All Encompassing Mortgage and Real Estate Thread

[Wulaw Horn 19,019]

MBS up 38 points right now (MBS up is good- means rates are down). By my calculation if we just have the same awesome day for another (checks watch) 16 days we will be back to where we started the year.  Whoo Hooo.  Don't call it a comeback!

When we ultimately end the day 7 basis points down and we deal with 48 re-price for the worse emails in our inbox yall all have permission to drag the shit out of me. 

[UTPhil2006 3,795]

[Incredulity 11,568]

3 hours ago, Wulaw Horn said:

By my calculation if we just have the same awesome day for another (checks watch) 16 day

I'll take the under

[Wulaw Horn 19,019]

37 minutes ago, Incredulity said:

I'll take the under

I’d settle for two more to end the day to get us back to where we were at the beginning of the week. 

[Wulaw Horn 19,019]

And now we are down 41 basis point. Down is bad. Fun while it lasted. 

[UTPhil2006 3,795]

51 minutes ago, Wulaw Horn said:

And now we are down 41 basis point. Down is bad. Fun while it lasted. 

Yep.  Any good is washed out usually fairly quickly.  

[UTPhil2006 3,795]

14 hours ago, Incredulity said:

I'll take the under

Pay the man, Shirley

[Neonmoon 38,127]

Seems like Fed will raise rates by 50 points in May. 

[Wulaw Horn 19,019]

Started the day 8 bips ahead, currently 49 bips down. Down is bad- interest rates up. 
Nice little morning of another 1/8 of a point rise in interest rates in the last 45 minutes. 

[UTPhil2006 3,795]

12 hours ago, Neonmoon said:

Seems like Fed will raise rates by 50 points in May. 

Yep just opened it and at the end of this sentence I'm closing my laptop and walking away from this crap today.  11 freaken points on top of the shit show that has been this week.

[UTPhil2006 3,795]

Me every time I open the market report tab..

 

Current mood..

[Wulaw Horn 19,019]

So- no support on 10 year until 2.58 (we are at 2.48 right now) so we got another 10 points to go before we find support there.  I always quote MBS (more precise as it relates to mortgages) where up is good, but mentioning 10 year here because it was mentioned up thread.  10 year up is bad for interest rates. 

We are up (checks chart...) 86 basis points for the year to date.  We are up 74 basis points since March 7!  To put that in context- many years will have delta's between the high and the low on the 10 year treasury of less than 75 basis points (2018 for example) so that would be your trading range for the year.  This is how much you are up in the last 18 days (remember- up bad on 10 year treasury).  

This feels like the 9 minute run against Purdue where we didn't score a single point- intellectually you know Texas won't go the next 25 minutes after that 9 minute run without scoring again, but in the moment it doesn't feel like we will ever get another bucket.

If you are buying (or looking for cash out) at a loan amount over 500k and are a good borrower though shoot me a PM- we can set you up at a rate in the low 3's on that 10/1 arm I did the math for yesterday- as we are seeing right now a monster spread of 1.25% on that particular product- which is a steal in these market conditions.

[Muny_Tex 293]

So with mortgage rates now firmly settled at/above 3-year highs, it would appear to me that the “core” ReFi market (excluding rarer deals like Wulaw’s high-value ARMs) is essentially dead…as vast majority of current owners either bought within past two years (safely in the low-mid 3’s) or already locked in at rock bottom rates in the first 12-18 months of Covid.

While this saturation level was inevitable one way or another; the major (unforeseen) consequence of the extremely rapid, no lube rise in rates would seem to be stomping out Cash-Out demand/viability for nearly everyone besides a handful of desperate folks who need the surplus cash at any cost…even when the math makes no sense.

With that in mind, my questions/concerns are as follows:

1.) What is the cumulative effect of eliminating an entire segment of a lending industry (ReFi’s) seemingly overnight…without a corresponding drop in housing prices that stimulates new deals on the buyer side to offset that shift? How long until lending shops start laying ppl off en masse? What about the big box banks that rely on revenue from these same deals? What about the title companies?

