From Wolf Street:
Mortgage-Rate Buydowns by Homebuilders Are Now All the Rage to Prop Up Sales, Lowering Effective House Prices in a Big Way, but Don’t Get Picked Up by House Price Data
Homebuilders don’t have the luxury of outwaiting the market, or waiting for the Fed to slash rates, or whatever, they must build and sell homes, that’s their business, no matter what the conditions in the market.
And the market is struggling with 7%-plus 30-year fixed mortgage rates and sky-high prices, after a ridiculous free-money spike during the pandemic. Sales of existing homes have plunged by about 25% from the same period in 2018 and 2019, and by about 32% from the same period in 2021, because buyers have pulled back, and the people with 3% mortgages have left the housing market altogether, not putting their homes on the market and not buying homes either, not even looking at homes.
That plunge in sales might be OK with potential home sellers, thinking that this too shall pass, but it’s not OK with homebuilders, and they’ve been adjusting to this market by cutting prices, building at lower price points, buying down mortgage rates, and offering incentives, such as free upgrades.
The latter two – buying down mortgage rates and piling on incentives – don’t show up in the prices of the homes they sell. So the pricing data that we have from the Census Bureau about sales of new single-family houses do not include the costs of mortgage-rate buydowns and incentives.
With mortgage rate buydowns, the homebuilder subsidizes the mortgage payment.
The duration of the buydown can be for a few years, which effectively turns it into a teaser rate that can cause problems when the rate jumps to normal.
Or the rate-buydown can be for the entire term of the mortgage (“permanent”).
The big homebuilders have mortgage-lender subsidiaries that originate the mortgage for their customers and then sell the mortgage to Government Sponsored Enterprises, such as Fannie Mae, which will securitize the mortgages into MBS. For example, the mortgage-lender subsidiary of D.R. Horton is DHI Mortgage Company.
Having their own mortgage lender makes rate buydowns a lot simpler for homebuilders. This is similar to the “captive” auto lenders, such as Ford Credit offering 0% 36-month financing for F-150 XLTs at the moment.
The costs of the mortgage-rate buy-downs can be big, because the home prices are big, and buydowns effectively lower the sales price of the home.
First ! Second time in 6 months WOW
Your daily dose of doom and gloom
https://nypost.com/2023/09/11/north-koreas-kim-boards-train-bound-for-russia-and-summit-with-putin-reports/
How ‘bout them Cowboys?
C*nts are Running the World
Ten 430.4
Bystander: Your comment from last night was well said.
Thanks 3b. Assuming not the Giants one..I am still fuming. The worst loss I have watched. Honestly I could not even shut off the game bc I had to see if Jones lived at the end. It was a horror movie
Bystander: Not the Giants one; that was an absolute debacle. I know a few Cowboy fans who are very happy this morning.
So, we had season tickets for the Giants, going back to the 50s. You know, one of those deals. I probably saw every home game (and some away games) that LT, Simms, etc. played. The old Giants Stadium was glorious, saw the same people in the same seats year after year, truly a great time. Those pits down the bottom of the circular walkways during halftime were like something out of ancient Rome. Kids would run in and try to collect coins and a few dollar bills floating down while getting pelted with beer. It was Thunder Dome!
Fast forward and that time is long gone. I’ve been to a handful of games in the new stadium but it represents nothing like the magic in the old stadium. Then, politics got involved and I took a year off because it killed my passion for the game. Last year I watched sparingly if nothing else was going on but never planned events around the Giants games like years ago. You know the stories, Giants games were like religion.
So, I tuned in last night and pretty much switched it off when the Cowboys ran back the blocked FG attempt on the Giants 1st drive. I woke up this morning and saw the score. Talk about shitting the bed! Anyway, I really had no other reaction. Like I said, I watch with sort of meh attitude now but hey, if expectations were that high going into this year, wtf happened last night?
