unemployment out, who also don't have a working partner who can at least cover the mortgage while they cut costs elsewhere will be low.

Omg regardless of what you think about the housing market, please do not listen to this poster. Do you have any idea what equity means? It’s just the amount that you would get when you sell. Value always matters. Even if you paid all cash, you don’t want to sell for a loss.

You're completely missing the point. if you're not selling, value doesn't matter. Your payments don't change, the house still serves as shelter. Value is just a number on a page. Having negative equity may prevent you from voluntarily selling, but from an economic standpoint someone who wants to sell but can't, but is still able to make their payments is no different from someone just living in their home like normal. The only time negative equity changes anything is if the owner is unable to make payments and is forced to sell or get foreclosed on, and as I already pointed out, in this area you'd have to fall through so many cracks to reach that situation that the overall number of people who will end up there is very low.

Also, do YOU know what equity means? Tell me exactly where you believe I misused the term. If you pay for a house all in cash and have 100% equity at the time of purchase it is mathematically impossible to be underwater regardless of future changes in value unless your property somehow achieves negative value. If you put 20% down you will have positive equity unless your house value drops 20% or more from purchase price which is very unlikely in this area.

It might not matter to you, but it matters to a lot of people!

NP. It only “matters” if you are selling, trying to refi, or trying to get a HELOC.

If you aren’t selling then it’s a “paper loss”. Just like I was a “paper millionaire” 20 years ago.

If a loss happens in a forest does it ever realize?

Why do people here think that people never need to sell their house? Death, job changes, retirement, relocation…there are lots of reasons houses need to be sold, and judging by this board, there are a bunch of people who have extended themselves to the limit to buy. Even if feds are exempt (which is questionable), a recession will hurt.

How many people have you seen on here count their home equity as part of their retirement savings? Lots counting on selling and moving to a lower LCL area and buying all cash with the DC home equity.

The current run up in home prices has been unprecedented, and if the we see a decline in prices commensurate with 2008, we can see 30-40% losses. There are people out there who bought years ago who will only lose paper profits, but, as usual, anyone who bought toward the end of the boom could get burned. Will that happen, who knows? But it is not a risk to be scoffed at.

I think the Fed is totally willing to throw people who bought in the past two years under the bus to normalize stop inflation, save the economy, and normalize the housing market. If prices drop 30% in late 2022, the only people who will be underwater are the people who bought between March 2020 and now. If you bought a house in 2019 you’d be happy as a clam because you’d still be up 10%.

That's what I was coming on here to ask -- would the Fed really go ahead and crash the housing market?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You think Jerome Powell has the nerve to shake up the housing market? No way. He was supposed to be a hardcore right wing rates guy but dropped to zero so fast it made your head spin. Then a few tweets from Trump and he didn’t touch rates for two years. He will raise twice to three times and that’s it.

He’s not going to do it on purpose. Trump wasn’t facing double-digit inflation, and the opposite is happening here. Biden is screaming at Powell to get inflation under control before the mid-term elections. The concern is that we’re already in the situation we were in in the early 80’s, when the Fed waited so long to act, that by the time Volcker did what he had to do, the cure was very painful.

Interest rates alone aren’t what is worrying. The amount of QE the Fed has to unwind is unprecedented. This is an oversimplification, but the problem is that the Fed has been buying up to $120 billion worth of Mortgage backed securities and Treasuries a month for years. That was $$ off the books of the banks, which allowed them to loan more $$. In May, they’re going to start letting $95 billion worth of those roll off as they mature. It’s not clear that they’ll meet that target, nor that simply letting the bonds roll off will do the trick. They may have to actively sell bonds, and no one has any idea what impact that will have on the loan market, other than not good. Banks will buy those bonds, but that will entail using cash that then won’t be available to loan out as mortgages.

