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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

#281

Post by brmgb »

rayiner wrote: post #241
brmgb wrote: post #152

Earlier quoted context omitted.

The interesting question is what would have happened if the USA had directely nationalized and restructured the failing banks rather than loan them money after the subprime mortgage crisis and if it had supported the economy through productive investments in infrastructure rather than lowering the Federal funds rate.

How does nationalizing the banks help?

By allowing you to restructure them before privatizing. The crisis was a failure of gouvernance. Most of these banks were going to and should have failed.

Once it was agreed that they were too big to let the situation run its course, it would have made sense to step in and actually solve the systemic problem.

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

#283

Post by hardsoftnfloppy »

JMTQp8lwXL wrote: post #18

I would be curious to see analysis for what home prices would be with 0 Fed intervention. Also, I don't understand how millennials aren't supposed to see this figure and immediately feel a sense of rejection, that the housing market is some form of a pyramid scheme, where you had to get in early to have a chance.

You know it only costs 20k to put a down payment on a house right? -Millenial here

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

#284

Post by Rury »

hn_throwaway_99 wrote: post #7

I keep thinking of all the huge amount of asset purchases by the Fed, especially legally dubious purchases like corporate bonds, that "this won't end well". That said, I don't really know what "not ending well" would look like. Would it just be total runaway inflation? Can anyone more knowledgeable comment on what possible endgames are for these asset purchases?

Yes it would be inflation - and you would most likely see inflation happen in only those asset purchases...

People incorrectly assume inflation means "the price of everything goes up".

Why is this incorrect assumption to make? Well because prices aren't merely dictated by supply, but rather supply & demand. Comparing inflated money supply to the total good supply is naïve, as this sort of analysis fails to consider the different demand between different goods.

As so, for a dumb example, if the FED just printed tons of money, enough to give each American $10m dollars, and each American said "I'm going to take this $10m in stimulus money, and invest it in Amazon stock", Amazon's stock price would inflate crazy! However, in this scenario meat prices wouldn't change at all, as none of this extra money spurred extra demand for meat - it only spurred demand in amazon stock...

This is predominantly why CPI is a garbage metric of inflation. It does not measure asset prices (such as stocks / real estate), and hence does not measure the inflation that is happening around us (the inflation we're seeing in assets like stocks & real estate).

And the end result is inequality. Those who own the inflated assets benefit from the inflated prices, while non-owners of the inflated assets are at a disadvantage. In this particular case, banks are benefitting from those who want to own a house, but don't already own one.

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

#285

Post by sethammons »

sokoloff wrote: post #273
sethammons wrote: post #269

Earlier quoted context omitted.

If you consider that the $500k house in the example is the same house that goes for $575k, then housing prices just increased to absorb the eager buyer at a lower percent down. And when the neighbor goes to sell, they see a similar house as their own sold for a higher price, so they try to sell for a higher price.

"so the downpayment is the same [for 5%] as it [was] for 10%" That's what I'm not understanding. In your example, the downpayment is wildly lower.

Right, at first. But do this over a few years and the housing market continues to expand and grow. The housing prices continue to go up and the required down payment continues to proportionally rise back to the point of market pressure pushing back. I don't think that half a down payment equals double the house cost (even in the long term), but it is just one more example of supply and demand. If you lower the upfront or monthly costs for something, then demand should go up which will push prices back up. Econ 101.

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

#286

Post by opportune »

sokoloff wrote: post #131
peterwwillis wrote: post #109

Earlier quoted context omitted.

So.... Is it a stupid time to get a mortgage and buy a house, or a fantastic time?

It’s a great time to refinance mortgage debt you already have. Whether it’s a great time to buy a house depends on the future demand for housing in the local area. If you pay today’s price for a house in Palo Alto or condo in NYC and those areas fall in popularity, it could easily be a bad call.

Condos in NYC have fallen about 10-20% lately (at least the ones I was looking at) so even with rising rates I doubt it could go underwater once the pandemic is over

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

#287

Post by jdhn »

jointpdf wrote: post #259
jdhn wrote: post #143

Earlier quoted context omitted.

>secondary cities (Grand Rapids MI) Grand Rapids? Unaffordable? Are you looking at condos downtown? Here's[0] a 3bd/2br with 1800 sq ft that admittedly is outside of downtown a bit, but is under $1000 a month. This condo [1] is more expensive, but would be totally affordable if 2 people were able to pay $1250 in rent by themselves. Both of these were on the first page of Trulia results when I searched for Grand Rapid…

A condo in GR is a possibility for sure, though you have to admit the market there has gotten ridiculous in recent years. Most of the decent houses near downtown get multiple offers instantly (same in Kalamazoo). Is $1250/mo a realistic amount to charge a roommate in GR?

If you really want that downtown life, then it may be realistic. It's definitely a lot cheaper than a corresponding condo of that size in a major city.

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

#288

Post by sokoloff »

sethammons wrote: post #285
sokoloff wrote: post #273

Earlier quoted context omitted.

"so the downpayment is the same [for 5%] as it [was] for 10%" That's what I'm not understanding. In your example, the downpayment is wildly lower.

Right, at first. But do this over a few years and the housing market continues to expand and grow. The housing prices continue to go up and the required down payment continues to proportionally rise back to the point of market pressure pushing back. I don't think that half a down payment equals double the house cost (even in the long term), but it is just one more example of supply and demand. If you lower the upfron…

OK, I agree with all that. Sounds like I wasn't missing much.

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

#289

Post by jointpdf »

OldHand2018 wrote: post #268
jointpdf wrote: post #257

Earlier quoted context omitted.

Indeed, my shortlist is Chicago (and maybe Grand Rapids) at this point. I’ve always been in love with Chicago—such a gorgeous city. Housing wise, I’m enchanted by the industrial brick and timber loft condos that there seem to be a lot of for decent prices. Can you recommend other neighborhoods besides Lakeview/Lincoln Park? Those are the only areas I’ve spent significant time in aside from downtown.

It really depends on where you plan to work, where your friends are, etc. I would recommend that you rent for a year or two and spend time exploring neighborhoods. You'll find a location you love eventually. There are definitely dangerous areas, but you're going to hear a lot of very outdated advice such as "never go south of Roosevelt" when in reality from Roosevelt south to Hyde Park has seen an incredible renaissa…

Strange layouts and maintenance projects are kind of my jam, so you may be increasing my enticement here. Thank you for the tips.

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

#290

Post by [deleted] »

gwd wrote: post #214
tnel77 wrote: post #206

Earlier quoted context omitted.

You don’t treat a couple hundred thousand dollars as an investment? Sounds privileged.

I think you've got it backwards. If new cars all cost $200k, would you buy one as an investment? No -- you'd either not buy one (unprivileged) or buy one anyway realizing it's a cost (privileged). I might spend $100k on a house that I was going to live in for 20-30 years, even if I knew that at the end of that time it was going to be worthless. But I certainly wouldn't spend $500k+ on a house unless I knew I'd be abl…

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