Another article showing concern in the housing market- yet the author may have lacked critical thinking

The video title is "Terrifying meltdown" ... but it's anything but. More like a minor correction on the tails of RE hyperinflation of the past few years. And I do mean hyperinflation. Here in central Texas, I'm still getting $500K+ cash offers for my house I bought for $235K 4 years ago.

The correction is never the problem. The price inflation leading up to it is the real problem.
Youtube titles are always clickbait, but his math at the point I linked seemed sound.

I don't think were in for hyperinflation on the current trajectory. The fed is tightening. A little with interest rates, a ton more with their balance sheet which no one talks about much. That certainly can change, but with divided government and a hawkish fed, we have a little while at least.
 
If the debt is defaulted on all the above goes out the window.

Akin to if a guy gets a $500,000 mortgage then tells the bank he wants to negotiate his debt to $250,000 of the $500,000 principal.

If defaulted or even negotiated retroactively down to simply not pay sections of the already vetted debt
Interest rates will triple, any debt that is even close to arrears will be called, energy supplies will become unstable (welcome back 1970’s) most flights will be grounded, food supplies will become unstable and unemployment will likely hit 20% overnight .

You will also have a 1/3 of the population that won’t have an income and won’t be able to pay bills.

Should be interesting come June/July, I recommend having a bunch of bottled water and canned food

Nothing like fully avoidable manmade problems .
 
Last edited:
Video should start at the appropriate time.

He calculates affordability by taking the percentage of average household income it would take to make payments on the average house using current average interest rates and compared back 20 years or so. Spoiler alert - its jumped the shark.


Arm Chair YouTube'r by the way, just talking here for conversation sake, not directed at anyone, just some thoughts after seeing that video.

As much as he talks the bottom line is home prices are what the public can afford to pay. Simple stuff.
We had a world health event which stopped the real estate market just as much as any other industry = result lower inventory.
Simple stuff but let's go a step further, feeding into the lower inventory and driving prices even higher was Federal Intervention in the markets by forcing down mortgage rates to the lowest in history and sending out stimulus checks. Just look at part of that guys chart, look at what normal interest rates look like.

Common sense simply says what I say is true. Low inventory, high home prices, artificially low interest rates, higher home prices.
The fact of the matter is, homes sold and will continue to sell. Now that FINALLY we are getting close (but not quite there) to normal interest rates this will force down home prices because the fact of the matter is, if people could not afford the homes they would not be able to get the mortgage to buy one!
Once we see rates 7 to 8% this will keep a cap on higher home prices, once we see building supplies back to normal this will hold down cost increases, once we see all the mentioned, we will see developers having to adjust their pricing to the home builders lower.

Over and over I say it. Supply and Demand, price are what the public can afford. Forget the dooms day, it will always correct to what the buyer market can afford.
Another inaccurate statement if I heard correctly is his reference to percentage of income being spent on homes. That is always the same or they would not get a mortgage. "Fannie Mae's maximum total debt-to-income (DTI) ratio is 36% of the borrower's stable monthly income." It's as simple as that. If you have a lot of cash reserves and incredible credit you could possibly go up to a max of 45%. But for the general population its 36% if your a first time buyer.
He also points to the "median home price" that is good. But (not that it matters) I dont know where he got those income amounts. He states he starts in 1997 if so I come up with an income level 20% higher than he has on his spread sheet at $37,000.

But everything in this insane long post means nothing other than there is always a dooms day person to get attention yet the free market always hums along nicely. Home prices are what the public can afford and when the public can no longer afford them, the prices will come down, which they are doing on the West Coast right now, stabilizing on the East Coast. If they crash, they crash, it's no different when they ran up to the sky in price increases. Sooner or later it will always play out but this one is the world health event, followed by Federal interference, to keep demand high when their was no labor force to build homes, no supplies to build homes and when those supplies were available sky high prices but with so much money poured into the economy and wages rising faster than a tide during a hurricane housing demand remained high.
Now it will stabilize or slow the pace if increases. His terrifying meltdown is other peoples opportunity to buy a home. We are due for sure and some people will get burned for paying so much if they plan on selling anytime soon.
 
