Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

thestreet.com

Post reply on HN
Print view View original

151–160 of 346 posts

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

#151

Post by mrfusion »

b34r wrote: post #137

Out of curiosity, why wouldn’t we want the government managing mortgages for the whole country? (Assuming the acquisition process isn’t slow AF because government.) Real estate seems like a pretty important part of the economy and, more importantly, the government artificially making housing more accessible for potential first time buyers creates a virtuous cycle where people can finally save money and the eventually…

It didn’t go so well with college loans.

Any market government gets into gets distorted.

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

#152

Post by brmgb »

lkrubner wrote: post #102
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.

Prices would be very low and unemployment would have averaged 50% for the last 12 years. I’m half joking, but if the Fed did nothing then we would still be in the middle of the Great Recession. Or consider the British “Great Depression” of the late 1800s — that lasted 20 years because the pound was over-valued.

The interesting question is what would have happened if the USA had directely nationalized and restructured the failing banks rather than loan them money after the subprime mortgage crisis and if it had supported the economy through productive investments in infrastructure rather than lowering the Federal funds rate.

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

#153

Post by qeternity »

b34r wrote: post #137

Out of curiosity, why wouldn’t we want the government managing mortgages for the whole country? (Assuming the acquisition process isn’t slow AF because government.) Real estate seems like a pretty important part of the economy and, more importantly, the government artificially making housing more accessible for potential first time buyers creates a virtuous cycle where people can finally save money and the eventually…

> Out of curiosity, why wouldn’t we want the government managing mortgages for the whole country?

> Real estate seems like a pretty important part of the economy...

You just answered your own question. Governments do not have a history of distributing scarce resources effectively. You need various market forces.

> the government artificially making housing more accessible for potential first time buyers creates a virtuous cycle where people can finally save money and the eventually spend that money to stimulate their micro economies

This is not what happens. As you said - it's artificial. Markets, like the internet, route around this sort of censorship. Any attempt to make housing artificially more affordable will have the effect of increasing demand (by design). When you increase demand, prices rise. And thus becomes unaffordable again. You can then increase the subsidies further to try to offset your original manipulation, which will only worsen the problem. This is precisely what happened in the 90s/early 00s and the result was the 2008 housing bubble.

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

#154

Post by tenpies »

b34r wrote: post #137

Out of curiosity, why wouldn’t we want the government managing mortgages for the whole country? (Assuming the acquisition process isn’t slow AF because government.) Real estate seems like a pretty important part of the economy and, more importantly, the government artificially making housing more accessible for potential first time buyers creates a virtuous cycle where people can finally save money and the eventually…

Because the government is a terrible market participant. It has infinite money, they suffer no consequences, and ideologues come up every so often and let their agendas take over any economic objective the program had in mind.

This is happening now more than ever with the Democrats seemingly deciding that the US Fed has the additional mandate of fighting systemic racism.

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

#155

Post by mrfusion »

havetocharge wrote: post #107
AstralStorm wrote: post #94

Earlier quoted context omitted.

No it isn't. There's tons of free space surrounding cities, including with developed infrastructure and support. The demand driven forcing is miniscule compared to artificial scarcity due to zoning permits or bad infrastructure. (Typically slow transportation.)

There's a degree of purpose to artificial scarcity though. If construction is completely unchecked, then the demand, and load on infrastructure can reach a point where it becomes unusable to everyone,old and new residents. I've lived in Toronto for a long time, and after pockets of th city got rezoned and high-rise construction was allowed, it created a situation where it was not possible to get onto public transit d…

You say these things like they’re facts. But no sources.

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

#156

Post by gwd »

refurb wrote: post #54
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.

I would be curious to see analysis for what home prices would be with 0 Fed intervention. It is an interesting thought experiment. From what I've gathered, any intervention by the government to make housing more accessible, just gets priced in pretty quickly, removing the benefit. For example, FHA offering 5% down payments instead of a standard 20%, just means every first time buyer can now pay 15% more (approximatel…

> From what I've gathered, any intervention by the government to make housing more accessible, just gets priced in pretty quickly, removing the benefit.

You say "any intervention", but you've only mentioned interventions that give more money. Other interventions:

1. Encouraging developers to build new properties, particularly properties for low- and medium-income tenants

2. The government building low- to medium-income housing themselves.

The problem with any policy, of course, which aims to bring down the prices of houses makes everyone who's already bought a house very unhappy.

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

#157

Post by ceejayoz »

mrfusion wrote: post #151
b34r wrote: post #137

Out of curiosity, why wouldn’t we want the government managing mortgages for the whole country? (Assuming the acquisition process isn’t slow AF because government.) Real estate seems like a pretty important part of the economy and, more importantly, the government artificially making housing more accessible for potential first time buyers creates a virtuous cycle where people can finally save money and the eventually…

It didn’t go so well with college loans. Any market government gets into gets distorted.

Most of the rest of the developed world doesn't really consider college a market in the American fashion, though.

Half-hearted government is a problem; education and healthcare both suffer in the US from trying to split the baby Solomon-style.

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

#158

Post by losvedir »

jointpdf wrote: post #61
refurb wrote: post #41

Earlier quoted context omitted.

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…

If you're considering Chicago unaffordable, I'm really curious what you think is affordable!

When I moved here, I was blown away that house prices where I live, about 30 minutes from downtown, are on average $150k, or less than 3x median yearly income here. This isn't actually drastically different from a semi-rural Missouri town I lived in for a bit.

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

#159

Post by roel_v »

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.

I'm currently looking at various mortgage options in Belgium, between 1 and 2% for 25 year term. But what makes it even better is that, by law, (variable) mortgage rates can never more than double (in Belgium). Yearly variable mortgage rates can be had for I got another mortgage in the deep of the aftermath of the 2008 crisis (2010/11 or so) and I had the same situation; rates were a bit higher then. I modeled various scenarios and basically a long fixed term mortgage would only be better if rates would double after, IIRC, 3 or 4 years after I got it. Despite my instinct that screamed 'NO' at variable rate mortgages, I got one anyway - and instead of going up, rates went down, significantly (in terms of their effect on monthly payments - I'm now paying more than 10% less per month than I did at the beginning).

Much of this is completely counterintuitive. This was the first time that cold hard reasoning and financial modeling made me direct profit, and it has done so several times since, but I also have to admit that it took me years to overcome the mental blocks and feeling of uneasiness that following through with real money on decisions that are based purely on facts. I know several people who got fixed terms mortgages around the time I got my first one, and they're still happy about it, they prefer the stability - even though they rationally know there is literally no downside to the variable rate one.

All that said, the Euribor-based mortgages mentioned elsewhere where you actually get paid for having a mortgage are no longer available :)

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

#160

Post by ethbr0 »

the_gastropod wrote: post #144
ethbr0 wrote: post #115

Earlier quoted context omitted.

It's possible the problem isn't speculation, but the rate of return on capital vs the rate of return on labor. If capital dominates, you're going to run into scenarios where it's fundamentally impossible to ever afford scarce goods that generate returns, because someone who started with more capital will now have an even larger delta with you, and is therefore able to outbid you.

Not all capital generates the same returns. Index funds have virtually no gatekeeper—you can open a brokerage account, toss in $10, and be an honest-to-god capitalist. And stocks tend to outperform real estate by a hefty margin. So catching up is possible.

Unfortunately, you need somewhere to live while you're catching up.

How much of salary - CoL can an average person dedicate to building capital?

I'm not saying it's hopeless, only that there are systemic factors fighting against home ownership in extremely supply-limited cities.

Post reply on HN