Home News Here’s the loophole that makes the U.S. housing market more wobbly than it appears

Here’s the loophole that makes the U.S. housing market more wobbly than it appears

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This housing market does not appear to be built on the same eerie foundation as the subprime crisis.

Consider these stats from Fannie Mae
FNMA,
+ 0.88%
,
A mortgage buyer backed by the US government. The weighted average FICO credit score for a single house in the first quarter was Sterling 748. Origination loans to value were 71%, and only 4% of homes had loans worth more than 95%. The percentage of buyers with a debt-to-revenue ratio above 43% (usually the point at which lenders become more sophisticated) was 29%.

I don’t like the times when I have no income, no work, no assets. But it ignores rising house prices.

As an example, an anonymous blogger named SoldAtTheTop looked up home prices in Boston. Bloggers have calculated home prices as if they were continuing the trend for the eight years prior to 2019. The author found that if prices returned to a more normal trend, Average loan-to-value for tracked jumbo loan samples jumps to 92% From about 70%. According to CoreLogic, jumbo mortgages were too big to be supported by Fannie Mae and Freddie Mac, and securitization rose to its highest level in 14 years last year.

“The loopholes in the lending criteria for this cycle were simply ignored, given the fact that housing valuations couldn’t accurately explain the anomalous price increases that occur in the market, or that borrowers came to the table at 20%. That’s it. We had a 30% deposit and a good credit history, “the author writes.

“I think my little sample clearly shows something important about the dynamics of the housing market in this cycle: the actual performance that comes from the prime lending market, especially when it comes to privately funded jumbo loan performance. , There are systemic risks that have not yet been fully realized, “said the blogger.

Indeed, the fact that prices are overcooked compared to history does not mean that they will soon return. The first victims of rising mortgage rates were housing transactions, not prices.

According to CoreLogic, home prices in May were still up 20% year-on-year, while pending home sales were down 14% year-on-year.However, the forecasting company’s capital economics U.S. home prices will soon begin to fall, About 5%. Still, as long as the US labor market is strong and owners can continue to pay monthly, falling prices will not be immediately catastrophic for jumbo mortgage owners.

Buzz

Minutes from the last Federal Open Market Committee meeting are scheduled for 2:00 pm east as investors are trying to figure out how far the central bank is trying to raise interest rates. There is also an ISM service index and job data, both of which expire at 10am.

Berkshire Hathaway
BRK.B,
-0.65%

Strengthen purchases of Occidental Petroleum
OXY,
-2.20%
,
The new Securities and Exchange Commission’s filings show that we are approaching a 20% level where the proportional distribution of energy companies’ earnings can be reflected in their profits.

Cryptocurrency lender Voyager Digital
VOYG,

Apply for bankruptcy protection..

Just eat takeaway
TKWY,
+ 20.18%

Stock surge in Amsterdam after signing contract with Amazon
AMZN,
+ 3.60%

among them US Prime users get a one-year membership in Grubhub. And the internet sales giant can get a 2% stake.

British Prime Minister Boris Johnson He told lawmakers he wouldn’t quitAfter the resignation of two senior officials.

market

U.S. Equity Futures After Unstable and Mixed U.S. Trading Days Pushed High Tech Equities By Lower Bond Yields
ES00,
-0.07%

NQ00,
-0.03%

Pointed to a slightly weak start. Yields on 10-year government bonds
TMUBMUSD10Y,
2.773%

It was 2.80%.Euro
EURUSD,
-0.74%

It was gradually rising from the low price for the first time in 20 years.

chart

How unusual is it to see stocks and bonds fall in the same half? This chart by fund manager Edmund de Rothschild shows how strange it was. Although they say they are “carefully positioned,” there are many opportunities not only in equities, but also in emerging markets and high-yield bonds.

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+ 1.89%

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+ 3.04%

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+ 20.88%

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