Last edited:
Arm Chair YouTube'r by the way, just talking here for conversation sake, not directed at anyone, just some thoughts after seeing that video.

As much as he talks the bottom line is home prices are what the public can afford to pay. Simple stuff.
We had a world health event which stopped the real estate market just as much as any other industry = result lower inventory.
Simple stuff but let's go a step further, feeding into the lower inventory and driving prices even higher was Federal Intervention in the markets by forcing down mortgage rates to the lowest in history and sending out stimulus checks. Just look at part of that guys chart, look at what normal interest rates look like.

Common sense simply says what I say is true. Low inventory, high home prices, artificially low interest rates, higher home prices.
The fact of the matter is, homes sold and will continue to sell. Now that FINALLY we are getting close (but not quite there) to normal interest rates this will force down home prices because the fact of the matter is, if people could not afford the homes they would not be able to get the mortgage to buy one!
Once we see rates 7 to 8% this will keep a cap on higher home prices, once we see building supplies back to normal this will hold down cost increases, once we see all the mentioned, we will see developers having to adjust their pricing to the home builders lower.

Over and over I say it. Supply and Demand, price are what the public can afford. Forget the dooms day, it will always correct to what the buyer market can afford.
Another inaccurate statement if I heard correctly is his reference to percentage of income being spent on homes. That is always the same or they would not get a mortgage. "Fannie Mae's maximum total debt-to-income (DTI) ratio is 36% of the borrower's stable monthly income." It's as simple as that. If you have a lot of cash reserves and incredible credit you could possibly go up to a max of 45%. But for the general population its 36% if your a first time buyer.
He also points to the "median home price" that is good. But (not that it matters) I dont know where he got those income amounts. He states he starts in 1997 if so I come up with an income level 20% higher than he has on his spread sheet at $37,000.

But everything in this insane long post means nothing other than there is always a dooms day person to get attention yet the free market always hums along nicely. Home prices are what the public can afford and when the public can no longer afford them, the prices will come down, which they are doing on the West Coast right now, stabilizing on the East Coast. If they crash, they crash, it's no different when they ran up to the sky in price increases. Sooner or later it will always play out but this one is the world health event, followed by Federal interference, to keep demand high when their was no labor force to build homes, no supplies to build homes and when those supplies were available sky high prices but with so much money poured into the economy and wages rising faster than a tide during a hurricane housing demand remained high.
Now it will stabilize or slow the pace if increases. His terrifying meltdown is other peoples opportunity to buy a home. We are due for sure and some people will get burned for paying so much if they plan on selling anytime soon.
Yes- he is as bad as that guy named after the StarTrek character that spouts off on YouTube.
 
Just to throw another hot coal in the fire-

There's more and more lil tid bits coming out all the time about how financial institutions aren't repo'ing cars at the rate they would if things aren't the way they are now. They are giving people longer grace periods, begging them to pay something.

The word is if they repo'ed the cars they should, the market would flood with repos, the value of used cars would plummet and the banks wouldn't get 30% of what's owed at auction.
 
Just to throw another hot coal in the fire-

There's more and more lil tid bits coming out all the time about how financial institutions aren't repo'ing cars at the rate they would if things aren't the way they are now. They are giving people longer grace periods, begging them to pay something.

The word is if they repo'ed the cars they should, the market would flood with repos, the value of used cars would plummet and the banks wouldn't get 30% of what's owed at auction.
I totally believe that. Exactly what they did with housing in 2008. If they had a 200K note on a house, and repo'd it and sold it for $150K, they had to take the $50K loss on their balance sheet. So they let the "owner" live in it for free, basically hoping they would mow the lawn, maybe make the occasional payment. Wouldn't surprise me there doing the same thing now with cars.
 
financial institutions aren't repo'ing cars at the rate... they are giving people longer grace periods, begging them to pay something.

