patrick.net

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I agree as far as real estate inflation as by 2007, the ratio of home price to median household income reached its all time high of 5.1

And that was when the 30 year mortgage rate was around 7.5% ! ! !

Now the ratio is at 4.4 but at a 30 year mortgage rate of around 3.2%.

https://www.longtermtrends.net/home-price-median-annual-income-ratio/

Who can forget the FROTH! FINDING! MISSION!

Agree with you there @APOCALYPSEFUCKisShostakovitch

Mozillo is scum.

Housing prices are far beyond the multiple of wages that they were in 1972.

Much of this is too-low interest rates, and too many mortgage guarantees by the government. In fact, there should be zero mortgage guarantees by the government. It just makes housing more expensive.

Patrick says

Much of this is too-low interest rates, and too many mortgage guarantees by the government. In fact, there should be zero mortgage guarantees by the government. It just makes housing more expensive.

I got a 30 year Vet Affairs (VA) mortgage with a 3% interest rate back in summer of 2016.

The home price was 5.1 times my reported household income, however the housing costs (mortgage+property tax+hoa fee+insurance) was only about 38% of my income.

Looks like we are stuck with low interest rates (i.e., 3% to 4% mortgage rates). If the Federal Reserve raises them, then it will kill the housing market and particularly the builders/developers.

What happens if the Chinese and Saudis sell off all their US Treasury bonds?

Interest rates would have to go up to get anyone to buy them.

Except -- the Fed might buy them at low interest rates with newly printed cash.

But then, does that really control mortgage rates?

There has to be some scenario under which mortgage rates rise, but I don't know what it is.

Patrick says

There has to be some scenario under which mortgage rates rise, but I don't know what it is.

Incomes going up across the board. Maybe if good paying jobs come back to the USA and jobs go to citizens first. No illegals or h1b's suppressing wages.

APOCALYPSEFUCKisShostakovitch says

By the way, Pubah Pat, I can't see my own comments any more. Really strange.

Just posted one on Mr Panther's note and while it registers on the post annunciator on the index page as (1) comment, when I click on the item, my comment is not there - for me, anyway.

I notice your ignores are back up to 51. Maybe you accidentally ignored yourself?

I wonder if HEYYOU ignores himself?

Onvacation says

I wonder if HEYYOU ignores himself

Theyself, not assuming species.

I foresee interest rates going to a new low after this unprecedented economic crisis created by the fear mongers and healthcare bureaucracy. The Clerisy is in full NAZI mode, and it’s sad to see how much economic damage they’re being allowed to inflict on America in the name of HEALTH CRISIS!!!!
But yah, unemployment levels higher than Great Depression? Interest rates are going to reach new lows.

Shaman says

I foresee interest rates going to a new low after this unprecedented economic crisis created by the fear mongers and healthcare bureaucracy.

Cash is dirty and should not be used anymore. All money must be deposited in a bank account. A small negative interest rate will be charged to keep y our money safe.

Okay, but what caused the housing inflation in the first place?
So much money was available to borrowers, and anyone who could hold a pen could borrow money.
The asset bubble is inflated by the availability of credit to buy the asset.
This has happened before.
I visited the museum of finance down on Wall Street in 2010 and they have several examples of this happening in history.
The real estate market had loans designed to require asset inflation to even work; once the inflation slowed, the house was in foreclosure. The loan was called ARM.
So a guy I know foolishly got this loan, put down $80,000+, ARM mortgage, and later he lost the money and a bank lost money when it all collapsed and he didn’t have the ability to pay the higher mortgage.
Lend money to the wrong guy and you lose, buy an asset with borrowed money and you may lose.

Right now housing prices are lifted by low interest rates and relatively high wages in certain parts of the country. In the California coastal areas, the deal is that we have a lot of people with money who can buy. It’s been a sellers market for about eight years.

clambo says

Lend money to the wrong guy and you lose, buy an asset with borrowed money and you may lose.

I love watching Dr Michael Burry in the movie The Big Short. He talks a lot about ARMs (adjustable rate mortgages) expiring and subprime mortgages.

I remember a neighbor who barely qualified for a mortgage who got an interest only mortgage at an adjustable rate. He housing costs (mortgage+property tax+insurance) was about 50% of his household income.

Onvacation says

Cash is dirty and should not be used anymore. All money must be deposited in a bank account. A small negative interest rate will be charged to keep y our money safe.

Most banks are offering 0.1% interest on checking accounts. That's the worse I've seen it. I don't see them going below 0%.

A bank requiring $1500 minimum balance on a checking account and only paying 0.1% can turn around and lend that money easily out at 4% to 5% such as for home equity line of credit (HELOC) loans.

The bank also requires a mortgage escrow balance of $1500 for a typical starter home. Banks have access to easy money like that.

Patrick says

Except -- the Fed might buy them at low interest rates with newly printed cash.

That is right as the Federal Reserve has pushed out the ChiComs as far as buying up US Treasuries.

ChiComs only own about $1.1 trillion. They have been winding down since their peak ownership was at $1.4 trillion in 2014.

ad says

Looks like we are stuck with low interest rates

Yeah, it's sort of like herpes at this point. I would luv luv LUV me some 77 style interest rates though!

Onvacation says

A small negative interest rate

Fed futures rates went negative Thursday. -0.25:0

clambo says

Okay, but what caused the housing inflation in the first place?

I lather a lot of the blame on Chris Dodd and Barney Frank. Wall street and the mortgage industry just took advantage of the shit situation those assholes put them in. Then the FED blew it all back up again like the dickheads they are.

APOCALYPSEFUCKisShostakovitch says

Onvacation says

I notice your ignores are back up to 51. Maybe you accidentally ignored yourself?

Yes, I was disturbed at my hater base was shrinking. Fixed.

Damn, maybe there is a way for a random user to get another user to ignore himself by including an ignore link as, say, an image url. That would be a bug.