patrick.net

Misc says

There is also the crowding out effect.

Time to stop quantitative tightening (QT). Maybe even if the Fed adds to its balance sheet at a relatively lower rate by buying mortgage backed securities, that should help reduce the 30 Year mortgage rate down to 6%.

If I was buying a home, I'd buy 4 discount points to lower the mortgage rate from 6% to 5%.

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The Fed has caused all kinds of problems with their hyper-active QE during the Covid scare. The Feds balance sheet is about $1 trillion negative value if they marked it to market. (The larger banks are sitting on losses of what ??? say $800 billion if they had to sell their long term treasuries and MBS). The Fed is now printing money to cover its negative cash flow instead of its usual ability of sending interest it collects to the Treasury.

We need more construction of residential units to alleviate the housing inflation, but that ain't gonna happen until the Fed QE's the mortgage market. The Fed based on its ivory tower thinking believes doing this will cause more inflation.

I have faith that Trump will prevail against this and will lower rates bigly.

.AD says

I'm not sure why the mortgage market is setting the 30 yr rate at ~7%.

Bond Vigilantes don't believe inflation is under control

AD says

Home prices historically have increased 4% a year on average based on research by Professor Robert Shiller.

Before or after inflation? 30-50% gainz in a short period are always unsustainable fake roids, either in the gym or in the housing market.

The great thing about his Index is that big jumps and crashes are directly attributable to Fed Policy. It appears the MBS buyers take the opposite view of the 50bp rate cut.

AmericanKulak says

AD says

Home prices historically have increased 4% a year on average based on research by Professor Robert Shiller.

Before or after inflation? 30-50% gainz in a short period are always unsustainable fake roids, either in the gym or in the housing market.

I think its 4% a year over a long timeline like +20 years. Its not inflation adjusted , its before inflation.

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Homeloaners are tempted to believe that ther modest post-inflation growth they were used to experiencing (say late 70s-late 90s getting a 9% post-inflation gain) was "finally correcting itself" to the "true" price by shooting up (90s-late 2000s, also mid 2010s-2020), which must be the true price because it makes them a winner. "Har, har, I was smart and brought tick tack shack and my investment is finally paying off."

In reality, 1-2%/YoY after inflation is the reasonable amount (not factoring in costly repairs like new roofs or replacing HVAC systems or major landscaping)

Another thing as to "Why now is different" is that Insurance and Property Taxes are skyrocketing from Florida to Texas to Arizona to even Kansas (where no massive growth can be attributed, nor any recent major disasters). It's becoming more and more expensive to own a home.

I suspect Insurance Companies are losing their shirt on commercial real estate post-COVID and the premium padding is not about hurricanes (which were below average frequency and strength over more than a decade) but due to underperforming office and retail space.

It's never been a better time to rent.

AD says

I think its 4% a year over a long timeline like +20 years. Its not inflation adjusted , its before inflation.

You may want to rethink that statement. Home prices going up when all else is equal is strictly due to inflation.

AmericanKulak says

to Texas to Arizona to even Kansas (where no massive growth can be attributed, nor any recent major disasters)

I've replaced two roofs in the past 5 years in San Antonio due to hail damage. And I'm one of the lucky ones. The entire region has had unusual hail (or seems to be anyway from what I've read) over the past decade.

It's been a killer for insurance companies.

I marked off where I started buying real estate and where I sold maui in 2024. Not because I'm some genius market timer that's just when I finally had the cash to buy. I stopped when I felt like I had plenty and needed to diversify.

All rentals, I've rented what I've actually lived in from 1992 to the present.

I would have done better if I had just stayed in the stock market but the real estate was a hedge in case I lost it all in the stock market.

I learned a lot too though so there is value there I guess.

HeadSet says

AD says

I think its 4% a year over a long timeline like +20 years. Its not inflation adjusted , its before inflation.

You may want to rethink that statement. Home prices going up when all else is equal is strictly due to inflation.

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AD says

HeadSet says

AD says

I think its 4% a year over a long timeline like +20 years. Its not inflation adjusted , its before inflation.

You may want to rethink that statement. Home prices going up when all else is equal is strictly due to inflation.

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Yes, but isn't that 4% "appreciation" just a reflection of inflation?

HeadSet says

Yes, but isn't that 4% "appreciation" just a reflection of inflation?

Yes. Tax free on a primary up to $500k married. Pretty damn good deal. Just don't overpay for real estate up front and know you're going to stay for a long time.

