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Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

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Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#51

Post by ece »

toomuchtodo wrote: post #29
jjoonathan wrote: post #23

Earlier quoted context omitted.

If they keep rates low, inflation will explode, and buying a house now will be an excellent investment. If they spike rates to fight inflation, like in the late 70s, buying a house now will be a terrible investment. That's why it's a lever of power: it can go both ways.

What's US gov debt servicing look like as rates go up? Not so good. Interest rates should rise substantially (to stop inflating assets and allowing zombie companies to continue to operate suboptimally), but there is no appetite. The US government owes ~$280B/year for each percent increase in interest rates. Dollar-weighed maturity of current US debt is 69.1 months. When rates rise, within one year roughly 1/3 debt wo…

I think everyone knows about paying higher taxes after gov spending, but maybe the rich can pay their fair share like the 70s.

Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#52

Post by runako »

nicoburns wrote: post #37
ethbr0 wrote: post #12

Earlier quoted context omitted.

It's going to be hard for the market to correct while (1) rates stay low, (2) housing demand > housing supply, (3) wages stay high enough to support buying. It's hard to see any of those collapsing in the near term. Especially (2).

I'm rather anticipating (1) collapsing in the next couple of years. It's possible governments will try to put it off, but it's going to have to happen at some point.

People keep saying this, and perhaps they will be proven correct at some point. But it brings to mind the economics maxim that "in the long run, we're all dead."

Japan's interest rate has not exceeded 0.5% for the last 25 years:

https://tradingeconomics.com/japan/interest-rate

Ours hasn't been in a "normal" range for almost 15 years. At what point are low interest rates just the backdrop of our time here rather than something we should expect to change? Would we assign a higher probability of (say) the USSR reconstituting or the Euro becoming the global reserve currency or US interest rates going back to a more normal rate like 6%? If all are improbable, why assert that one must happen at some point?

Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#53

Post by bradleyjg »

skywal_l wrote: post #38
bradleyjg wrote: post #11

Earlier quoted context omitted.

The market will not be allowed to correct. That was the lesson of 2008. The only endgame here comes after the end of dollar dominance.

Now in what circumstances the dominance of the dollar would end? The dollar has pretty much replaced gold in the world economy. And the US happens to own the only mine in the world. I don't see any scenario, bear some sort of cataclysmic event, that would, in say, the next 50 years, change any of that. But I would gladly have my mind changed.

Hogs get slaughtered. We’ve collectively figured out that we have the world’s only gold mine and are busy exploiting the F out of it. Both parties, round the clock.

For example, we prop up our residential housing market by having one part of the government create dollars to buy the mortgages backed securities created by another part of the government in order to keep the yields down and justify low mortgage interest rates.

Do you think the rest of the world is going to sit back and be cynically exploited forever?

Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#54

Post by cinntaile »

ethbr0 wrote: post #12
fanniemae wrote: post #9

Earlier quoted context omitted.

And they'll be screwed when the market corrects and the value of the home they just bought drops significantly

It's going to be hard for the market to correct while (1) rates stay low, (2) housing demand > housing supply, (3) wages stay high enough to support buying. It's hard to see any of those collapsing in the near term. Especially (2).

If financial crises could be predicted we wouldn't be in that mess every x years.

Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#55

Post by chernevik »

"Under the terms of their 2008 conservatorships, [Fannie and Freddie] currently have access to more than $250 billion in support from the Treasury Department."

These institutions and their Federal guarantees contributed enormously to the 2008 housing bubble and subsequent collapse. But 13 years later, here they are, allocating credit. What could go wrong?

Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#56

Post by long_time_gone »

helen___keller wrote: post #25
titzer wrote: post #21

Earlier quoted context omitted.

Must be me, but I missed the part of socialism that includes an impossible debt burden to private banks and a massive housing market bubble.

Socialism with American characteristics

The same system we've been calling "capitalism" for 200 years?

Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#57

Post by ethbr0 »

nicoburns wrote: post #37
ethbr0 wrote: post #12

Earlier quoted context omitted.