2.) If govt monopoly money in form of direct stimulus is out of picture (for at least a while), how many (thousands? millions?) of Americans are going to be able to sustain their lifestyles (or service the credit card debt accrued from that long overdue family trip to Disney) if they can’t conjure up the $70-90k of “free cash” equity they were expecting from a low rate cash out?

3.) If materials/commodity costs remain high, how can builders justify dropping their prices to match the reduced budgets of entry-level buyers in presence of higher rates (and possibly tighter underwriting requirements)? Seems to me that scenario creates a lot of “stagflationary” winds where prices remain artificially high due to lack of inventory caused by poor margins.

Certainly interested in other viewpoints, but my .02 is that creating recessionary activity by kicking the entire real estate industry in the balls doesn’t really do much (at all) to solve inflation…it just adds more layers to a triple decker shit sandwich.

P.S. As for point #2: I don’t think that using your house as an ATM machine to live beyond your means is a good thing; but like it or not, borrow/spend reflects huge segment of the US economy…and it’s gonna get real ugly real quick when most ppl no longer have that lever to pull.


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[Wulaw Horn 19,019]

This is a really great post. Will respond more when on a computer. 

[LCHorn 2,589]

3 hours ago, Muny_Tex said:

With that in mind, my questions/concerns are as follows:

1.) What is the cumulative effect of eliminating an entire segment of a lending industry (ReFi’s) seemingly overnight…without a corresponding drop in housing prices that stimulates new deals on the buyer side to offset that shift? How long until lending shops start laying ppl off en masse? What about the big box banks that rely on revenue from these same deals? What about the title companies?

2.) If govt monopoly money in form of direct stimulus is out of picture (for at least a while), how many (thousands? millions?) of Americans are going to be able to sustain their lifestyles (or service the credit card debt accrued from that long overdue family trip to Disney) if they can’t conjure up the $70-90k of “free cash” equity they were expecting from a low rate cash out?

3.) If materials/commodity costs remain high, how can builders justify dropping their prices to match the reduced budgets of entry-level buyers in presence of higher rates (and possibly tighter underwriting requirements)? Seems to me that scenario creates a lot of “stagflationary” winds where prices remain artificially high due to lack of inventory caused by poor margins.

Certainly interested in other viewpoints, but my .02 is that creating recessionary activity by kicking the entire real estate industry in the balls doesn’t really do much (at all) to solve inflation…it just adds more layers to a triple decker shit sandwich.

P.S. As for point #2: I don’t think that using your house as an ATM machine to live beyond your means is a good thing; but like it or not, borrow/spend reflects huge segment of the US economy…and it’s gonna get real ugly real quick when most ppl no longer have that lever to pull.

I just got the kids down three hours late so I'll take a swing:

1. Thank God; refi lenders are a blight and the Better.com's of the world and that model are empty calories from a business sense (from a consumer side they provide the least competent hand holding on the biggest financial transaction most consumers will make in their life and on the competitor's side we see them as a "good time" friend who isn't there in the community, accountable to a local network for referrals and they pinch down on margins from the folks that are local, will be sponsoring the T-ball team, volunteering for the volunteer fire department, and still around when you're escrows are screwed up by the servicing company and you're panicking because the servicer told you that you owe $5k for back taxes and you need someone to advise you). 

2.  The "free cash" is still there, it's just going to be in the form of a second lien and right now their rates are much closer to 2nd lien rates from six months ago, while mine are 2% higher (i.e., 2nd lien money is considerably more demand driven).

3.  At least in Austin the builders have so much demand that nobody is lowering prices or increasing incentives, and I'd surmise that's broadly true nationally.  The unfortunate consequence of the demand* crunch is that builders are the only ones creating entry level housing for borrowers making around the median family income and while I think the model of the KB homes of the world is somewhat unhealthy (a house should be built for multiple generations of ownership, not as a disposable entity as a result of compromised quality), a healthy market must provide housing that's a natural step up from renting and not require six figures of income to graduate to home ownership ( for example, @Bozo_Casanova, when he opines on building codes, would agree that a diversity of housing is a part of an egalitarian society that isn't simply providing an asset class for the wealthy). 