Ed,
Not sure I even had high expectations other than compete. Stay in game, play sound and keep it close, maybe steal a win here and there. Last night was decimation of OL . Honestly the worst I have ever watched. It was like Don Bosco playing 85 Bears. Not joking. They were double teaming Parsons and he still got through. There was no where to go, no where to kid, like a trapped child in corner with drunk daddy’s belt.
Bystander: Offense and special teams, zero execution.
Jones was running for his life last night, the line could not protect him. Cowboys have the best defense in the NFL. Last season, Dallas had the highest pressure rate in the NFL, and they have only gotten better.
7 SACKS
2 INT
1 PICK-6
1 BLOCKED FG TD
5 FORCED FUMBLES
O line.
Same reason the Jets will lose similarly tonight. Oh, they have a good quarterback now. Who is to old to scramble. Will be retired after 4 games due to injury.
Finally,
A lot of you questioned how I could be so high on the economy. I’ve pointed out nearly all of the things he has, but the Prof describes it better here:
https://www.profgalloway.com/least-bad/
Hard Knocks has been a strange watch this year with Rodgers desperately trying to act like a normal human being while being worshiped by his younger teammates. He did mentor them pretty well on the show. If he can get the ball to receivers Wilson, Lazard, Hardman Jr and Randall Cobb they will put up wins. Will it be 10-plus wins? We shall see….
It was like Don Bosco playing 85 Bears.
Lol. I watched a few of the highlights. I think a lot of people were pumped up to see a competitive game. You’re at home, Sunday night, NFC East teams and you simply don’t show up? If you’re the coach, what do you tell your team?
Lib, reminds me of out old informal marketing slogan, “we suck less than everyone else!”
Fed consumer credit survey says a record number of consumers reporting credit/loanns harder to get in August 2023, and expect that to continue in the months ahead.
Joe in Vietnam: “I’m going to bed now.”
That phrase, concluding a number of Mitch McConnell moments.
Dor-Win is doing my windows as I type this. So far. relatively impressed. I wish they were a little more careful removing some trim which needed replacement after install. I plan to restain all of the oak in my home, so not a big deal to trim and stain some replacement, but trim has gotten ridiculously expensive and matching the stain. Hoping they get done before the storms coming in.
Lib,
My kid read yours and LW’s posts from the other day.
Didn’t make her happy to say the least. Buy I do believe she understands her father’s situation a bit more clearly now.
7 windows (5 with grids) double hung vinyl, $4300 complete.
Windows look much better made than the other vinyls we installed 12 years ago. Much sturdier locks and handles on the top of the top window is a nice touch.
Polish outfit, of course.
https://youtu.be/1EPlFdNa1bQ?t=16
https://www.npr.org/2023/09/10/1187224861/electric-vehicles-evs-cars-chargers-charging-energy-secretary-jennifer-granholm
Energy secretary hilariously tries to take a cross country electric car trip, needs a team to try to plan and actively manage the charging stations, and still can’t pull it off. She even had her staff parking gas powered cars in the charging spots to hold them for her. Joe blow doesn’t have a team or extra cars to plan a trip.
Her advance team realized there weren’t going to be enough plugs to go around. One of the station’s four chargers was broken, and others were occupied. So an Energy Department staffer tried parking a nonelectric vehicle by one of those working chargers to reserve a spot for the approaching secretary of energy.
That did not go down well: a regular gas-powered car blocking the only free spot for a charger?
In fact, a family that was boxed out — on a sweltering day, with a baby in the vehicle — was so upset they decided to get the authorities involved: They called the police.
Stay classy.
BRT,
Another overeducated eejit.
If you want electric, and want to travel, you need to buy a Tesla.
Any other brand is a joke when traveling. Watched a show with a guy who bought a used Rivian, his trip home was a nightmare, broken chargers, others super slow, others that showed-but they were part of a hotel- if you weren’t staying you couldn’t charge, etc.
You want a Bolt, you charge it at home and go back and forth to work only. Or buy a plug in hybrid like Toyota, then you can have best of both worlds.