I know someone who worked car loans for C1. Management of such things is different than it was. I am not sure we can use car repo information as easily as in the past, as a measure of economic health.

Things are managed differently today in just about every field.

I see the US economy as currently near robust, but perpetually on the edge of disaster. Will AI be the next tech boom? Or is it worthless? Will Iran nuke Israel? Will millennials purchase homes?

Something like 27% of homes are purchased with cash, even those purchasers might dry up if they can't sell existing homes, leading to a solid downturn.
 

Mortgage demand from homebuyers drops to a 28-year low.​



Im actually happy to see rates increase *LOL* Our new home almost complete, close this month will have a small mortgage for now.
First time I checked last Nov we were above 7% and it was upsetting. Jan I locked in at 5.87% perfect timing. There was a short window where I might have gotten .12% less and actually right now if I pay an extra point will bring it down to 5.5 or slightly lower.

As far as the 28 year low, makes good headlines, though as we know the housing market is very region specific. Flight from certain states to other states. The southeast, at least in our area is still humming along, like, I am in shock we need houses on the market here, they get bought up quickly.
The community we are buying in, which is the state next door to us in NC. They sell as quick as the lot # is released for sale. So many under construction they limit what they release I guess to make sure they can manage what they are selling. It's really the whole coast of SC and NC up to Willmington. But that is my impression I cant know the entire market along the coast. But am sort of in tune as I live in the state.

What REALLY shocked us, due to close this month was trying to buy appliances. Washer Dryer and Refrigerator. Even though all the stores (Best Buy, Home Depot and Lowes) carried the brand and model numbers, we had to split up the purchase between Best Buy and Home Depot and no one store could deliver all three appliances by the time we move in which is 3 weeks out. So in order to get them in time we had to split it up. Refrigerator from Best Buy and Washer/Dryer from Home Depot (or the other way around)

So next is the furniture, seems like the same thing going on, long lead times and accept will we have the bare minimum for that when we move it. New house and we are doing all new furniture.
I suspect some of this is also new inventory controls to keep costs lower, it just seemed weird because we are not even in prime season yet. Though here in the SouthEast its darn close.
 
Last edited:
rates_so_far_01.gif
 
Since some of you still think new houses are better:

New houses are better for many almost everyone. Even more so for a first time buyer. Everything is new, no expenses, no time, no mess, no inconvenience remodeling.
Nothing to spend money on.
We did that when we moved South 16 years ago from L.I. NY bought a new 5 br 3000 sq ft home. in 16 years never spent a dime on repairs or remodeling. Raised our family here, kids successful and off on their own.

Now it was time to move on, new experiences, new smaller home, about to close, this time near the coast of NC. So looking forward to it, huge community multiple pools, clubhouses, golf courses, security at the main gate, electronic at the others with cameras, license plate readers *LOL* Brand new for less than we just sold out big old 16 year old home (actually 15 years) Down here in the land of the free I wouldn't consider a used home if it was more than a couple years old. No reason too.

Up in NY there was no choice, no land on Western Nassau County to build on, your stuff with 50+ year old homes and be prepared to be stuck paying over decades 10s of thousands to upgrade. The new home is also built to the latest building standards and storm proofing as well as energy efficiency.

Will have another 16 years of a brand new home with all the upgrades and nothing to spend money on again for the next 15 years. Gosh I hope I am still alive !!! *LOL*LOL*
As far as these you tubers, it's all B.S. Tens of thousands of homes sold nationally every year (or more) of course there will be lemons, there always were and there are for any manufactured product in the world. For each of those there will be a you tube on how bad it is.
Look up any product you want to buy and you can find something negative on any product. 🙃
 
Not sure about not spending a dime on a new home after the purchase. Perhaps on HVAC and structural stuff, I would agree, but any upgrades cost a huge premium from the builder.
So if one has deep enough pockets to get everything they want from the builder, sure I can see that, but otherwise especially first time buyers, they will most likely be spending money on improvements.
Bought two brand new homes, it certainly wasn’t a done deal on spending after the purchase in my case lol.
 
Back
Top