patrick.net

Link appears to be dead.

Just in case here it is again thanks Corntollio
http://wp.me/p1gHkh-mn

The link does have a flaw Logan. Thank you for uploading the chart to the post; a very interesting chart indeed.

hrhjuliet says

The link does have a flaw Logan. Thank you for uploading the chart to the post; a very interesting chart indeed.

http://wp.me/p1gHkh-mn

Logan Mohtashami says

http://loganmohtashami.com/?p=1387

Still having trouble with that one.

How about this http://wp.me/p1gHkh-mn

Worked for me. Thanks!

Logan Mohtashami says

How about this http://wp.me/p1gHkh-mn

Thank you, sir. I appreciate your analysis.

By the way, do you have any insight on these guys?:

http://cal-lending.com/

Are they shady? Are their rates really high? Some of the loan products they are offering seem too good to be true, but it also doesn't have any rates listed. Also, it seems like they offer hard money loans too -- do they have some Tony Soprano-looking guys who come after you if you don't pay?

corntrollio says

Thank you, sir. I appreciate your analysis.

By the way, do you have any insight on these guys?:

I have never heard of them in my life> However, rule of thumb when you see massive blitz of advertising it's usually just a pitch to get you in.

So you would most likely have to talk to a human being before getting any real details

Don't have the year over year growth on mortgage purchase applications. Going to need more cash buyers and on higher year over year volume which looks unlikely

Call it Crazy says

Try this for the year over year on purchase apps... It claims it's down 19.5% YoY...

Yes, and down -18% on the 4 week moving average year over year with higher inventory

Call it Crazy says

There's a lot more to this than "weather" and "low inventory"....

The best argument against low inventory is this.

Last year we had lower inventory that this year
This year there are some places that are down 10%-25% in sales
Phoenix, Las Vegas, Southern California , Sacramento and all those areas have had a jump in inventory.

So, what is different this year than last year
Housing Inflation on both fronts didn't take of in the first 4 months of 2013.

This is why last May I wrote the Housing Inflation is coming article

http://loganmohtashami.com/2013/05/07/housing-mammoth-stuck-in-tar-has-bigger-problems-to-worry-about/

If we had just better job profile and income growth I would think differently. However, majority of the jobs recovered have been low wage and going to people 50 and over

Logan Mohtashami says

However, majority of the jobs recovered have been low wage and going to people 50 and over

With such a low inventory, I honestly think wages don't matter in short run.

bubblesitter says

With such a low inventory, I honestly think wages don't matter in short run.

For price gains yes, for strong mortgage buyer demand we need it.
65% mortgage buyers is so awful with rates roughly 4.25%-4.5%
I am not surprised by it. However, we are near the point where we will recover all the jobs lost from the Great Recession and it can't create enough mortgage buyer demand for year over year growth

Call it Crazy says

What's your definition of low inventory?

On a national level 6 months is a balanced normal market, so 5 months is low

If we can get to 6 months inventory that would be a plus. Have to slow prices down

Logan Mohtashami says

For price gains yes, for strong mortgage buyer demand we need it.

65% mortgage buyers is so awful with rates roughly 4.25%-4.5%

Logan, that raises a big question. How are banks going to survive without their main business - LENDING going in full steam?

Logan Mohtashami says

will recover all the jobs lost from the Great Recession

I doubt we are going to recover those high paying positions - not enough to sustain home price gains, that is why we will have to rely heavily on more cash buyers, once those cash buyers are dry, it is game over, IMO.

bubblesitter says

Logan, that raises a big question. How are banks going to survive without their main business - LENDING going in full steam?

Banks make most of their money through investing banking. When short term rates rise they will be able make more on their products.

However, loan growth this decade is going to be very soft. In fact in this economic majority of the lending has come through government agencies not the banks in terms of volumes.

Student loan debt has gone parabolic since 2007 and the Federal government has about 40% of that market

bubblesitter says

I doubt we are going to recover those high paying positions - not enough to sustain home price gains, that is why we will have to rely heavily on more cash buyers, once those cash buyers are dry, it is game over, IMO.

