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The Unpleasant Scenario Is They’ll Be Stuck With A House They Overpaid For

A report from The Daily News in Washington. “What goes up, must come down — except for the housing market, experts say. Longtime loan officer and Longview native Jon Trussell oversaw the opening of a national mortgage lender branch in October, nearing the expected end of the low mortgage interest rates spurred by the pandemic. ‘Growth in the mortgage business has been pretty wild in the last three years,’ he said.”

“Trussell said the loan options are keeping up with rising prices. The United States Federal Housing Administration loan, which offers lower down payments and interest rates, raised its maximum handout up $64,000 to $420,680 for Cowlitz County homes in 2022. The large jump, Trussell said, is one he’s never seen and will help even the playing field for new homeowners. The office offers online applications and options that don’t require down payments like Veterans Affairs loans for service members and veterans, as well as United States Department of Agriculture loans for rural homes. ‘Lending is fun,’ he said. ‘It’s fun to help a first-time homeowner who’s nervous get their first keys.'”

From CBS 19 TV. “In East Texas, median home prices have skyrocketed over the last two years – up nearly 23 percent in Tyler and almost 29 percent in Longview. If you’re financing a new house, know that you have more options than the traditional 20 percent down, 30 year fixed mortgage. ‘There’s so many great programs that are out there [where] you don’t have to have 20% down,’ said Monica Rucker, loan specialist at Fairway Independent Mortgage Corporation. ‘We have a no down-payment program out here. It’s built for the rural areas. And so you can get in…with nothing, if you qualify.'”

From WBMA in Alabama. “Interest rates are low and the demand for housing is high. This is forcing some first-time homebuyers to go to extreme lengths to beat out the competition. ‘A buyer may offer list price and then – another buyer will come in and say, I need to get five thousand more than the list price,’ said Real Estate Appraiser Tom Horn. Horn said losing out on a home causes many people to bid higher the next time out of desperation. The real question is, are buyers setting themselves up for failure in the future.”

“‘In that situation, an appraisal is very important because the price that they’re willing to pay to get into a house, may not actually be what the home is worth,’ Horn said.”

“Homebuyers bidding higher in competitive market comes at a price, experts say. Down the line, market values might catch up with what the homeowner paid. If that doesn’t happen, new homeowners could find themselves in a bind. ‘The unpleasant scenario is that housing supply catches up and perhaps interests rise, such that mortgage rates increase, that demand begins to taper off and they’ll be stuck with a house that they overpaid for,’ said Samford University Economics Professor Jeremy Thornton.”

“Thornton believes the housing market is headed down that path. ‘I think every indication now, we’re likely to see, a year or two years from now, higher interest rates than what we do now,’ Thornton said. Thornton foresees today’s buyers making less when it comes time to sell. With less money in their pocket, and higher interest rates in the years ahead, they’ll have less buying power for their next home.”

The Globe and Mail. “After months of blistering inflation, economists and investors are betting the Bank of Canada will start raising interest rates on March 2, kicking off a brisk rate hike cycle that could see borrowing costs return to pre-COVID-19 levels or surpass them some time next year. ‘Can the housing market withstand a return to prepandemic mortgage rates even though house prices have risen by 40 per cent in the interim? I just don’t think it can,’ said Stephen Brown, senior Canada economist with Capital Economics, adding that he expects the bank’s policy rate to peak at around 1.5 per cent about a year from now.”

The Daily Mail. “Australian property prices could stall within a matter of weeks before plummeting following the biggest boom in 32 years. Economist Matthew Hassan noted the signs were already there, even if ‘the total stock on market remains at extremely low levels.’ ‘Auction markets softened a touch into year end and look to have begun 2022 with a similar tone,’ he said.”

“Westpac is expecting the Reserve Bank of Australia to raise the cash rate in August from a record-low of 0.1 per cent, marking the first rate rise since November 2010 after the Global Financial Crisis. ‘This earlier and slightly more aggressive tightening cycle has clear implications for the residential property,’ Westpac said. ‘Housing will be ‘collateral’ damage in the RBA’s efforts to keep inflation on target over the medium term.'”

“Australia’s median property price now stands at $718,146, CoreLogic data on houses and apartments for January 2022 showed. So even with a 20 per cent deposit factored in, someone earning an average, full-time salary of $90,329 would owe the bank $574,517 – giving them a debt-to-income ratio of 6.3. The Australian Prudential Regulation Authority considers a debt-to-income ratio of six, before tax, to be at a dangerous point where a borrower would struggle to meet monthly mortgage repayments.”

