Now think of all the other industries that were heavily dependent on artificially low rates. Especially tech

Figured I’d update with some real time data. A few pages back I mentioned we got pre approved at 5.05% for a conventional loan - rate locked today at 4.99.  So down a smidge, I’ll take it.  We’ll have to keep an eye on things because we get one chance to shift lower prior to close. Although the chances of that occurring seem to be about 0.

I work in real estate title.  Business is about half of what it was this time last year.

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Is supply the issue or is finding buyers the issue? Also what area?

Sweet, I was anxiously awaiting the return of the NINJA loan.

Nothing to worry about, the best economy in history, run by genius adults!

https://www.cnbc.com/2022/04/28/us-q1-gdp-growth.html



Ooopski.

Not in mortgage but my bank is listed in that article, yes. It was announced internally about two weeks ago
Admittedly our mortgage Dept did not appear robust or have diverse products (I went to outside banks for my personal business)

He's pleased to announce that we've set course for the closest iceberg and are all ahead full!

Wow, that’s amazing.

"Credit is underwritten based on LTV, FICO, and liquidity" = these are buyers who have great credit scores and the cash available to pay in full but they see the benefit of buying a an investment property at an interest rate lower than the inflation rate.

I guess if I was a millionaire without a job, these would be the way to go.  Smart really.

For now maybe.

Ninja and ARMs are back.

I hope you’re right, I’m looking for something with 6 seats.

https://fortune.com/2022/04/27/deutsche-bank-major-recession-2023-inflation-federal-reserve/

“
Less than a month after saying the U.S. would experience a “mild” recession, Deutsche Bank has doubled down, saying the recession will be worse than it previously imagined.

The bank now expects “a major recession” in late 2023 to early 2024, according to a Tuesday note to investors titled “Why the coming recession will be worse than expected.” Although the bank predicts the economy could pick up in mid-2024, things will get worse before they get better, according to the report.

The bank had previously raised eyebrows in early April as the first major bank to predict a recession would hit the U.S. by late next year. The Tuesday report, written by a team led by Deutsche Bank’s chief economist and head of research David Folkerts-Landau, questions why other major banks maintain rosier projections for the U.S. economy.

“I am very surprised we are the extreme outlier on the street,” Folkerts-Landau writes in the report. “Given the macro starting point, my view is that the burden of proof should be on why this boom/bust cycle won’t end in a recession.”

…”

2023.

We have morons in charge. We will be lucky if we get through the summer.

Dude is perhaps a bit alarmist and probably trying to sell something.    However, some interesting points as to the cash out issue, which has been discussed in this thread.  The problem is incentivizing people dumping their homes.

Month ago


Couple of days ago.

The fuck. How do you buy a home with out income?
Both our first mortgage and our refi crawled up our asses about income.

Yep, first quarter in 2022 gdp was down 1.4%.  Another quarter of that, and it will be official.

Time to short the AA tranches.

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Thanks Putin!  

Agreed, the talking heads on the TV said it, so it must be true.  They wouldn’t lie to me.

Obviously this means we need $5T more stimulus

Welp, my house is under contract and appraisal is due back shortly.  Maybe that'll be three of us in this thread who get lucky.  Last house I sold I got boned by their appraiser for over 20k.

Appraiser was at my house Weds for my HELOC. Waiting to get the report back.

Just pulled the trigger- 4.875% VA loan locked in today

This was sorted out, loan didn't exist anymore and was just a ghost in the paperwork. No delay on settlement. Whew

Good. I keep my lien releases in the safe forever. Just in case.  Sure, the county is supposed to have a copy but I’d rather be in my hands.

Mortgage rate increases are already knocking people out of buying.

2 previously removed houses are back on the market after the mortgages fell through because of rate increases.  

Either the buyers didn't want to pay for it or they ended up being rejected.

A heloc right now I'd be careful unless you found a unicorn that's at a locked rate.
To the best of my knowledge they are always at a variable rate tied to prime + whatever you agreed to.

Who's Warren Buffett?

BTW when foreclosures start really ramping up Blackrock et-al are going to look like geniuses for buying up the homes they already have and continuing to manipulate the prices to their favor.

Being rejected is easy when you go stupid at Home Inprovement stores and order new appliances and electronics BEFORE owning because ‘we wanted things ready when we moved in.’

1.99% for 6 months then prime +1

Problem is, nowadays, you HAVE to order ahead of time or you might be waiting weeks or months after you close to actually get the appliances you need.

