patrick.net

Hmmmm... let's face it. Rates can't go above 4% just to keep this housing market afloat.

Very crowded graph. Makes it hard to read.

Strategist says

Very crowded graph. Makes it hard to read.

These charts can be, the factual truth is that We are at 21st century lows just 0.03 basis points away from a new fresh all time low for mortgage purchase application for this century.

The problem is that rates are at 4%, inventory has been rising this year and if we didn't have cash buyers 20% above historical norms home sales would be down -13% to -17% year over year not the -2%we will see most likely

So, as long as Rich Americans and Foreigners buy homes sales can keep at bay.

At this point mortgage purchase applications need to rise 17% to 27% year over year next year for the first 5 months of the year to even have a shot at 5.09 million total homes sales. That's only assuming a 2% drop in total volume of cash buyers next year

Logan Mohtashami says

The problem is that rates are at 4%, inventory has been rising this year and if we didn't have cash buyers 20% above historical norms home sales would be down -13% to -17% year over year not the -2%we will see most likely

So, as long as Rich Americans and Foreigners buy homes sales can keep at bay.

At this point mortgage purchase applications need to rise 17% to 27% year over year next year for the first 5 months of the year to even have a shot at 5.09 million total homes sales. That's only assuming a 2% drop in total volume of cash buyers next year

It's the loans. No subprime, stated, easy underwriting like in the 1980's and 1990's.
When top dog Bernanke gets denied for a mortgage, we know we have a problem. A friend of mine got denied for a mortgage, even though:
$400K loan
25% LTV
$300K income
Perfect credit
Denied Denied Denied on silly technicalities. Solve this problem, and housing solves itself. Solve the housing problem, and the economy solves itself.

Strategist says

A friend of mine got denied for a mortgage, even though:

$400K loan

25% LTV

$300K income

Perfect credit

Denied Denied Denied on silly technicalities. Solve this problem, and housing solves itself. Solve the housing problem, and the economy solves itself.

He couldn't show enough income because he doesn't pay the taxes for it. Self employed

Tight Lending Is a Myth this is the main reason why everyone blew it in terms of thinking of main street America could by homes like they did in previous cycles

Stick to math, data and facts, and then once I was blind now I can see ;-)

Call it Crazy says

Strategist says

Denied Denied Denied on silly technicalities.

Apparently there's more to the story if he has "perfect credit"... What's the real truth?

His employer switched him from W2 to 1099. It was saving everyone taxes.

Call it Crazy says

Strategist says

Denied Denied Denied on silly technicalities.

Apparently there's more to the story if he has "perfect credit"... What's the real truth?

Yup. there must be more to it. 100k down payment, 300k income a year , 800+ credit and he was denied for a 400k mortgage??

Strategist says

His employer switched him from W2 to 1099. It was saving everyone taxes.

Exactly, couldn't show the income. Plus this is a very small portion of the buyers in America

Majority of living working Americans are wage earners

Logan Mohtashami says

He couldn't show enough income because he doesn't pay the taxes for it. Self employed

Tight Lending Is a Myth this is the main reason why everyone blew it in terms of thinking of main street America could by homes like they did in previous cycles

He showed income as he was on W2.
Strategist says

Call it Crazy says

Strategist says

Denied Denied Denied on silly technicalities.

Apparently there's more to the story if he has "perfect credit"... What's the real truth?

His employer switched him from W2 to 1099. It was saving everyone taxes.

This loan is a RISK FREE loan. They could have made an exception. It's stupidity beyond belief.

If you can't show enough income to buy a home with this metric, can't buy a home

620 fico
3.5% down
43% Debt to Income

If we ease from these standards we are just allowing poor Americans back in housing

Plus the tight lending crew they cherry pick loans like crazy.

It's 100% non sense, it's funny Americans complain that they don't make money and yet housing experts or tight lending crew doesn't know this is happening even with the data there.

It's shocking to me that people can't simply read the data, it show a emotional attached to housing.