It's going to be hard for the market to correct while (1) rates stay low, (2) housing demand > housing supply, (3) wages stay high enough to support buying. It's hard to see any of those collapsing in the near term. Especially (2).

I'm rather anticipating (1) collapsing in the next couple of years. It's possible governments will try to put it off, but it's going to have to happen at some point.

What do you see leading to the collapse?

At least in the US, mortgage debt only recently hit 2008 levels in absolute terms (i.e. not adjusting for 12 years of population growth), which doesn't seem overly burdensome.

Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#58

Post by skywal_l »

bradleyjg wrote: post #53
skywal_l wrote: post #38

Earlier quoted context omitted.

Now in what circumstances the dominance of the dollar would end? The dollar has pretty much replaced gold in the world economy. And the US happens to own the only mine in the world. I don't see any scenario, bear some sort of cataclysmic event, that would, in say, the next 50 years, change any of that. But I would gladly have my mind changed.

Hogs get slaughtered. We’ve collectively figured out that we have the world’s only gold mine and are busy exploiting the F out of it. Both parties, round the clock. For example, we prop up our residential housing market by having one part of the government create dollars to buy the mortgages backed securities created by another part of the government in order to keep the yields down and justify low mortgage interest…

> Do you think the rest of the world is going to sit back and be cynically exploited forever?

Yes absolutely. Because this system does not benefits american citizens (it used to, but it is less and less the case). It benefits world elites which have been co-opted in a global financial system which is based on the dollar. Hell, the CCP leaders all own assets in dollars, they wouldn't want to see any of this change. Remember that the money that fuel the 2008 bubble was, for the most part, chinese investments.

Bottom line is, the world is driven not by ideologies or political interests but by economic interests. At the top: greed and at the bottom: hunger, with a declination in between. Both ends tend toward the status quo and the dollar is very much part of it. For me, only ecological collapse or some other unforeseen global cataclysm would change any of that and probably not for the best.

Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#59

Post by wsloth514 »

WORMS_EAT_WORMS wrote: post #15
yardie wrote: post #4

$1M is a $4000/m mortgage requiring a $12000/m income or $140k salary. That seems doable for some professions. If you are on the fence of buying a home, right now would be a good time to do it. Because they aren't getting cheaper and with this announcement they will almost certainly rise to meet this new, looser qualification.

I could not downvote this faster. Ridiculous and wrong. Shameful advice. I be curious know your age, income, and net worth to see how out of touch you are. Do not take this advice and debt at this ratio. - take home is gross income not net like taxes or health insurance. It also doesn’t factor in retirement even - mortgage estimate is wrong - does not factor property taxes - Just open an affordability calculator or m…

This is not really shameful advise. As a Software Engineer in 30s, with occasional side work. I make more than $140k alone. This is not to mention my wife in marketing, who does well, so we are above $200k combined both working remotely now. Now I wouldn't do $1 million because that would just be too big of a house. But we are currently doing half that on our renovation which is feasible even with the increased construction costs. I agree there is more to the costs like property taxes. But I know people in the city who's rent is above $3k a month in rent just for a studio who are now considering buying because it makes more sense now. They also make a lot more than me doing the same thing. But even when all is said and done, factoring in mortgage, utilities, taxes, etc. My wife and I will be paying around an extra $500 a month for an actual house than renting an apartment?

Re: Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1M as Prices Soar

#60

Post by yardie »

francisofascii wrote: post #13
yardie wrote: post #4

$1M is a $4000/m mortgage requiring a $12000/m income or $140k salary. That seems doable for some professions. If you are on the fence of buying a home, right now would be a good time to do it. Because they aren't getting cheaper and with this announcement they will almost certainly rise to meet this new, looser qualification.

I remember thinking the same thing back in 2006 when I bought a home. The house lost 30% of it's value after two years. Turned out 2009 would have been a better time to buy.

And the result of 2009 was a tightening in lending standards. Which helped create a 5 year glut of housing. More housing was built than there were qualified buyers to take possession. Those govt lending standards haven’t abated. If anything they are too strict as buyers have to bring more cash to closing since appraisals aren’t matching sales prices.

We’re headed for a slow down for sure but not a reversal. As much as I’d like that to be the case.

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