Here’s the doomer perspective, which I don’t necessarily subscribe to, but it’s not outside the realm of possibility:

https://seekingalpha.com/article/4488903-another-housing-bubble-fed-holding-pin

Wait, seeingalpha is suggesting there's a housing bubble? Stop the presses:

https://seekingalpha.com/article/2790915-2015-housing-trends-will-the-echo-bubble-continue-expanding

https://seekingalpha.com/article/4066115-housing-bubble-is-back

https://seekingalpha.com/article/4187390-u-s-housing-bubble-enters-stage-2-suddenly-motivated-sellers

https://seekingalpha.com/article/4236567-splendid-housing-bubbles-in-america-shrink

I didn’t say I agree with them, but I give them credit for being consistent. They predicted that the unprecedented levels of QE would lead to inflation and an unsustainable boom in housing prices (check) and that it would become dangerous when it eventually had to be unwound (which is where we are now). Their position is that it was like a sugar high for the economy, and eventually the crash will come (and they weren’t alone in that, this has been openly discussed for years). We’re going from the Fed buying $40 billion a month to trimming $95 billion a month, and it’s not clear that will be enough to tame inflation. It may be that the Fed can navigate unloading $2.6 trillion in bonds (25% of the mortgage market, for perspective) without harming the market, but that entails a lot of finger crossing and hopium, and is not something that I’m willing to bet my own money on.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ok this is from a FB video I watched this morning, but I’d it true?

For those who bought at the peak of the market, if the house loses value they’ll have negative equity. If the economy then winds up in a recession, that could work out very badly for the housing market. Is that super off-base?

It depends entirely on a number of factors.

If they bought all-cash they've already got 100% equity and value is basically irrelevant. If they put 20% down there's very little chance they will see a 20% drop in values. If they put less down it depends entirely on if they or a working spouse lose their jobs. An underwater house isn't a big deal unless you're forced to move.

DC has such a huge percentage of all cash buyers (25%) that alone will insulate the market a great deal. Our job market is also probably the most stable in the country. Fed jobs aren't going anywhere, fed contractor jobs aren't going anywhere. I imagine ultimately the number of people in this area who don't have significant equity, who also see their home value go underwater, who also lose their jobs, who also don't have savings to ride a brief period of unemployment out, who also don't have a working partner who can at least cover the mortgage while they cut costs elsewhere will be low.

Omg regardless of what you think about the housing market, please do not listen to this poster. Do you have any idea what equity means? It’s just the amount that you would get when you sell. Value always matters. Even if you paid all cash, you don’t want to sell for a loss.

You're completely missing the point. if you're not selling, value doesn't matter. Your payments don't change, the house still serves as shelter. Value is just a number on a page. Having negative equity may prevent you from voluntarily selling, but from an economic standpoint someone who wants to sell but can't, but is still able to make their payments is no different from someone just living in their home like normal. The only time negative equity changes anything is if the owner is unable to make payments and is forced to sell or get foreclosed on, and as I already pointed out, in this area you'd have to fall through so many cracks to reach that situation that the overall number of people who will end up there is very low.

Also, do YOU know what equity means? Tell me exactly where you believe I misused the term. If you pay for a house all in cash and have 100% equity at the time of purchase it is mathematically impossible to be underwater regardless of future changes in value unless your property somehow achieves negative value. If you put 20% down you will have positive equity unless your house value drops 20% or more from purchase price which is very unlikely in this area.

It might not matter to you, but it matters to a lot of people!

NP. It only “matters” if you are selling, trying to refi, or trying to get a HELOC.

If you aren’t selling then it’s a “paper loss”. Just like I was a “paper millionaire” 20 years ago.

If a loss happens in a forest does it ever realize?

Why do people here think that people never need to sell their house? Death, job changes, retirement, relocation…there are lots of reasons houses need to be sold, and judging by this board, there are a bunch of people who have extended themselves to the limit to buy. Even if feds are exempt (which is questionable), a recession will hurt.

How many people have you seen on here count their home equity as part of their retirement savings? Lots counting on selling and moving to a lower LCL area and buying all cash with the DC home equity.

The current run up in home prices has been unprecedented, and if the we see a decline in prices commensurate with 2008, we can see 30-40% losses. There are people out there who bought years ago who will only lose paper profits, but, as usual, anyone who bought toward the end of the boom could get burned. Will that happen, who knows? But it is not a risk to be scoffed at.

I think the Fed is totally willing to throw people who bought in the past two years under the bus to normalize stop inflation, save the economy, and normalize the housing market. If prices drop 30% in late 2022, the only people who will be underwater are the people who bought between March 2020 and now. If you bought a house in 2019 you’d be happy as a clam because you’d still be up 10%.

