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Nascent Housing Recovery Faces New Test In Regional Bank Crisis
Not surprisingly, US mortgage rates dropped over the last week alongside falling US yields.
The 13bps decline wasn't especially pronounced, but it was notable for being the first drop in six weeks.
After receding sharply from last year's highs, financing costs rose anew as a string of hot US economic data (ironically including housing figures) compelled traders to reassess the adequacy of Fed terminal rate expectations as they stood prior to January's blistering payrolls report.
Bets on highe
I know 6.5% for a mortgage is nasty but I’ve owned five houses and that’s the lowest rate I was ever offered. Bought my first house in 1970 at 8.5%, the second in 1972 and the third in 1975, both at over 9%. The only good rate I ever had was 0%, on my current house I bought for cash. In my view the largest single cause of the GFC was too many people buying houses they couldn’t afford so they could use them as banks. Around 2006 I noticed some data in an out-of-the-way spot in the WSJ showing various metrics of risk in the mortgage market. One piece that caught my eye was the percentage of new mortgages on which no payment had ever been made. By mid to late 2007 that number was well into double digits and the six-month default rates were getting positively scary. I wasn’t really paying attention to CMOs at that point, although my largest single asset holding was in Vanguard’s Ginnie Mae fund, a great earner at the time. With a large minority of folks in the housing market unable to pay for what they bought back then, maybe looking at those default trends might be in order once again.
Great summary H
My regional is talking 8% on a commercial industrial balloon renew this year. They are also quite-literally advising I seek out alternate funding sources despite having a multi year lease tenant and ~1/4ish mortgage to market value on the property. Meanwhile at the day job (architecture) we had a recent bid package come in 15% over with highly credible estimators on the team. No end in sight on the ground for this tightening multiplied by inflation cycle. Meanwhile we turn away jobs via talent supply issues.. Go figure.