People think the supply chain is mostly fixed now, it isn't, especially with white goods.

I used to be a bar tender, now I own a boat.

Lots of people overextended them selves with easy money.

Easy money gone and costs are up.

This was an entertaining read.

https://www.reddit.com/r/wallstreetbets/comments/uflx06/the_2022_real_estate_collapse_is_going_to_be/

The 2022 Real Estate Collapse is going to be Worse than the 2008 One, and Nobody Knows About It


There's going to be a lot of text here, so all you smooth brain apes who are on reddit, a text based website, yet are still to retarded to read, can skip to the end where there will be a very short summary, a bottle of milk from your mother, and a blankie.

First, lets talk about the part of the real estate market that's gonna go bust that everyone knows about (or at least that people who pay attention to this shit or read my previous DDs know about): CMBS. This is the Commercial Mortgage Backed Securities Market. These are loans on commercial buildings that have been securitized, bundled, and sold to investors. The following is an explanation of the CMBS issues I wrote for another DD over six months ago:

The CMBS (Commercial Mortgage Backed Securities) Bomb

This one is a bit different from the mess we had in 2008 with MBS (mortgage backed securities) because it's a different market with different rules, and it's a smaller total market than MBS.

That said, the problems here might actually be worse. There is a company called Ladder Capital, formed out of the remnants of the Bear Stearns bond department, that has struck an unusual deal with Dollar Store, and they have a LOT of properties that are very, very much coasting on made up mortgages. I could easily write like three pages on this one partnership alone, but I'll just summarize instead and say these people learned absolutely nothing from 2008 except that it was a profitable scam that carried no jail time.

To understand just how bad the CMBS mess is, you need to understand how CMBS' work. At first glance, they're similar to regular MBS, it's a bundle of tens or hundreds of mortgages for commercial properties, they're divided into tranches (usually six) and the lowest tranches pay out the highest yields but also fail first. And now things get a little complex, so I'm going to simplify like crazy here, but this is the most important part to understand why this is all going to blow up.

A commercial building is an income generating property, it's market value is derived from how much income it generates. The bank lending you the money will want you to put up some amount of collateral for the loan. If rents go up, the amount of collateral you have to post goes down. If rent goes down, the amount of collateral you have to post goes UP. Now the weird thing about CMBS loans is that if only half your building is rented, you can just pay half your mortgage and whatever you owe for the other half of the building just gets added to the end of the loan. Now, say you can't rent out the empty half of your building, and you want to renegotiate the terms of your loan rather than just keep adding debt to the back of your loan. Well, this is where the CMBS comes into play, because all those different tranches? The investors behind them have different incentives, the guys at the lowest tranches don't want you to modify the loan, because that means losses, and they take those losses first, while the guys in the highest tranche want to modify the loan because it generates more income for them and they're not eating any losses. Unfortunately for you, in most CMBS agreements you need a supermajority of 70-80% of the votes to get a loan modification.

So, to lower rents to market rates and get the building rented out, since you can't get a loan modification, you, the landlord, have to write a check to the bank to make up the difference between the value of the building at the old, higher rental rate and the value of the building at the new, lower rate. Or you can just do nothing, get an extra write off for your taxes, and hope some sucker comes in and rents at the higher price or a different sucker comes along and buys the place from you, making it their problem. This is why you'll see so many empty storefronts with ridiculous asking prices that the landlords won't budge on - it's because they can't.

I really, really skimmed just the teeniest top of the surface on this subject, but basically all those CMBS notes that are super toxic start coming due in March of 2022, and they're going to absolutely detonate the commercial property market. Many banks and investment groups will be destroyed when these go bad, just like in 2008.

Video of Empty Stores in NYC

This is a video from a guy who just walked around downtown NYC showing all the empty stores and how the place basically looks like a dead mall now.

TIMEFRAME: March 2022

Well, I said March 2022 was when these shit CMBS notes were going to start detonating/causing problems. Let's check shall we?

​

God that's a big shampoo commercial.

You see that little spike at the end of the head and shoulders before it really dives to new all time lows? Yeah, that's the last day of February, 2022.

Ok, so that's 1/3 of the US real estate market, what about the 2/3rds of the market that's residential? Well, this is where it gets weird, and how everyone (including me) kept missing it. I've written before about the issues with the US housing market - housing units relative to population has actually increased over the last decade+, while homeownership rates have dropped and prices have skyrocketed.