Investments you can depreciate. Yes you have to pay it back, but if you bought wisely your sale price should beat inflation and the payback. Besides starting a company, RE is probably the best avenue to wealth for the average person. It's just the average person has no fucking clue what they're doing.

HeadSet says

AD says

HeadSet says

AD says

I think its 4% a year over a long timeline like +20 years. Its not inflation adjusted , its before inflation.

You may want to rethink that statement. Home prices going up when all else is equal is strictly due to inflation.

.

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Yes, but isn't that 4% "appreciation" just a reflection of inflation?

Yes, as far as consequently resulting in the inflation rate to increase (i.e., causes increase in housing cost aggregate of PCE and CPI).

I just want housing to be less virtually treated as an asset like stocks.

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AmericanKulak says

The great thing about his Index is that big jumps and crashes are directly attributable to Fed Policy. It appears the MBS buyers take the opposite view of the 50bp rate cut.

I look at the +7% mortgage rate and compare to the PCE overall of 2.1% (i.e., annual inflation rate). They are not making much money at that rate, if they are making any money now selling mortgage loans.

And I think the Fed Funds Rate is now around 4.6%. So technically a bank borrows at 4.6% and charges 7% for a mortgage plus any fees like origination fee.

Our local bank lent us a 30 Yr mortgage at 3% (veteran affairs) in summer 2016 while the Fed Funds rate was 0.25%, and the loan origination fee was $800.

Probably took the bank loan officer no more than 4 hours to work our loan.

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AD says

So technically a bank borrows at 4.6% and charges 7% for a mortgage plus any fees like origination fee.

For some reason, I can still get 4.5% on savings account at a CU, and 3.8% on money market demand deposits at Discover. I presume that the credit union and Discover use that retail money to fund credit card loans and not mortgages.

HeadSet says

I presume that the credit union and Discover use that retail money to fund credit card loans and not mortgages.

Bingo. That's why they offer points, hotels and airfare. Get you to rack it up to pay interest once you cannot pay the balance. The spread on 4.6% to 24% CC interest is insane.

I'll take the tax free point money. I'm a unicorn though. Most people see "candy" and want to eat it and don't pay for it. "But I got points to stay at a Hilton for a night" and then didn't pay the balance. 2-3 months not paying the full balance, you just paid for that room.

Mortgages they're playing the CC game essentially. They then sell it off to Freddie and Fannie after they got their cut. They just have to make sure they have the deposits to loan. Most of them do now. You'll never end up after 2-3 years max with a servicer/bank that you did the original loan with. F & F are not in the billing business. They just give a cut to servicer's.

SoTex says

It's been a killer for insurance companies.

I'm still believing it's the utter destruction going on in downtown office rental. None of things are new or unheard of.

AmericanKulak says

I'm still believing it's the utter destruction going on in downtown office rental. None of things are new or unheard of

Yeah, that too. Also our decaying infrastructure.

SoTex says

AmericanKulak says

I'm still believing it's the utter destruction going on in downtown office rental. None of things are new or unheard of

Yeah, that too. Also our decaying infrastructure.

I bitch about cities, and haven't been to downtown Chicago for 3-4 years until the recent marathon. They're doing a good job for a massively blue city. Indiana aside, IL and WI have some of the best infrastructure because of freeze thaw. Roads go to shit in 5 years here and modern asphalt mix is shit. Indiana can eat shit. Worst roads in the country and expensive toll wise. CA comes in a close second and I don't know why.

Great Video from a Public Adjuster about insurance in Florida.
https://www.youtube.com/watch?v=hjBzIsGxeZE

"Snake Farm", "(American) Lack of Integrity" LOL.

Adjuster recommends NOT using Domestic-only Florida Insurers. Says Chubb is the best but only for higher end housing.

Also of interest:
https://www.insurancebusinessmag.com/us/news/property/florida-insurers-deny-nearly-half-of-hurricane-claims-ratings-agency-says-508765.aspx

60 Minutes episode referred to:
https://www.youtube.com/watch?v=j5re7zBzrJk

Make insurance optional again, or at least make it minimal and ban no fault, and watch premiums collapse and payouts rise. Free America from mandatory insurance.

SoTex says

Yeah, that too. Also our decaying infrastructure.

After watching the above video, it's mostly just corruption.

AmericanKulak says

After watching the above video, it's mostly just corruption.

You know, I should have considered that. Decaying / corrupt institutions.

I think this next Trump term is smack dab at the end of the so called 4th Turning.

It's going to be interesting...

Watched part of the first link. Talking on a YouTube channel as an insurance adjuster is a big no no unless you're selling it. Adjusters get fired over it. I have a friend that worked on a case against me and he didn't tell me until after it was settled. This guy was likely sales and talking about adjusters.

