patrick.net

Was this not expected?

bubblesitter says

Was this not expected?

This data point is different than the NAR monthly sales metrics. Monthly sales metrics had about a 1%-4% YoY trend decline depending on the month.

However, on this metric for 33% wasn't even a whisper number.

Pre activity for first time home buyers is key and it usually happens Jan -May and I was explaining to a lot media types that 2014 was the worst year I have ever seen in my life.

So, to break to this new low considering we have 140 million workers now and rates at 4% is very telling of the demand cycle from Main Street & first time home buyers

I wrote this in March of 2014 working with Bloomberg on a First Time Home buyer demand article

"First Time Home Buyer, What's that"

http://loganmohtashami.com/2014/03/05/first-time-home-buyer-whats-that/

Logan Mohtashami says

Pre activity for first time home buyers is key and it usually happens Jan -May and I was explaining to a lot media types that 2014 was the worst year I have ever seen in my life.

So, to break to this new low considering we have 140 million workers now and rates at 4% is very telling of the demand cycle from Main Street & first time home buyers

It remains to be seen what would be coming spring. A lackluster spring does not bode well for strength of the housing market.

Back on December 2013

5. The shift towards renting instead of buying will continue in 2014. Millions of Americans will rent because they can’t qualify for a home mortgage and the days of staying in a delinquent home have pretty much come to an end. At the end of 2013 we had nearly 3 million loans in delinquency. Many these will go the way of foreclosure or a short sale and these would-be owners will become renters. The younger, would-be first time home buyers will face both housing price inflation and the massive amount of student loan debt on the books.

http://loganmohtashami.com/2013/12/30/2014-housing-predictions/

May of 2014 the Spring Selling Season Interview with Bloomberg not only saying First Time Home buyer is the worst ever, but that move up buyers are now showing the stress first time home buyers showed in 2012

http://loganmohtashami.com/2014/05/16/bloomberg-financial-interview-on-health-of-the-housing-market-2014/

To quote an article I wrote in late 2012: A lot of things have changed in America because of our debt blow up, … maybe a generation will wait just a bit longer to buy a home.

“The Young and the Renting”

http://wp.me/p1gHkh-g0

bubblesitter says

It remains to be seen what would be coming spring. A lackluster spring does not bode well for strength of the housing market.

As long as Rich Americans and Foreigners buy homes with cash the demand story will stay at bay

We are looking at a Drop of 100K -200K YoY with total sales.

However, if the rich weren't buying homes with cash 20% above historical norms and went just back to normal levels then sales would be down YoY -13% to -17%

The problem is that buyers aren't demanding that sellers accept 10% of listing price.

Call it Crazy says

Is that the MAJOR reason.... the debt?

It's a factor in the question.

All the 9 Circles of First Time Home Buyer Inferno come to the total answer of lack of demand

The one benefit I have in my line of work is that I get to see real live applications

When I see On paper DTI cost impairing first time home buyers from seeking their PITI levels of comfort that's a factor for sure

The poor don't buy homes and they don't even apply. That group is irrelevant in the bigger equation because they are natural renters for a long time

However, real life single and dual incomes first time home buyers when you see the information you can see that debt is a factor

Student loans
Car loans
Credit Card

( All together) in the equation does make a difference.

The poor will always rent and will do so for a longer period of time this century because they never had the capacity to own a home it's just this was done in the previous cycle

Number 6 on the list of 9

6. Exotic loans that allow would be homeowners to obtain credit without collateral or income verification are removed from the market.

Call it Crazy says

What are you seeing, are young buyers trying to get creative with their down payments (gift letters, borrow from family, etc) just so they can buy? What are they showing as actual savings, assets, etc.?

Conventional 95% loans can be gifted like FHA and obviously VA loans are 100% 0 down payment

I go to number 7 on my list

7. Financially strapped parents are unable to “gift” down payments for first home purchases by their children.

This doesn't get enough economic play but help from Mom and Dad hasn't been that much this entire cycle.

I have only seen 2 transaction since 2008 that had a gift factor in it

in the bubble markets like california, prices are simply too high for the 1st time and young family crowd.

why should mom & pop pay a list price in 2014 of $628k for a 3br townhouse when the property last sold in 2012 for $449k? no renovations... nothing! it just was purchased and then simply relisted at a psycho-inflation markup.

Call it Crazy says

What's your crystal ball show 5 - 10 years out?

making longer term predictions is very difficult because of other factor coming into play that no one can predict.

Its easy to know government debt is expanding on budget due to demographics as mandatory payouts will exceed government revenue by 2024-2027

The best housing thesis I can give you is that

Once older Americans leave the work system younger workers which are going to be a big number for the next 2 decades will get some wage inflation and by that time a lot younger Americans will marry and have dual incomes and assets to buy.

