About time the rest of the industry noted the behavioral trend that we were one of first to identify and discuss.
2) Mortgage lock-in, and this is one of the major trends I’m looking at in the near future. Should mortgage rates go up, borrowers are going to be less inclined to move if it means losing their sweetheart mortgage rate. I know I wouldn’t give up my 3.95% for a 5.5%. So what’s it mean? I’ll stay longer.
February 2013
Likewise, this will further intensify the “mortgage lock in” dynamic that I’ve noted here on numerous occasions. If interest rates rise significantly in the future, borrowers with extremely low rate mortgages will be less likely to trade up or laterally as their financing costs will rise dramatically. Instead they may chose to stay and in some cases remodel or expand instead of selling. We already have this with the HARP 2 borrowers, HARP 3 will significantly increase the number of homeowners in this group.
January 2013
From Newsweek:
Housing Market Data Is Warning Sign for Americans: Peter Schiff
As the U.S. housing market grapples with its lowest sales since the mid-1990s, economist Peter Schiff warns of a looming crisis in which homeowners are resorting to renting their properties to retain their existing mortgage in what he calls a deteriorating economy.
With the National Association of Realtors (NAR) reporting a slump in existing home sales and a surge in median sales prices last week, Schiff, on his The Peter Schiff Show podcast, pointed to a potential trend in the real estate market in which homeowners will begin renting out their homes to retain the properties on which they have low mortgage rates versus selling on the open market, which would cause them to take on a new mortgage with a higher interest rate.
“Existing homes aren’t selling,” Schiff said. “The people who are in them have low mortgages and they’re not motivated to sell, and the people who want to buy them can’t afford to buy them because they can’t get those rock-bottom mortgage rates.
“The guys that own the homes don’t want to sell because where are they going to live? I mean, they’ve got these cushy low mortgages that they don’t want to give up. Now, maybe they’ll rent out their homes so they can hang on to the mortgage.”
…
The situation, which is forcing homeowners into what experts call the “lock-in” effect, is compounded by the interest rate hike campaign that the Federal Reserve embarked on last year aimed at curbing inflation. While the Fed has signaled that its job is done in terms of rate hikes, the effects are long lasting, especially on mortgage rates.
Even some older threads stretching back to 2006ish, but we didn’t use that exact phrasing.
“This is more of a sign of just how bad the economy is, and it’s going to get a lot worse than that,” Schiff said.
I don’t get this statement. No inventory and higher mortgage rates means less sales. We’ve been saying this for a few years. It’s a stalemate. And, what’s going to get worse? Less houses to market? Higher prices? Lingering higher mortgage rates despite FED movement?
It’s like saying it’s raining and it’s just another sign of how bad weather can be.
For some more context, the genesis of that discussion were the arguments about the correlation (or not) between mortgage rates and home prices (or their respective second derivatives). Lock-in was probably one of the most satisfying explanations for why home prices don’t fall when mortgage rates increase, and that’s directly due to the reduction in inventory, reduction in transaction volumes, and a reduction in the “multiplier/velocity” of chained sales (sale permits a purchase, permits a sale, permits a purchase, permits a sale, etc) – think of this as the equivalent of the M2 velocity of money.
To fan the flames of that one. There is no correlation between mortgage rates and home prices, none, zip. Yes, historically there were periods of time when they were positively correlated, but there were other periods of time when they were inversely correlated, and other time periods where there was zero mathematical correlation. Thus, there is no correlation.
What Schiff writes about renting out houses makes no sense. Where does the homeowner move renting or selling? Either way they need a new home.
Chgo: I was just about to say the same thing.
Where does the homeowner move renting or selling?
The Poconos? A quad in Toms River West off of route 37? Holy Name Cemetery in North Arlington? ;)
They do what Gator and I did when we kept the multi and bought a cheap house in GR. Only instead of the high mortgage rates being the reason not to sell, it was the deflated price that our multi would fetch. In this case, almost 40 percent less than we paid for it plus cost of upgrades.
Money is money however you slice it.
LAX, that house you posted last night in Vegas is a block away from Main Street Downtown and within spitting distance of the Greyhound bus depot. Forget the Ring doorbell. You would need to not have one to keep the vagrants from knocking on your door.
You can always refinance when rates come down. And they will.
I’m surprised the market reaction was up to the GDP growth number terrible Biden produced this morning. Seems like all this positive news might delay March’s interest rate cut. I would expect the FED to start talking tough again soon. I’m kinda in the 3B camp. I wouldn’t cut it yet. Heck, I might even raise it further.
