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Forum » Fed ending purchase of $50B/month MBS, raises interest rates
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Thread: Fed ending purchase of $50B/month MBS, raises interest rates

post 1659217133 04-06-2022, 12:48 PM
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Fed ending purchase of $50B/month MBS, raises interest rates

Fed silently ceased purchasing of 50 billion/month of mortgage backed securities a few weeks ago, totaling $1.3T since the start of "covid".

Mortgage interest rates now up over 2 percentage points, 4.5%. The equivalent of a 25% raise in price.

Holy hell brothers. Holy hell. This RE market is a ZOMBIE. Its over.

https://www.cnbc.com/video/2022/03/1...U.S.%20history.

The only thing that can prop up housing now is 100% inflation.

Good luck everyone. I know some of you are going to be extremely stubborn and refuse to realize your gains. Time in market is trying to time the market, period.

I tried to tell you repeatedly how underwriters had no need to verify data because they were just going to sell the loans to the gov't anyways but you kept quoting "muh fundamentals". God damnit bros, peace be with you. I pray for your future.
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post 1659217253 04-06-2022, 12:51 PM
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post 1659217303 04-06-2022, 12:51 PM
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post 1659217313 04-06-2022, 12:51 PM
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post 1659217383 04-06-2022, 12:53 PM
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Originally Posted By rectifryer⏩
I tried to tell you repeatedly how underwriters had no need to verify data because they were just going to sell the loans to the gov't anyways but you kept quoting "muh fundamentals". God damnit bros, peace be with you. I pray for your future.
This right here tells me you don't know what you're talking about
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post 1659217493 04-06-2022, 12:54 PM
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Originally Posted By microsuede⏩
This right here tells me you don't know what you're talking about
sure

are you going to tell me about your anecdotal experiences working your single job in industry now lmao

my point is that banks made more money the more loans they could package and sell to the gov't, period. That is not a controversial or incorrect statement. Even if the loans failed, they would not be liable.
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post 1659217563 04-06-2022, 12:55 PM
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armchair economists like OP have no clue that this means literally zero to the housing market.
post 1659217793 04-06-2022, 12:58 PM
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Originally Posted By GainzMcgee⏩
armchair economists like OP have no clue that this means literally zero to the housing market.
feel free to explain where I'm wrong.....
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post 1659217873 04-06-2022, 12:59 PM
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So....housing values go down because demand goes down...

Where do people stop paying their mortgages again causing all these defaults because interest rates rise on already locked in payments?

Are there a massive amount of ARMs out there about to be realized? Other than that....peoples mortgages will stay the same number, and if anything go down because of assessments in localities.

Im all about values going down tho, just to be clear. Daddy needs another rental property.
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post 1659218013 04-06-2022, 01:01 PM
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Originally Posted By twovalvekid⏩
So....housing values go down because demand goes down...

Where do people stop paying their mortgages again causing all these defaults because interest rates rise on already locked in payments?

Are there a massive amount of ARMs out there about to be realized? Other than that....peoples mortgages will stay the same number, and if anything go down because of assessments in localities.

Im all about values going down tho, just to be clear. Daddy needs another rental property.
None of that is the premise of my argument. I've always argued this is drastically different that 2008. If people default its because they choose to do so.
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post 1659218193 04-06-2022, 01:04 PM
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Originally Posted By rectifryer⏩
None of that is the premise of my argument. I've always argued this is drastically different that 2008. If people default its because they choose to do so.
So what's the problem? Housing values are going to decrease because rates go up? You told people this would happen? Youre a regular Nostradamus?
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post 1659218233 04-06-2022, 01:04 PM
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Just to be clear here, I just want confirmation that Quantitative Easing doesn't affect real estate prices. If someone can confirm that, I'll know this is a completely lost cause and I'm talking to a god damn soggy biscuit.
Originally Posted By twovalvekid⏩
So what's the problem? Housing values are going to decrease because rates go up?
More or less. rates, and quantitative easing that was propping up real estate investments.