Everyone who looks at the residential market thinks its being bought by residents, and that all the people buying today are actually qualified buyers with good credit scores and jobs and such. And that is true for all the people buying houses. There is not a repeat of the 2008 sub-prime debacle with NINJA (No Income, No Job, no Assets) loans. What is new - and whenever you get a financial crisis it's always, ALWAYS driven in large part by a "new" type of financial instrument (read debt) - is the sheer number of homes being bought up by with cash, and it's inferred these are all institutions and foreigners. For example, about $90 billion in US real estate was bought by foreigners in 2021. Wall Street however, blew that away, hitting as high as 1-in-7 of all homes and 1-in-2 of all apartments.

Now, people look at that record institutional/foreigner buying and think it's the explanation, but the truth is, even with those crazy numbers, 6-in-7 homes and 1-in-2 apartments are still being bought by regular people, often with, again, "cash".

These purchases are frequently referred to as "cash buys" because the buyer just pays the seller cash. However, they don't actually have piles of cash lying around in freighters to pay for this stuff. They take out loans. Specifically, they take out loans on their equity assets. Now this is where it starts getting sticky, because institutions are not buying these houses and apartments as residences, they're buying them as income generating properties.

In traditional home mortgage loans, there are two things assessed: the value of the house, which acts as collateral for the loan, and the borrower's ability to pay back said loan via wages or assets. It's a relatively simple two-factor risk analysis.

Now, let's look at what risks the Wall Street owned rental homes are subject to: income generated/rental rates, housing values, stock/derivative values, interest rates, urban planning, crime rates, and overall market returns. So basically, the money being loaned is getting assessed on a one-factor risk analysis: value of assets under management (AUM) of the borrower. But then that money is getting used to buy a whole bunch of houses/apartments, and all of a sudden it's subject to a whole horde of other risks, and the original risk profile is more useless than you are with your compensated evening companionship after a couple drinks.

There's one other thing I haven't mentioned yet, that's huge, and the reason Wall Street never really messed around with buying up everyone's house before the 2008 crash. And it's a big one: Liquidity. More specifically: Liquidity of Assets. Lemme say that one more time for the folks in the back recovering from barnyard animal sex gone wrong hearing loss:

Liquidity of Assets
Wut mean? Glad you asked 'tard. Liquidity of Assets (LoA) basically means how easy or hard it is to sell an asset. Now, one of the reasons wall street hedge funds and investment banks can do things like leverage up at 37.5-1 (the theoretical max level they use) or, say, 200-1 (the level Goldman is at according to the last 13F filing I read) is because the money is backed by securities and derivatives and other financial instruments which are extremely liquid. So if things go tits up like the Titanic, the lender can force a sell off of this stuff very quickly to get their money back. Now in reality this isn't true, or Credit Suisse and Nomura wouldn't still be dragging around Archegos bags from last year, and Bill Hwang couldn't have pulled a Reddit meme and avoided margin calls by not answering the phone (yes, that really, actually, in real life, happened). But in theory, it is.

Now, housing? Housing is illiquid as fuck. It takes a lot of time and effort to sell a house. Or to buy one. There are special rules and whatnot from the federal government about what kind of collateral and stuff you need for a residential house. 2008 was so bad because the banks basically ignored all of those. After 2008 one of the few things the government sort-of did fix was tightening up lending standards for retail (regular people), so everyone who's looking at the last crash sees that retail borrowers aren't overleveraged with bad loans and sub-prime and thinks it can't happen again. But all those rules and whatnot get ignored if the buyer is paying "cash". This is the financial equivalent of the military expression "Generals always fight the last war".

The massive use of margin/equity backed loans by both retail and institutions to buy property has taken two separate markets, the liquid/volatile equity market, and the illiquid/stable housing market, and stitched them together like a human centipede with dogshit wrapped in catshit debt passing back and forth into one market that is unequally liquid and extremely price volatile.

If you need proof that this is what's happening, lemme help you out with some charts that illustrate my point:

This is US Margin debt over the last few years

https://preview.redd.it/27i0k94w6pw81.png?width=502&format=png&auto=webp&s=d42eb68f00af67a6afad37582123d3277c940409

Now lets compare it to US home prices over the same period

https://preview.redd.it/5d5qtnvbhpw81.png?width=1168&format=png&auto=webp&s=d60e5cbd4091a43a3e437532cb9fa414d4a345d9

So basically, we've got loans on inflated assets fueling loans on other inflated assets. This is feedback loop that goes parabolic.. then crashes, hard. You can see the margin debt coming down and forming the first valley before it goes back up a little to complete the Head and Shoulders pattern, then drills down into the center of the earth. Because housing is illiquid, it's going to lag that drop, but as you can see from the price curve leveling off, it's getting ready to do the same thing.

