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

thestreet.com

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

#71

Post by baconandeggs »

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.

Just look at the chart on page 20 of this Fed paper (the Fed was created on 1913, the fiat dollar became the global reserve currency in the 70s after years of debasement to pay for the cold war, vietnam, etc.)

https://www.dallasfed.org/-/media/documents/institute/wpaper...

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

#72

Post by TheSpiceIsLife »

anoncareer0212 wrote: post #30
donmcronald wrote: post #26

Earlier quoted context omitted.

If you print money, but only give it to the top 10% who use it to prop up the stock market, does that cause inflation? I don't understand how America can pump a couple trillion dollars into the economy and it doesn't seem to have any impact. If the average person is getting any of that it should cause inflation, shouldn't it?

We spent so many years hearing it trickles down that we didn't realize how inherently backwards it really is - why would anything trickle down into actual purchases, they're always asset price pumps

Rather than trickle down economics I like to call it:

Deluge up economics.

We're all struggling to pay rent and groceries and transport costs

/

They're all struggling to find somewhere to park another hundred million, billion / trillion? Whatever.

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

#73

Post by alisonkisk »

refurb wrote: post #48
legulere wrote: post #43

Earlier quoted context omitted.

Moving often means leaving friends and family behind.

There are drawbacks. But find a lower cost of living city and the savings on housing means you could probably fly back home once a month and still be ahead.

Sacrificing 10% of your life to air travel, plus massive fuel waste, doesn't sound nice

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

#74

Post by alisonkisk »

epicureanideal wrote: post #45
refurb wrote: post #41

Earlier quoted context omitted.

Not to be snarky or obvious, but you should do what the people in the past did - find a better place to live that allows you to buy a home more easily. That's one of the reasons why there was a big migration to places like LA. Lots of jobs and cheap land to build on. To me, SF is like NYC. Unless you got in early or are one of the 1%, it's not a great place to try and build a life in (if you're looking to own a home)…

The problem is that at the same time, the good jobs are being concentrated in a small number of cities. Even if someone is willing to move to a cheaper place, they find that relative to the employment available, it isn't much better. In the end, they realize that no matter what they choose, they need to struggle incredibly hard just to get a similar quality of life to what a baby boomer was able to achieve with a hig…

You just have to take some of that time saved thanks to internet and smartphones, and put it into commuting. or telecommute.

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

#75

Post by core-questions »

gaukes wrote: post #39
renewiltord wrote: post #15

Earlier quoted context omitted.

Yeah but the Fed can just make 7.5% more money and we're back at even and it won't even be bad because they're trying to increase inflation not decrease it.

The money they’re printing isn’t being circulated because people are keeping it in their bank accounts and reducing spending. I think we’re in for something when things return to normal.

If everyone starts spending, doesn't that increase demand, and therefore push the economy into high gear? Doesn't everyone want more business?

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

#76

Post by alisonkisk »

JMTQp8lwXL wrote: post #31
donmcronald wrote: post #26

Earlier quoted context omitted.

If you print money, but only give it to the top 10% who use it to prop up the stock market, does that cause inflation? I don't understand how America can pump a couple trillion dollars into the economy and it doesn't seem to have any impact. If the average person is getting any of that it should cause inflation, shouldn't it?

Inflation for luxury goods or the types of things the 10% buys (which has some overlap with everyone else: they too, need food, housing, etc). But most households don't need more than 1 washing machine. So you gift any amount to the top 10%, but washing machine prices aren't going anywhere.

Healthcare, education, housing prices go somewhere though.

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

#77

Post by onion2k »

darrenf wrote: post #62
nostromo wrote: post #57

The headline isn’t correct. There is $17T in US mortgage debt. The Fed has backed $2T of that via mortgage backed securities, up from $1T pre-Covid-19. That’s ~11% not 1/3. The article itself mentions this, but decided to use a misleading headline instead.

The amount expressed in dollar terms needn’t match the quantity of mortgages, so both can be true - no?

The article states "The Fed now owns almost a third of bonds backed by home loans in the U.S." which is where the headline comes from.

I think the reason why it's important is that owning 'mortgage backed debt' means you own an instrument sold by the mortgage underwriter rather than the mortgage itself. If the mortgage payer defaults and the underwriter fails you have no way of recovering the debt. A mortgage backed bond is tied to the actual property, so if the payer defaults you can sell the real estate to get the money back.

That might be completely wrong though. The extend of my financial education is watching The Big Short.

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

#78

Post by topspin »

MattGaiser wrote: post #55
the-dude wrote: post #52

Earlier quoted context omitted.

Not sure what lock-in period means. This was a variable/monthly rate. So it could go even lower. Current 30 year rates in the EU are comparable to the US ones, maybe even lower.

By lock in he is asking if the rate can change. In the USA, the rate is permanent.

> In the USA, the rate is permanent.

Variable rate mortgages exist in the US.

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

#80

Post by missedthecue »

alisonkisk wrote: post #73
refurb wrote: post #48

Earlier quoted context omitted.

There are drawbacks. But find a lower cost of living city and the savings on housing means you could probably fly back home once a month and still be ahead.

Sacrificing 10% of your life to air travel, plus massive fuel waste, doesn't sound nice

Point is, you can't expect to have your cake and eat it too
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