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

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

#71

Post by antisthenes »

vinyl7 wrote: post #20
larrymyers wrote: post #12

Earlier quoted context omitted.

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…

Inventory is already well on its way back to 2020 levels, and is exceeding 2019 levels in some areas. The "shortage" was caused by demand from extremely low interest rates, now that demand has died...the shortage is over. Not to mention, as we head into this recession and life/layoffs continue, people will be forced to sell if they can no longer cover their mortgage. https://twitter.com/RickPalaciosJr/status/15886888…

Yeah, with the caveat that '18 and '19 inventory was AWFUL. My friend purchased a house in '17, and I - in '18, and we both to increase our budgets by ~15-20% in order to be able to afford _any_ house that didn't look like an environmental disaster.

Even then, these were 70 year old starter homes.

Basically - if you live in a desirable area, don't expect housing prices to reflect a 35% drop off of the interest rates increasing. Expect to pay roughly 2018-2019 prices, maybe even with 5-10% on top, adjusting for inflation.

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

#72

Post by xenadu02 »

fratlas wrote: post #57
Test0129 wrote: post #49

Earlier quoted context omitted.

Similarly, the delusion of the "house poor" hoping for another 2008 is frankly hilarious. The difference is, if you picked up a house at 2.7% you will be winning for a long time. There are fewer ARMs, which means a small more protracted "collapse". Housing supply is still non-existent and will be into the near future. Wages will need to keep pace with housing costs in order to provide anyone a chance to succeed. Even…

> you lost out on a literal once in a lifetime opportunity I don't think anyone can make claims like this, lots of people made the right decision by not buying into an inflated market with job instability around the corner. I think the correction is needed, any people who didn't overextend will be fine if they intend to stay put for 5-15 years.

The parent comment is making a really good point (in a roundabout way):

It is just another variation of "timing the stock market". Even if you're correct you can end up losing so much money on the upside that long-term you lose compared to people who buy into a bull market.

Depending on the exact circumstances of when you bought, your mortgage rate, how much prices fall, how long you can hold, and how much prices recover you can still end up losing by not having bought during the run-up.

Here's a made up bay area example:

A house sells for $2m in 2014. Due to rising prices over 8-10 years you end up buying for $3m at 2.5% interest in 2021. The market then tanks by 30%. That puts the house back at $2.1m. Over the following 5 years the market recovers somewhat and the house is worth $2.8m in 2026.

A naive view says "see! it was correct not to buy in 2021! waiting was the correct choice."

But that's not the whole story.

Buying in 2021 means you did not pay $5k/mo rent from 2021-2026. That's $270k. Not all of that will go to principle but some will. And you're 5 years ahead of the mortgage payoff schedule compared to not buying.

Speaking of time value of money... buying in 2021 means you got 2.5-3% interest on your 30 year mortgage. Depending on how things play out buying in 2026 might end up with 4-6% on the same mortgage:

2021 Purchase @2.5%: total interest paid $1.26m 2026 Purchase @4%: total interest paid $2.15m 2026 Purchase @6%: total interest paid $3.47m

In this scenario buying in 2021 ends up with the bank paying _you_ to take the mortgage since inflation is up. If you assume inflation says around 2-2.5% after that you more or less borrow the money for free.

Buying in 2026 costs you around $1m-$2.2m over the life of the loan.

In this example even accounting for the market dropping 30% _and_ not fully recovering it still made more sense to buy in 2021. Remember this is just one example with a lot of assumptions. I'm not saying this is what will happen. I'm merely pointing out that you can predict prices are inflated, wait for them to fall, and end up losing compared to a "sucker" who bought at the peak.

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

#73

Post by xenadu02 »

fy20 wrote: post #39

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 a…

I don't know why you'd want to deal with the European or UK system. It means your housing payment can fluctuate, possibly dramatically, due to actions entirely outside your control.

Mortgages in the US generally don't have a payoff penalty after a certain amount of time (and some don't have one at all) so in a falling interest rate scenario you can simply refinance.

To answer your question: the ultimate buyers (or should I say ultimate lenders) are taking the interest rate upside risk in exchange for stability. Mortgages just don't lose much money. When defaults are high they lose out on future interest and may take principle haircuts but they don't evaporate. Even most of the garbage from the 2007 financial crisis eventually recovered as housing recovered - comparatively few of the actual mortgages were written off.

If you want that kind of stability you can buy US Treasuries to earn 1% (or even less). Or you can get into mortgages and earn 2.5% for almost the same risk. Those rates would be higher today of course since the fed is raising rates.

You might rightly say that LIBOR or whatever rates don't fluctuate that much... in which case the same argument applies to the risk lenders take on in the US market.

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

#74

Post by staticman2 »

silisili wrote: post #33
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.

Inflation has been nowhere close to 10 percent for 3 years. You can determine the adjusted rate here:

https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=100&year1=2019...

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

#75

Post by theGnuMe »

tinnou wrote: post #59
andromeda-brain wrote: post #54

Earlier quoted context omitted.

Would you be willing to share a specific property as an example?

Zillow: https://www.zillow.com/homedetails/1488-Sunland-Ct-San-Jose-... Redfin: https://www.redfin.com/CA/San-Jose/1488-Sunland-Ct-95130/hom... The history between May and August was deleted on Redfin. Either there is a way to pay Redfin to delete history or @lotsofpulp is right, or maybe a convenient bug?

Yeah that's a trick. They take it off the market and then relist which resets the clock. They do this so buyers won't assume there is something wrong with the property due to the price changes.

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

#76

Post by lotsofpulp »

theGnuMe wrote: post #75
tinnou wrote: post #59

Earlier quoted context omitted.

Zillow: https://www.zillow.com/homedetails/1488-Sunland-Ct-San-Jose-... Redfin: https://www.redfin.com/CA/San-Jose/1488-Sunland-Ct-95130/hom... The history between May and August was deleted on Redfin. Either there is a way to pay Redfin to delete history or @lotsofpulp is right, or maybe a convenient bug?

Yeah that's a trick. They take it off the market and then relist which resets the clock. They do this so buyers won't assume there is something wrong with the property due to the price changes.

Then kudos to Zillow for continuing to provide the accurate history.

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

#77

Post by jgust »

hmmmmmm111 wrote: post #21
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…

What is the common sense reason that windfall taxes would reduce the price of gas and food?

1) additional profit from raising prices won't go towards the bottom line, so the incentive to raise price is not as attractive

2) if a company is hell bent on raising prices to capture profit, there is still an incentive to reduce tax liability by re-investing those profits into the company (increasing headcount would benefit the non-ruling class)

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