The worst housing thesis I can give you is that

We are stuck in a permanent 4.5 - 5.7 million existing home sale market for a long time with a high level of cash buyers who will rent out single family homes to Americans

landtof says

in the bubble markets like california, prices are simply too high for the 1st time and young family crowd.

CA is a housing inflation nightmare. On my model 82% of the working population is priced out of market once you X out the Rich, that is 3 X median income so roughly 180K

When asked to give an opinion as to why Warren Buffet is terribly confused by the low housing demand when rates are so low; my answer: It’s not rocket science, it’s simply math.
My Q&A with Mutualfunds.com

http://mutualfunds.com/q-and-a-and-interviews/interview-with-logan-mohtashami/

Logan Mohtashami says

Demand From First Time Home Buyers Hits 21st Century Low

When the Federal Reserve Chairman gets his loan denied, what chance do first time buyers have? All you have to do is bring back the loans that were available in the 1980's and 1990's, with the same underwriting guidelines.
Bring back:
1. Subprime
2. Liars loan
3. Negative Am

Logan Mohtashami says

The worst housing thesis I can give you is that

We are stuck in a permanent 4.5 - 5.7 million existing home sale market for a long time with a high level of cash buyers who will rent out single family homes to Americans

i have an inclination to believe that it would be career suicide for politicians to allow this to continue much longer. in fact, aren't some foreign capital flyers already getting spooked over mere rumor of regulation?

Strategist says

When the Federal Reserve Chairman gets his loan denied, what chance do first time buyers have? All you have to do is bring back the loans that were available in the 1980's and 1990's, with the same underwriting guidelines.

Bring back:

1. Subprime

2. Liars loan

3. Negative Am

#1 Bernanke refinanced in 2011 to a 4.25% rate and the Fed loan survey which I deem to be useless states that underwriting is at it's easiest point in this cycle

2. That was a refinance not a purchase. Refinancing due have some legal structure issues as their is No PLM for private label loans such as a HARP 3.0 product but millions and millions of Americans have refinanced already

3. Sub Prime is not deemed to be illegal which can't come back unless Dodd Frank and CFPM rules are torn down

So no more 100% loan stated stated 2/28 3/27

Liar loans are here and have been for years. Actually just did a stated income recently myself. So, that isn't an issue unless you want 0% down stated income loans which isn't going to happen

Negative Am loans which were very popular with self employed have 0 chance of coming back as they have been deemed the worst toxic POS loan ever created in is form from 2000 and on, it was much different back in the 1980's and 1990's but on record it was such a bad loan that banks simply took existing no delinquent arms off that product as recasting rate would send families into foreclosure

landtof says

in fact, aren't some foreign capital flyers already getting spooked over mere rumor of regulation?

Not really, I have heard of a tax rumor but like a lot things with housing and government they will always do what they can to create demand because they need the revenue from housing for state budgets

Logan Mohtashami says

3. Sub Prime is not deemed to be illegal which can't come back unless Dodd Frank and CFPM rules are torn down

So no more 100% loan stated stated 2/28 3/27

Liar loans are here and have been for years. Actually just did a stated income recently myself. So, that isn't an issue unless you want 0% down stated income loans which isn't going to happen

Negative Am loans which were very popular with self employed have 0 chance of coming back as they have been deemed the worst toxic POS loan ever created in is form from 2000 and on, it was much different back in the 1980's and 1990's but on record it was such a bad loan that banks simply took existing no delinquent arms off that product as recasting rate would send families into foreclosure

There you are. This is what makes loans hard to get.
Even the liar loans are priced exorbitantly, essentially making it unavailable.
There is absolutely noting wrong with subprime, liar loans and neg am's as long as there is enough equity. It's pathetic.

Strategist says

There is absolutely noting wrong with subprime, liar loans and neg am's as long as there is enough equity. It's pathetic.

The thesis is flawed

A lot of sub prime expansion came with only less than 5% down, a lot with 100% lending

Also Option Arm negative Am loans had 20% down up until 2005 when they brought it with 10% down

So you had equity there to start and it was an epic disaster because everyone was paying the 1.25% rate which started the negative am trends.

Out of all the loans the Option Arm loan was the worst default one on record even with 10% -20% down. Hence why the banks quickly changed what was left from the carinage to a 30 year fix product

Logan Mohtashami says

Not really, I have heard of a tax rumor but like a lot things with housing and government they will always do what they can to create demand because they need the revenue from housing for state budgets

always do what they can to create demand - except for working americans... sounds like a wonderfully successful campaign slogan.

i know, i know, it's california - home of the 1 party system.

Logan Mohtashami says

Strategist says

There is absolutely noting wrong with subprime, liar loans and neg am's as long as there is enough equity. It's pathetic.