I feel bad for them, it's like disconnecting from the matrix

Logan Mohtashami says

If you can't show enough income to buy a home with this metric, can't buy a home

620 fico

3.5% down

43% Debt to Income

If we ease from these standards we are just allowing poor Americans back in housing

These are low standards to begin with. I therefore agree.
What's wrong with sub prime and stated income with a maximum 75% loan?

Keep it simple.

My on air interview with CNBC just keeping it simple on housing

https://www.youtube.com/watch?v=o9O_FDLPdgA&t=10m35s

Call it Crazy says

Strategist says

Call it Crazy says

Strategist says

Denied Denied Denied on silly technicalities.

Apparently there's more to the story if he has "perfect credit"... What's the real truth?

His employer switched him from W2 to 1099. It was saving everyone taxes.

Ahhh... The verifiable income catch... Remember, past performance is not a guarantee for future earnings...

He's a doctor.

Strategist says

What's wrong with sub prime and stated income with a maximum 75% loan?

We do have stated income loans, I have had them for the past 3 years. Very little people can do them. However, send your friend my way I can do a stated income for him if he has those metrics.

Stated income loans are banned from the U.S. per CFPB it's illegal so no bank gets legal protection from a lawsuit. So, only a few people can do.

I have done 5 non QM loans this year all to rich people. It's there for wealthy people

right, something sounds strange about denial with 300k income and perfect credit...

we are in the process of pre-approval for buying again after renting for the last 18 months. it is not a problem to get a loan, but i find the lender is playing games like a car dealership, shifting around costs in hopes we'll think we're getting a great deal (when in reality they are trying to take from us as much money and cash-on-hand as they can). they are also advertising teaser rates and bargains and then quickly moving away from those deals during the negotiations. the old "one vehicle left at this price" in fine print game i suppose...

logan - in your estimation how much leverage does the buyer have right now at the negotiating table? if a builder/lender has qualified buyers in the system, how much can those buyers push their desired terms? thanks.

landtof says

if a builder/lender has qualified buyers in the system, how much can those buyers push their desired terms? thanks

If you're buying a new home you might have some leverage now because new home sales have been light compared to expectations.

What's happening with new homes is that they are losing business to existing homes now

I talk about it here

http://loganmohtashami.com/2014/09/17/economic-denial-from-builders-the-sequel/

Logan Mohtashami says

Strategist says

What's wrong with sub prime and stated income with a maximum 75% loan?

We do have stated income loans, I have had them for the past 3 years. Very little people can do them. However, send your friend my way I can do a stated income for him if he has those metrics.

Stated income loans are banned from the U.S. per CFPB it's illegal so no bank gets legal protection from a lawsuit. So, only a few people can do.

I have done 5 non QM loans this year all to rich people. It's there for wealthy people

He was trying to get a 3.75% loan with no costs. 30 year. His existing rate is 4.5%. Stated would have higher rates and costs.

landtof says

logan - in your estimation how much leverage does the buyer have right now at the negotiating table? if a builder/lender has qualified buyers in the system, how much can those buyers push their desired terms? thanks.

It takes less than 5 minutes to know if you're qualified for a loan or not after filling out an application. The standards are low, the only issue comes up is with self employed because they have to give 2 years tax returns and YTD P&L and can't use any of the business money for the home purchase

Strategist says

He was trying to get a 3.75% loan with no costs. 30 year. His existing rate is 4.5%. Stated would have higher rates and costs.

Oh you're talking about a refinance, different item all together then. 3.75% no cost loans is a 2012 early 2013 story that rate is long gone

thank you - yes, we are pushing hard on a builder who has excess supply and future phases un-reserved.

landtof says

thank you - yes, we are pushing hard on a builder who has excess supply and future phases un-reserved.