Not that I agree, but Torsten Slok was out yesterday pounding the table for March.
https://ca.finance.yahoo.com/news/key-indicator-says-fed-still-230220936.html
Consumer spending + runaway credit card use = higher GDP
A rally with flat interest rates would feel so much less artificially induced than a rally with falling interest rates.
Either way, I think 24 is gonna be a good year. Especially if you and me see it in together.
My wife and I want to move into 3 tiny homes on a random plot of land and rent out our house. We would each get 1, and the kids would share 1.
Lib, love the Tommy reference!
https://www.lendingtree.com/credit-cards/credit-card-debt-statistics/
Actually, it’s really not that bad. Don’t believe everything you read.
And Biden didn’t create the inflation alone. Trump started it all on his own. With those stupid, stupid, stupid Covid payments and of course his threats to fire Powell if he didn’t ZIRP.
Is everyone still doing worse than they were in 2020?
Heck, I’m partying like it’s 1999. And I expect this to continue for at least the rest of the year. The FEDs got ammo now.
Thanks Old.
Heck, I’m partying like it’s 1999.
You elitists like rubbing it into the face of the common man. ;)
Gary, you are so far from the common man. Just accept that you are part of the top 10%.
Lib; Certainly no need for a cut in March, and in fact probably no need to cut at all this year. Higher for longer.
“Higher for longer.”
I doubt that happens, but it would be good for the country. Not so much for Wall Street.
It’s as I always predicted. Powell will be Man of the Year in 2023. And ran out of DC in 2024.
Lib: We shall see. But, if economy is humming along and recessions appear to be a thing of the past, then no need to lower rates. That said, there are white collar layoffs happening.
Chicago 8:29
In regard to single family house owners renting it out. Where they move is usually something smaller, bought or rented. The term is “accidental landlords”. Every step of their journey is accidental. As they don’t realize that their perceived faith based reality don’t add up to real reality.
They don’t want to swallow the loss of capital or mortgage. They rent it out with some silly excuse that they will keep it for their kids or believe (I’m dating myself ) Carlton Sheet’s real estate scam bs. They usually ask outrageous rent following the rule of thumb formula that if my property is worth $1M, then annual rent is 1M divided into 20 or $50k/yr ~ $4100/month.
Then it sits empty, requiring maintenance. Eventually they rented out at lower amounts that they though. Then they realize based on what they rented and how much the rent is that tenant has expectations. Big one now is that people are expecting a lower commission from RE tour guides than a month’s rent, so that is coming out of their pocket like it happens in many areas outside NJ. If Wall Street/PE is having trouble making money in the south doing single family rentals, what can you expect from some single house owner.
If tenant rents a McMansion and has pool or elevator he expects to use it. Which of course accidentally cost more money to meet the tenants demand. Landlord can ignore it, at best tenants walks away, or tenant can lawyer up for what is contracted.
At the end they always accidentally realize, that the like stocks – the first loss is the best loss. Either they spend a lot of money keeping the property up or they let it slide and become an absentee/borderline slumlord trying to keep going month to month.
Las Vegas, where you aren’t safe in your “gated” community.
Moment Las Vegas pastor, 46, is shot dead by female neighbor in his driveway in front of his wife and two children inside gated community
Nick Davi was shot dead by his neighbor Joe Juno, who also wounded his wife
Junio, 36, reportedly harassed the family for weeks before the deadly shooting
The family had complained about her to their homeowner’s association
In this Taylor Rule chart which Chicago linked to, the FED lending rate was never further off from where it should have been except when TRUMP was in office. Hmmmm.
https://s.yimg.com/ny/api/res/1.2/SC8WslNlbeGWVicmnkeb3w–/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTUyODtjZj13ZWJw/https://media.zenfs.com/en/business_insider_articles_888/b9af5d23511e86a3f3f763afde195bf3
“That said, there are white collar layoffs happening.”
Yes there are. But the IPO market is hot and eventually, bull market rallies lead to nimiety.
We’ll see. Just not seeing a significant recession anytime soon. Certainly NOT before the election.
It’s all noise, just noise.
3b says:
January 25, 2024 at 11:00 am
Lib: We shall see. But, if economy is humming along and recessions appear to be a thing of the past, then no need to lower rates. That said, there are white collar layoffs happening.
Fast Eddie says:
January 25, 2024 at 9:54 am
Consumer spending + runaway credit card use = higher GDP
Banks. TBTF. Been there, done that.
Don’t worry, taxpayers will bail them out. No one will get convicted. It’s all good.
Get some CBD and party on.
