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Thread: Home Buying
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06-03-2021, 02:43 PM #49Hall Of Fame Poster
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Re: Home Buying
Can a correction happen until large numbers of people start defaulting on their mortgages? I feel like that's when the last one occurred. We had some friends where both spouses lost their jobs at once in 2009. They ended up being okay but that was the climate in the last crash. Everyone was scared and people were actually losing their homes. Seems more likely to me that prices will stay high until there is a catastrophic recession or something else happens where large numbers of people can't afford to pay their mortgages and still put food on the table. Maybe hyperinflation? I'm not an economist so I am really out of my depth here.
It also seems like the current state of inflation in building materials, namely lumber, will keep prices elevated. I know that should ease as supply increases and material prices come down. We all know they tend to come down more slowly than go up though.Last edited by BustOfPallas; 06-03-2021 at 02:57 PM.
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06-03-2021, 05:53 PM #50
Re: Home Buying
Actually hyperinflation would make paying your mortgage easier, assuming you have a fixed rate mortgage. However, the value of a mortgage dropping to the value of a few pay checks, while it sounds good, would collapse the supply side of the economy.
The Great Depression was deflationary. The value of the dollar climbed. While very difficult economically the government remained stable at least partly because its currency did. Governments survive even severe deflation. They never, ever survive hyperinflation and the collapse of their currency.
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Re: Home Buying
There are a number of things at play here. The default rates on the secondary market in 06/07 and q2 08 was what caused the crash. Right now it is an inventory problem, people are overpaying.
I can give some insider knowledge, servicers such as PHH , JPM Chase and BOA are doing non-loss NIB deferrals due to covid. These will need to be paid, due to the non-loss methodology the trust has floated the balances on the books but much like a balloon payment these will need to be made (likely through a modification that extends the mortgage a year or so.
I'd venture to say some of these will fail but the real reason the market will reset is simple macro econ, people will stop overpaying and inventory will increase as we come closer to equilibrium.
The real fear imo is this years inflation, Biden looks to spend another 6T, that would terrify me for 2022. 1/4 of the M2 was born out of thin air over the last year, poof magic new money supply. This level of reckless economics can't end well.
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06-03-2021, 11:18 PM #53
Re: Home Buying
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