Here is my cell 949-291-8293 if have more questions, hard to get details on a transaction on a web thread

Logan Mohtashami says

It takes less than 5 minutes to know if you're qualified for a loan or not after filling out an application. The standards are low, the only issue comes up is with self employed because they have to give 2 years tax returns and YTD P&L and can't use any of the business money for the home purchase

hmmm - they took 3 days to process a pre-approval (with a credit pull) and we are salaried with over 10 years in our industries and have excellent credit. yeah, i don't like how they've been dealing so far. maybe time to move on...

landtof says

hmmm - they took 3 days to process a pre-approval (with a credit pull) and we are salaried with over 10 years in our industries and have excellent credit. yeah, i don't like how they've been dealing so far. maybe time to move on.

I can't explain how awful that is you must be dealing with retail or a builders lender

Logan Mohtashami says

If you can't show enough income to buy a home with this metric, can't buy a home

620 fico

3.5% down

43% Debt to Income

If we ease from these standards we are just allowing poor Americans back in housing

Well not until we protect the RE industry and allow banks to make houses deemed unfit for resale. Until one of their starwmen companies comes along along and buys them at auction takes a few turns at the helm of the paint brush then resales the house for a $60K profit.

It boggles my mind, that anyone and everyone involved with America's RE health who has the affordability factor in mind only when it comes to the buyers ability to repay. But then consider houses under valued when a live potential buyer comes along.

There's a sweet spot for a healthy market, in healthy markets poorer people can find houses that are with in their income threshold. That threshold shouldn't be an artificial arbitrary number that man made week over week inflation creates.

If our governmetn doesnt' give a shit about the manipulations and price gouging then I fully support them giving out as many no doc and liar loans as they can muster. Even unemployed people should not be turned down from a mortgage.

Come on let's light this puppy, I'm sick of the RE insiders getting all of the "Shit for Free" gravy. What's good for them is great for every one else.

The FHA should be giving loans on those $40K distressed houses in black or Latino neighborhoods, then giving a $20K grant to fix them up. They would still be $140K on average bellow what the current system is putting them in.

If anyone is paying attention to the Zillow heatmaps accross the country in cities accross America, you will blatenly notice that the RE industry is re-Redlining neighborhoods that they fucked them selves over on back when they did during mid last century.

It was short sighted of them that 80% of the black neighborhoods would end up just minutes from downtown and all of the financial centers in America.
So they are trying their damnedest to push those buyers into health mixed neighborhoods that aren't as viable as a premium RE location, and distressing neighborhoods that were healthy even after the RE crash.

If the Government is going to be in Real estate, the let's get them "ALL IN!".

CaptainShuddup says

If the Government is going to be in Real estate, the let's get them "ALL IN!"

Mandatory 2% capital rule for FHA, they got 2 bailouts and Treasury credit line to boost their capacity to lending. It's just that their loan isn't comparable to 95% conventional loans which people have been getting. Even I haven't done a FHA loan since 2012

However, the GSE will bring out a 3% down loan soon which will make FHA totally irrelevant unless you're lending to multiple people in one home

Yeah but that 2% capitol would be easier to swing if the houses weren't artificially massaged to be 40 to 60% higher.

CaptainShuddup says

Yeah but that 2% capitol would be easier to swing if the houses weren't artificially massaged to be 40 to 60% higher.

You can see why they don't really want to push FHA to lower limits, why the new loans going through the GSE's

sbh says

Someone is finally offshoring something to America: housing for wealthy foreigners. See, folks, globalization financing works! Stop complaining, your standard of living is rising as we speak.

Good Line :-)

‪#‎QE‬ ‪#‎RIP‬
10 year low point on Fed day 2.27% last week 2.24% not much movement but we saw a spike on the 10 year to 3.35%
We are now .48 basis point higher from the 10 year 2 weeks ago
It looks like we have seen the low's in mortgage rates for 2014. The irony is on the day the ‪#‎Fed‬ ends #QE we are at 21st century lows for mortgage purchase applications.
Can we get a refund on that 4.4 trillion

bubblesitter says

Hmmmm... let's face it. Rates can't go above 4% just to keep this housing market afloat.

