Ain’t gunna happen?

From the Washington Post:

It’s a Housing Slump, Not a Crisis

I’m in the process of building a house, so I recently met with the head of a real estate brokerage to discuss selling my current home in about a year. Knowing that I worked in finance, he asked me my views on the housing market because he said he was seeing lot of doom and gloom on the internet.

First, all real estate is local. The housing market where I live in coastal South Carolina is still strong. Although transactions are down from a year ago, that’s because there are very few houses on the market. A lot of people – many of them cash flush and not impacted by rising interest rates — are moving here from other parts of the country, and I wouldn’t have any trouble selling my house today if I wanted. He agreed.

He also agreed when I told him that you can’t randomly scroll on Twitter these days without running into predictions of an impending housing collapse. Jeff Weniger, the head of equities at WisdomTree investments, recently posted a thread on Twitter labeled “Housing is in trouble” that went a bit viral. The thread was well-researched with charts and data to back up each of his points, such as how the supply of new homes has skyrocketed, as have monthly principal and interest payments on mortgages. Correspondingly, the National Association of Home Builders’ Housing Market Index has tanked. New and existing home sales have dropped precipitously, and affordability has tumbled to 2005 levels.

Some people take these facts and extrapolate them into a thesis, which is that a housing crisis is coming that will be equal to or greater than the one that we experienced in 2008. In fact, judging from what I read online, this seems to be the prevailing view. I suppose some of this is understandable. The Federal Reserve is raising interest rates like never before, and I suppose that in some nightmare scenario higher borrowing costs will choke off demand for credit. But I doubt it will get that far, given how important the housing market is to the economy, accounting for anywhere between 15% and 20% of gross domestic product.

There are two main reasons why we are not going to experience another crisis in residential real estate. The first is that housing is financed much differently than in the years leading up to the subprime mortgage collapse and resultant financial crisis. You had no money down mortgages, “liar” loans, NINJA loans, interest only mortgages, negative amortization mortgages and numerous financial innovations on top of those – all of which were facilitated by poor underwriting standards. Then, those mortgages were packaged together into bonds given top AAA credit ratings. Those bonds were then packaged into high-risk securities called collateralized debt obligations that were also assigned the highest credit ratings. Finally, Wall Street created many hundreds and hundreds of billions of dollars of risky credit-default swap contracts tied to all those bonds and CDOs. It was a virtual daisy chain of leverage, and when people stopped paying for mortgages they shouldn’t have been given the first place, there was a domino-like effect that led to a bailout of some of the country’s biggest financial institutions. 

Today, there is no market for subprime mortgages or related bonds, CDOs and credit-default swaps to speak of. What is out there is negligible and certainly not a threat to the financial system. I am not much of a fan of regulation, but it’s clear that things like the Volcker Rule, the Dodd-Frank Act and Basel III have made the financial system safer by curbing excessive risk-taking. In fact, it may be nearly impossible to have a housing-related crisis ever again. I recently obtained a construction loan for my new home, and I can assure you that the underwriting standards were the opposite of lax. At the very end of the process, my lender required a 30% down payment instead of 20% out of an abundance of caution. 

The second reason is that consumers have massively deleveraged themselves. Almost half of mortgaged properties were considered equity-rich in the second quarter, meaning owners had at least 50% in home equity, according to real estate data provider Attom. Bloomberg News reported that it was the ninth straight quarterly increase, helped in part by an increase in down payments by recent buyers. Nationwide, the portion of mortgaged homes that were equity-rich reached a record 48.1% in last quarter, up from 34.4% a year earlier. Meanwhile, the share of homes that were considered seriously underwater — where the mortgage is 25% greater that the property’s estimated market value — dropped to a low of 2.9%.

This entry was posted in Demographics, Economics, Employment, Housing Bubble. Bookmark the permalink.

61 Responses to Ain’t gunna happen?

  1. dentss dunnigan says:


  2. Hold my beer says:

    I pumped Gas for $2.99 yesterday.

    Took a company car to dealership for recall work. Was amazed to see all the empty parking spots where new cars would have been a few years ago. Only 1 car in the showroom.

  3. grim says:

    Yeah, the Honda dealer by me on 23 is a ghost town, I wonder if they stay in business. Maybe I’m wrong, and they can basically just sell all the inventory that comes in immediately, or they’ve shifted to people just placing orders. The new Carmax on the other hand, has what looks like a completely full lot.