*My position that most of the current demand in the housing market is principally driven by millenials coming onto the market, not easy money lending exacerbated by the Fed). 

As to your larger point I'm far less pessimistic; I had the privilege of working for one of the best loan teams in the country (in excess of $1b in 2021 loan production and for the originators like @Wulaw Horn that's as a branch, not the whole bank, though we left in 2020 when we were only doing about $70m a month :-), and I'd like to think that our unit totals count as as sufficient exposure to the greater lending environment in multiple markets.  This is purely anecdotal, but I don't see our borrowers utilizing their equity as cash machines, particularly to what I recall seeing in 2007-2008.  Qualification requirements are so much stricter, and those that are exploiting equity gains are most frequently reinvesting the proceeds in the subject property or for the purchase of another piece of real property.  There are definitely losers in this (anyone renting trying to buy), but it's not the institutional malfeasance that was the result of overly permissive underwriting guidelines a decade ago.  

I don't expect rates to stay where they are; when I was leading our morning meeting with our production team today I described it as a ball thrown up in the air--I don't know when but at some point gravity is going to work and that ball is coming down and everyone buying today is going to be refinancing.  Wulaw follows Habib and while I think he's wrong with enough frequency that I like to poke fun at him he's also a bit of a canary for the minds of California lenders*, and there's a growing confidence a recession is coming and EVERYTHING about the market can be boiled down to this--if enough people believe it then it becomes true.  If enough market participants believe demand will fall then money will be moving into bonds, driving down rates.  Given the fast increase in retail pricing over the first quarter I'd like to think that it's a result in a lack of confidence about where prices (on bonds) and inflation will be tomorrow; once that appears to stabilize (as regards inflation, not necessarily decrease, but stabilize), I think we'll see a subsequent fall in rates and it very well may happen with surprising speed.   

*at least in our business, everything good and bad seems to come out of California before spreading nationally

 

[Wulaw Horn 19,019]

9 hours ago, LCHorn said:

I just got the kids down three hours late so I'll take a swing:

1. Thank God; refi lenders are a blight and the Better.com's of the world and that model are empty calories from a business sense (from a consumer side they provide the least competent hand holding on the biggest financial transaction most consumers will make in their life and on the competitor's side we see them as a "good time" friend who isn't there in the community, accountable to a local network for referrals and they pinch down on margins from the folks that are local, will be sponsoring the T-ball team, volunteering for the volunteer fire department, and still around when you're escrows are screwed up by the servicing company and you're panicking because the servicer told you that you owe $5k for back taxes and you need someone to advise you). 

2.  The "free cash" is still there, it's just going to be in the form of a second lien and right now their rates are much closer to 2nd lien rates from six months ago, while mine are 2% higher (i.e., 2nd lien money is considerably more demand driven).

3.  At least in Austin the builders have so much demand that nobody is lowering prices or increasing incentives, and I'd surmise that's broadly true nationally.  The unfortunate consequence of the demand* crunch is that builders are the only ones creating entry level housing for borrowers making around the median family income and while I think the model of the KB homes of the world is somewhat unhealthy (a house should be built for multiple generations of ownership, not as a disposable entity as a result of compromised quality), a healthy market must provide housing that's a natural step up from renting and not require six figures of income to graduate to home ownership ( for example, @Bozo_Casanova, when he opines on building codes, would agree that a diversity of housing is a part of an egalitarian society that isn't simply providing an asset class for the wealthy). 

*My position that most of the current demand in the housing market is principally driven by millenials coming onto the market, not easy money lending exacerbated by the Fed). 