It really didn't do that much when it was 3.25% back in 2012. We just had a very low level of sales to work from, the net % of mortgage buyer never grew

Logan Mohtashami says

So, as long as Rich Americans and Foreigners buy homes sales can keep at bay.

Thank you for telling the truth.

Strategist says

He's a doctor.

Your friend could just save 400K and then buy the house. There is no problem with this case, and this is not a representative example of why people can't buy houses. They can't because they don't have the money.

The problem is not lending standards. The problem is the expectation that housing prices should go up 6% regardless of how much wages go up.

When you have such an expectation, lending standards will NEVER be lose enough.

Housing is doing well right now. It's up big time from last year.

Logan Mohtashami says

So, as long as Rich Americans and Foreigners buy homes sales can keep at bay.

Home sales... Personally I don't care how many houses are sold: I want to know the price. The price says by itself only rich Americans and foreigners buy (cash or not). If the price goes higher, even less sales will happen, to even richer buyers.

The problem is not cash sales boosting overall sales. This is in part a feature of a landscape where millions of people have retirement money available to invest.

No... the problem is we are simply not getting a large enough supply of new houses built for $250K. Building is simply not keeping up population growth.

And the consequence is the deplorable situation we have now: poor people (and young people) living in basements, or paying rents through the nose, and rich people fighting it out, with fists full of cash, for the few houses that are actually for sale.

Heraclitusstudent says

No... the problem is we are simply not getting a large enough supply of new houses built for $250K. Building is simply not keeping up population growth.

They are building rentals in a strong way this cycle because builders know that the capacity to own the debt is weak.

However, rent inflation is picking up more than wage growth

Double housing inflation problem

Logan Mohtashami says

They are building rentals in a strong way this cycle because builders know that the capacity to own the debt is weak.

However, rent inflation is picking up more than wage growth

Double housing inflation problem

Rent inflation says eloquently they are not building nearly enough.

We live in a world where people in power deliberately decided to restrict the availability of housing to facilitate the transfer of wealth from young people to older people - and tax collectors and WS.

Who cares about the quality of life of new generations.

Heraclitusstudent says

Rent inflation says eloquently they are not building nearly enough.

They are playing catch, overbuilt on Single Family Starts.

Back in 2012 I wrote about this very topic

"However, if 2012 is the year for the big recovery in housing then why are the four horsemen not bringing their zombie homes to the market to sell to primary resident buyers? I believe they are seeing what I have said for years now: that we simply don’t have enough qualified home buyers ( excluding cash buyers) to take on the true massive inventory in this country.

Even though all a person needs is a 620 fico, 3.5% down payment and verified income which demonstrates the capacity to buy the home, there yet remains a dearth of qualified primary resident buyers to absorb the inventory.

A primary resident housing boom is not on the horizon."

http://loganmohtashami.com/2012/04/02/housing-actions-speak-louder-than-words/

Heraclitusstudent says

So we have the buyers, but where is the supply???

We went from somewhere like 267 square foot per person to now 967 square foot per person as a country over 40 years. I don't believe the builders can turn on a dime.

Now there is a test pilot for $120K starter homes that are coming in 2015 or 2016 for one builder, turn key no upgrades. That I suppose is a chart

Call it Crazy says

A house is worth what YOU pay for it. Californians love to overpay for housing.

That's a stupid argument.

First, apparently you don't believe in the notion of market.

Second... sure you can for a shack for $500K instead of a crappy home for $1.2M. The choice is just your money or your life - whichever you value most.

Logan Mohtashami says

We went from somewhere like 267 square foot per person to now 967 square foot per person as a country over 40 years. I don't believe the builders can turn on a dime.

They can start building smaller homes and apartments today. I don't believe they need years to make new plans.

What we are seeing is not inertia: Today builders are focusing on the high end because that's where they make the best margin. Considering they're not given leeway to build en masse, they are building what they can build for the high end. And that's fine with me: housing is fungible.

Call it Crazy says

Why would the same house that sells for $1.2M in CA sell for $300K in my county?

Because your county is composed of morons and no one smart, with buying power, wants to live there?