  4. Hold my beer says:

    A few years ago when a car salesman told you he might have one of those on the lot it was a sales technique. Today when the salesman says he might have one, he is being an optimist.

  5. Juice Box says:

    Latest report says dealer inventory is basically unchanged from a year ago, 37 days supply about 1.09M vehicles at dealers, shortage of smaller fuel efficient cars and Asian brands.

  6. Trick says:

    Honda and Acura are way down in sales,

  7. grim says:

    The Acura dealer down the road a bit is chock-full of non-Acura used cars.

    The Kia dealer up the road near 287 has a back lot completely full of supercars. Mclarens, Lamborghinis, etc etc.

  8. Libturd says:


    My son remarked about the same thing recently. The DCH Acura where 23 (ends) intersects Bloomfield Avenue in Verona has a parking lot full of race cars. Not an Acura in sight. So many anomalies in the economy is never a good thing.

  9. grim says:

    Yeah, the Kia dealership went viral sometime last year:

    There’s a super high end dealer across the street from Clifton High on Colfax. You’d never know, it’s all indoors. He deals in very high end cars, Ferraris, vintage race cars, etc. Got to walk through that place a few years ago, no doubt there are a couple million dollars worth of cars in there on any day. Hell, there are probably single cars there worth more than a million.

    There’s another place in Paterson (not big boy toys), that does high end car transportation. Friend of mine walked me through there a few years back, there were three Bugattis there that day, nuts. They transport those cars all around the world for people. Events, summer houses, etc. Crazy shit.

  10. Juice Box says:

    Here is an interesting tweet.

    Very negative sentiment on the stock market. Panic hedging from institutional traders.

    “Last week, institutional traders bought $8.1 billion worth of put options. They bought less than $1 billion in calls. This is 3x more extreme than 2008.”

  11. Libturd says:

    Reading the headline article, it reminded me a lot of much of the news that came out in 2006. The real problem with this article is that it blames the last housing crisis on the collapse in leverage due to Wall Street assholery. But that’s not what killed the housing market. What killed the housing market was lack of affordability combined with stricter lending standards. As I read this article, lots of people are still getting mortgages with 5% down. Do you really think this crowd can afford 6% interest rates? They couldn’t afford 2% interest rates. And Uncle Sam is trying to get out of the lending market simultaneously. Though I don’t see a 2008 collapse. I do see a collapse significant enough to drive the financial markets down as well as home prices by a minimum of 20%. Quite frankly, I expect prices to drop closer to 30 or 40%, but it might take a while. Without Wall Street fucking up royally, the ship will sail much slower this time. None the less, it will still reach its destination.

  12. Fast Eddie says:

    You guys are confusing me on the car situation. Are you saying they’re selling like crazy or not selling at all?

  13. Libturd says:

    I’m guessing still suffering from inventory shortage/delays related to the semi-conductor shortage.

  14. Juice Box says:

    Top Gear Imports where RT 80 meets the parkway in Saddle Brook.

  15. Ex says:

    Car loans were the next “economic powder keg” for a while.
    Nothing to see there I suppose.

  16. Juice Box says:

    Lib – They got the money from Congress with the CHIPS ACT, there won’t be any more shortages.

    BTW the companies that lobbied congress for passage this year formed the Semiconductors in America Coalition (SIAC) group last year. They always had the money for new chip plants, those companies in SIAC combined spent $633 Billion of their profits in stock buybacks over the last 10 years. That is allot of chip FABs even at a cost of 20 Billion dollars a pop.

  17. grim says:

    Cars are still selling, but inventory is restrained.

    In my post above, it’s probably Carmax that’s the most exposed, given the investment in that used car inventory. If the bottom of the used market continues to fall, they’ve got exposure. I’m sure they screw people on trade values, so perhaps their cost basis is lower than would be expected.

  18. grim says:

    Jobless claims at 222k?

    What recession?

  19. Libturd says:

    Exactly. You can’t slow this overheated market down. Raise them rates Powell. Raise them rates.

  20. Juice Box says:

    re: Car loans.

    On the credit side, here is the latest Q2 Report from the Fed. There is in increase in borrowing but nothing to worry about yet. Since the 2008 the Fed pays the banks interest of around 100 Billion a year to park those reserves at the Fed overnight not to lend aggressively.

