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

Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

cnbc.com

Post reply on HN
Print view View original

31–40 of 77 posts

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#31

Post by tqi »

bpodgursky wrote: post #9
blindriver wrote: post #7

So far the mortgage rates skyrocketing corresponds to an equivalent mortgage that is about 35% lower. Meaning that if you could previously afford a $1 million mortgage, you can now only afford about a $650,000 mortgage with the same payment. If you don't see a corresponding price drop of 35% then it might be too early.

Does this assume 20% down? The higher the cash component on average, the less it matters. If it's a cash market (bay/Seattle/NYC), might be more resilient.

I wonder if cash buyers really are that resilient. I assume most people who have that much in assets primarily have it in stocks (rather than actual cash), which have also dropped precipitously this year.

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#32

Post by jjcon »

eo3x0 wrote: post #28

Housing prices are dropping, as would be expected with the interest rate hikes. House prices are set at the margins, just like any asset. Even if the folks with 3% mortgage rates sit tight and don’t sell, there will still be downward pressure on prices because prices are not determined by non-transactions. There are plenty of listings for those who need to exit the market and liquidate, driving inventory up. Just a q…

If you look at the national picture in the USA prices haven't really budged by much at all, it would seem reasonable that they will but when and by how much is the million dollar question:

https://www.zillow.com/home-values/102001/united-states/

https://www.redfin.com/us-housing-market

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#33

Post by silisili »

blindriver wrote: post #7

So far the mortgage rates skyrocketing corresponds to an equivalent mortgage that is about 35% lower. Meaning that if you could previously afford a $1 million mortgage, you can now only afford about a $650,000 mortgage with the same payment. If you don't see a corresponding price drop of 35% then it might be too early.

I think one has to remember inflation, too. It's been, what, 10% for nearly 3 years? A 300k house in 2020, if inflated as such, would be 399k in 2023.

For that reason, I hesitate to predict a huge downward trend in house prices. In this environment, prices holding steady would be a downward trend.

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#34

Post by sgc »

toomuchtodo wrote: post #13
sgc wrote: post #8

Earlier quoted context omitted.

Rents have gone up, and people have locked in historically low interest rates. Very few people actually have to sell, and outside of limited life situations, many will just shift to renting. That is why it is taking so long for prices to drop, and why they very well might never drop enough to match previous affordability before we hit a period of declining rates. If only 10% of owners on the market are actually feeli…

We can speculate, but will have to see what job losses look like over the next 12-18 months, Boomers (10k per day retire) trying to downsize or tap their equity to support themselves in retirement, etc before boldly proclaiming sales with seize up as rates climb. Life happens, some people will need to sell, even if that means losing their sweet 2-3% rate. Cash buyers know what these assets are worth at these interest…

We are in the middle of it. Rates have been going up for a long time, and around here, year over year sales are down 40%. Prices are flat or have taken a very small dip, depending on the submarket. I am not at all convinced this trend will continue beyond a 10-20% drop in prices, nowhere near the 35-50% drop required to reach purchasing power parity depending on where the Fed stops raising rates. A slow, smaller drop is functionally equivalent to prices continuing to go up for many as they have been for so long, but then also gets a certain group of cash buyers who aren't looking for an absolute killing, just good returns, back into the market to slow down further drops.

Of course we don't know the future, and if things really go to the worst due to wars around the world etc, all bets are off. But my opinion is based on things continuing more or less in the current mediocrity for a while, rather than getting significantly worse.

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#35

Post by bequanna »

jjcon wrote: post #32
eo3x0 wrote: post #28

Housing prices are dropping, as would be expected with the interest rate hikes. House prices are set at the margins, just like any asset. Even if the folks with 3% mortgage rates sit tight and don’t sell, there will still be downward pressure on prices because prices are not determined by non-transactions. There are plenty of listings for those who need to exit the market and liquidate, driving inventory up. Just a q…

If you look at the national picture in the USA prices haven't really budged by much at all, it would seem reasonable that they will but when and by how much is the million dollar question: https://www.zillow.com/home-values/102001/united-states/ https://www.redfin.com/us-housing-market

Housing affordability has never been as low as it is currently and we are headed into a recession.

I think large drops (40-50%) in most regions are likely.

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#36

Post by blacksqr »

jmyeet wrote: post #16

It's unsurprising mortgage volume is down given economic uncertainty and the spiking interest rates. As such, layoffs at mortgage originators seem inevitable. But here's the lesson I want people to take from this: both Demorats and Republicans are cut from the same neoliberal cloth in that they both serve corporate interests. What do I mean by this? Neither pushes back on the idea that interest rates are the only way…

A corporate tax increase was just passed in August.

