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Crom Valen

44,246 Posts.

2012

26/01/18

14:44

Post #: 30591847
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Originally posted by Fudley61 ↑

Someone was recently ridiculing me for an opinion on Real Estate.
Look at this stuff below.

Everywhere you look, there is trouble....

(I added bold)

“The Fed and Government have largely exhausted the population of would-be mortgagees that can make a 0-3% down payment on a conventional mortgage plus carry the monthly burden of servicing that mortgage. The tax advantage from deducting real estate taxes was stripped from the equation.

I suspect the Fed is getting worried about the housing market. The Fed’s QE holdings rose $5 billion last week. The entire increase is attributable to an increase in mortgage holdings. Not only is the Fed not reducing its balance sheet, it felt compelled to inject capital into the mortgage market.

One thing to keep in mind. A large percentage of homes purchased and financed with 0-3% down payment mortgages in the last couple of years are underwater. When a buyer puts almost nothing down on a mortgage-financed home, the transaction costs all-in are about 10% of the value of the home. These homes are underwater at closing. Except in certain bubble areas, homes have not appreciated in value enough to make up for the amount that low down payment buyers are underwater when they closed. When the stock market eventually tanks, it will take home values down at least 30-40%, and possibly more.

Just like any market bubble, I believe the housing market is reaching the point of exhaustion. As households continue to get squeezed financially, there will be a lot of homes put on the market hoping for last year’s price. “

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It's a farce. They say one thing while doing another. The balance sheet will start expanding again as the market for the debt dries up. The Fed are back-stopping everything....
7 Upvote

0 Great analysis

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