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More Of A Seller Panicking Market

A report from KGW 8 in Oregon. “The Portland real estate market has been sizzling hot for years, but now it seems to be slowing down just a little. Real estate broker Michelle Maida said the market typically slows down this time of year, but right now it is slower than usual. It is not just Portland, Seattle is feeling it too. ‘It is a trend we’re seeing nationally, it definitely is,’ Maida explained.”

“Maida would not call this a buyers’ market, but said sellers are feeling the pressure. ‘I call this more of a seller panicking market because they’re not getting what their neighbors got nine months ago on their house,’ Maida said. ‘But it’s going to be ok, it’s a cycle.'”

“Maida said prices are still going up, but so are interest rates which means home buyers cannot spend as much. The higher interest rates means people have less buying power. She also said sellers are not seeing multiple offers like they have in the past.”

“‘It’s a longer time on the market,’ Maida said. ‘We see less multiple offers unless you have a $350,000 house that’s totally done out you’re probably not going to see a multiple offer in this market right now.'”

From Realtor.com. “The realtor.com® economic research team analyzed a wealth of housing data to come up with a forecast of what 2019 might hold for home buyers and sellers—and it looks like both groups are going to be facing some challenges.”

“We’re expecting to see the biggest increases in high-end inventory in the metro areas of San Jose, CA; Seattle, WA; Worcester, MA; Boston, MA; and Nashville, TN. All of those metro markets, which may include neighboring towns, could see double-digit gains in inventory in 2019.”

“At the time of last year’s forecast, the GOP’s proposed revision of the tax code was still being batted around Congress. While there was talk that it might discourage people from buying a home, no one really knew how it might affect the real-estate market.”

“This year … well, we still don’t really know. That’s because most taxpayers won’t be filing taxes under the new law until April 2019. And while some people might have a savvy tax adviser giving them a better idea of what’s in store, for many, the reality check will come in the form of a bigger tax bill—or a bigger refund.”

“‘I think the new tax plan will affect mostly homeowners and home buyers in the upper parts of the distribution,’ says Andrew Hanson, associate professor of economics at Marquette University. ‘Those who either own or are buying higher-priced homes are going to pay a lot more.'”

“Sellers of those pricier homes will also take a hit, as buyers anticipating bigger tax bills won’t be as willing to pony up for a high list price. The biggest change resulting from the new tax law, Hanson predicts, will be in mortgages, since people will be less inclined to take out large mortgages.”

“‘If anyone is going to be upset about the tax plan, it’ll be mortgage bankers,’ he says.”

From CNBC. “Federal Reserve Chairman Jerome Powell may have ‘blinked’ in his Wednesday speech, saying that the Fed had ‘no preset policy path’ for interest rates, but his work is far from over, CNBC’s Jim Cramer warned. ‘What’s the biggest risk to the system right now? After listening to Fed Chief Jay Powell, who made a lot of sense today, I’d say it’s non-bank lending,’ Cramer said Wednesday on ‘Mad Money.'”

“In the speech, Powell characterized non-bank lenders as imprudent and a potential problem for the credit markets and the broader financial system. Still, he noted that after the 2008 financial crisis, federal regulators took measures that ‘have reduced the risk that key non-bank parts of the system would freeze up in the face of market stress.'”

“Even so, Cramer thought the rapid-fire rise of institutions like Quicken Loans, PennyMac and LoanDepot, three of the largest non-bank lenders, posed a near-term threat.”

“‘There are many non-bank institutions making home loans that could collapse in value,’ Cramer warned. ‘These companies came out of nowhere. They now control about half of the current mortgage market — that’s a trillion dollars’ worth of mortgages a year.'”

“Worse, if those lenders can skirt regulations meant for big banks with similar lines of business and make loans without enough documentation or money down, ‘that could be a serious problem,’ the ‘Mad Money’ host warned.”

“But Cramer — who in 2007 famously criticized the Fed for not paying enough attention to the economic layout — worried that the central bank would again fail to stop these unsound lending practices.’

“Instead of raising interest rates blindly, he suggested the Fed ‘make sure they play by the same rules as J.P. Morgan and Bank of America. If there are outliers and reckless lenders, you don’t raise rates, you shut them down. The Fed has that power — they should use it.'”

“Cramer’s urgency stemmed from the worrisome trends across the market. In the housing sector, reports are showing falling new home sales, plateauing home prices and rising supply.”