I have seen/met very few government workers that are worth half of what they get paid. The good ones really stand out.
Americans’ cars now have the ‘unmatched power to watch, listen and collect information about what you do and where you go,’ according to a concerning new study.
According to the Mozilla Foundation, at least 84 percent of 25 car brands studied have the power to share or sell the personal data of drivers to to data brokers, law enforcement, and others.
‘The gist is: they can collect super intimate information about you — from your medical information, your genetic information, to your ‘sex life’ (seriously), to how fast you drive, where you drive, and what songs you play in your car,’ the study said.
The study gave all 25 of the studied cars ‘Privacy Not Included’ warnings, finding the car brands were collecting ‘too much personal data’ from drivers.’
It found that Tesla, Nissan, Hyundai, Cadillac, and GMC were the top five worst companies when it came to driver privacy.
It also found that 92 percent of the cars, which they called ‘data-gobbling machines,’ say they can share your information with the government upon an ‘informal request.’
Moreover, all but two, Renault and Dacia, gave ‘drivers little to no control over their personal data,’ including the choice to delete it.
The study notes that Nissan’s privacy policy says the company can share sensitive personal information, ‘including driver’s license number, national or state identification number, citizenship status, immigration status, race, national origin, religious or philosophical beliefs, sexual orientation, sexual activity, precise geolocation, health diagnosis data, and genetic information.’
Gary,
Son of Stupid makes the case for Joe again.
https://twitter.com/atrupar/status/1700968657201828000
To steal a quote:
The only reason they let us vote is because it doesn’t matter. If it did, they wouldn’t let us vote. Here endeth the lesson.
Phila fed claims mortgage owner-occupancy fraud is rampant and such loans are much more likely to default strategically.
“We identify occupancy fraud — borrowers who misrepresent their occupancy status as owner-occupants rather than investors — in residential mortgage originations. Unlike previous work, we show that fraud was prevalent in originations not just during the housing bubble, but also persists through more recent times. We also demonstrate that fraud is broad-based and appears in government-sponsored enterprise and bank portfolio loans, not just in private securitization; these fraudulent borrowers make up one-third of the effective investor population. Occupancy fraud allows riskier borrowers to obtain credit at lower interest rates. These fraudulent borrowers perform substantially worse than similar declared investors, defaulting at a 75 percent higher rate. Their defaults are also likelier to be “strategic,” suggesting that they pose a risk in the face of declining house prices.”
h**ps://www.philadelphiafed.org/consumer-finance/mortgage-markets/owner-occupancy-fraud-mortgage-performance?s=34
He is right about this:
Sen. Josh Hawley has a new populist proposal that eschews the laissez-faire Republican economics of old: he wants to install an 18 percent cap on credit card interest rates.
The Missouri Republican tore into soaring interest rates – which hit an average of 28 percent this week just as credit card debt levels have surpassed $1 trillion in the U.S.
In comments to RealClearPolitics, Hawley noted the government was ‘quick to bail out the banks just this spring,’ referring to Silicon Valley Bank of California and Signature Bank of New York, but ‘has ignored working people struggling to get ahead.’
He put credit card issuers directly in his crosshairs: ‘We know what they’re doing.’
Phila fed claims mortgage owner-occupancy fraud is rampant and such loans are much more likely to default strategically.
Only way to stop them is to put them in prison. Never gonna happen.
But it’s a white collar crime, so a slap on the wrist, rinse and repeat.
For 9/11, a bit of rare footage:
https://youtu.be/o6t31R4tI10?t=118
Wow, I’d never seen that in full.
Ouch, you can see Rodger’s Achilles snap last in last night’s game.
https://twitter.com/BeantownUS2/status/1701547904471626006
Now that I figured I’m not moving any where any time soon, I was considering giving the bathrooms a refresh and called a “bath fitter”. The quote to rip up the existing tile, tub and shower and replace with some composite material is $23K for two bathrooms.
What do you all think?