As to your larger point I'm far less pessimistic; I had the privilege of working for one of the best loan teams in the country (in excess of $1b in 2021 loan production and for the originators like @Wulaw Horn that's as a branch, not the whole bank, though we left in 2020 when we were only doing about $70m a month :-), and I'd like to think that our unit totals count as as sufficient exposure to the greater lending environment in multiple markets.  This is purely anecdotal, but I don't see our borrowers utilizing their equity as cash machines, particularly to what I recall seeing in 2007-2008.  Qualification requirements are so much stricter, and those that are exploiting equity gains are most frequently reinvesting the proceeds in the subject property or for the purchase of another piece of real property.  There are definitely losers in this (anyone renting trying to buy), but it's not the institutional malfeasance that was the result of overly permissive underwriting guidelines a decade ago.  

I don't expect rates to stay where they are; when I was leading our morning meeting with our production team today I described it as a ball thrown up in the air--I don't know when but at some point gravity is going to work and that ball is coming down and everyone buying today is going to be refinancing.  Wulaw follows Habib and while I think he's wrong with enough frequency that I like to poke fun at him he's also a bit of a canary for the minds of California lenders*, and there's a growing confidence a recession is coming and EVERYTHING about the market can be boiled down to this--if enough people believe it then it becomes true.  If enough market participants believe demand will fall then money will be moving into bonds, driving down rates.  Given the fast increase in retail pricing over the first quarter I'd like to think that it's a result in a lack of confidence about where prices (on bonds) and inflation will be tomorrow; once that appears to stabilize (as regards inflation, not necessarily decrease, but stabilize), I think we'll see a subsequent fall in rates and it very well may happen with surprising speed.   

*at least in our business, everything good and bad seems to come out of California before spreading nationally

 

Really great post. Thanks for sharing. If you’ve got someone better than Habib (I get what you are saying about him long term but I’ve not found anyone better and he shits all over the clowns in the mainstream financial media) I’d love to see it bc while I don’t view him as an oracle or anything I think he’s interesting and like to see his POV. 

My subscription to his system is valuable (to me) for 3 reasons:

1) it’s the best place to follow what’s going on in the actual MBS market in real time (sending 5X’s a day updates to my phone via text- his calls on alerts to lock in front of reprices etc)

2) his short term technical analysis is right way more than it’s wrong as to what’s likely to happen for the rest of the day (where support and resistance levels are, etc) 

3) I like their pushback on the analysis from the mostly financially illiterate mainstream financial press. 
 

As to your point in general:

1) couldn’t agree more at all. Our rates are really low as a broker compared to the market as a whole. We don’t have a 300 point margin, more often than not we are working from a range somewhere between 125 and 250 basis points. But I need a margin to survive and exist. When someone undercuts me by 1/8 and the customer says - it’s just a refinance I know the people I’m working with are going to be a clown show but I don’t care bc it’s just a refinance- that’s fine as far as it goes- but you are rewarding people unaccountable to the consumer and taking money out the community. Every time we do a loan we are committing to creating a community of past customers. We send out cards. We watch and interact with stuff on face book. We remind them to file their homestead exemptions. We tell them what their house is worth and tell them when to call their servicer and get their pmi removed (even if they aren’t refinancing). We give away stuff like Thinking Texas Football books to our longhorn past customers written by @Scipio, we sponsor this community enabling guys like @immamacto do even more, we randomly give away tickets to playoff games, or run free March madness contests, or buy stuff every single time we get asked by past customers selling Girl Scout cookies, camp sponsorships etc. we sponsor a girls AAU basketball league.  We spend 6 figures on doing stuff to create a community and stay engaged with our past clients every year- that’s a big investment for us, but it makes sense  because we are part of every community and affinity group we work in.