From Bloomberg. “New Zealand’s central bank is set to raise interest rates for a third straight meeting and may signal a quicker pace of tightening ahead as it seeks to rein in the fastest inflation in more than 30 years. The bank will probably publish an interest-rate track ‘that doesn’t look that different to market pricing,’ said Stephen Toplis, head of research at the Bank of New Zealand in Wellington. ‘The concern I’m starting to have is that because unemployment and inflation are so front of mind, for very good reason, people are starting to forget that rapid increases in interest rates should have an impact on the economy,’ Toplis said. ‘There’s a real chance here the wheels fall off the economy.'”

From Yicai Global. “Yango Group said it is in danger of defaulting on debt as the Chinese homebuilder has little in the way of cash on hand because of the impact of tighter regulation, financing difficulties, and the nation’s cooling real estate market. Yango has disposable funds of less than 1 percent of its book capital, the Fuzhou-based firm said on Feb. 18.”

“The developer has CNY61.4 billion (USD9.7 billion) of debt to repay over the next two years, it said, and is likely to come under pressure from creditors to repay loans in advance as the company’s credit rating crumbles. It has cut prices to speed up payment collection, it added. Amid a cooling market, Yango achieved less than 80 percent of its sales target last year and the firm is bracing for a 2021 loss of up to CNY5.8 billion (USD915.5 million).”

The Telegraph. “HSBC’s exposure to the Chinese property market has led to the banking giant taking a $500m (£368m) hit against the potential fallout from the crisis that has rocked the sector. The bank, which makes most of its money in Asia, said that the charge would cover an ‘increase in allowances to reflect recent developments in China’s commercial real estate sector.'”  

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This Post Has 86 Comments

  2. ‘median home prices have skyrocketed over the last two years – up nearly 23 percent in Tyler and almost 29 percent in Longview…’And so you can get in…with nothing, if you qualify’

    And everybody qualifies in east Texas cuz they’re broke a$$. Like the small sh$tholes in Canada we looked at yesterday, this is the end.

  3. ‘Can the housing market withstand a return to prepandemic mortgage rates even though house prices have risen by 40 per cent in the interim? I just don’t think it can’

    Calm down Steve, take a breath. Exhale. Now, all you gotta do is make sure prices don’t go up 40%.

    Oh…

    1. Darwin.

      “‘It is dangerous. It is lethal, and it is fast. And it is ravaging our community,’ he concluded.”

    2. “He’s 24. He loved his job; always talking about his job, talking about his new daughter. He loved his daughter,” said Marquez.

      I guess he didn’t love her enough to not do coke that he bought from a stranger. But yeah, a Darwin award winner.

      1. I warn the younger apprentices I work with about this. Coke, ecstasy, molly, xanax, all those club / party drugs. They may or may not listen.

        1. It didn’t used to be this way. Drugs used to be too weak because they were cut with so much baby powder. Now they’re too strong from being cut with too much fent.

      1. Better get their stuff out of their fast. Slight rehab. Maybe a run of the swiffer and then get that rent up for the next junkie

  5. ‘the banking giant taking a $500m (£368m) hit against the potential fallout from the crisis that has rocked the sector’

    Recall the German guy who was calling BS on Evergrandes bond payments said this bank was insolvent.

    ‘the charge would cover an ‘increase in allowances to reflect recent a$$poundings in China’s commercial real estate sector’

  7. ‘another buyer will come in and say, I need to get five thousand more than the list price,’ said Real Estate Appraiser Tom Horn’

    That’s some sound lending right there.

  8. ‘So even with a 20 per cent deposit factored in, someone earning an average, full-time salary of $90,329 would owe the bank $574,517 – giving them a debt-to-income ratio of 6.3. The Australian Prudential Regulation Authority considers a debt-to-income ratio of six, before tax, to be at a dangerous point where a borrower would struggle to meet monthly mortgage repayments’

    So they are already there.

    ‘‘The concern I’m starting to have is that because unemployment and inflation are so front of mind, for very good reason, people are starting to forget that rapid increases in interest rates should have an impact on the economy…There’s a real chance here the wheels fall off the economy’

    That’s what you guys are counting on, right? You’ll own nothing and be happy?

