82% of mortgaged homes have a rate below 6%

[Hohn]

The fed broke the market by pouring too much money in, somehow everyone refinancing or over-paying for houses was supposed to help with the pandemic. People are now stuck in there houses because it would cost so much more to move.

I watched part of the fed meeting when they cut 50bps - 30 minutes of my life I will never get back. A young reporter asked about housing and JP said "it wasn't a fed mandate" and essentially it was someone else's fault - while at the same time 100% of "QT" have been mortgage backed securities, so there pushing mortgage rates up. They have not shrunk there treasury balance one Iotta. What a bunch.

It will take a very long time for there to be an actual functional housing market again.

Well, housing isn't a Fed mandate.

And the fed didn't do anything but its job. The money that got poured in was when Uncle Sam borrowed into existence trillions of dollars while covid was shrinking the economy. Prices are the result of the proportion of the quantity of money to the size of the economy. You add money and shrink the economy, there's only one way prices can go. And that's precisely what "they" did.

The Fed acts monetarily, but this was a fiscal issue all along.

 

[BrendanC]

we bought in september of 24’ and are at a 5.62% with 2 years at 4.62% thanks to seller concessions (i’m a handy man and do the work myself lol).

i’m doubtful i’ll ever be able to get to the 3% range.

 

[SC Maintenance]

Well, housing isn't a Fed mandate.

And the fed didn't do anything but its job. The money that got poured in was when Uncle Sam borrowed into existence trillions of dollars while covid was shrinking the economy. Prices are the result of the proportion of the quantity of money to the size of the economy. You add money and shrink the economy, there's only one way prices can go. And that's precisely what "they" did.

The Fed acts monetarily, but this was a fiscal issue all along.

It appears that you have no understanding on what a fed balance sheet is?

If they have nothing to do with the mortgage rates why do 1/4 of all mortgage backed securities in existence still sit on their balance sheet?

They drive rates down. The treasury has no ability to do that. Nor can the treasury create money from thin air.

 

[dlundblad]

I was surprised to see 20% are under three percent.

2.8 for us.

 

[road_rascal]

I looked up our mortgage rate and it's 2.375% on a 15 year fixed (we refinanced in 2021). We also pay extra every month.

 

[PandaBear]

I was surprised to see 20% are under three percent.

At one point in 2012 or so if you do 10 to 15 year fixed you can actually get 2.5% APR.

 

[PandaBear]

Points aren't factored into these mortgages. I wonder how much effect points have on this trend.

Not much. At rate so low and people moving more often now, most people don't try to pay more up front to save later.

 

[SC Maintenance]

Not much. At rate so low and people moving more often now, most people don't try to pay more up front to save later.

I have checked in the past and the ROI on the points buy down is very long - I think my math last time said 8 years. The mortgage lenders are pro's. They play the odds and likely seldom loose. Unless you know for sure your staying somewhere a long time it likely isn't worth it.

 

[edyvw]

They could have lowered short term rates and not loaded their balance sheet. Or they could have loaded there balance sheet and left short term alone. Or they could have told Freddie and Fannie to stop collateralizing so many loans - their GSE's, they could have been told. Or even if they were too stupid for all that they could have stopped at the end of 2020 when it was obvious to everyone it wasn't what they thought it might be rather than continuing to 2023. But they did none of those things. "transitory" Unless you were a depositor at SVB. Then the fed has your back.

It wasn't about supporting the economy. How does pushing home prices up support anyone but the banks?

Then to top it all off Powell has the stones to stand there in 2024 and say the the fed "has nothing to do with housing". Laughable.

Same nonsense as 2008.

I agree, don't get me wrong. They could do various things differently.
Could they do it differently, prevent various scams etc? Absolutely. I mean, it absolutely wreaked havoc in rural mountain communities here. Every hedge fund manager bought a home here and, with that, pushed out people from communities. And those who stayed now cannot afford real estate taxes (Montana is an excellent example of this issue).

 

[tbm5690]

I looked up our mortgage rate and it's 2.375% on a 15 year fixed (we refinanced in 2021). We also pay extra every month.

That might be the lowest rate I've heard of. I wonder if anyone here has lower than that. I'm at a 2.625% on a 20 year.

 

[PandaBear]

I have checked in the past and the ROI on the points buy down is very long - I think my math last time said 8 years. The mortgage lenders are pro's. They play the odds and likely seldom loose. Unless you know for sure your staying somewhere a long time it likely isn't worth it.

It is a risk vs reward thing for both the lenders and the borrowers. Lenders also don't want to keep paying for the cost every 6 months and would want to sometimes get more return now vs later. If it is a healthy market that everyone lend for around that price it is the market price, for the term, that people find acceptable on both sides.

The only good deal I find for refi most of the time are out of California (but still in the US) brokers who take a cut of his or her own commission and refund back to me as escrow. In other word I got paid cash instead of buying points. They also told me sometimes lenders have some quota to meet and they will give out extra commission to promote certain lenders at the rates they are advertising, and it is up to these agents to "give back" to close the deal. In the end everyone wins. I did the math and I end up with an even better deal than buying points up front when the commission cash back is factored in.

 

[cpayne5]

That might be the lowest rate I've heard of. I wonder if anyone here has lower than that. I'm at a 2.625% on a 20 year.

Pretty sure someone earlier in the thread posted something lower, but mine is a 2.25% 15 year that I refinanced in October 2020. Very fortunate to have such a rate. Hoping to have it paid off by the time I'm 50 (7 years).