The thesis is flawed

A lot of sub prime expansion came with only less than 5% down, a lot with 100% lending

Also Option Arm negative Am loans had 20% down up until 2005 when they brought it with 10% down

So you had equity there to start and it was an epic disaster because everyone was paying the 1.25% rate which started the negative am trends.

Out of all the loans the Option Arm loan was the worst default one on record even with 10% -20% down. Hence why the banks quickly changed what was left from the carinage to a 30 year fix product

That's why I said bring back the standards prior to 2000. Minimum 25% equity.
There is an army of self employed and small business owners who have the 25% down with pristine credit, but can't prove the income.

Call it Crazy says

Strategist says

That's why I said bring back the standards prior to 2000. Minimum 25% equity.

There is an army of self employed and small business owners who have the 25% down with pristine credit, but can't prove the income.

See a problem yet??

How many of them lost that 25% during the last crash because they couldn't make their payments and got foreclosed?

If they maintained sensible underwriting instead of going to zero down, the crash would not have happened in the first place, because the bubble would not have happened.
This over reaction on being overly cautious is holding up the economic recovery

One thing I'm noticing here in the Bay Area is that typical starter homes, ones that may need renovations or repairs are virtually non-existent. Flippers have ruined first time home buying market here. Instead of previous generations that could buy a home that needed improvements at a reasonable price we are forced to pay $150k more to a flipper just for granite counter tops, new paint and a new yard.

cjogara says

One thing I'm noticing here in the Bay Area is that typical starter homes, ones that may need renovations or repairs are virtually non-existent. Flippers have ruined first time home buying market here. Instead of previous generations that could buy a home that needed improvements at a reasonable price we are forced to pay $150k more to a flipper just for granite counter tops, new paint and a new yard.

First-time homebuyers should not buy fixers. Even newish homes have enough headaches.

Why shouldn't first timers buy a fixer? Are you implying that flippers are providing a benefit for first timers? There's plenty of people able to do the work themselves and would enjoy the opportunity to make the place their own. My parents did this as well as did most of my friends parents. In fact this was a perfectly viable option for first timers up until the housing bubble. If it's a bad idea now why wasn't it a bad idea for generations past?

Let me be perfectly clear with this because I believe their is some confusion on this topics

Stated income loans are here in America today even thought they are illegal under CFPB

All CFPB says is that this loan of stated income has no legal protection for future lawsuits from anyone

If a Bank wanted to offer an option arm loan product they could do it today.

However, what bank in their right mind would offer such a product?

0... there is your answer

cjogara says

One thing I'm noticing here in the Bay Area is that typical starter homes, ones that may need renovations or repairs are virtually non-existent. Flippers have ruined first time home buying market here. Instead of previous generations that could buy a home that needed improvements at a reasonable price we are forced to pay $150k more to a flipper just for granite counter tops, new paint and a new yard.

i'm seeing $100k to $200k asking price gains even without the minor upgrades. just by virtue of purchasing 2-4 years ago.

Logan Mohtashami says

If a Bank wanted to offer an option arm loan product they could do it today.

However, what bank in their right mind would offer such a product?

true, they could do a lot of things - but aren't they are only conservative because they wouldn't be able to package and sell the loans, not because it would be risky for them? they only seem to want to sell loans that the taxpayer will back, if things go south.

landtof says

because it would be risky for them?

Rich Americans are getting stated income loans and these banks are holding these loans on their books.

Tight Lending Thesis is so flawed in many ways because it's being told by people who have 0 financial lending background and can't see what's going on today

Option Arm loan is garbage, what person would even get it at this stage of the cycle. Banks haven't heard any demand cry for this loan so they have stuck to traditional stated income loans with big down payments

well hold on - and i know CA is insane, but banks are refusing to lend me 95% conventional because of agency limits (presumably because they wouldn't be able to sell my loan onto someone else).

if they would issue me this loan, my DTI and credit would be in check and i would be in a new house in a few months.

1.) prices are too high in CA and sellers need to adjust
2.) agency limits for CA need to be raised so that people can get 95% conventional and banks can freely sell it on with taxpayer backstop.

is this way off?

i have a feeling the banking industry is lobbying hardcore for #2 above

thanks for the charts btw.

landtof says

well hold on - and i know CA is insane, but banks are refusing to lend me 95% conventional because of agency limits (presumably because they wouldn't be able to sell my loan onto someone else).

Your loan is above $417,000 with 5% down. You need another 5% down and you can go up to 1,100,000

Agency Jumbo doesn't allow 5% down, risk level because a lot people bought homes with high loan limits with 5% down and it cost the GSE big time and a lot big loan limits caused the massive hit on reserves.

89.90% lending is here in CA

In fact it's my most popular loan but you have to make money and have 10%

$625,500 first mortgage
Today they have limited the 2nd loan piggy back now up to $1,100,000

Yes Piggy Back loans are back in CA