      1. They never seem to account for the fact that historically about 1/3 of households rent. The median house price should reflect the median income of not the total households, but of the top 2/3 of households. That said, the DTI ratio of 6.3 is nuts. Even at low interest rates, the typical DTI should be ~3x.

        2. Well if they exclude renters, then they need to exclude the people in peak earning years who have been in the same house for 25 years and are only going to downsize. Those people skew the numbers much more so than renters, and in the opposite direction.

          I looked up median household salaries in Australia and found numbers all over the place, but they seemed to be in the 60-70K range. Which makes the ratio more like 8-9, not 6.3.

    2. “That’s what you guys are counting on, right? You’ll own nothing and be happy?”

      Close. What I am counting on is me owning them, and then I will be happy.

      3. Based on SS in this Brandoninflation, grandma will be eating that cat food from Chewy shortly. If she’s lucky

        2. I have an elderly friend. She qualifies for the food bank, and they give her enough food for 3 people. If someone is eating cat food, it’s because they are too proud to look for people food.

  10. Mortgage Businesses Seen Laying Off Thousands as Volume Drops
    (Bloomberg) — U.S. home mortgage lenders have spent much of the last two years hiring. Now they might have to spend the coming months laying workers off.</em>
    Its going to get real ugly. I remember in 2000 when we were laying people off and the Sales manager says: “It’s really sad that we have to layoff these people. These are the people who worked late to get the loans out the door and missed there son’s baseball games and their daughter’s soccer matches.” Very true but… Mortgage is an incredibly cyclical business.

      1. “‘Cause we got a great big convoy
        Rockin’ through the night
        Yeah, we got a great big convoy
        Ain’t she a beautiful sight?
        Come on and join our convoy
        Ain’t nothin’ gonna get in our way
        We gonna roll this truckin’ convoy
        ‘Cross the USA
        Convoy! (Ah, you wanna give me a 10-9 on that, Pig Pen?)
        Convoy! (Negatory, Pig Pen, you’re still too close)
        Yeah, them hogs is startin’ to close up my sinuses
        Mercy sakes, you better back off another ten”

        I think I could donk the daylights out those lyrics.🤣

        On a more serious note….. the public muster points are the front page. I believe the real action is localized and decentralized.

      2. Exclusive: D.C. National Guard Members Told to Be Ready Ahead of Potential Truck Convoy

        KRISTINA WONG
        19 Feb 2022

        Washington, DC National Guard members have received a notice to be prepared to assist local law enforcement ahead of a potential trucker convoy headed to the nation’s capital, according to two sources.

        The notice, obtained by Breitbart News, stated that the D.C. National Guard Land Component Command will be “encamped” beginning February 22 “for forthcoming ‘Trucker protest.’” One source explained that the term “encamp” is similar to “occupy an area.”

        https://www.breitbart.com/politics/2022/02/19/exclusive-d-c-national-guard-members-told-be-ready-ahead-potential-truck-convoy/

  12. ‘It’s fun to help a first-time homeowner who’s nervous get their first keys.’”

    Fun in the sense of local gap-toothed hillbillies “helping” city boys they encounter during the latters’ canoe trip through the Appalachians.

    1. No housing market cycle would be complete without a race to the subprime bottom of the lending barrel just before the CR8R event.

      1. There is no crisis…. in falling housing, gold, silver, stock and bitcoin prices.

        Murphy, TX Housing Prices Crater 27% YOY As Dallas/Fort Worth Housing Market Turns Toxic On Soaring Inventory And Mortgage Defaults

        https://www.movoto.com/murphy-tx/market-trends/

        As a leading economist explained, “Get rates back up into the long term historic range of 12% to 15% and most of these problems go away on their own.”

    1. russia says “higher gas prices coming soon.”

      I can envision Putin chuckling when Brandon did everything he could to scuttle US energy independence a year ago, and when hat in hand just a few months later, Brandon asked OPEC and other producers to increase production to bring prices back down, and they all said “no”.

      So, $5-6 gasoline this summer? I also got my NatGas bill, the biggest one I have ever seen by far.

      #FJB

        2. Europe has roughly 900-million modern westernized consumers, and over one-third of their energy resources come from Russia. And the newest $11Billion “Nord Stream 2” undersea natural gas pipeline was recently completed. It’s a very high stakes game being played right now.