If it rains and your property floods, it's a flood. This is fact. The people in NC that got wiped out it was a flood. Likely didn't have separate flood insurance. If it "comes from the sky" it's home owners insurance and if it "comes from the ground" it's a flood. Where the fuck does water come from? The sky. He contradicted himself out of the gate showing he doesn't know what he's talking about.

Fact is people didn't pay for flood insurance. Most don't or have to unless they're in a 100 year flood plain. They'll have to repair or foreclose if they don't have the cash. Water in your property is a flood. No flood insurance there will be no payout. I could watch more, but I know bull shit when I hear or see it. I've experienced floods. I've had to deal with multiple insurance claims. Get the right protection and it's no problem. If it's too expensive don't live in that spot. Plenty of areas to live that have almost zero chance of flooding.

TL:DR - Mother nature and other humans are a bitch. Expect the worst and get the right coverage for any of your needs. Never had a claim denied.

Nature is a bitch about FAFO. Choose insurance protection accordingly - if it's too expensive, you're living in the wrong place.

Thing is when there is a disaster, the government is always dragged kicking and screaming to "Help those poor People".

Just look at those homeowners in the landslide in California.

Flood insurance simply reduces the cost to the government somewhat.

My wife grew up in the Rio Grande Valley - "The Valley." She told me stories of shady developers who would build shit houses on flood plains and sell them to (most likely illegal) Mexican immigrants; these were called the Colinas. There would be a rainy season and the houses would wash away, there would be a great wailing and gnashing of teeth. The gub'ment would pay out to cover up the corruption of the developers and local gub'ment that colluded with the corrupt developers to defraud the poor fools who bought the crap housing.

Insurance is in collusion with the corrupt gub'ment.

WookieMan says

If it "comes from the sky" it's home owners insurance and if it "comes from the ground" it's a flood.

yeah, in Florida, you have to show water damage was from rain coming down and throw the damage house structure like roof and windows, and not from the water level rising and flooding your home such as from a storm water retention pond in your backyard or from a flooded street

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AmericanKulak says

Also of interest:
https://www.insurancebusinessmag.com/us/news/property/florida-insurers-deny-nearly-half-of-hurricane-claims-ratings-agency-says-508765.aspx

yes, the Florida insurance company denies about 1/2 the claims by stating the house was not in good condition such as the roof should have been replaced and it allowed water to come in from the storm

but what I don't understand is usually the insurance company will inspect the home each year, or at least when the home owner applies for the insurance

so if you are insured, it would be generally accepted or implied that the insurance company approves of the condition of your home like the condition of the roof

i know the insurance company went into my attic to verify the roof clips or straps and to inspect the entire home like check the electric power panel , hot water heater, etc

the insurance company told my friend who lives within a mile of the beach that he had to replace his roof cause it was at least 20 years old if he wanted to keep his insurance coverage

as far as risk mitigation but related to automobile insurance industry, Virginia requires annual car inspections which means essentially only road-worthy vehicles are being driven

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stereotomy says

Nature is a bitch about FAFO. Choose insurance protection accordingly - if it's too expensive, you're living in the wrong place.

And politicians. If you can't sue with loser pays, the politician and insurers get their ways - after pocketing all your premiums for years and then dropping you the moment you go to collect on damage.

The insurers that aren't complete shits and run on pure numbers and risk assessment exist only for well-off clients or in economics textbooks.The rest capture more profit by not paying out. This is because those who could self-insure are still better off spreading their risk with well-run, pure math oriented insurers - but those insurers only work in the free market of the self-insured.

One guy got a desk adjuster sending him "Termites are responsible for the floor and wall damage"

Dude is like "Uh, I live in a concrete block house. There isn't any wood at the surface level nor for 8 feet. Just concrete block, stucco, and rebar. My claim is not for my roof. It's for my walls."

AD says

WookieMan says

If it "comes from the sky" it's home owners insurance and if it "comes from the ground" it's a flood.

yeah, in Florida, you have to show water damage was from rain coming down and throw the damage house structure like roof and windows, and not from the water level rising and flooding your home such as from a storm water retention pond in your backyard or from a flooded street

I get the point, but if a retention pond overflows that's rain. Either way, buy/build where you're on the high ground, as much as you can. Hard in FL. We bought the two highest lots topographically in our subdivision. It would take over 20" of water to flood our land.

