Fearing losses, banks are quietly dumping real estate loans • Hacker News Board

Re: Fearing losses, banks are quietly dumping real estate loans

#71

Post by jjav » Tue, Jun 25, 2024, 4:02 AM UTC

charlie0 wrote: post #34

lwansbrough wrote: post #28

Earlier quoted context omitted.

Agreed. The de-risking of the housing market has been disastrous for The de-risking has come in the form of artificial scarcity caused by zoning gatekeeping and outdated fire code, amongst other things. It’s time North America took a hard look at the root causes and fixes them before there is a crisis of confidence in leadership (which is already happened to me - I’m moving out instead of buying in to the insanity.)

Voting with your feet is the most practical option.

I know it's not what seems like the most fun solution but there is merit in this.

For anyone in their 20s or 30s.. you only have so many years even if it seems life is long. If your current city makes it impossible to have the housing you want you have two choices. Try to change it, which is noble but can take many decades. Or move.

I can't fault anyone for trying to change it since improvement is a great cause. But do you want to find yourself 60 years old, still waiting for those changes?

I'm on the younger side of GenX so not in my 20s anymore. But when I was in my 20s I wanted to desperately live in my chosen city (Manhattan). I tried everything but it was way too expensive to reasonably rent, forget buying. I gave up and moved and bought a nice house for less money than a closet in Manhattan.

Re: Fearing losses, banks are quietly dumping real estate loans

#72

Post by TuringNYC » Tue, Jun 25, 2024, 4:09 AM UTC

HeyLaughingBoy wrote: post #59

TuringNYC wrote: post #42

Earlier quoted context omitted.

>> Then, just take the example and imagine they declare bankruptcy. That loan is going to be worth 0 in the vast majority of cases. >> Loans go to zero. It happens in real estate, it happens in oil and gas, it happens in other places I'm sure. It's not especially common, but it happens. It is common, but at the end of a cycle. The chances of second lien loans being worth zero are higher and higher as leverage increas…

> the less incentive owners have to continue paying People keep saying this, but the only time they can come up with examples are when the owner wants out of the property. In the case of a home loan, being underwater is meaningless if you're not going anywhere. Most people will continue to pay because they need a place to live. I have yet to hear of someone who was underwater on their primary home loan and decided to…

>> People keep saying this, but the only time they can come up with examples are when the owner wants out of the property. In the case of a home loan, being underwater is meaningless if you're not going anywhere. Most people will continue to pay because they need a place to live. I have yet to hear of someone who was underwater on their primary home loan and decided to stop paying it and default just because. For an investment property I could see that happening. For the house that you plan to live in for the next 20 years? No.

Only if you have a real choice. Reasons people will default:

- Divorced, force seller; especially common as finances go downhill

- floating rate on 2nd mortgage/HELOC is no longer affordable

- Lost job, have no money to pay mortgage. defaults

- Job change with lower income. Have money, but not enough to keep up with payments

- property taxes re-assessed, no longer affordable. tax liens pile up on home

Re: Fearing losses, banks are quietly dumping real estate loans

#73

Post by yunwal » Tue, Jun 25, 2024, 4:43 AM UTC

jjav wrote: post #71

charlie0 wrote: post #34

Earlier quoted context omitted.

Voting with your feet is the most practical option.

I know it's not what seems like the most fun solution but there is merit in this. For anyone in their 20s or 30s.. you only have so many years even if it seems life is long. If your current city makes it impossible to have the housing you want you have two choices. Try to change it, which is noble but can take many decades. Or move. I can't fault anyone for trying to change it since improvement is a great cause. But…

There are really really good reasons why certain places are expensive vs. cheap. Having no access to walkable areas, fresh food, education, safe water, or public amenities in general is not a dignified way to live for most people. It's not about fun, it's about your health, community, support system. Changing that situation in cheaper areas is not necessarily going to be easier than changing housing affordability.

Re: Fearing losses, banks are quietly dumping real estate loans

#74

Post by mtalantikite » Tue, Jun 25, 2024, 4:44 AM UTC

freitzkriesler2 wrote: post #61

api wrote: post #26

Earlier quoted context omitted.

Real estate infuriates me to the point that I find myself hoping it burns to the ground and that the whole industry suffers. “Real estate always goes up” is treated like a damn entitlement to the point that the financial well being of everyone under 40 today has been sacrificed to it. In 2008 it felt like the entire real economy was put on the chopping block to bail it out. I’d love for a real estate market that look…

Hear hear. It's time for a teddy Roosevelt figure to come along and gut real estate investors.

I mean, Bernie was pretty close until the machine behind the Democrats worked as hard as they could to force Biden. They almost took Bernie off the ballot here in New York when it was clear Biden was getting the nomination.

Re: Fearing losses, banks are quietly dumping real estate loans

#75

Post by petre » Tue, Jun 25, 2024, 4:47 AM UTC

freitzkriesler2 wrote: post #61

api wrote: post #26

Earlier quoted context omitted.

Real estate infuriates me to the point that I find myself hoping it burns to the ground and that the whole industry suffers. “Real estate always goes up” is treated like a damn entitlement to the point that the financial well being of everyone under 40 today has been sacrificed to it. In 2008 it felt like the entire real economy was put on the chopping block to bail it out. I’d love for a real estate market that look…

Hear hear. It's time for a teddy Roosevelt figure to come along and gut real estate investors.