That's what I was coming on here to ask -- would the Fed really go ahead and crash the housing market?

They don’t want to. But I agree with pp that they may decide that inflation is the bigger threat, given the choice between double digit inflation for all consumers and giving a haircut to a limited number of homeowners who bought at the peak of the market. They hope that they can navigate the cool down without a crash, but again, no one’s ever done this before.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ok this is from a FB video I watched this morning, but I’d it true?

For those who bought at the peak of the market, if the house loses value they’ll have negative equity. If the economy then winds up in a recession, that could work out very badly for the housing market. Is that super off-base?

It depends entirely on a number of factors.

If they bought all-cash they've already got 100% equity and value is basically irrelevant. If they put 20% down there's very little chance they will see a 20% drop in values. If they put less down it depends entirely on if they or a working spouse lose their jobs. An underwater house isn't a big deal unless you're forced to move.

DC has such a huge percentage of all cash buyers (25%) that alone will insulate the market a great deal. Our job market is also probably the most stable in the country. Fed jobs aren't going anywhere, fed contractor jobs aren't going anywhere. I imagine ultimately the number of people in this area who don't have significant equity, who also see their home value go underwater, who also lose their jobs, who also don't have savings to ride a brief period of unemployment out, who also don't have a working partner who can at least cover the mortgage while they cut costs elsewhere will be low.

Omg regardless of what you think about the housing market, please do not listen to this poster. Do you have any idea what equity means? It’s just the amount that you would get when you sell. Value always matters. Even if you paid all cash, you don’t want to sell for a loss.

You're completely missing the point. if you're not selling, value doesn't matter. Your payments don't change, the house still serves as shelter. Value is just a number on a page. Having negative equity may prevent you from voluntarily selling, but from an economic standpoint someone who wants to sell but can't, but is still able to make their payments is no different from someone just living in their home like normal. The only time negative equity changes anything is if the owner is unable to make payments and is forced to sell or get foreclosed on, and as I already pointed out, in this area you'd have to fall through so many cracks to reach that situation that the overall number of people who will end up there is very low.

Also, do YOU know what equity means? Tell me exactly where you believe I misused the term. If you pay for a house all in cash and have 100% equity at the time of purchase it is mathematically impossible to be underwater regardless of future changes in value unless your property somehow achieves negative value. If you put 20% down you will have positive equity unless your house value drops 20% or more from purchase price which is very unlikely in this area.

It might not matter to you, but it matters to a lot of people!

NP. It only “matters” if you are selling, trying to refi, or trying to get a HELOC.

If you aren’t selling then it’s a “paper loss”. Just like I was a “paper millionaire” 20 years ago.

If a loss happens in a forest does it ever realize?

Why do people here think that people never need to sell their house? Death, job changes, retirement, relocation…there are lots of reasons houses need to be sold, and judging by this board, there are a bunch of people who have extended themselves to the limit to buy. Even if feds are exempt (which is questionable), a recession will hurt.

How many people have you seen on here count their home equity as part of their retirement savings? Lots counting on selling and moving to a lower LCL area and buying all cash with the DC home equity.

The current run up in home prices has been unprecedented, and if the we see a decline in prices commensurate with 2008, we can see 30-40% losses. There are people out there who bought years ago who will only lose paper profits, but, as usual, anyone who bought toward the end of the boom could get burned. Will that happen, who knows? But it is not a risk to be scoffed at.

2008 was different, though. Lots of people were over leveraged and their mortgages were securitized, which means when the mortgages went south the investment companies holding the securitized/pooled mortgages. When the crash came, mortgage lending dried up. That’s different from mortgage interest rates going up.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ok this is from a FB video I watched this morning, but I’d it true?

For those who bought at the peak of the market, if the house loses value they’ll have negative equity. If the economy then winds up in a recession, that could work out very badly for the housing market. Is that super off-base?

It depends entirely on a number of factors.

If they bought all-cash they've already got 100% equity and value is basically irrelevant. If they put 20% down there's very little chance they will see a 20% drop in values. If they put less down it depends entirely on if they or a working spouse lose their jobs. An underwater house isn't a big deal unless you're forced to move.