You should check it out and be aware. If you disagree after investigation then follow your intuition, but you should at least be aware of the most dominant force in real estate over the last two years. The US gov't bought $1.3T of MBS in less that two years. They have now suddenly ended it and raised interest rates, in line with Blackrock's request.
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post 1659218423 04-06-2022, 01:07 PM
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I've wondered about the effect the large investment firms will have on the housing market. It has it's down sides, but on the positive I'm guessing it could create more stability.
post 1659218673 04-06-2022, 01:11 PM
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Originally Posted By rectifryer⏩
Just to be clear here, I just want confirmation that Quantitative Easing doesn't affect real estate prices. If someone can confirm that, I'll know this is a completely lost cause and I'm talking to a god damn soggy biscuit.



More or less. rates, and quantitative easing that was propping up real estate investments.

You should check it out and be aware. If you disagree after investigation then follow your intuition, but you should at least be aware of the most dominant force in real estate over the last two years. The US gov't bought $1.3T of MBS in less that two years. They have now suddenly ended it and raised interest rates, in line with Blackrock's request.
I get it, but honestly dont GAF that in the short term my house goes down in value. My payment is going to stay the same. Like i said above, if prices get drastically cheaper, i doubt rates will go up enough to counteract that. Meaning, the drop in value will outpace the increase from higher interest rates. Just a thought. Money will get more "Expensive" to get, but if housing gets significantly cheaper, then it may not have as much of an overall effect as we think.

But im just talking out my backside at this point.
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post 1659220203 04-06-2022, 01:37 PM
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OP's smooth brains are something to behold
post 1659220263 04-06-2022, 01:38 PM
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Originally Posted By OffwhiteBrah⏩
OP's smooth brains are something to behold
Go ahead, point out where I'm wrong and why.
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post 1659220533 04-06-2022, 01:42 PM
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Link in OP doesn't work.
post 1659221423 04-06-2022, 02:02 PM
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Would like to see a counter argument to my theory.

https://seekingalpha.com/article/448...ed-holding-pin
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post 1659221473 04-06-2022, 02:03 PM
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The housing bubble didn't matter unless you owned a second home anyway. Gonna sell your inflated house...and buy another inflated house.
post 1659221693 04-06-2022, 02:08 PM
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Originally Posted By OptimusTrajan⏩
The housing bubble didn't matter unless you owned a second home anyway. Gonna sell your inflated house...and buy another inflated house.
Unless you had patience and simply waited a short period for this to happen.
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post 1659221983 04-06-2022, 02:12 PM
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Originally Posted By twovalvekid⏩
So what's the problem? Housing values are going to decrease because rates go up? You told people this would happen? Youre a regular Nostradamus?
I think OP forgets that a 30-year loan for $500,000 at 2.75% has a payment of $2,041, whereas a 30-year loan at 5% for $380,200 has a payment of $2,041. In both cases you end up payingexactlythe same amount over the life of the mortgage. The only difference is the downpayment, which is already gone. You will not benefit even a little bit from walking away from your mortgage until housing prices drop 24%, and that is counting on mortgage rates staying at 5%. If they go up to 6% home prices would have to drop 32%. You would, however, be haunted by a foreclosure and short sale for a decade.

OP doesn't apparently realize that low interest rates have made it so people could buy expensive houses at extremely low payments so they have no incentive to walk away. Even if you are "underwater" from a current sales value perspective with an interest rate is 3% lower than the current mortgage rate you aren't actually underwater over the life of the loan.
post 1659222003 04-06-2022, 02:12 PM
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Originally Posted By rectifryer⏩
Just to be clear here, I just want confirmation that Quantitative Easing doesn't affect real estate prices. If someone can confirm that, I'll know this is a completely lost cause and I'm talking to a god damn soggy biscuit.



More or less. rates, and quantitative easing that was propping up real estate investments.

You should check it out and be aware. If you disagree after investigation then follow your intuition, but you should at least be aware of the most dominant force in real estate over the last two years. The US gov't bought $1.3T of MBS in less that two years. They have now suddenly ended it and raised interest rates, in line with Blackrock's request.
Of course fed purchases have an effect on the market. And I could certainly see a flattening/small correction. Maybe housing prices will give up what has been gained in the past year. But that's it.

Because people still have to live someplace:

- pre-existing lack of supply [more so in desirable Sun Belt locations]

- inflated materials, labor, and financing for builders

- current owners have an incentive to not sell [can't replace their present housing for the same money]

- higher down payment + higher monthly payment will lock out some potential buyers who are then stuck in the rental market

- rents are insane in many areas relative to incomes; but again, people have to live somewhere

The only true relief valves I see to bring down housing prices in a major way are a massive economic downturn [no job/not enough money/more people living on the street] or a lot of people dying off unexpectedly.

If demand destruction due to high inflation truly turns into a self-reinforcing death spiral I'm sure housing prices will go lower. But it won't matter for most people as they will still be too broke to afford to purchase one.

Blackrock:maybe they don't want the Fed to burn down the US$, maybe they want less competition in the market and cheaper purchase prices for themselves as higher interest rates will make their cheap/free cash go further AND keep the rents high
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post 1659222123 04-06-2022, 02:15 PM
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Originally Posted By rectifryer⏩
Would like to see a counter argument to my theory.

https://seekingalpha.com/article/448...ed-holding-pin
they make an analogy to 2008 but then also say it’s not the same
I agree, when housing cools, it will be a bubble pop in certain areas (I think locations with high migration (tx, fl, etc) won’t feel it as much

And I don’t see how the impact is anywhere close to the 2008 credit crisis, where lending essentially stopped and the solvency of banks were the issue
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post 1659223133 04-06-2022, 02:35 PM
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Originally Posted By soaponarope1⏩
I think OP forgets that a 30-year loan for $500,000 at 2.75% has a payment of $2,041, whereas a 30-year loan at 5% for $380,200 has a payment of $2,041. In both cases you end up payingexactlythe same amount over the life of the mortgage. The only difference is the downpayment, which is already gone. You will not benefit even a little bit from walking away from your mortgage until housing prices drop 24%, and that is counting on mortgage rates staying at 5%. If they go up to 6% home prices would have to drop 32%. You would, however, be haunted by a foreclosure and short sale for a decade.

OP doesn't apparently realize that low interest rates have made it so people could buy expensive houses at extremely low payments so they have no incentive to walk away. Even if you are "underwater" from a current sales value perspective with an interest rate is 3% lower than the current mortgage rate you aren't actually underwater over the life of the loan.
that's the same example I gave you in the other thread. What do you mean I don't understand it lmao

By the exact same token, homes selling for a mill have to sell at $750k with the 2% rate hike we saw this month.

At no point have I said anyone is walking away. I've never said that.

The main point in which demand/supply changes is when more people list. Less listings have occurred over the last two years, well below the normal rate. This will change, and now that the same buyer can afford less....
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post 1659239143 04-06-2022, 09:02 PM
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Originally Posted By rectifryer⏩
sure

are you going to tell me about your anecdotal experiences working your single job in industry now lmao

my point is that banks made more money the more loans they could package and sell to the gov't, period. That is not a controversial or incorrect statement. Even if the loans failed, they would not be liable.
You don't understand the process is my point, if bank and non bank lenders turn people down during underwriting on loans that they would make money on because on either the lenders guidelines or the agency's guides.
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post 1659239573 04-06-2022, 09:12 PM
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Sorry OP, loan standards have been stupid high as of late.

No way in hell someone is going to put 20% down on a 500k property and then walk away because the value slumped 5%.

I have a feeling the opposite is going to happen: There are going to be even fewer homes on the market.

Nobody is moving because nobody can afford homes. It's a vicious cycle that feeds off of itself.
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