Now, we know that there are a ton of loans using inflated, volatile collateral on illiquid, inflated assets. And this is a certified bad thing. But the coming death spiral of equity/asset sales isn't the only giant elephant in the room everyone is ignoring. I'm talking of course, about Evergrande in specific and Chinese property bonds in general.

The list of Chinese real estate developers that aren't paying their employees, debts, bonds, or suppliers is actually longer than you pretend your wang is, so we'll just use Evergrande as a proxy for the whole lot of them.

Evergrande hasn't made hundreds of millions of dollars of interest payment on bonds since September. A couple weeks ago they failed to pay the principal payment on a maturing bond to the tune of $2.1 Billion. So, you'd think that means their debt is junk and they've defaulted, right?

Not so fast. Let's check what the big 3 ratings agencies have to say about it:

Fitch: RD - Restricted Default

S&P: SD - Selective Default

Moody's: Caa1- Rated as Poor Quality and Very High Credit Risk

You notice what's missing from all of those? "D" - Default. Evergrande has missed everything they can possibly miss, and they're still not rated D. Hell, those brazen cockchuffers at Moody's actually have 4 separate ratings lower than what they're slapping on EG bonds. Here, let me take a second to speak in the meme language you smooth brained retards actually might understand:

https://preview.redd.it/dc1p7y99fqw81.jpg?width=849&format=pjpg&auto=webp&s=d7adb931a585d603db30e2b6b8456db353404948

The reason that none of these agencies will put the "D" on Evergrande bonds is twofold -

1: they don't want to piss off the Chinese government

2: the banks and hedge funds that are their primary clients are balls deep in this debt and can't get it off their books because shockingly people haven't forgotten how those same banks and hedge funds fucked, saddled, and rode them with garbage debt in 2008.

Why is this relevant to US housing, equities, and the margin loans financing the spiraling prices of both? Easy. The same people who hold the worthless Chinese debt also hold trillions of dollars of equities that they've taken margin loans against to buy trillions of dollars of US Housing. After Amazon's Q4 earngings, everyone who looked into them said "Holy crap! The only thing holding up their ER is this $110 Billion Rivian valuation!" Some people even made memes about it on WSB pointing out that it was the only thing holding up the entire US market. Now, what happened when AMZN's Q1 ER came out and the RIVN valuation had dropped to more realistic levels? Right, a -189% miss on earnings and a huge bear run on SPY and QQQ.

Quick shout out to those of you who like to play options on stock lockup expiries - RIVN's lockup ends on May 8th, and AMZN and F have a ton of shares with a cost basis of $10 they can sell on or after that date. The price is currently $30. You do the math on if they want to hold onto that garbage once they can dump it at a profit.

That's a huge drop in the collateral backing all that margin debt. Is it enough to cause the Mother of all Margin Calls (MMC) and set off the worst crash since 1929? Nope. Not yet. But it's coming. Remember how people pointed out on AMZN's last ER how they were actually super fuk? Yeah, you know who had a supposedly positive ER but is actually super-mega-fuk and just lied through their teeth about it? Apple. AAPL doesn't have a single factory working right now, and their by far #1 market - China - is in the midst of complete economic collapse. (the politburo doesn't have emergency meetings about giant spending packages because things are going well) They gave zero guidance on either of these things, which makes me think that it's even worse than I think it is, and I think it's fucking horrible. But back to the bad Chinese debt. The reason Wall Street can survive a hit to something like AMZN and the indexes is that they're hedged to the balls for stuff like that. Know what they're not hedged for? Chinese property bonds universally going to zero.

So what happens when the collateral for those margin loans goes down? I'm sure you retards behind Wendy's have all heard this one before - you get a margin call. First, you (or more likely your broker) sells equities. But if equities are all dropping, they comin' for that money, and they're looking at your assets to get it. Guess what? Housing and commercial real estate are both assets they can force sales on. So that same self-reinforcing spiral that drove up both equity and real estate prices? It's going to go into reverse, but here's the thing, when everyone is selling at the same time, prices go down really, really, really, really, really, really fast.

We learned this last time in 2008. This time, because the housing market is directly tied to the crashing stocks, instead of indirectly through people who will default over time as they lose their jobs or balloon payments come due or rates adjust, it's going to happen all at once, faster and more violently. We actually got a brief preview of what this is going to look like thanks to the wild incompetence and greed at Zillow - Z. Their stock crashed 40% in five days when it was revealed they'd bought too many houses they couldn't rent or flip and had to sell them at a loss. And that was just a couple of neighborhoods in Arizona. When this hits nationwide, it's going to be exponentially worse.