DC has such a huge percentage of all cash buyers (25%) that alone will insulate the market a great deal. Our job market is also probably the most stable in the country. Fed jobs aren't going anywhere, fed contractor jobs aren't going anywhere. I imagine ultimately the number of people in this area who don't have significant equity, who also see their home value go underwater, who also lose their jobs, who also don't have savings to ride a brief period of unemployment out, who also don't have a working partner who can at least cover the mortgage while they cut costs elsewhere will be low.

Omg regardless of what you think about the housing market, please do not listen to this poster. Do you have any idea what equity means? It’s just the amount that you would get when you sell. Value always matters. Even if you paid all cash, you don’t want to sell for a loss.

You're completely missing the point. if you're not selling, value doesn't matter. Your payments don't change, the house still serves as shelter. Value is just a number on a page. Having negative equity may prevent you from voluntarily selling, but from an economic standpoint someone who wants to sell but can't, but is still able to make their payments is no different from someone just living in their home like normal. The only time negative equity changes anything is if the owner is unable to make payments and is forced to sell or get foreclosed on, and as I already pointed out, in this area you'd have to fall through so many cracks to reach that situation that the overall number of people who will end up there is very low.

Also, do YOU know what equity means? Tell me exactly where you believe I misused the term. If you pay for a house all in cash and have 100% equity at the time of purchase it is mathematically impossible to be underwater regardless of future changes in value unless your property somehow achieves negative value. If you put 20% down you will have positive equity unless your house value drops 20% or more from purchase price which is very unlikely in this area.

It might not matter to you, but it matters to a lot of people!

NP. It only “matters” if you are selling, trying to refi, or trying to get a HELOC.

If you aren’t selling then it’s a “paper loss”. Just like I was a “paper millionaire” 20 years ago.

If a loss happens in a forest does it ever realize?

Why do people here think that people never need to sell their house? Death, job changes, retirement, relocation…there are lots of reasons houses need to be sold, and judging by this board, there are a bunch of people who have extended themselves to the limit to buy. Even if feds are exempt (which is questionable), a recession will hurt.

How many people have you seen on here count their home equity as part of their retirement savings? Lots counting on selling and moving to a lower LCL area and buying all cash with the DC home equity.

The current run up in home prices has been unprecedented, and if the we see a decline in prices commensurate with 2008, we can see 30-40% losses. There are people out there who bought years ago who will only lose paper profits, but, as usual, anyone who bought toward the end of the boom could get burned. Will that happen, who knows? But it is not a risk to be scoffed at.

I think the Fed is totally willing to throw people who bought in the past two years under the bus to normalize stop inflation, save the economy, and normalize the housing market. If prices drop 30% in late 2022, the only people who will be underwater are the people who bought between March 2020 and now. If you bought a house in 2019 you’d be happy as a clam because you’d still be up 10%.

That's what I was coming on here to ask -- would the Fed really go ahead and crash the housing market?

Softening or even small drop isn’t a “crash”.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ok this is from a FB video I watched this morning, but I’d it true?

For those who bought at the peak of the market, if the house loses value they’ll have negative equity. If the economy then winds up in a recession, that could work out very badly for the housing market. Is that super off-base?

It depends entirely on a number of factors.

If they bought all-cash they've already got 100% equity and value is basically irrelevant. If they put 20% down there's very little chance they will see a 20% drop in values. If they put less down it depends entirely on if they or a working spouse lose their jobs. An underwater house isn't a big deal unless you're forced to move.

DC has such a huge percentage of all cash buyers (25%) that alone will insulate the market a great deal. Our job market is also probably the most stable in the country. Fed jobs aren't going anywhere, fed contractor jobs aren't going anywhere. I imagine ultimately the number of people in this area who don't have significant equity, who also see their home value go underwater, who also lose their jobs, who also don't have savings to ride a brief period of unemployment out, who also don't have a working partner who can at least cover the mortgage while they cut costs elsewhere will be low.

Omg regardless of what you think about the housing market, please do not listen to this poster. Do you have any idea what equity means? It’s just the amount that you would get when you sell. Value always matters. Even if you paid all cash, you don’t want to sell for a loss.

