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

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

#161

Post by CydeWeys »

postingawayonhn wrote: post #58
refurb wrote: post #54

Earlier quoted context omitted.

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…

> For example, FHA offering 5% down payments instead of a standard 20%, just means every first time buyer can now pay 15% more (approximately) for a house. Assuming they had the same deposit available they would theoretically be able to pay 300% more. Of course they probably wouldn't be able to demonstrate their ability to service a loan that large.

They're not gonna pay 300% because they wouldn't be able to pay even the first monthly mortgage payment. Buyers aren't stupid -- they'll take advantage of low money down but they won't get themselves into a mortgage that they literally already can't afford the payment on from day one. No, the way mortgage problems typically happen is that the payments are initially affordable but then something changes (typically job loss).

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

#162

Post by ethbr0 »

xnyan wrote: post #148
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.

Well said. Another way of looking at it: in the long term return on investment (r) > economic growth (g) because “everyone” gets g but people with capital also get r.

Indeed, and credit where credit is due: https://en.m.wikipedia.org/wiki/Capital_in_the_Twenty-First_...

I don't ascribe to everything, but it's a thought provoking perspective.

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

#163

Post by sokoloff »

gbasin wrote: post #146
tialaramex wrote: post #126

Earlier quoted context omitted.

> Wait, what? Wouldn't it mean that a pool of prospective buyers that couldn't afford 20% but can afford 5% are now able to buy a house? No. Real property doesn't work that way at all. The effect of most of this kind of government intervention in the housing market is to subsidise developers. In fact it's so bad that in the UK shareholders of such a developer are outraged because the uncapped bonus structure for exec…

Developers can't get FHA loans

Things that give your buyer pool more money/more access helps your selling position, even if you can’t get the money straight from the tap.

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

#164

Post by tfigment »

gwd wrote: post #156
refurb wrote: post #54

Earlier quoted context omitted.

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-inco…

And they get unhappy because they have been trained to think of housing as investment that should grow faster than inflation rather than a place to live.

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

#165

Post by mrep »

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.

Historically, equity markets and housing provide similar returns when you factor in rent according to this super interesting harvard paper on "The Rate of Return on Everything, 1870–2015" and the corresponding HN discussion [0]. Far less liquid and actually more stable though according to the paper.

[0]: https://news.ycombinator.com/item?id=19817584

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

#166

Post by ynniv »

wahern wrote: post #108
baconandeggs wrote: post #71

Earlier quoted context omitted.

Just look at the chart on page 20 of this Fed paper (the Fed was created on 1913, the fiat dollar became the global reserve currency in the 70s after years of debasement to pay for the cold war, vietnam, etc.) https://www.dallasfed.org/-/media/documents/institute/wpaper...

Perhaps the better chart is on page 21 (Figure 16), where as compared to all the other countries surveyed the U.S. is at the far low end of housing price inflation. In fact, unless I'm missing something it comes in dead last among all 14 countries at the end of the sample period, 2012.

The high growth countries had been destroyed in a war.

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

#167

Post by sokoloff »

glofish wrote: post #149
glenstein wrote: post #119

Earlier quoted context omitted.

>just means every first time buyer can now pay 15% more (approximately) for a house Wait, what? Wouldn't it mean that a pool of prospective buyers that couldn't afford 20% but can afford 5% are now able to buy a house? That's a shift in the structure of the market rather than just a change being "priced in" for the same set of buyers. >In hot markets, the prices rise quickly to reflect that and everyone is in the sam…

Initially it does have the effect you state: > prospective buyers that couldn't afford 20% but can afford 5% are now able to buy a house? hence the measures are popular and very visible. Long term however (just as with subsidies and scolarships for education) all lead to pushing prices up. Perhaps the buyers in the market could pay 10% but now that they only have to pay 5% the remaining 5% slowly (say over a few year…

> Perhaps the buyers in the market could pay 10% but now that they only have to pay 5% the remaining 5% slowly (say over a few years) gets factored into the purchase price so that the down payment is the same as it were for 10%.

Are you proposing that the effect is to nearly double house prices in a few years?

If today’s price is $500K and buyers could pay $50K down, in a few years, that place would need to be $1M for the 5% down payment to be the same figure.

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

#168

Post by rayhendricks »

wyclif wrote: post #142
jointpdf wrote: post #61

Earlier quoted context omitted.

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…

Since you're spent a lot of time researching this: have you ever found a way to correlate 3rd-tier and below cities with fiber internet speeds and infrastructure? Seems like that info would be useful to a lot of people here, who are looking to move to a more rural area but are working tech jobs remote long term or even permanently and need fast internet.

This is a great idea. I’d take it a step further and correlate it to the availability of municipal fiber and also a Costco within a 30min drive.

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

#169

Post by CydeWeys »

vertis wrote: post #145
jointpdf wrote: post #61

Earlier quoted context omitted.

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…

I'm an outsider, but when I look at the US market there seem to be really cheap houses away from the major cities. Far cheaper than Australia. For example: https://www.realtor.com/realestateandhomes-search/Rochester_... Now I don't really know anything about Rochester. But you would be hard pressed to find anything in a city for ~50-60k in Australia. Not comparing Apples to Apples, but the 1 bedroom apartment I bough…

Rochester is definitely cheap, but for a reason: It's a city on the down slope past its peak. It's a deindustrialized rust belt city with a population down 38% from its pre-WWII high. That goes a long way to explain why housing is so affordable. And I wonder what the tech job situation is like there (though that may matter less now, what with the pandemic increasing the acceptability of WFH).

It's hard to move somewhere for cheap housing where you literally wouldn't know a single person, though. Social life is important.

Also, there's the winter weather. I hope you like cold and snow.

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

#170

Post by jeffreyrogers »

wahern wrote: post #108
baconandeggs wrote: post #71

Earlier quoted context omitted.

Just look at the chart on page 20 of this Fed paper (the Fed was created on 1913, the fiat dollar became the global reserve currency in the 70s after years of debasement to pay for the cold war, vietnam, etc.) https://www.dallasfed.org/-/media/documents/institute/wpaper...

Perhaps the better chart is on page 21 (Figure 16), where as compared to all the other countries surveyed the U.S. is at the far low end of housing price inflation. In fact, unless I'm missing something it comes in dead last among all 14 countries at the end of the sample period, 2012.

The US as a whole has low housing prices. But that is including all the homes in Nebraska and other places most HN readers don't want to live in. The home prices in the ~10 cities people on HN actually want to live in are much higher and not affordable for most people. And the good jobs are only in the expensive places, unless you're a doctor or something like that.
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