    “Mortgage balances shown on consumer credit reports increased by $207 billion during the second quarter of 2022 and stood at $11.39 trillion at the end of June, compared to $10.44 trillion four quarters ago. Balances on home equity lines of credit (HELOC) increased by $2 billion, a modest increase but one that follows many years of declining balances; the outstanding HELOC balance stands at $319 billion. Credit card balances saw a $46 billion increase since the first quarter – although seasonal patterns typically include an increase in the second quarter, the 13% year-over-year increase marked the largest in more than 20 years. Credit card balances remain slightly below their pre-pandemic levels, after sharp declines in the first year of the pandemic. Auto loan balances increased by $33 billion in the second quarter, continuing the upward trajectory that has been in place since 2011. Student loan balances now stand at $1.59 trillion, roughly unchanged from the first quarter of 2022. Other balances, which include retail cards and other consumer loans, increased by a robust $25 billion. In total, non-housing balances grew by $103 billion, a 2.4% increase from the previous quarter, the largest increase seen since 2016.”

  21. grim says:

    Talked to my farmer yesterday, he’s not happy with the corn crop this year. Bushel weights and yields going to be down due to the dry weather. In all likelihood, he’ll be harvesting at the start of next month, which is very early.

    Bears are brutal for him this year in Sussex, they are decimating the fields. He has no recourse, though he’d love to shoot them all. He is not happy about the bear hunt decisions.

    If we get a wet late September and October, harvest this year is going to be a disaster for him, corn is going to rot in the fields.

    Going to be interesting from a terroir perspective. If you think of whiskey in the same way as you do wine, the corn harvest has a big impact on flavor. While it’s easy to adjust for starch yield differences (we don’t work in bushels anyway), the are almost certainly flavor differences due to the dry season.

    We’re looking at needing roughly 10 tons to get us through the end of the year. We have a big barrel commit in 2023, and probably need another 20 tons to make it through to next harvest. Otherwise we switch to rum, which is equally as challenging this year (sugar and molasses shortages).

  22. Juice Box says:

    Grim: re CarMax

    Here is one recent opinion. They are moving allot of used cars 1.6 million annually but it is only a small share of the used car market.

  23. Fast Eddie says:

    I’m really not much of a drinker but I just got a sudden urge to do a shot of Silk City Bourbon. Is it too early?

  24. Libturd says:

    Exactly. You can’t slow this overheated market down. Raise them rates Powell. Raise them rates.

    And Grim, CarMax, Carvana, Vroom, Carsdirect, etc., offer embarrassingly poor trade-in values and disgustingly inflated purchase prices. I mean, really, really bad. Their market is people who are uncomfortable negotiating. When I first saw a Carvana commercial, I figured I would see how bad it was. I gave them the VIN of my car. They offered less than have the Kelly Blue Book for dealer trade-in value. Time is money. I get that. But I’m not losing 5K for not spending a couple hours seeing what local dealers will offer you for your trade. And this was during the great used car shortage from about a year ago.

    In other news, we’ve had to replace the brakes on the Mazda 6 four times now, in the last year. I have not been charged for any of them except the initial, but my service guys (at Jim’s Super Service Exxon) said the rotors and pads being manufactured right now are complete garbage and he is seeing it with lots of cars. I let someone else do the brakes on our CX-9 and so far, no issues and I confirmed it was a different manufacturer. Exxon, doesn’t mind because he gets paid for the work regardless if it’s me or NAPA parts paying. But the day at the shop frequency is starting to get annoying even if I do get brand new brakes every 3 or 4 months. The new shop I’m using is MOPAR.

  25. Jim says:

    Fast Eddie says:
    September 8, 2022 at 9:15 am
    I’m really not much of a drinker but I just got a sudden urge to do a shot of Silk City Bourbon. Is it too early?

    Of course not! It is 5 pm someplace in the world.

  26. 3b says:

    Lib: Saw something yesterday that said the Fed could be sort of done after the September hike. Not close in my view. They will keep tightening until they get inflation to 3 percent; rates are still too low.

  27. Libturd says:

    I think so too. Though their mandate is to control inflation, they really need to cool the economy to do it. Raising the rates will eventually do this, but I still don’t think we are that close. We’ll see. Could be a long, cold Winter for Europe and China. Think that won’t impact us? I would think again. Again, the headwinds are all still in place.