You're completely missing the point. if you're not selling, value doesn't matter. Your payments don't change, the house still serves as shelter. Value is just a number on a page. Having negative equity may prevent you from voluntarily selling, but from an economic standpoint someone who wants to sell but can't, but is still able to make their payments is no different from someone just living in their home like normal. The only time negative equity changes anything is if the owner is unable to make payments and is forced to sell or get foreclosed on, and as I already pointed out, in this area you'd have to fall through so many cracks to reach that situation that the overall number of people who will end up there is very low.

Also, do YOU know what equity means? Tell me exactly where you believe I misused the term. If you pay for a house all in cash and have 100% equity at the time of purchase it is mathematically impossible to be underwater regardless of future changes in value unless your property somehow achieves negative value. If you put 20% down you will have positive equity unless your house value drops 20% or more from purchase price which is very unlikely in this area.

It might not matter to you, but it matters to a lot of people!

NP. It only “matters” if you are selling, trying to refi, or trying to get a HELOC.

If you aren’t selling then it’s a “paper loss”. Just like I was a “paper millionaire” 20 years ago.

If a loss happens in a forest does it ever realize?

Why do people here think that people never need to sell their house? Death, job changes, retirement, relocation…there are lots of reasons houses need to be sold, and judging by this board, there are a bunch of people who have extended themselves to the limit to buy. Even if feds are exempt (which is questionable), a recession will hurt.

How many people have you seen on here count their home equity as part of their retirement savings? Lots counting on selling and moving to a lower LCL area and buying all cash with the DC home equity.

The current run up in home prices has been unprecedented, and if the we see a decline in prices commensurate with 2008, we can see 30-40% losses. There are people out there who bought years ago who will only lose paper profits, but, as usual, anyone who bought toward the end of the boom could get burned. Will that happen, who knows? But it is not a risk to be scoffed at.

2008 was different, though. Lots of people were over leveraged and their mortgages were securitized, which means when the mortgages went south the investment companies holding the securitized/pooled mortgages. When the crash came, mortgage lending dried up. That’s different from mortgage interest rates going up.

Yes, 2008 was different. But that doesn’t mean that the current situation isn’t perilous in a different way.

[Anonymous]

When have housing prices ever dropped 30-40%? Especially in the northeast/coastal areas for single family homes?

And whatever drops there were, how long did they remain?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ok this is from a FB video I watched this morning, but I’d it true?

For those who bought at the peak of the market, if the house loses value they’ll have negative equity. If the economy then winds up in a recession, that could work out very badly for the housing market. Is that super off-base?

It depends entirely on a number of factors.

If they bought all-cash they've already got 100% equity and value is basically irrelevant. If they put 20% down there's very little chance they will see a 20% drop in values. If they put less down it depends entirely on if they or a working spouse lose their jobs. An underwater house isn't a big deal unless you're forced to move.

DC has such a huge percentage of all cash buyers (25%) that alone will insulate the market a great deal. Our job market is also probably the most stable in the country. Fed jobs aren't going anywhere, fed contractor jobs aren't going anywhere. I imagine ultimately the number of people in this area who don't have significant equity, who also see their home value go underwater, who also lose their jobs, who also don't have savings to ride a brief period of unemployment out, who also don't have a working partner who can at least cover the mortgage while they cut costs elsewhere will be low.

Omg regardless of what you think about the housing market, please do not listen to this poster. Do you have any idea what equity means? It’s just the amount that you would get when you sell. Value always matters. Even if you paid all cash, you don’t want to sell for a loss.

You're completely missing the point. if you're not selling, value doesn't matter. Your payments don't change, the house still serves as shelter. Value is just a number on a page. Having negative equity may prevent you from voluntarily selling, but from an economic standpoint someone who wants to sell but can't, but is still able to make their payments is no different from someone just living in their home like normal. The only time negative equity changes anything is if the owner is unable to make payments and is forced to sell or get foreclosed on, and as I already pointed out, in this area you'd have to fall through so many cracks to reach that situation that the overall number of people who will end up there is very low.

Also, do YOU know what equity means? Tell me exactly where you believe I misused the term. If you pay for a house all in cash and have 100% equity at the time of purchase it is mathematically impossible to be underwater regardless of future changes in value unless your property somehow achieves negative value. If you put 20% down you will have positive equity unless your house value drops 20% or more from purchase price which is very unlikely in this area.