How much worse? Well, that depends on where you are. Here's some graphs explaining that while the US is fuk, somehow our Maple Swiling neighbors to the north are exponentially worse off - life lesson, don't tie yourself to China kids.

This is bad, but it's kind of hiding how bad because the data cuts off too soon after the COVID crash.

https://preview.redd.it/fp2lg6eqrqw81.jpg?width=390&format=pjpg&auto=webp&s=ea798013a5e45454c0be8e952c08b61ec0926728

Yeah, Canada.. I'm sorry maple's. It's gonna be rough. Good luck, and care with RBC, pretty sure that between a huge position in Chinese debt and an incredible number of soon to be bad mortgages and margin loans they're completely worthless.

https://preview.redd.it/oaxud29rrqw81.jpg?width=461&format=pjpg&auto=webp&s=c533ad7efe260d452a16e99cced6185e46b40449

Look, I started writing DD's last fall saying we'd just gone into recession but nobody noticed and everyone laughed at me and said I was crazy. After that Q1 GDP miss it looks a bit different, ya? Last summer I wrote about how CMBS was fuk and it would start coming due in March 2022, and people pointed and laughed. See the chart earlier in this post. Now I'm telling you that the banks and the Fed and every fucking person has fucked up and missed that real estate and equities have gotten tied up in a gordian knot that's getting sucked into a black hole of failure. I'd like to be wrong. I've been wrong before (see my terrible takes on corporate hedging of HYG for an example), but I don't think I'm wrong here.

The market and housing and everything is going down like Anne Robbins trying to get off the Hollywood black list. I've never given dates before because I didn't have a good enough idea of when things would finally hit a critical mass. If we keep following the 2008 chart (thanks for being predictable algorithms!) we're going to go up for a couple of weeks then crash sometime between the end of May and the middle/end of July. Summer collapses are historically rather rare, so I like this fall myself, but I wouldn't be surprised by either outcome.

https://preview.redd.it/3zx4dri9tqw81.jpg?width=275&format=pjpg&auto=webp&s=6b6cbdadfa3f647e7f086b32478feea9136bc500

TL;DR: In 2008, the unknown weapons of financial mass destruction were sub-prime loans, MBS, CDS, and CDOs. In 2022 they're margin loans, asset backed loans, Chinese bonds, and "cash" purchased assets.

This is how inflation leaked into the real economy from the assets it was supposed to be segregated in. Fed printer goes brrrrr --> assets inflate --> margin loans against assets drive up real estate --> owners of real estate suddenly have lots of extra money --> inflation.

As of November of '21, the Fed had printed $13 Trillion since the start of COVID. $1 Trillion was stimmies. The rest? The rest went to the rich via inflated asset prices and debt purchases. Don't believe them when they try to blame this shitshow on stimmies and the just now conveniently-mentioned-in-the-media "return of sub-prime loans" bit. They just want a chance to blame this on poor people and immigrants to avoid having anyone look at them. And don't think JPow's greedy ass can save you this time, to match the financial impact of what the Fed did during COVID they'd have to print nearly $60 Trillion. That's Weimar Republic territory, if we're not headed there already.

-----------------

EDIT: a lot of you aren't understanding my point, which sort of proves it I guess. Look, housing is going to crash because the corps and investors and "cash" buyers are going to get liquidated on their margin loans when the market crashes. That's going to free up way more supply than there is demand, driving prices down. Again, this exact scenario was seen with the Zillow housing sell-off last fall.

The banks and lenders and regulators literally DO NOT KNOW that these margin accounts are actually propping up housing, because it doesn't show up on any of their data.

EDIT2: SPY 12/16 200p, GME 1/20 950c, sell on volatility spikes, rebuy when they drop, vary dates and strikes slightly to avoid wash sales

*Sources include but not limited to: FRED, Statista, CoreLogic, FINRA

Someone is paying attention. The story fits IMO.

Interesting reddit article.

So what happens, stuff crashes and big corp comes in and scoops up even more?

I thought the big corps were the ones that were going to default?


I just signed the contract to list my house to go travel around in an RV to figure out where to move outside of my current state. Am I tarded to take the payday now or should I stay put?(we're planning on buying in actual cash from the sale of the house around the end of summer/fall time)