  28. Ex says:

    Carvana is laughable. My guess is they peaked during the lockdown.
    I’m done car buying for at least 5 years. No lie.

  29. Phoenix says:

    Well, we can’t build a car, or make a chip. But we do have a winner here from Jersey in something that might be useful.

  30. 3b says:

    Lib: I agree. I also think gas/ energy prices here will be going up again as we head into the Winter here.

  31. Phoenix says:

    I made the mistake of going to the local laundromat for the complex where I live.

    Who uses the wrong soap, who puts dog hair in the machines, who puts a whole jar of scented beads in with their laundry, the tenant that squishes the pods into the top of the machine, that the area isn’t air conditioned, how much they hate their neighbors and the maintenance man- no wonder the guy doesn’t have hair he must pull it out every day.

    I was surrounded by them. It reminded me of this:

  32. Phoenix says:

    I also think gas/ energy prices here will be going up again as we head into the Winter here.

    Not rocket science. You are shipping it to Europe and Ukraine nicely compressed for a higher profit under the guise of FREEDOM.

    Q-Tip said, FREEDOM isn’t FREE.

    This old goat, just like Cheetoh head, likes his slogans.

    Cotton headed old goat is going to destroy the lives of many in the lower to middle classes in his “Quest” to inseminate his version of worthless FREEDOM around the globe.

  33. Phoenix says:

    In America, you aren’t even free to film in your local library or town hall-


    FREEDOM starts right here. What are you doing to educate your public employees about what is FREEDOM right here in America?

    I’m not cynical. It’s all Bull shite.

    Eddie, me either when it comes to a drink. But I am starting to understand why people do and why they want to be high all of the time.

    This is why. America knew the answer a long time ago, and here is the proof:

  34. Juice Box says:

    People bitching about the iPhone 14 being the same as the older versions, including Steve Job’s daughter.

    This SOS feature nice innovation, we should see some stories about people lost in the woods or perhaps on a sinking boat off the coast or in a large lake etc using this service to get help.

    Emergency SOS and chat with emergency responders via satellite messaging if cellular signal is not in range.

  35. Fast Eddie says:

    Apple is a cult like Starbucks. You’re not sure why you have the product nor are you sure you even like it. It’s just that everyone else has it/buys it so you need to do so, too. Being trendy is so American these days. Being edgy is even better. And being extreme is the best yet! It’s the new formula for success!

  36. Phoenix says:


    Can’t build one in America, however.

    Are we too stoooooooopid?

    Or are our fingers too big to hold the screws from all of the Big Mac’s consumed here.

    Can’t have Graydon, Cadence, Aubrey or Sophia assemble an Iphone- Now you can’t have Min, Yan, and Xiu- Pelosi doesn’t like them anymore- so now its Lakshmi, Aashvi, and Uma whose children will be working in the Apple factory.

    You’ve come a long way, Baby.


  37. leftwing says:

    “Saw something yesterday that said the Fed could be sort of done after the September hike. Not close in my view.”

    What are you reading….first it was two times 100 for Jun/Jul now nothing beyond Sept? Motley Fool lol? Cramer?

    400bps is terminal FFR right now…currently at 225-250….that leaves 150-175 in hikes over three/four meetings…pick your cadence because no one actually knows, even Powell, as any further refinement from there will be data specific…

    Recall, so long as month over month CPI increase is at or below 0.3% it is a mathematic certainty that glide path will have FFR and year over year inflation meeting at 4% in the first quarter or so of 2023….

    This is what a soft landing looks like fellas….no shotgun blast stopping the inflation animal dead in its tracks….just an elongated period of incremental actions and waiting which is entirely in character for a Chairman who believes in transitory inflation…without drastic steps a la Volckler almost by definition one soft lands the economy.

    And, as I pointed out yesterday, he is already a good measure of the way there…if you get 75bps in two weeks your FFR will be 75% of the way to terminal value….ditto for speculative assets like SPACs, NFTs, remote real estate, CW peak liquidity shit-co values, etc. All those excesses already wrung out of the system.

  38. Phoenix says:

    I want a phone that can’t be hacked with Pegasus.

    Well, that will never happen as our government want’s our phones to be hackable.

