So I work as a housing counselor, trying to help first time home buyers purchase homes.
This last year I’ve been seeing ridiculously high mortgage payments clients getting approved for. Well above the standard 30% Housing Ratio, 44% DTIv ratios conventional mortgages demand.
Speaking with a lender today, turns out Freddie/Fannie have really relaxed guidelines around Housing Ratio. So people are getting conventional loans with up to 50% Housing Ratio! (Which means 1/2 of someone’s Gross monthly income is going to their Mortgage).
This reminds me so much of pre -2008. These loans are totally unaffordable. I’ve seen clients making less than me taking on payments $1,000 more than my Mortgage. And I’m not wealthy or crushing it by any means.
Bottom line- there’s going to be massive foreclosure rates coming in the next 1-5 years. Not sure how best to play it at this time though.
Housing Bubble Coming
byu/Belzer_fundamentals inwallstreetbets
Posted by Belzer_fundamentals
32 Comments
Only if they lose their job. The mortgage is always the first thing to get paid. Puts on travel and everything else that makes living fun.
Trust me bro?
That’s fine, just tell me where to go all in 
looks like someone spent too much time on r/REBubble
Underwriting has been very strict since Obama, unless you’re claiming there is an outright nation-wide fraud going on.
So you mean ‘come the next recession’ when people start to lose jobs? As long as we’re not adding these mortgages into AAA mortgage securities like last time.. I guess there is the possibility these people will be able to remortgage in 2-3 years assuming rates come down, giving sizable relief to those payments.
Do you have any sources other than trust me bro?
FHA with rocket mortgage allows 57% DTI. Lol. If the standards were the by the books , getting a house would be inaccessible.
They predict a recession on all 365 days of the year.
They are wrong about the recession on all 365 days of the year.
If a normal person like you can see it, the people getting paid to avoid a recession have seen it months ahead of you.
Have you checked the Florida stripper homeowners index?
That is the one you need to follow.
the way to play this is puts on bank stocks, really long, like too long to be purchased on a conventional market. You need a bookie, who’s also a monk, who can record your trade on a stone tablet or reed scroll. If you find the wizard bookie monk, your descendents will be rich for generations.
Selling puts on my mortgage
While real estate bubbles are a thing and there is definitely an issue with the cost of housing here is the problem with associating it with 2008. Banks have learned from 2008 and the old lending practices was to take a house as collateral and then sell it as soon as they foreclose to get back as much as possible. This is what crashed the market in the first place.
From that you will realize that banks have started changing their practices. Before banks were not in the business of owning houses. You will notice that has changed, one of the big buyers of residential real estate today are funds and banks and they are renting them out. Corporate home buyer ship is up overall.
Secondly if you have been studying the market over the years you will see that foreclosures are down, that does not mean that defaults were always down, starting about 2010 the banks realized that if they dumped inventory onto the market they lose money so they started keeping shadow inventories of things and allowing people to stay in their houses longer. Banks are not doing this out of the kindness of their hearts, somewhere along the road they realized they could recoup their money by controlling inventory and selling at a more opportune time, and they realized probably during this time they could rent out the inventory which lead to above.
So while you may see some easing I doubt we will have a 08 collapse again for those lessons learned from corporations especially banks.
Clients making less than you making payments $1000 more than you is such a pointless data point. When did you get your mortgage? When did you buy your house? This environment is elevated both on interest rates and home prices, drastically more than even 2021.
There will be no bubble until supply increases. And supply is not increasing
I’m a former mortgage broker and I’m now in my 40’s. 99% of my neighborhood is locked down on sub 3% mortgage paper. We’ve seen maybe 5 houses for sale in my neighborhood since covid. Oh, and my home I purchased in 2019 doubled in value. This isn’t a housing bubble, this is boomers and gen x getting rich off the fed money printer. Really glad I bought when I did.
https://preview.redd.it/nn2yeva5qcvd1.jpeg?width=660&format=pjpg&auto=webp&s=6b4697c64f20ba9fd2dd5cfdca44be9ad2009646
Let me guess, if the bubble bursts in 2026 or even 2030 you’ll say “I told you so”
The basis of the last bubble was fraudulent credit tranche ratings. So packages of rated bonds were really B or C aka junk when they said triple A. Rating testing has improved, there is 3rd party review, the stress testing of failures regardless of the first two have also improved. The banks no longer pay the rating’s agencies the same way. You’re just woefully under informed, and likely living in a dying area, doesn’t sound like builders are expanding home building in your area and peoples incomes aren’t keeping up with inflation meaning business is down.