Part of the problem when coming off a financial bubble is that you believe those better paying jobs are going to come back when the demand for those jobs where fake and thus so where the jobs to a degree.

This is the one point that some people just tend to neglect, we don't have the economic firepower and a lot of these jobs are going to be people 50 and over

Call it Crazy says

What's your definition of low inventory?

Spring is here and listings are dry.

Logan Mohtashami says

Student loan debt has gone parabolic since 2007 and the Federal government has about 40% of that market

Whoa, Logan, that graph is scary. I sense that more trouble is ahead for our beloved Fed Govt.

Call it Crazy says

That didn't help much.... How about a point of reference, number or something...

I am strictly looking at my zip code here in Socal. Again, RE is very local. It could be different in your neck of woods.

Logan Mohtashami says

Student loan debt has gone parabolic since 2007 and the Federal government has about 40% of that market

Anyone have a theory as to why this chart is a hockey stick??? What the hell happened that shot up debt like that? Methinks it has to be some sort of gov't policy...the market wouldn't drive something like that.

Call it Crazy says

I get that, I know it's local... The term "low inventory" has such different meanings to people.

A listing comes on the market and it is gone in a week. I mean, it is that bad here, and these are top of the line listings here, nothing close to a 500K shack.

Lets put the numbers together and we get this

Massive expansion on student loan debt right when the recession was starting

Massive expansion of Americans working over the age of 50

1.6 million men ages 25-54 not working
1.1. million women ages 25-54 not working

This cycle has been brutal for the young, so expansion of student loan debt because no way they can pay it and no jobs for the young. Then on top of that a lot people went back to school to better themselves a partial factor on labor force falling.

jojo says

That chart is nuts. I read somewhere that it's actually over 1.1 trillion now.

Yes, that chart is just the federal side of the equation which I believe is roughly 37-43% of the entire market

bubblesitter says

Whoa, Logan, that graph is scary. I sense that more trouble is ahead for our beloved Fed Govt.

The federal government debt is 1 giant ponzi scam. However, since we have the biggest economy and biggest military in the world... this can go on and on. In fact the budget years 2022-2052 look horrible so we are heading to 40 Trillion of debt ( Not counting unfunded) and we sill be able to borrower $$$ because the entire world is one credit bubble as well

bubblesitter says

I am strictly looking at my zip code here in Socal. Again, RE is very local. It could be different in your neck of woods.

It's a nightmare story here in CA. They say 68% of the state is priced out M2M.. but I know it's worse than that because the CAR using still 20% down buyer model

Call it Crazy says

Try this for the year over year on purchase apps... It claims it's down 19.5% YoY...

http://www.mortgagenewsdaily.com/data/mortgageapplications.aspx

It's weak, 2014 Housing Predictions staying in line, we clearly have lost the 30% metric buying in certain areas of the U.S.

http://loganmohtashami.com/2014/01/01/my-interview-with-bloomberg-financial-on-my-2014-housing-predictions/

bgamall4 says

We have a mortgage depression.

Something doesn't look right

It is an interesting chart and I see a problem with house sales assuming there is no glut of *foreign buyers with cash* buying.

In places like Manhattan, the rich come in forever, from all over, with money they have earned all over, and pay whatever it costs.

In most of the U.S.A., people pay their downpayment with savings, and their mortgage with wages.

If your town has houses for $500K, and after the huge debacle of 2007-2008, you must pay 20% down in CASH SAVINGS plus the closing costs of $10,000+, you're talking a large chunk of change that is not in the guy's 401K, it's sitting in the bank. ($110,000 in liquid account).

Now looking around where I live, I just do not see any guys who have that kind of change jingling in their jeans.

Actually where I live, I see people using food stamps at Whole Foods and Safeway while HUD pays 90% of their rent. Yet the houses are still expensive.

Interesting factoid: 50% of mortgages today are "sub prime". Do you believe that mortgage lending will ever become "lax" again?

Its time to do away with food stamps and open government food coops.
Have it all computerized and issue id cards to qualifying contestants.
This will virtually eliminate the fraud in the system and stretch the tax dollars we contri ute.

clambo says

Interesting factoid: 50% of mortgages today are "sub prime". Do you believe that mortgage lending will ever become "lax" again?