    Just like Trading Places- and possibly Bed Bath and Beyond.

    Wanna know where a stock is headed, hack the phones. You will know.

    And profit every time. Guaranteed.

    No doubt it’s happening. Way too much money at stake.

  39. Phoenix says:

    transitory inflation

    Like a transitory cardiac arrest.

    One you will be broke by the time the “transitory” comes around.

    The other you will be brain dead and an organ donor had you checked the box on your driver’s license.

  40. Juice Box says:

    Phoenix – We will never build stuff like that here, traditional human labor is needed as lots of parts cannot be automated and nobody in the USA has the grit for they are too fat and happy here.

    How about sewing 300 garments a day for 12 hours a day six days a week for the equivalent of $1200 us dollars?

    Here is a company you may not have heard of Shein.

    6 million Chinese “factory girls” sewing day and night to cut design and production of a garment down to only 3 days to sell it quickly online to US and customers from other countries.

    They also just started opening up pop-up retail stores in the US to complement their online business.

  41. Nomad says:

    Lib, see if Driveway will give you a better price on your car. For a while, they were offering a lot more. They drop the offer after they inspect but it was usually still better than their competitors.

    Brakes: akebono makes good pads. Wagner used to make a decent pad and rotor or check out some of the better brands on RockAuto.

  42. Phoenix says:

    Schein’s Goals. Goes good with an Armstrong quote: “Men substitute words for realities and then talk about the words.”

    The United Nations Sustainable Development Goals (SDGs) provide a framework for our environmental sustainability and social impact strategy. We support all 17 SDGs, which help guide our priorities and programs, and which will guide our future goal setting and reporting.
    We are a signatory to the United Nations Global Compact (UNGC) and support the ten principles focused on human rights, labor, environment, and anti-corruption.

  43. Ex says:

    10:44 Apple is a technological eco-system.

  44. Trick says:

    Ran my truck through the usual car buying apps last week to gauge what I could get for it, Carmax was the highest but you have to bring it in where they would inspect and probably knock off a few bucks. It was a hair lower the the KBB trade in average range.

  45. No One says:

    Lakshmi in India wishes she could work in a factory assembling Iphones.
    Instead of a career path of farming, garbage picking, whoring, or going hungry.
    India has a huge number of really poor people. Foreigners “exploiting” their labor would deliver a major upgrade for many people’s lives.
    Plus, while India’s government is screwed up, it’s not aggressively fascist like China’s, promising its people that someday they are going to smash the skulls of the Americans.

  46. 3b says:

    Left: It was a market watch article, and those comments were part of the article. I am of the belief, that inflation is embedded right now, and the Fed has more work to do. Rates right now are still accommodative away from housing. I also believe that when he the Fed is done, they will stand pat for some time, to ensure the medicine works. I am quite skeptical on the soft landing theory, as history shows they are rare.

  47. Phoenix says:

    Foreigners “exploiting” their labor would deliver a major upgrade for many people’s lives.

    So buying medication from Indian pharmaceuticals for 1 dollar a vial and selling it to an American for 500 a vial is an upgrade for the lives of both the producer and the user.

    Sounds a bit “Shkreli” like.

  48. Very Stable Genius says:

    A federal grand jury issued subpoenas related to a super PAC created by Donald Trump to raise money as he promoted baseless voter fraud claims.

    Thursday, September 8, 2022 11:46 AM ET

    According to subpoenas issued by the grand jury, the Justice Department is interested in the inner workings of Save America PAC. Similar subpoenas were sent on Wednesday to aides who worked in the White House and for Mr. Trump’s presidential campaign.

  49. Libturd says:

    Again, I’m in agreement with you 3b. Why immediately waste your recession busting ammo if you don’t need to?

    Of course, we could argue all day about this stuff. It’s all just guesses. Like do I start Burrows or Prescott this week?

    Even if you end up being right, it’s really all luck.

  50. Libturd says:

    The Queen is dead.

  51. 3b says:

    Lib: Just saw that.

  52. BidenIsTheGOAT says:

    Harry and Megan went back. Hide the silver.

  53. leftwing says:


  54. leftwing says:

    3b, don’t necessarily disagree with anything you say. Particularly agree they will keep rates higher longer…conforms with fewer hikes, you need to go longer.