          1. Nord Stream 2” undersea natural gas pipeline was recently completed

            That’s odd. I read just yesterday that the construction had been shut down, because Russian aggression. I wonder if the game is totally rigged.

          2. That’s odd. I read just yesterday that the construction had been shut down, because Russian aggression. I wonder if the game is totally rigged.

            I realized over the past couple years that there are a few thousand super wealthy people who are controlling everything on this earth. The whole thing is rigged.

          3. I read it was “certification” that was being stopped. I dunno, maybe the pipeline is operational but Europe isn’t allowed to use it?

          4. “The whole thing is rigged.”

            Likely very little out there are “markets.”

            “I read it was “certification” that was being stopped.”

            That’s what I read too.

            When I was at Cal Poly, SLO, I met someone from Argentina whose family held an import/export license that sounded like they “skim a percentage” of of certain goods coming and going. No particular skill set, just membership in the “big club.”

  17. Stock Market Today
    U.S. Stocks Resume Losses; Trump SPAC Pares Gains After Social Media App Launches
    JUAN CARLOS ARANCIBIA 11:20
    AM ET 02/22/2022

    U.S. stocks gapped down at the open Tuesday after Russia moved troops into two contested parts of Ukraine and military officials feared a full invasion. After paring losses, indexes resumed declines, while oil prices surged.

    The Nasdaq composite opened 1% lower and fought back to a minor gain. But shortly after 11 a.m. ET, the Nasdaq was off 0.7%. The S&P 500 lost 0.6%. Volume rose on the NYSE and Nasdaq compared with the same time on Friday. (The stock market closed Monday for Presidents Day.)

    The Dow Jones Industrial Average fell 0.8%, after component Home Depot (HD) fell below its 200-day moving average, a level that had kept the stock from further deterioration.

    Shares slid nearly more than 7% despite that the home improvement chain’s earnings release this morning topped sales and earnings expectations. Same-store sales rose 8.1% for the January-ended quarter. Home Depot also raised its quarterly dividend by 15% to $1.90 a share.

    https://www.investors.com/market-trend/stock-market-today/u-s-stocks-pare-losses-despite-ukraine-invasion-fears-trump-spac-jumps-after-social-media-app-launches/

    1. “The price of U.S. crude oil rose 1.8% to $92.74 a barrel. Brent crude climbed close to $100 a barrel.”

      IIRC, oil futures prices dipped into negative territory in spring 2020. What a difference a couple of years’ worth of pandemic stimulus makes!

  19. Some Colorado Sun headlines today:

    Xcel Energy rate hikes would raise utility bills up to $18 per month. And they’re not done yet.

    Boulder County housing prices are still climbing 6 weeks after Marshall fire

    After a short-term rental in Golden and a hotel in Boulder, their latest place to stay is a house in Broomfield rented to them by a local couple who want them out by June. The rent is $4,500 a month, nearly twice the $2,400 a month they paid for their old home in Superior. The family did not have rental insurance and so are covering most of their costs out of pocket.

    …

    Even those who bought their homes long ago and had affordable mortgages are discovering rents for comparable homes may top $5,000, Bohanan said.

    I’m wondering why more people aren’t just packing it in and leaving the state. Prices in metro Denver are simply absurd.

    1. a safe haven

      The government of Canadia has confiscated bitcoin wallets of the “Freedom Terrorists”. So they claim. Safe indeed.

  24. What’s the end game?

    733 Maroon Peak Cir, Superior, CO 80027
    02/15/2022 Sold $1,000,000
    01/24/2022 Listed $775,000
    10/27/2021 Sold $650,000

      1. I rent near here. These poor buyers find out real quick how the constant flight school, Rocky Mountain Airport, small planes loop the hoods EVERY SEVEN MINUTES 7 days per week from 7am to 10pm. Might explain the quick turnaround sales. I’ll bet a buck the realtors never mention the noise to potential buyers.

        1. That’s the Colorado standard tract home look. The equivalent of the California stucco shack with the fake time roof. Crammed together even though there is empty land everywhere.

          It sold for $330K in 2003

      3. A million bucks for a house where the front door opens right into the living room. The price jump is no doubt related to the fact the 1000 houses in the are were permanently removed from the market, as they burned to the ground.

        And it’s in Superior.

        1. “A million bucks for a house where the front door opens right into the living room.”

          Indeed. And where’s the coat closet? 🙂

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