Like I said. Dealt with a flood as a teenager. My dad was an ass hole and I had to rehab the basement up to 4' while he was golfing. So I take flooding pretty seriously and will pre-plan and engineer for flooding protection on the build. I've mentioned it before, but hope to hold 2-4k gallons in underground tanks from roof run off. Pool will get some. Nat Gas generator to run the house and sump pumps to flood my neighbors on lower ground... lol.

Tornados I fear the the most, but for whatever reason they stay to the south of us. Not sure if it has to do with Lake Michigan messing with weather. There was one northwest of us that was weird. I think that was an F3 or 4.

Over 5000 Ford Trucks from 2023 remain unsold in the USA as we enter 2025. Nobody in their target market is remotely considering paying what Ford wants ($70k+) for the F-150 and Bronco Raptors.

Nissan cutting 9000 jobs (global).

Stellantis earnings will be a blood bath. Rubicons piling up and the rest of the vehicle lineup, or, like Ford, ludicrously overpriced Trucks.

Volkswagon, which avoids lay offs like crazy, is shutting multiple plants, laying off thousands, and cutting wages in a massive shock move.

The dealers don't want the trade ins, but the under-pressure buyers won't buy without a good deal on a trade in. Used cars don't move because there are no 3-4% dealer incentives on Used, only New. 11.3% is the average used car loan rate now.

How did car companies overproduce expensive vehicles no one wants? Probably misreading the market with all the cash handouts Xiden did.

I mention this because Cars and Housing are two big expenses.

AmericanKulak says

Used cars don't move because there are no 3-4% dealer incentives on Used, only New. 11.3% is the average used car loan rate now.

Where in the fuck do you buy a car with that interest rate? Even used. That's a 590 credit score if getting a loan. Have never been over 8% in my lifetime and always buy used. That's just shitty credit. I have current collections (medical) and my score is still 700.

AmericanKulak says

How did car companies overproduce expensive vehicles no one wants? Probably misreading the market

Just like the housing market, the automakers will always satisfy the most profitable portion of the marketplace first during a time of shortage. Now that shortages are over, in theory, you should see more affordable new car options become available. But auto manufacturing has a long lead time, so it's going to take a while. Plus auto manufacturers have always hated their clientele that buys the lower priced vehicles, so they are in no hurry to accommodate.

The more puzzling thing is that the one thing automakers haven't done yet, that they should have done already is to bring back lower trim levels. That I think is something that they can do in a short period time.

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https://nypost.com/2024/11/12/real-estate/floridas-crumbling-home-prices-havent-been-this-bad-since-2011/

I figure for every 1% increase in the 30 Yr mortgage rate, there should be a drop of 10% in prices. So just on that, prices should be 40% below there early 2022 levels.

Factoring in that household income has risen about 20% since early 2022, then home prices should be about 20 to 25% below early 2022 levels.

Our townhome about 2 miles from the beach in the Florida panhandle had a peak value of around $330,000 in early 2022. So it should be around $264,000.

We bought it for around $187,000 in 2016, so it would appreciate 4.25% annually to around $264,000.

Everything "returns to the mean" when figuring home prices historically increase about 4% a year.

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WookieMan says

Where in the fuck do you buy a car with that interest rate? Even used. That's a 590 credit score if getting a loan. Have never been over 8% in my lifetime and always buy used. That's just shitty credit. I have current collections (medical) and my score is still 700.

Wild, right?

This is several months out of date, but they list the average rate for a used for Prime (~680) credit as 9.3%

https://www.nerdwallet.com/article/loans/auto-loans/average-car-loan-interest-rates-by-credit-score

Shouldn't be a shock. Rate Hawks are demanding a higher ROI despite the Fed Cuts because they don't think inflation is whipped.

Again, when you look at leases and the financing for new vehicles, buying used at the outrageous prices they're asking is absurd. It used to be 100 miles off the lot and a third of the value was gone. Because of COVID and exporting low mileage used vehicles abroad, now 50k mileage, 5 year old vehicles have an ask of only 30-40% below (today's!) new.

Another one.


It's the same chart, but still out of date:


https://www.experian.com/blogs/ask-experian/average-car-loan-interest-rates-by-credit-score/

Imagine paying over $500mo. for a used car that isn't a collectible or a super high end or specialty vehicle.

If you figure the mean credit score (think Single Moms and Millennial hoebags with massive college and Ulta Beauty credit cards) is about 640-650, 11% sounds right.

The Car Market is going to be wild.

Fortunately my lease isn't up until March. I think I might just get another lease on a lower end vehicle since I don't want to be a bagholder in case the prices don't really collapse until next summer or beyond.