    Re: soft landing, not saying they’ll do it and am aware that 85% of the time Fed raises rates they cause recession…however, if one understands this Fed never intended to ‘break the back’ of this inflation it makes sense…all of it…the paucity and delay in their moves and that they will land it because they are not attempting to break it, they are just looking into the distance when the inflation/rates line will meet and cross…..

    Those Feds that failed? They pulled the hand grenade to blow up the bear, fully realizing the percentages are that in addition to killing the bear they have a high likelihood of catching shrapnel themselves…this Fed? No grenades or weapons at all. They’re just going to continue to sit down and stare at the bear until it moves on…Big difference.

  55. 3b says:

    Left: I don’t disagree with your analysis, and I would say we more agree than disagree.

  56. Libturd says:

    I’m with you too and understand it. I am actually surprised they are even going after inflation at this point.

    Let’s see what happens when the bottom starts falling out. I’m positioned 50/50, which really shows how unsure I am.

  57. Trick says:

    Left, If the fed just pulled in the garbage cans several years ago there would be no bear problem

  58. chicagofinance says:

    You really think so? No question it has been clubbed like a baby seal, but are we really at bone pile yet?

    leftwing says:
    September 8, 2022 at 10:48 am
    All those excesses already wrung out of the system.

  59. chicagofinance says:

    Libturd says:
    September 8, 2022 at 1:37 pm
    The Queen is dead.

  60. chicagofinance says:


    Mortgage Rates Hit 5.89%, Highest Level Since 2008
    Rate on 30-year mortgage topped an earlier high in June

    By Ben Eisen

    Mortgage rates touched their highest level in nearly 14 years this week, another blow to the rapidly cooling housing market.

    The average rate on a 30-year fixed mortgage rose to 5.89%, topping an earlier high from June, according to a weekly survey by Freddie Mac released Thursday. This time last year, rates were below 3%.

    And mortgage rates look set to continue rising. The Federal Reserve has been lifting rates to try to curtail inflation, which has driven up borrowing costs across the board. The central bank currently appears to be on a path to lift rates another 0.75 percentage point this month.

    The housing market is a key focus for the Federal Reserve because rising costs there are a major component of this year’s sky-high inflation. It also is an area where Fed policy can have an outsize impact because the housing market is so sensitive to interest rates. Higher rates can add hundreds of dollars to a buyer’s monthly mortgage costs.

    “We’re all focused on the housing sector,” said Fed Vice Chairwoman Lael Brainard at a banking conference Wednesday.

    Mortgage rates are roughly double where they were a year ago, and that is leading some people who are ready to buy a house to consider renting instead. WSJ economics reporter Ben Eisen joins host J.R. Whalen to discuss the tradeoffs of buying versus renting in the current housing market.Read Transcript

    The record-low rates of the pandemic era had ushered in a bonanza in the mortgage market, with many companies growing rapidly by refinancing borrowers into lower-rate loans. But rising rates have slowed that business considerably, forcing some firms to lay off employees or close up shop.

    Higher rates have led many buyers to think twice before purchasing a home.

    When Luke Gardner moved across the country earlier this year, he and his wife went back to renting. They sold their condo in Chicago but decided to hold off buying when they got to Seattle, partly because of the uncertainty of rising rates and high home prices.

    Mr. Gardner said they have continued to look for places to buy and are resigned to paying more in mortgage costs than they have ever paid before. But the shifts in the housing market have reduced the urgency to buy a place immediately.

    “We’re ready to pull the trigger and financially we can do it,” Mr. Gardner said. “But we’re like, maybe there’s better days ahead, and if not, we’re fine renting for a little while.”

    Still, there are wide variations in local housing markets, with some areas cooling off much more quickly than others.

    At the end of July, prices in more than 85% of large housing markets were down slightly from their peaks, according to Black Knight Inc. More than one-tenth of housing markets faced price declines of over 4%.

    In the Washington, D.C., area, the market remains competitive, especially for houses that the seller stages well, said D’Ann Melnick, a real-estate agent in the area. But the buying frenzy of last year has dissipated, bringing supply and demand back into closer balance.

    “A seller can’t just throw any house on the market at an inflated price and expect to be able to set their terms,” she said.

  61. 3b says:

    Chgo: That is where Left and I disagree, I don’t believe the excess is out of the system yet; it was years in the making.

Comments are closed.