It might not matter to you, but it matters to a lot of people!

NP. It only “matters” if you are selling, trying to refi, or trying to get a HELOC.

If you aren’t selling then it’s a “paper loss”. Just like I was a “paper millionaire” 20 years ago.

If a loss happens in a forest does it ever realize?

Why do people here think that people never need to sell their house? Death, job changes, retirement, relocation…there are lots of reasons houses need to be sold, and judging by this board, there are a bunch of people who have extended themselves to the limit to buy. Even if feds are exempt (which is questionable), a recession will hurt.

How many people have you seen on here count their home equity as part of their retirement savings? Lots counting on selling and moving to a lower LCL area and buying all cash with the DC home equity.

The current run up in home prices has been unprecedented, and if the we see a decline in prices commensurate with 2008, we can see 30-40% losses. There are people out there who bought years ago who will only lose paper profits, but, as usual, anyone who bought toward the end of the boom could get burned. Will that happen, who knows? But it is not a risk to be scoffed at.

I said it only matters IF you are selling. So if you are selling then it will matter.

We won’t see 30-40% losses, if any loss at all. Most vulnerable to loss are undesirable locations/properties. And condos.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You think Jerome Powell has the nerve to shake up the housing market? No way. He was supposed to be a hardcore right wing rates guy but dropped to zero so fast it made your head spin. Then a few tweets from Trump and he didn’t touch rates for two years. He will raise twice to three times and that’s it.

He’s not going to do it on purpose. Trump wasn’t facing double-digit inflation, and the opposite is happening here. Biden is screaming at Powell to get inflation under control before the mid-term elections. The concern is that we’re already in the situation we were in in the early 80’s, when the Fed waited so long to act, that by the time Volcker did what he had to do, the cure was very painful.

Interest rates alone aren’t what is worrying. The amount of QE the Fed has to unwind is unprecedented. This is an oversimplification, but the problem is that the Fed has been buying up to $120 billion worth of Mortgage backed securities and Treasuries a month for years. That was $$ off the books of the banks, which allowed them to loan more $$. In May, they’re going to start letting $95 billion worth of those roll off as they mature. It’s not clear that they’ll meet that target, nor that simply letting the bonds roll off will do the trick. They may have to actively sell bonds, and no one has any idea what impact that will have on the loan market, other than not good. Banks will buy those bonds, but that will entail using cash that then won’t be available to loan out as mortgages.

Here’s the doomer perspective, which I don’t necessarily subscribe to, but it’s not outside the realm of possibility:

https://seekingalpha.com/article/4488903-another-housing-bubble-fed-holding-pin

Wait, seeingalpha is suggesting there's a housing bubble? Stop the presses:

https://seekingalpha.com/article/2790915-2015-housing-trends-will-the-echo-bubble-continue-expanding

https://seekingalpha.com/article/4066115-housing-bubble-is-back

https://seekingalpha.com/article/4187390-u-s-housing-bubble-enters-stage-2-suddenly-motivated-sellers

https://seekingalpha.com/article/4236567-splendid-housing-bubbles-in-america-shrink

I didn’t say I agree with them, but I give them credit for being consistent. They predicted that the unprecedented levels of QE would lead to inflation and an unsustainable boom in housing prices (check) and that it would become dangerous when it eventually had to be unwound (which is where we are now). Their position is that it was like a sugar high for the economy, and eventually the crash will come (and they weren’t alone in that, this has been openly discussed for years). We’re going from the Fed buying $40 billion a month to trimming $95 billion a month, and it’s not clear that will be enough to tame inflation. It may be that the Fed can navigate unloading $2.6 trillion in bonds (25% of the mortgage market, for perspective) without harming the market, but that entails a lot of finger crossing and hopium, and is not something that I’m willing to bet my own money on.

Consistent? Broke clock you mean. There is no proof the boom in housing prices is unsustainable, if you mean the prices will hold. I don’t think any one is advocating that prices will keep rising at the same level, so you would be arguing against a straw man.

And to be honest, they and many others have been warning of inflation for DECADES. Yes it is here. Mostly from supply chain disruptions, but it is up to the Fed to help halt it.