Here is thing with the sub prime, I don't consider the loans in the system as Sub prime in respect to how the old sub prime debt structure was done. Let me give you an example

For me sub-prime is this

2/28 2 year fixed/ 28 year amortized after 30 year product.
5% jump on the rate after 2 years 100% loan stated income stated asset.

I can list a ton of these types of loan. These loans are all gone and won't come back. If you buyer has a 640 fico or 620 fico but DTI is in the high 20's and puts a down payment verified. I wouldn't consider that sub prime. So the structure of the debt is much different now than in the past. With QM in the system now there is less appetite to give lower income Americans home that breach over 43% DTI, this is a good thing in my mind

To your question if standards would ease, I don't believe it should and hope not. I took to task Mark Zandi when he wrote his article about saying standards are too strict

http://loganmohtashami.com/2014/01/27/mark-zandi-its-the-economy-stupid/

I wrote poorly, I don't know that mortgages *originating today* are subprime, rather that many outstanding mortgages are sub-prime.

I don't believe that lax mortgage lending is coming back either nor should it.

Some readers may not know that Fannie&Freddie 1. lost 90% of stock value 2. were placed under "conservatorship"=taken over by U.S. Treasury/ FHFA in Sept. 2008.

Some readers also may not know that the "secondary market"=Mortgage backed securities provides the capital for many mortgages which are largely going to meet FHFA/Fannie/Freddie guidelines.

The whole situation is a little bit interesting, because on one hand many have an interest in continuing the whole elaborate scheme, while on the other there is still risk inherent in the system if they lend money to losers for inflated bubble houses (i.e. the collateral is a bubble) and the loser flakes out.

clambo says

Some readers may not know that Fannie&Freddie 1. lost 90% of stock value 2. were placed under "conservatorship"=taken over by U.S. Treasury/ FHFA in Sept. 2008.

Freddie/Fannie major problem was they were over leveraged 75-1 72-1 they only got into Alt A products in 2006, late in the cycle. However, you're over-leveraged like that and the market turns you're ##!!

Even FHA needed a congressional FHA Solvency Act passed in 2012 with 2 bailouts to them

Everyones current loan are performing good once the standards came back in line. We still have 3 million delinquent loans from the past to work off.

The only item I see that can cause some DTI stress is that some people have 2nd liens come due 2014-2016. So not only do they become a PITI payment, it's amortized 20/15 years which makes it a much bigger payment.

Some of have balloon coming to them at some point.

However, the current standards keep all the homes bought good, in terms of the capacity to own the debt

bgamall4 says

Private mortgage pools took over with bogus AAA mortgages in late 2003

Yes the private label loans were awful. New Century, B&C Mortgage, Countrywide, Downey Saving, Washington Mutal, 2004 is when things got whacky with more exotic loan programs because that was the only way to keep the bubble going.

Speaking of which, all of you should see the documentary, I was at recent conference with the Producer of "Money for Nothing" it's a documentary about the Federal Reserve and its impact on the economy

Here is the trailer, if you haven't seen it Gary you will like, it's a bit basic but in a great format

http://moneyfornothingthemovie.org/trailer/

Documentary website
http://moneyfornothingthemovie.org/

clambo says

I don't believe that lax mortgage lending is coming back either nor should it.

Here was my interview last year on Bloomberg on the myth of tight lending standards

http://loganmohtashami.com/2013/03/27/will-be-on-bloomberg-financial-talking-about-bernankes-myth-on-tight-lending-standards-the-real-housing-story/

Nick Timiraos @NickTimiraos
Mortgages to borrowers with subprime credit: not happening http://on.wsj.com/1kSGLCc Average credit scores staying high

Logan Mohtashami @LoganMohtashami
@NickTimiraos Exactly! Because DTI & LTI levels for lower end score Americans are too light Mark Zandi is wrong! http://loganmohtashami.com/2014/01/27/mark-zandi-its-the-economy-stupid/ …