 

[Hohn]

It appears that you have no understanding on what a fed balance sheet is?

If they have nothing to do with the mortgage rates why do 1/4 of all mortgage backed securities in existence still sit on their balance sheet?

They drive rates down. The treasury has no ability to do that. Nor can the treasury create money from thin air.

I had to go recheck my post to see where I said that the Fed has nothing to do with mortgage rates. I still can't find it, perhaps you can help me?

Appearances can be deceiving, don't you agree?

My statement that the "fed did nothing but its job" is simply that it bought assets so it could inject liquidity. I said nothing about which assets it bought. Those assets include MBS (since 2009). And of course that would have an effect on the secondary mortgage market.


https://fred.stlouisfed.org/series/WSHOMCB.

Note that all MBS on the Fed sheet are underwritten by Fannie/Freddie/Ginny. The Fed does not own any "non-agency" MBS.

So yes, the Fed's action when it buys assets will have an effect on that asset market. That's why the fed exists-- it buys mostly government debt and owns the primary responsibility for manipulating the market for government debt to achieve policy ends (unemployment and economy growth).

I never said the Treasury drove rates down. To the contrary, it is the deficit spending that creates inflation which drives up interest rates in general, including mortgage rates. Contra your assertion the Treasury ABSOLUTELY can create money. Any use of credit creates money. When I use my credit card, I create money. We know this must be true because when I use my card, the seller gets paid (actual) money but yet I have paid nothing for it-- yet. How is it possible for a seller to get paid without my account being deducted? How can the money be in two places at once? It cannot be. Rather, NEW MONEY was created to pay the merchant. And when that money was created, it created also a debt for me. When I pay that debt, I destroy the money I created.

So every use of credit creates money. And when the government is using $1T or more of additional credit every year, it is creating additional money. Now it may be that the Fed is doing the actual printing-- but the deficit spending is the initiating acting that creates the money and is ultimate why it exists *and* circulates.

The fed can print its own money, but it cannot put that money into circulation. It's pushing on a rope. The fed could print $5T in cash in the next month and stick it in it own vault and it would have NO macroeconomic effect. In order for that cash to have a macroeconomic effect, it must circulate. Which means it must be pulled into the economy by the FOMC operations-- commercial paper lenders. (this is ultimately why QE was ineffective, but that's another topic).

By comparison, when the Treasury borrows money to spend, it both circulates AND creates money.

Uncle Miltie was absolutely correct that "inflation is always and everywhere a monetary phenomenon", but that's not saying that it's a FED phenomenon. Friedman was saying that inflation is always the result of the aggregate money supply in proportion to aggregate demand/national income/GDP (pick your term).

 

[SC Maintenance]

I had to go recheck my post to see where I said that the Fed has nothing to do with mortgage rates. I still can't find it, perhaps you can help me?

Well, housing isn't a Fed mandate.

And the fed didn't do anything but its job. The money that got poured in was when Uncle Sam borrowed into existence trillions of dollars while covid was shrinking the economy. Prices are the result of the proportion of the quantity of money to the size of the economy. You add money and shrink the economy, there's only one way prices can go. And that's precisely what "they" did.

The Fed acts monetarily, but this was a fiscal issue all along.

Not a fiscal issue. Housing prices run up was a monetary policy failure.

My statement that the "fed did nothing but its job" is simply that it bought assets so it could inject liquidity.

They did not do there job. There job is employment commensurate with economy's long run potential, stable prices, and moderate long term interest rates.

Relative to this thread, they did exactly opposite of their job. They drove long term rates to an all time low, which drove housing prices to an all time high. So it was the opposite of moderate interest rates and stable prices, and did little to affect long term employment.

Fed's Important triple mandate highlighted.

SEC. 2A. The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. ø12 U.S.C. 225a¿

And of course that would have an effect on the secondary mortgage market.

So we agree?

it is the deficit spending that creates inflation

Deficit spending may create inflation (like now), or it may create deflation (crowding out) like in the UK currently or recently at least. Expanding the money supply creates inflation all other things being equal, but its not that simple either - velocity of money matters also. Only the fed and commercial banks can expand the money supply. The treasury can not (directly)

Contra your assertion the Treasury ABSOLUTELY can create money.

Please explain how? Borrowing money is not creating money. If they could create money why borrow in the first place? If someone uses money borrowed (created) from the fed or a bank to buy the treasuries, the banks created the money, not the treasury.

That is exactly why the fed is supposed to be independent. If you want to say they don't act like there independent you would get no argument from me on that.

So every use of credit creates money.

No. Banks may lever up - which creates money. Or the treasury can borrow money that already exists - like when I buy a T-bill.

By comparison, when the Treasury borrows money to spend, it both circulates AND creates money.

Borrowing money doesn't create money. I bought a T-bill last week, like I do often. It was a loan to the treasury. The money was in my fidelity account. No additional money was created. If anything it was destroyed, because that money is no longer there for fidelity to lend to others. They cannot (or are not supposed to) Re-hypothecate my T-bill. If they were short of funds they could borrow from the fed (which is creating money) but it depends.

"inflation is always and everywhere a monetary phenomenon", but that's not saying that it's a FED phenomenon.

Monetary policy is fed policy, and Friedman was very specific about this.

Anyway, good talk. We disagree.

If your trying to say the fed and treasury are in cahoots, that is true.