The US no longer has politicians like Teddy Roosevelt anywhere in sight.

Re: Fearing losses, banks are quietly dumping real estate loans

#76

Post by mitthrowaway2 » Tue, Jun 25, 2024, 4:49 AM UTC

phkahler wrote: post #70

mitthrowaway2 wrote: post #67

Earlier quoted context omitted.

I think this doesn't get enough attention. The biggest shareholders in many companies are index funds like Vanguard and BlackRock, which often have the right to vote on behalf of the shares in their ETFs. Their interests are in ensuring the entire ETF goes up, and a real estate deleveraging would do the opposite.

>> Their interests are in ensuring the entire ETF goes up... Things like automatic enrolment in 401K plans, or automatically bumping employee contributions by 1 percent will also benefit the broad market and funds.

Yes, as does curing COVID and protecting the environment.[1] And on the less good side: broad-based price hikes instead of fighting with the competition over market share in a race to the bottom.[2] It remains to be seen whether ETF ownership is connected to "greedflation", but I believe so.

[1] https://newsletterhunt.com/emails/12216

[2] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2632024

Re: Fearing losses, banks are quietly dumping real estate loans

#77

Post by charlie0 » Tue, Jun 25, 2024, 4:57 AM UTC

yunwal wrote: post #73

jjav wrote: post #71

Earlier quoted context omitted.

I know it's not what seems like the most fun solution but there is merit in this. For anyone in their 20s or 30s.. you only have so many years even if it seems life is long. If your current city makes it impossible to have the housing you want you have two choices. Try to change it, which is noble but can take many decades. Or move. I can't fault anyone for trying to change it since improvement is a great cause. But…

There are really really good reasons why certain places are expensive vs. cheap. Having no access to walkable areas, fresh food, education, safe water, or public amenities in general is not a dignified way to live for most people. It's not about fun, it's about your health, community, support system. Changing that situation in cheaper areas is not necessarily going to be easier than changing housing affordability.

I'd challenge that. I recently moved and was able to find a place that had all that and was cheaper. Having lived in big cities all my life, I totally believed that only big cities had this. Of course, now that I challenged myself to look outside the box, I was finally able to find something.

Re: Fearing losses, banks are quietly dumping real estate loans

#78

Post by anon291 » Tue, Jun 25, 2024, 5:01 AM UTC

theandrewbailey wrote: post #22

> It’s an early but telling sign of the broader distress brewing in the commercial real estate market, which is hurting from the twin punches of high interest rates, which make it harder to refinance loans, and low occupancy rates for office buildings — an outcome of the pandemic. And that's what I think is behind much of the push for RTO. While a lot (if not most) office space is rented, corporate executives are the…

What I don't think people realize is that, in general, the people that stand the most to lose from these kinds of things are not banks. Banks typically hold assets for others, not in their own right.

By far, the biggest investor in real estate is government pension funds. Government has every vested interest to enforce RTO, because without it, if companies stop leasing space, then government pension funds will be unable to pay out.

All too often people assume 'greedy bankers' are the ones who are going to lose. That's wrong. Bankers are the middle men. Bankers don't care. They'll get their cut.

Re: Fearing losses, banks are quietly dumping real estate loans

#79

Post by charlie0 » Tue, Jun 25, 2024, 5:05 AM UTC

jjav wrote: post #71

charlie0 wrote: post #34

Earlier quoted context omitted.

Voting with your feet is the most practical option.

I know it's not what seems like the most fun solution but there is merit in this. For anyone in their 20s or 30s.. you only have so many years even if it seems life is long. If your current city makes it impossible to have the housing you want you have two choices. Try to change it, which is noble but can take many decades. Or move. I can't fault anyone for trying to change it since improvement is a great cause. But…

The compromise here could be you can now have vacations in Manhattan. There's an odd thing that happens to most of us where we become convinced we HAVE TO live in certain places and we get tunnel vision because of that. Personally, I think the sweet spot is living 20-40 minutes of such places. It tends to be more peaceful further from downtown areas, considerably more affordable, yet still close enough you could day-trip it and enjoy the amenities.

Re: Fearing losses, banks are quietly dumping real estate loans

#80

Post by brailsafe » Tue, Jun 25, 2024, 5:10 AM UTC

anon291 wrote: post #78

theandrewbailey wrote: post #22

> It’s an early but telling sign of the broader distress brewing in the commercial real estate market, which is hurting from the twin punches of high interest rates, which make it harder to refinance loans, and low occupancy rates for office buildings — an outcome of the pandemic. And that's what I think is behind much of the push for RTO. While a lot (if not most) office space is rented, corporate executives are the…

What I don't think people realize is that, in general, the people that stand the most to lose from these kinds of things are not banks. Banks typically hold assets for others, not in their own right. By far, the biggest investor in real estate is government pension funds. Government has every vested interest to enforce RTO, because without it, if companies stop leasing space, then government pension funds will be una…

Isn't a lot of that tied up in residential real estate investment trusts though, which offer the much more perverse incentive of pushing rents as high as they'll go, to the point of increasing homelessness?