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The Fed now owns nearly 1/3 of all U.S. mortgages

thestreet.com

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Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#61

Post by jointpdf »

refurb wrote: post #41
scrumbledober wrote: post #34

Earlier quoted context omitted.

well as a 30 year old looking for my first home who grew up in the bay area... yeah that's exactly what I feel.

Not to be snarky or obvious, but you should do what the people in the past did - find a better place to live that allows you to buy a home more easily. That's one of the reasons why there was a big migration to places like LA. Lots of jobs and cheap land to build on. To me, SF is like NYC. Unless you got in early or are one of the 1%, it's not a great place to try and build a life in (if you're looking to own a home)…

Housing (and construction) prices have been ballooning out of control everywhere for the last several years. Both major cities (DC, Boston, Portland, Seattle, Chicago, LA, Denver, San Diego) and secondary cities (Boise ID, Grand Rapids MI, many more) are all totally unaffordable. I’ve spent hundreds of hours researching different areas over the last year. Looking at sold homes from just 2-3 years ago, many seem like a steal compared to what’s available now. It’s just extremely bleak.

Meanwhile, my landlord bragged about buying the house I live in with no money down and no income check during the subprime mortgage era, and has been renting it out since. Now he is selling it during a pandemic and I’m about to become a vagabond.

I do think the vacuuming up of affordable housing by real estate investors (perhaps many of whom accumulated wealth via the surging stock market) is at least part of the problem. Landowners have strong incentives to keep the housing stock low (and the rents high), or they get washed.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#62

Post by darrenf »

nostromo wrote: post #57

The headline isn’t correct. There is $17T in US mortgage debt. The Fed has backed $2T of that via mortgage backed securities, up from $1T pre-Covid-19. That’s ~11% not 1/3. The article itself mentions this, but decided to use a misleading headline instead.

The amount expressed in dollar terms needn’t match the quantity of mortgages, so both can be true - no?

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#63

Post by patd »

refurb wrote: post #47
the-dude wrote: post #40

Earlier quoted context omitted.

I was paying 0.6% for the last years ( Euribor mortage ). Some people in North West Europe actually had negative rates already.

What was the term? Was it a floating rate after a lock-in period? The thing that makes 2.5% so incredible in the US, is that it's the rate for a 30 year fixed mortgage. Get one of those loan today and you'd still be paying 2.5% interest in 2049.

You can get fixed 15 to 30 years mortgage rate in some European countries for less than 1% in some cases and 2% in most cases.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#64

Post by andi999 »

donmcronald wrote: post #26
throwaway4good wrote: post #17

Earlier quoted context omitted.

The fed can keep interest rates low; it is literally what they are doing by buying the bonds. In principle you should see higher inflation and a falling currency. However this policy (aggressive buying of all kind of bonds) has been persued by the Europeans and Japanese for years and it haven't really caused a collapsing currency or high inflation. Some may argue that it suspends a natural reallocation of resources i…

If you print money, but only give it to the top 10% who use it to prop up the stock market, does that cause inflation? I don't understand how America can pump a couple trillion dollars into the economy and it doesn't seem to have any impact. If the average person is getting any of that it should cause inflation, shouldn't it?

Inflation is mitigated by all products you buy come from china.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#65

Post by baconandeggs »

lvs wrote: post #13

There would be no inherent problem with having the Fed hold this much debt, if the tax system then soaked up distortions in how the resulting stimulus was distributed into the economy. That is, if the tax system is structured to pull back currency from unproductive sinks before it yields inflation, then there's no problem with the Fed holding that debt. A better structure, as others have pointed out, would be to have…

OR...you could let nature run its curse and have those debts refinanced at real interest rates that reflected the actual production in the economy, or defaulted and have those assets and resources liberated, thus correcting the distortions which were product of the FED and the government in the first place.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#66

Post by rootw0rm »

jdm2212 wrote: post #32
donmcronald wrote: post #26

Earlier quoted context omitted.

If you print money, but only give it to the top 10% who use it to prop up the stock market, does that cause inflation? I don't understand how America can pump a couple trillion dollars into the economy and it doesn't seem to have any impact. If the average person is getting any of that it should cause inflation, shouldn't it?

There's no impact because people are sitting on cash rather than spending it. What the Fed accomplishes by handing out the $1 trillion is this: they kept all the _other_ money circulating. If people wanted to hoard $1 trillion because they're scared about the future, well, now they've hoarded it. They feel safe and they spend the rest of their money, and the economy keeps humming along. If instead they'd tried to hoa…

so basically...yes, it sucks either way.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#67

Post by baconandeggs »

JackFr wrote: post #25
olliej wrote: post #3

Does the fed get the interest income from those mortgages? Because if it’s not getting 100% of that interest it’s simply bailing out speculative loans by banks. What are the rules for the fed taking on mortgages etc? I would want a max price of 80% of the value of the mortgage alongside the all proceeds portion so that banks can’t just make bad loans and then onsell them to tax payers

Taxpayers don’t need to bail out the Fed. The Fed literally creates money ex nihilo.

The Fed creates the money, but the taxpayers give it value.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#68

Post by true_religion »

septillianator wrote: post #46
jdm2212 wrote: post #32

Earlier quoted context omitted.

There's no impact because people are sitting on cash rather than spending it. What the Fed accomplishes by handing out the $1 trillion is this: they kept all the _other_ money circulating. If people wanted to hoard $1 trillion because they're scared about the future, well, now they've hoarded it. They feel safe and they spend the rest of their money, and the economy keeps humming along. If instead they'd tried to hoa…

People or Corps? Seems like stimulus money is eventually just finds its way to a handful of companies that are making piles with it.

People run corporations. When you see a round of layoffs it doesn't come out of mere cold blooded economic necessity. The leadership gets scared, and no longer feels optimistic thus they cut projects.

Sure, you can give all the money directly to the common people, but you'd end up having to do that forever since the wider economy would collapse as rich share holders first feel doubt, then have those doubts confirmed in a self fulfilling prophecy.

Common people should have non emergency sources of welfare, and governmental aid to rely on. If they don't, then the situation is aleady dire.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#69

Post by 082349872349872 »

remote_phone wrote: post #8
hn_throwaway_99 wrote: post #7

I keep thinking of all the huge amount of asset purchases by the Fed, especially legally dubious purchases like corporate bonds, that "this won't end well". That said, I don't really know what "not ending well" would look like. Would it just be total runaway inflation? Can anyone more knowledgeable comment on what possible endgames are for these asset purchases?

The worst case scenario is the rest of the world dumping US treasuries, and causing interest rates to skyrocket and USD to plummet.

Wouldn't the worst case (from the US standpoint) scenario be if the USD strengthened over time, and all these low-nominal interest loans not only had to be carried at higher real rates, but eventually come due at more than the original principal?

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#70

Post by JMTQp8lwXL »

afpx wrote: post #59
JMTQp8lwXL wrote: post #18

I would be curious to see analysis for what home prices would be with 0 Fed intervention. Also, I don't understand how millennials aren't supposed to see this figure and immediately feel a sense of rejection, that the housing market is some form of a pyramid scheme, where you had to get in early to have a chance.

The pyramid scheme isn’t a new thing, sadly. The chart for median home prices shows it starting at least as far back as 1997. Maybe as far back as 1976.

Interest rates on 30 year fixed mortgages have been declining since 1981: https://fred.stlouisfed.org/series/MORTGAGE30US
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