“‘When you get a great deal of housing inventory and prices start coming down while mortgage rates go up, that typically causes a collapse in pricing as sellers are desperate to get out, but few buyers can actually afford these homes because they’re swapping out a cheap, old mortgage for an expensive, new one,’ Cramer said.”

“‘At that point, homeowners who want to sell have no choice but to chase buyers further down,’ he continued. ‘If the non-bank lenders issued floating debt, these sellers with floating-rate mortgages [will] default en masse if they can’t find buyers. It could be a mini version of the mortgage meltdown we had a decade ago.'”

“So while Powell’s comments may have ignited a relief rally in the stock market, the “Mad Money” host didn’t want anyone to be fooled into thinking there weren’t still serious risks to the health of the U.S. economy.”

“‘It’s now time for him to put on his regulatory hat. He needs to crack down on these non-bank lenders with firm enforcement, not higher interest rates, which will just push any troubled lenders over the edge [and] make things worse,’ Cramer said of Powell. ‘We know it’s happening. We see the ads. We know there’s been little or no regulation of these guys. I’m not crying wolf. The Fed needs to crack down on these non-bank lenders before it’s too late.'”

This Post Has 45 Comments
  1. ‘We know it’s happening. We see the ads. We know there’s been little or no regulation of these guys. I’m not crying wolf. The Fed needs to crack down on these non-bank lenders before it’s too late’

    English proverb for when a solution comes too late – English …
    https://english.stackexchange.com/…/english-proverb-for-when-a-solution-comes-too-late
    Feb 22, 2013 – The standard idiom has to do with horses rather than cows: closing/shutting the stable door after the horse has bolted trying to stop something …

    1. May 25, 2018

      “In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”

      “Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”

      http://thehousingbubbleblog.com/?p=10443

      1. Quicken Loans, PennyMac, LoanDepot, Christian and a donkey walk into a GSE.

        Peel the onion a little bit there Cramer.

        1. I don’t know about all of these outfits, but PennyMac came straight out of the subprime scoundrel league.

          1. You’re right. It’s the same guys doing it all over again. They pretty much got away with it the first time, why wouldn’t they go back and do it again the second time?

      1. Ad agency credit:

        Foote, Cone & Ponzi, Chicago, Illinois

        Of course, all the trades people that are featured in this commercial make enough to afford a house in the first place?

        I am sure we all know plenty of lamp makers, couch makers, couch wooden leg makers than make >>100K/yr.

        Hello, Did someone say all this stuff is now made in Chindia?

        Don’t worry. Be happy. It will all work out.

        1. Wow, I totally missed this commercial. This is eerily scary. Talk about wanton consumerism run amok. Everything about this commercial just screams emptiness.

    2. ‘We know it’s happening. We see the ads. We know there’s been little or no regulation of these guys’

      I think this is one of those “we all knew” moments.

  2. ‘We’re expecting to see the biggest increases in high-end inventory in the metro areas of San Jose, CA; Seattle, WA; Worcester, MA; Boston, MA; and Nashville, TN. All of those metro markets, which may include neighboring towns, could see double-digit gains in inventory in 2019’

    I’d bet a bunch of this “high-end” inventory would look pretty ordinary to most of us. But where’s it coming from UHS.com? I thought we were in a permanent shortage?

  3. “Maida would not call this a buyers’ market, but said sellers are feeling the pressure. ‘I call this more of a seller panicking market because they’re not getting what their neighbors got nine months ago on their house,’ Maida said. ‘But it’s going to be ok, it’s a cycle.’”

    Keep telling your clients that Michelle, “it’s going to be ok, it’s just a cycle” a cycle that is repeating itself just like a decade ago. You better get your best UHS outfit on and go find some knife catchers Michelle, this one is going down fast

    1. they’re not getting what their neighbors got nine months ago on their house

      And the UHS’s try to tell us prices are not falling.

      1. “Maida said prices are still going up, but so are interest rates which means home buyers cannot spend as much. The higher interest rates means people have less buying power. She also said sellers are not seeing multiple offers like they have in the past.”

        LOL

  4. “‘There are many non-bank institutions making home loans that could collapse in value,’ Cramer warned. ‘These companies came out of nowhere. They now control about half of the current mortgage market — that’s a trillion dollars’ worth of mortgages a year.’”

    Not to worry, good citizens. Our ever-vigilant regulators and enforcers are all over that, and would surely not allow loose lending to develop into a systemic risk to the financial system.

    1. “Big picture: The housing picture is growing darker. The Realtors trade group now expects sales of existing homes to decline 3.1% in 2018, and another 0.4% in 2019. The group also forecasts home prices will fall 2.5% next year.”

