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re: Fannie Mae says a recession is likely; could hit the housing market
Posted on 5/20/22 at 7:57 pm to WaWaWeeWa
Posted on 5/20/22 at 7:57 pm to WaWaWeeWa
quote:
And if the houses that are available can’t be bought at the current prices because interest rates are rising and people can’t afford the monthly payment, what happens? The prices come down.
Yeah, a lot of people who can afford a $1700/mo mortgage probably can't afford a $2700/mo mortgage and that's going to be a pretty realistic payment difference if we see mortgage rates go to like 7.50%. But this will take time to work through the system.
This post was edited on 5/20/22 at 7:58 pm
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Posted on 5/20/22 at 8:00 pm to Eli Goldfinger
quote:
Housing demand will still outpace supply.
That’s mostly what’s happening now…supply side shortages.
Housing demand could tank if the cost of everything else continues to rise along with loss of jobs, declining stock market, etc.
If people are being forced to spend more money on food and power they'll be less likely to throw down money for a house.
Posted on 5/20/22 at 8:02 pm to dewster
quote:
Stagflation could very well lead to job losses and families not being able to cover their mortgage
This is the major factor that seems to be minimized. How high will the Fed go on rates to cool down the inflationary component?
Posted on 5/20/22 at 8:08 pm to WaWaWeeWa
If your bear market thesis is correct, then how do you explain the movement of hedge funds into single family housing and creating homes that are built to rent (which will also exacerbate the housing supply crunch)? I could see housing prices stall, and maybe even a minor correction in the short term, but I don’t buy the whole housing market is gonna crash theory. I think you could see a continued redsistribution on population from the most expensive housing markets to markets where housing costs are cheaper. Your judgment seems to be made by only looking at the demand side of the equation. Supply has been historically low and I don’t see that correcting itself any time soon. Locally, with all of the new industrial projects being announced, I think the impact will be much less. Just my 2 cents however.
Posted on 5/20/22 at 8:11 pm to frequent flyer
In unrelated news, weathermen have predicted 100% chance of rain when water is falling from the sky.
Posted on 5/20/22 at 8:13 pm to lsualum01
quote:
If your bear market thesis is correct, then how do you explain the movement of hedge funds into single family housing and creating homes that are built to rent (which will also exacerbate the housing supply crunch)? I could see housing prices stall, and maybe even a minor correction in the short term, but I don’t buy the whole housing market is gonna crash theory.
They are shifting to hard assets
It’s a move that signals an outlook even more pessimistic than mine
Posted on 5/20/22 at 8:24 pm to frequent flyer
We are absolutely going to have a recession and a housing market correction, and I think it’s going to be worse than 2008. The current run up has been largely interest rate driven, with people able to afford a more expensive home due to low interest rates. Don’t forget that people ‘walking away’ from their mortgages because they couldn’t afford the payment and couldn’t sell the house for anything close to what they bought it for was a thing as recently as 2012. ‘Cash for keys’ was also a popular program. What saved the market then was the fed’s ability to cut rates to 0% and start QE to buy mortgages. With the inflation we have now, market forces will have to settle this. The fed is unwinding it’s balance sheet (QT) and will be unable to cut rates even if the housing market implodes. I’m afraid a lot of people who bought $500K starter homes will be in foreclosure unless they can ride it out for 5-10 years. I think we are in a very bad spot.
Posted on 5/20/22 at 8:24 pm to frequent flyer
Bottom line, we are a customer economy. It depends on everyone to spend money, which means credit is important for it to survive.
There is a conflict between what is in our (individually) best interest and what is in the best interest of the economy.
The more money people save, that's money that isn't going into the economy. It might not be in your best interest to by a $300k house or a brand new vehicle, but if you want to keep up with everyone else you will and that's good for the banks.
Anyway, what I am getting at is we don't really produce that much and when you do depend on everyone spending money.. when you throw in a pandemic in which people were saying home that has a big impact.
As for as the housing market. I remember in 2006-07 seeing all of these neighborhoods popping up and homes selling as soon as the contractor started building them and thinking that there was no way the housing market would stay the way it was. And then people would move in and there was a new truck and SUV in front of these new homes. All it takes is for something unpredictable to happen.
Starting in late 07, that's when the housing market started to take a hit because of all the default loans which lead to people not being able to get loans as easy.
Right now the pandemic is having an impact on the economy and we have no idea what's going to happen. The stocks I trade on my own.. Right now I am down half of my original investment.
Our economy is so god damn fragile (again because is customer spending driven).
So thanks Fannie Mae for stating the fricking obvious.
There is a conflict between what is in our (individually) best interest and what is in the best interest of the economy.
The more money people save, that's money that isn't going into the economy. It might not be in your best interest to by a $300k house or a brand new vehicle, but if you want to keep up with everyone else you will and that's good for the banks.
Anyway, what I am getting at is we don't really produce that much and when you do depend on everyone spending money.. when you throw in a pandemic in which people were saying home that has a big impact.
As for as the housing market. I remember in 2006-07 seeing all of these neighborhoods popping up and homes selling as soon as the contractor started building them and thinking that there was no way the housing market would stay the way it was. And then people would move in and there was a new truck and SUV in front of these new homes. All it takes is for something unpredictable to happen.
Starting in late 07, that's when the housing market started to take a hit because of all the default loans which lead to people not being able to get loans as easy.
Right now the pandemic is having an impact on the economy and we have no idea what's going to happen. The stocks I trade on my own.. Right now I am down half of my original investment.
Our economy is so god damn fragile (again because is customer spending driven).
So thanks Fannie Mae for stating the fricking obvious.
Posted on 5/20/22 at 8:29 pm to Flavius Belisarius
quote:
The current run up has been largely interest rate driven, with people able to afford a more expensive home due to low interest rates.
nail > head
And just think about people who could actually afford their current mortgage but their budget was stretched to the max. Now with inflation they are going to be forced to pay their mortgage or sacrifice something else.
Many people will probably downgrade into cheaper housing driving prices down.
Posted on 5/20/22 at 8:35 pm to WaWaWeeWa
quote:
Many people will probably downgrade into cheaper housing driving prices down.
Except they won’t be able to because instead of a 3% interest rate they’ll be paying 6% at least, and that’s if they are able to sell their current home for anything close to what they bought it for, or else they get foreclosed on. Again, there are more parallels between 2022 and 2007 than people want to admit.
Posted on 5/20/22 at 8:36 pm to Eli Goldfinger
Do you realize that 10% per year is a whole fricking lot?
Posted on 5/20/22 at 8:38 pm to Eli Goldfinger
quote:
Millennials were slowed by the Great Recession, but they have some money now and need housing.
I think you are underestimating the number of millennials who live in apartments.
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