Phoebe Gates is no Phoebe Cates.
Bill Gates’ daughter Phoebe Gates, 21, stuns in nude slip dress at Feud: Capote Vs The Swans premiere… after dad was at World Economic Forum in Davos
AccidentalLandlords AreTheBest,
That post is spot on. Every single example I’ve seen of people renting out their homes around here has ended up in complete (and expensive) disaster. I only know of three, but each one was truly horrific.
I say this to everyone who thinks about doing it. Take a lower offer and sell. You cannot play landlord unless you are really handy. The higher the rent, the higher the expectation the tenant will have for “perfect” living conditions.
Say your kitchen sink drains a little slowly. You ignore it as resident. Your tennant won’t. Guess what that $400 profit you made this month is going to Roto Rooter. Their spoiled kid makes waves in the bathtub. Too much water on the floor of the bathroom and it leaks down through the kitchen ceiling and soffits. For me, that’s a three or four visit job with less than $20 in materials. For the non-handy luxury landlord? $400 per sheet rock repair. There goes three months more profit. And these are extremely minor examples. Just wait until they ruin the icemaker or burn out your washer and dryer due to running oversized loads.
This is why George Bush pushed “A home of your own.”
It’s why, when your neighbor wants to raise chickens and dogs in her yard, you don’t call the “association” and bother her. At least not in Las Vegas.
It’s why, in a country where “property” means more than people, a twenty year old girl was shot just by mistaking an address (The woman, identified as Kaylin Gillis, was a passenger in a vehicle when a man, 65-year-old Kevin Monahan, fired two shots from his front porch)
If it ain’t yours, you won’t give a f, and if your landlord wants profit, what they don’t give a f about is you.
Libturd says:
January 25, 2024 at 11:20 am
AccidentalLandlords AreTheBest,
That post is spot on. Every single example I’ve seen of people renting out their homes around here has ended up in complete (and expensive) disaster. I only know of three, but each one was truly horrific.
I say this to everyone who thinks about doing it. Take a lower offer and sell. You cannot play landlord unless you are really handy. The higher the rent, the higher the expectation the tenant will have for “perfect” living conditions.
Say your kitchen sink drains a little slowly. You ignore it as resident. Your tennant won’t. Guess what that $400 profit you made this month is going to Roto Rooter. Their spoiled kid makes waves in the bathtub. Too much water on the floor of the bathroom and it leaks down through the kitchen ceiling and soffits. For me, that’s a three or four visit job with less than $20 in materials. For the non-handy luxury landlord? $400 per sheet rock repair. There goes three months more profit. And these are extremely minor examples. Just wait until they ruin the icemaker or burn out your washer and dryer due to running oversized loads.
https://georgewbush-whitehouse.archives.gov/news/releases/2003/12/images/20031216-9_d121603-3-515h.j**
https://georgewbush-whitehouse.archives.gov/news/releases/2003/12/images/20031216-9_d121603-3-515h.html
I guess they managed to reboot his processor and get him restarted. Didn’t know that. How long before we see the next blue screen of death?
Ukraine-for-border negotiations on the rocks after Trump comments
Senate Minority Leader Mitch McConnell acknowledged that reality in a private meeting Wednesda
When Trump becomes President again it’s going to be the Swifties storming the Capital.
hehe.
Hope one wears horns.
Tesla shares plummeted more than 10 percent on Thursday, wiping billions off the company’s valuation after CEO Elon Musk failed to allay concerns about stagnating growth and persistent price cuts on the company’s earnings call.
BYD has made a car that can lift it’s tire over a pothole. Perfect for the Republic of NJ, where no matter how much you pay, you can’t get a pothole free road.
And the Chinese, they keep pressing ahead.
https://youtu.be/41NsrzQjT3I
Libturd says:
January 25, 2024 at 11:54 am
Hope one wears horns.
Travis Kelce.
The economy has improved significantly over the past 18 months or so once they ditched the new green deal and adopted the MAGA energy plan. That brought down inflation. Now we’re going to see the today election year gas price drop which will bring it down further. The only problem for the traitor is he’s losing his radical base by going back to carbon.
“But the IPO market is hot…”
What market you looking at?
Doing some selective shorts…put on some AMD, low cost, high payout if she goes down toward 165 next couple weeks. Overextended, and earnings on the horizon…longer than usual so trying to set some easy pickings in the event of a downturn…
Not saying they are performing well. But they are occurring, which is novel.
Sofi will go up 75% in one day if earnings are good on the 29th. You may want to look at that one Leftwing.
Lib, something about being so close to the strip.