I have been looking for the past 8 months and I closed a week ago. People have too much money. I am in fucking Czech Republic and people have too much money. The good things sell immediately for crazy prices ($300k-400k for 3 bedroom apartment in Prague) Rent prices are outrageous ($1-2k easily) And in my country we don’t even use freedom units. Money is useless. People are regarded.
Is this bubble in the room with us now?
Are these people all getting ARMs? Do we expected interest rates to be significantly higher in 1-5 years? Are there a crazy amount of derivatives betting on the success of the housing market to continue?
This is not another 2008.
I work in real estate too. I personally don’t think there will be any meaningful uptick in foreclosures. During the housing crisis people were given loans so easily it’s the first thing they did, they didn’t have the rest of their life in order (healthcare, savings, unnecessary car payments) Buyers now are less stupid with their money cause they’ve seen the consequences and they know housing will only get more expensive. In a very general term, today’s buyer gets the house last after they’ve squared away all their debts and bills.
> there’s going to be massive foreclosure rates coming in the next 1-5 years.
Maybe. For those who lose their jobs guaranteed, so if we see some mass layoffs and the unemployment rate spike, for sure. However, if the Fed gets rates 2%+ lower in the next 3 years you will be seeing a huge majority of these folks refinancing and lowering their payments with a not insignificant portion of them in better financial situations as well.
Every idiot I know is saying this is just like 2008.
Except it’s not.
2008 had record levels of unoccupied home inventory on top of all the financing mess.
Right now we’re looking at record LOW inventory. People aren’t buying a 2nd or 3rd house speculatively.
It’s almost nothing like 2008.
This is nothing new – people will continue to max out debt ratios regardless of rates and home prices. As long as prices hold up, you won’t see massive foreclosures. People will sell instead as demand will remain elevated and supply will remain low.
FHA loans, which are generally used for higher risk borrowers(low credit score, DTI issues, etc), have max DTIs of 55% and we’re seeing a lot of maxed DTIs nowadays.
Also worth noting this is on pre-tax income before factoring in basics like utilities. It’s strictly mortgage payment, insurance, property taxes, and mortgage insurance.
The majority of buyers are reallllllly stretching what they can qualify for. Also, it’s good to understand that affordability and what you qualify for aren’t necessarily on par with each other.
but fundamentally, 2008 bubble is mostly driven by people with multiple houses on mortgage, and the supply was more than the demand. The situation now is quite different. Recommend this pod cast: [https://www.nytimes.com/2024/09/24/podcasts/the-daily/housing-crisis-michigan.html](https://www.nytimes.com/2024/09/24/podcasts/the-daily/housing-crisis-michigan.html)
Even though guidelines have loosened, right now the underwriting standards are still stricter than they were pre-2008, where subprime loans, low-doc/no-doc mortgages, and exotic loan products (like adjustable-rate mortgages) were far more common. Today, most loans are still fixed-rate, and creditworthiness is more closely scrutinized imo.
Bring it on. I want a cheap house.
Money isn’t backed by anything
Yes, there are a lot of people that are over extended housing-wise. However, the total amount of equity in homes is something like 3.5x what it was in 2007. The average homeowner has $300,000 in home equity as of February 2024, and that number was less than $90,000 in 2007 in the run-up to the last housing crisis.
https://www.cbsnews.com/news/heres-how-much-equity-the-average-homeowner-has-now/#:~:text=According%20to%20the%20February%202024,the%20ICE%20Mortgage%20Monitor%20report.
This isn’t new, a few years ago my friend with $100k in student loans got approved for a $700,000 mortgage on a $70,000 income.