      1. “The group also forecasts home prices will fall 2.5% next year.”

        I predict the UHS will underpredict the price declines that result when would-be buyers step back and wait for prices to stop falling.

        1. forecasts

          What’s the chance they are predicting for next year exactly what they already see for this year and are trying to keep secret?

    1. The proliferation of “micro homes,” “micro apartments” and “tiny houses” has absolutely nothing to do with what people actually want to live in, and everything to do with the fact that they can’t afford a normal sized residence.

      This is just one in a long list of distortions due to reckless monetary policies by central bankers. Until we have honest conversations, IN PUBLIC, about the destruction in the quality of life of human beings due to these crooked pigmen, nothing will change.

      1. “US$364,150…ultra-compact units with a net area of 128 sq ft.”

        The boat I’ve lived aboard for 10+ years has 2 x that area and then again 3 x that up in the open air. Cost nothing compared to US$364,150. Rounds off to zero actually. I thought I was kind of living a minimalist life. These guys are squeezed in very tight and giving up a lifetime of earnings for the privilege. The maths don’t make any sense. Our credit mania has sure spread a lot of misery around the world.

    2. This sentence from the article was quite apropos:

      “In comparison, a standard parking space in Hong Kong is 134 sq ft. An average prison cell at the government correctional facility in Stanley is roughly 85 sq ft.”

  5. Cramer has found nonbank lending religion and is preaching it from the mountain tops…about five years too late to do anything about the problem other than watch the awful consequences play out during the housing reversal now underway.

  6. With closed borders, a birth rate below replacement rate, and falling life expectancy, I’m wondering where future U.S. housing demand will originate?

    1. future U.S. housing demand

      Add that the mentality after this bust will be that housing is the biggest expense of your life and the worst possible “investment”. People will want a nice efficient little cottage, so as not to be as poor as the previous generation of debt slaves.

      What will we do with the millions of cardboard McMansions?

    2. The labour market
      America’s fertility rate continues its deep decline
      Wanted: policies that make it easier for mothers to work
      Democracy in America
      Oct 31st 2018
      by C.K. | WASHINGTON, DC

      WHILE America’s job market has improved overall, employment opportunities for storks seem to be drying up. Last year, the total number of births in the United States fell to its lowest level in 30 years. The general fertility rate dropped to the lowest rate since the United States Centre for Disease Control started keeping records in 1909: to 60.3 births per 1,000 women aged between 15 and 44. The total fertility rate, meanwhile, which estimates the average number of children a woman could expect to have over her lifetime at current birth rates for each age, at 1.76 births per woman, is below the “replacement rate” for fertility. That is the level that keeps populations stable (about 2.1 children per woman). And it is a considerable drop from a decade earlier, when the rate was 2.12 births per woman.

  7. ‘There are many non-bank institutions making home loans that could collapse in value’

    This is odd. What would it matter is Quicken fell apart? A reduction in radio ads, sure, but they aren’t backing anything. What does matter is the quality of their loans. And by not requiring skin in the game, the regulators left that up to these non-bank lenders.

    1. “‘There are many non-bank institutions making home loans that could collapse in value,’ Cramer warned. ‘These companies came out of nowhere. They now control about half of the current mortgage market — that’s a trillion dollars’ worth of mortgages a year.’”

      If you think demand was bad now, wait until the non-bank lender collapsed like countrywide and indymac.

    2. Maybe he meant the loans could collapse in value, rather than the institutions collapsing in value. We all know these low-quality loans are stuffed into teachers’ pension funds, grannys’ mutual funds, insurance funds all over the world, etc, not to mention filling the books at Fannie, Freddy, FHA/HUD, and the Fed itself.

      Of course when Quicken, LoanDepot, et al eventually do collapse, it will take away major loan originators, slashing the number of knife catchers able to get financing to help prop up the deflating bubble. So maybe that’s his problem.

  8. “‘I call this more of a seller panicking market because they’re not getting what their neighbors got nine months ago on their house’…Maida said prices are still going up, but so are interest rates which means home buyers cannot spend as much…”

    A true bullshitter if there ever was one.

    “They’re not getting what their neighbors got,” but “prices are still going up.”

    Any person with even the slightest modicum of common sense can see right through this asinine comment.

  9. “but now it seems to be slowing down just a little”

    JUST a LEETLE.

    Not going down, mind you. Slowing down means still going up, but at a slower rate. Just a LEETLE slower than before, you still have to buy now or get priced out forever.

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