My Gawd. I’m losing it fellas.
The weather is awesome though.
LAX,
1) Seriously, keep as busy as possible. Do some wash, sweep something, nail some lumber together, paint something, clean out the basement or attic… do something!
2) Whenever you think it’s about you, it’s not about you. Keep repeating it.
3) Keep asking yourself, “What am I going to learn today?” Repeat it over and over.
4) Pick up the guitar and find 5 different inversions of 7 major chords on the fret board. After you find them, play a simple 3-chord progression using variations of the inversions. Do it!
Two words: Casa Vega. You guys ever want the best Mexican.
Sherman Oaks. Go figure.
Not being argumentative, just trying to center your data for your own decision making.
Most professionals would say the IPO is lackluster at best. Big names overwhelmingly aren’t getting out, the handful that have squeaked out have some serious losers.
Equity capital market guys got badly haircut bonuses with some job cuts, that certainly doesn’t happen in normal let alone hot markets.
Proceeds and volume are down, with proceeds down substantially more, ie. the issues making it out are shitty second tier companies pumped by second tier banks…
I keep an eye on this (and M&A volume) pretty closely as uptrends in each is one of your best indicators of a sustainable bull market, ie. companies and investors are willing to go further out on the risk curve with their corporate activities which requires a bullish view on economy *and* their own company prospects.
First chart:
https://www.ey.com/en_us/ipo/trends/q4-2023-ipo-market-trends
2) word. Right? You turn into the invisible man at 57!
Trust me fellas x …. I am lucky I’ve got tons of shit to do to keep
Me busy. I’m just naturally “insane”. In the membrane.
Can’t blame the weed either. Raised by BoomrrsZ
On SOFI, not attractive right here, the risk/reward setup doesn’t clear my hurdles. May very well go up and I’ll wave it good-bye and be happy for you and others in it…otherwise I’ll look when it has a six handle, low sixes ideally.
4) I’m in the Bass Era rn. Loving it. New P Bass due Friday new 100w Ashdown Combo in days following. That bottom.
11:51 swifties represent all that is great about American Femdom.
Tall Blonde Chicks from Pennsylvania.
Final approval was given by Paramus to the developers of the Garden State mall transportation for the first phase of the redevelopment, which includes 575 apartments. These will be one and two bedrooms with a den. The den will have barn doors, and we’re going to have a closet as well. Town officials were concerned that having closets in the den would lead to people converting the dens to bedrooms. The developers agreed to remove the closets, but the barn doors can stay. Well, what can you say, except the thought process in my mind is flawed. Just because there won’t be closets in the den does not mean they can’t be used as a bedroom. You don’t necessarily need a closet for a bedroom, or you can simply buy a moveable/ portable closet, and put it in the den/ bedroom; problem solved.
Bought 6 new tires today. Took pathfinder in to rotate front to rear and get 2 new front tires. The rear ones were Yokohamas and had developed cracks on the sidewall. Still under warranty so got $300 Credit for the pair and got Michelins instead. Realized the other car had Yokohamas also around the same age. Inner tire tread was down to 1/32
Was 6/32 in June and 5 to 6/32 in August when I had a tie rod replaced and alignment done. Never had a tire deteriorate so rapidly. The tires were so worn I only got credit for the rear ones that were at 5/32. Got Michelins too.
Hold forever?
Americans are actually now completely stranded in 40-year-old properties…..old homes with no updates.
https://fortune.com/2024/01/25/housing-market-americans-stranded-old-property-affordability-home-improvements-real-estate-jon-bostock/?twclid=26gmc4pvkcvv52q18l5e8sbubh
Power just came back on. Our 40 plus year old underground wiring system had a fault since around 5 am. All our wiring is all buried no utility poles. 5 crews in JCP&L trucks were out in the neighborhood all day checking each transformer junction box.
Now I have to unplug my portable generator and wheel it back into the garage. Might be time for a permanent natural gas generator, but then again if I buy one the power will probably not go out again for 10 years.
Hold,
Always consider Continental Tires. In most cases, they are the same quality as Michellins, but last much longer. The Cross Contacts I had on our CX-9 were rated for 100K and are nearly there. Great rain grip too.
Just did a set of tires for the M3. Staggered wheels.
Michelin Super Sports. Chef’s Kiss.
Bonus: passed Smog Test.
Libturd
I will try to remember those next time. Never heard of them before.
Lib – Those are Nazi tires….
Lib baby, this seems like more your style
https://www.zillow.com/homedetails/4231-Solace-St-Las-Vegas-NV-89135/295540378_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare