Perhaps the BEST B1G Forum anywhere, here at College Football Fan Site, CFB51!!!

Being in the MortgageBanking business, let me add some additional color:

-we are seeing 25 to almost 50% of home purchases that are happening are cash buyers.( depending on which market) They won’t be affected by a rising interest rates or decrease in property values.

-For those getting a mortgage, approximately 80% or more of them are fixed rates, so interest rate changes will not affect them. Obviously they could be affected by a substantial decrease in income.

- the fundamentals of mortgage lending are substantially better than the crash.  There are far less speculative buyers, income and debt are much more accurately scrutinized, much more heavily documented, and reserves are much more prevalent.  No liar loans, no “no documentation loans“ and very few if any interest only loans.

-it is likely that we will start to see a movement to adjustable rates as we move through this year and see more rate hikes. Borrowers paying 4.5% now are shocked- despite the fact that those are still historically low rates. They can easily afford those rates. But first time homebuyers typically are very sensitive to these rates and are being priced right out of the market. The gap between haves and have nots is clearly widening in the housing market- which exacerbates things- as it leads to less people willing to sell and move up. 

It is hard to accurately predict where this goes since it never been anything like this before.  

Are the cash buyers at times folks who already borrowed using other collateral, or because they are a group of investors pooling money?

I have heard a lot of "corporations" have been in the game.

Both.  

1.   People who are wealthy- they just have cash. 
2.   People Who have saved a lot of money for retirement and are cashing in their retirement to make a cash purchase.  They are retiring down here in Florida or California or Arizona or whatever and pay cash for their last house. 
3. Private or public companies buying up real estate with cash.

“The root causes of the next crash won't be the same as the last one…”
1) In 2008 the banks AND the individual home buyers were BOTH exposed to risk.

Correct, and this is why:



Fannie Mae Eases Credit To Aid Mortgage Lending - The New York Times (nytimes.com)

Rush is launching a new beer label following the success of Rush Canadian Golden Ale, and it truly has the best punny name ever.

Its name? Moving Pitchers! (Get it?!)


https://wmgk.com/2022/03/21/rush-beer-2/

University changes name of Karl Marx study room because of Russian invasion of Ukraine | indy100

Kind of, well, literally amusing, figuratively speaking.

nothing like canceling a dead German over Russia's invasion- 140 years after said German died.

Which CFB programs appeared to be on the upside and almost disappeared of late?

UNC and Texas come to mind.  They look pretty decent for one year and then ....

Indiana might make the grade.  I don't know about LSU and Florida, I think they will get back soonish.  Oregon?  Close.

We've noted before how many Blue Bloods have been down for a while now, Michigan of course made a recovery, but is that a lasting trait or one time up and back down?

FSU has been so down for a while they don't count, nor does Miami I think.  Tennessee looks to be on an upswing.  I think Arkansas really is, but maybe they tank now too?

I think it was a one time deal. Harbaugh hasn't gotten that huge bump at all on the 2023 trail like I thought he would from a big 2021 season. Not sure he even really wants to be at Michigan. He would be in the NFL if the Vikings had offered him the job.

In my own guessing where real estate might be going you’re post hits on the two opening points I’ve lead my thoughts with:

“…people can't afford these homes that they're buying…”
1) With homes selling at such comparably higher values than two years ago – i.e. a previous rental address of mine in Portland OR selling for $250K in 2017 sold for $400K in late 2021 – they are, by raw valuing, substantially higher risk mortgages for the individuals qualifying for ownership.
a. By extension, there will statistically be more foreclosures in the next 2 or 3 years…
b. …especially as Federal Reserve borrowing rates are planned for an incremental rise to 2.0% by calendar year’s end.
2) Compounding the risk of higher value mortgages is the overall interest rate (7 percent?) along with rising gas prices cutting into the homeowner’s ability to pay these abruptly higher value mortgages.

this isn't really true. the risk isn't associated with the purchase price. the risk is associated with the borrowers ability to repay the loan. banks are't giving out bullsh**t loans to just anybody. people are being vetted (as they should be) and required to, you know, actually put down money. that is a huge difference from 2008.

And as HB stated, nearly 80% of mortgages being pumped out- are fixed interest rate.

“The root causes of the next crash won't be the same as the last one…”
1) In 2008 the banks AND the individual home buyers were BOTH exposed to risk. This time around, I believe the risk is almost entirely on the buyer. Banks mitigated their lending risks in wake of the 2008 meltdown and, unlike in 2008, they have the advantage of demand presumably remaining high. Banks can likely sell foreclosures without the tide of financial losses that spurred 2008’s meltdown.
2) I will go further and say the next foreclosure “crisis” might not play out as a crash or even a market disruption. Home values might very well remain high through oncoming waves of expected foreclosures if the demand remains high thanks to the increase costs of building materials, construction, and time consuming regulations slowing down the ability to raise supply high enough to meet demand.

the 2008 crisis was caused by massive amounts of garbage loans being pumped out- loans with virtually no vetting of income, asset, or employment- and with as little as like 1% or less down and 90+% of these loans had adjustable interest rates - and these loans were accounting for over 20% of all home loans being pumped out leading up the crash- when historically these types of loans have been 5-8%. And of course people would just walk-away from a home they couldn't afford or were underwater in if they had no real skin in the game (low or no downpayment) AND their interest rates were ballooning.

Garbage loans being pumped out lead to MASSIVE speculation by developers buying up shit land in middle of nowhere that should've been worth nothing- overpaying massively for said land- and massive overbuilding of spec homes and developments that there wasn't true, real demand for. It was all funny money was being injected into the system- which caused demand and therefore home prices to spike- it wasn't REAL DEMAND like there is right now. It was all artificial. There was no shortage of supply like there is now- there was inventory and homes for sale everywhere. It was just so easy for any asshole to get a loan to buy a home. That is not the case today. At all. 

The cash buyers are really driving prices up in a lot of the hot markets. Can't compete with cash.

And what REALY crashed the system was all those garbage loans being rolled up into huge tranches of loans- CDOs- and the FRAUD that went on with the rating agencies being paid to rate that trash as AAA (good as gov't bonds) and then all the credit default swaps being sold betting against those garbage CDOs- which really just multiplied the losses to infinity and triggered the collapse.