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#37

Post by metacritic12 »

eo3x0 wrote: post #28

Housing prices are dropping, as would be expected with the interest rate hikes. House prices are set at the margins, just like any asset. Even if the folks with 3% mortgage rates sit tight and don’t sell, there will still be downward pressure on prices because prices are not determined by non-transactions. There are plenty of listings for those who need to exit the market and liquidate, driving inventory up. Just a q…

Houses are set on the margin, but that doesn't mean the "lock in effect" doesn't have a net positive effect on prices.

There is heterogeneity of sellers in how much they "must" sell (versus alternates like rent it out, not move at all if they're nearly indifferent between cities, etc). Clearly "lock in" reduces total sellers.

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#38

Post by alexpetralia »

eo3x0 wrote: post #28

Housing prices are dropping, as would be expected with the interest rate hikes. House prices are set at the margins, just like any asset. Even if the folks with 3% mortgage rates sit tight and don’t sell, there will still be downward pressure on prices because prices are not determined by non-transactions. There are plenty of listings for those who need to exit the market and liquidate, driving inventory up. Just a q…

Out of curiosity, because I've read this a few times, what is not priced at the margin?

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#39

Post by fy20 »

in the US I find it strange that the mortgage interest rate is almost always fixed for the life of the mortgage. If you took a mortgage at 2% which is well above the Fed's interest rate, then isn't the lender loosing money? Or is that not how it works?

I'm from the UK where mortgages can fixed for a definite period, usually 2-5 years, then it changes to a variable rate mortgage (with the same provider), but there's always the option of choosing variable from the start. The variable part is a margin + the Bank of England base rate.

I now live in Europe and here it's the same, except basically nobody chooses a fixed rate mortgage. The monthly repayments are recalculated every six months using the current EURIBOR rate - which is set by a group of banks themselves, not the European Central Bank (it sounds a lot like a cartel).

Either way, I'm buying a house now when interest is the highest it's been for over a decade, but it doesn't really bother me as it will drop at some point and my monthly payments will go down.

Re: Wells Fargo mortgage staff brace for layoffs as U.S. loan volumes collapse

#40

Post by chadash »

larrymyers wrote: post #12
blindriver wrote: post #7

So far the mortgage rates skyrocketing corresponds to an equivalent mortgage that is about 35% lower. Meaning that if you could previously afford a $1 million mortgage, you can now only afford about a $650,000 mortgage with the same payment. If you don't see a corresponding price drop of 35% then it might be too early.

There's been a lot of news coverage lately about how low inventory is going to continue to keep housing prices high, despite mortgages going up. Basically people with 2%-3% mortgages are going to sit tight, because they can no longer afford a comparable house were they to move. Low inventory means prices won't drop as much as people hope with rising interest rates. The only wild card here is what will happen with cas…

> The only wild card here is what will happen with cash buyers, who aren't affected by mortgage rates.

Depends what you mean by cash buyer. There's a few different categories here and people sometimes get confused.

1) Someone who is very wealthy and has enough cash (or cash convertible assets) lying around to buy house without financing. I'd put Bill Gates in this category. I think most people assume that this is what all cash buyers are (albeit not as wealthy as BG)

2) Someone who sold a home that previously appreciated in value and is now able to use the difference (plus some savings) to pay for the next home in cash. For example, you bought in Brooklyn in 1970 and now want to retire in Miami. You can probably sell that first place and have enough liquid cash to buy in Miami. This is sort of like category 1, but not necessarily someone who is wealthy in a way that most people imagine.

3) Someone who has access to some other means of temporary financing. For example, let's say you run a company and have a close relationship with your bank. You might already have a line of credit with the bank collateralized against your business or other assets that you can draw down to get a temporary loan so that you can make a "cash offer", which you then plan to turn around and get a mortgage on. You don't need to be able to afford $600,000 in cash to buy a $600k home. You just need to be able to have some means of financing it in between when you buy the home and when you take out a mortgage. Often times this might be a family member or friend helping out.

4) A real estate investment company that buys houses in cash. Again, you may not actually have the cash around, but you have a banking relationship and the ability to get large amounts of cash on short notice and without the amount of due diligence a mortgage reuqires.

In 2020-2021 when the housing market was at its peak, I suspect that a substantial chunk of "cash buyers" probably fell in category 3. Yes, people had more money and there were lots of bitcoin millionaires, but not enough to hear about multiple cash offers on $500k homes (if you are the sort of person with $500k in cash to spare, you probably want more than a $500k home).

In any case, all of these groups are affected by the current environment. The stock market is down and there are just fewer people in Group 1 right now. Sure, Bezos and Gates are just fine, but the person who had $10M in liquid assets in 2021 might have $7M in in late 2022 and is probably a lot more nervous about taking money out of that. For group 2, the house you are selling isn't gonna sell for as much, so you'll have less money to spend on your next house. For group 3, these people were planning to use financing as a bridge, but the underlying mortgage rates still very much affect you if you plan to take out a mortgage after the sale. And of course, Group 4 is probably the most effected... what kind of person in their right mind is investing in residential real estate right now :)

Post reply on HN