But of all those things above they all pale in comparison to the most important thing, which is accountability. We stress like hell over every deal. We are successful something like 99.2% of the time when we tell someone they will get a loan and we are on time over 90% of the time.  If we fail to measure up in anyway we are going to be there to take your phone call, get our ass kicked and do everything in our power to make it right.  A dissatisfied customer in our network is a total and complete disaster to us. If you are on a headset in Detroit you don’t give a fuck about any of that stuff. It’s just not the same experience. So yeah- those clowns leaving the industry that provide shit service and no strategic advice (yes Mr. Customer- great idea to buy points on a starter home you won’t be in 5 years from now) will a happy day. And it’s not because I care if I lose a deal to them (thank God we have enough to make us happy and we love like 95% of the people we are privileged to help), rather it’s because I’m fundamentally irritated at known nothing clowns giving a bad rep to what I view as a really cool and honorable profession. 

2) Yep- I’ve sent a couple people to local banks recently because it made more sense for them to do a second loan rather than roll it all into one.  Beyond rate people need to also look at cost- lots of times those local banks with a second lien loan come out better there than doing a deal with me- I always tell them to look at those guys if there’s any reason to believe they might be better served that way. 
My standard run of thumb is always 36 months- if a deal doesn’t pay out in 3 years it’s likely not a great idea to do that deal- that’s true regardless of interest rate environment.

3) really well said, co-sign with everything you said. I would add:  with interest rates rapidly rising I believe there will be a class of potential seller that limits themselves from selling their place (why would I sell when I have a 2.5% rate when I will buy at 5%?). Most people aren’t going to base their buying/selling decisions on this but some will.  That will lead to even more of what you are saying regarding builders playing an outsized role in trying to meet demand. 

Now- if the economy starts to go badly and people lose jobs you might see more sales in lieu of foreclosure and that will work against what you are saying, but A) we aren’t there (yet) and B) housing defaults are pretty much at record lows. 
 

I’m monitoring the interest rates scaling a cliff right now and bummed out because it sucks (the people we were prequalifying  in late December at 2.75% and buying now at 4.25% ish are really bummed), but I believe, generally that this is the market frothing and we will hit a ceiling, bounce down, and stabilize. 

I think that number happens around 5 (ceiling going up) and I bet we settle somewhere around 4 at the end of the day, with potential pressure to go down from there if we hit recessionary territory, which I think is 60/40 in the next 12 months or so. 

What this looks like now:

1) it’s an bitch to be a first time home buyer- I feel for them

2) it’s not going to get any better for them (in Texas at least) so they need to get in as soon as they can, hard as it is, because Texas is still an attractive migration state (both international and internal) and supply chains are still fucked up

3) I love my job because I get paid to help people; and 

4) to the extent we all have to eat a shit sandwich (maybe- originations are down what- 60% YOY right now so almost everyone is going to be down somewhat) for a little while if it drives some of the clowns and hucksters out of the business I’m fine with that. 

I made a living with no data base and getting into the industry in 2017 when originations were at a low for about a decade. I anticipate making a living now bc we have the same skills, set up, but now with database and relationships in the industry that will help us out, while the plug and play people at internet sites can’t say the same. Good luck to them in their next stage of life. 

Great post. 
 

 

[Neonmoon 38,127]

I think it’s going to get worse before it gets better (rate wise) 

 

Unrelated, but funny exchange I read this week

Person A: Do we know anyone that does stated income loans?

Person B: Yes, but they require 100% down payment. 

[Muny_Tex 293]

Excellent replies, many thanks gents. Did not occur to me that a purge of scummy lenders may create a net positive, so it’s nice to have some optimism now.

For Wulaw’s point about new disincentives for sellers in high rate environment…this is spot-on.

In 2021, the theme was “I’d love to sell and bank these mega profits , but I’ll go broke trying to find a comparable house…assuming I can even win the bidding war.”

For 2022, it’s looking like Wulaw’s point of “why should I sell when I’m locked in at 2.75%, only to turn around and buy at ~5.5%?” Plus it also may be “I doubt I can even get the $XXX I was offered for my house last year anymore now that the market has cooled.”

Both episodes lead to continued inventory squeezes, but I would posit that 2022 is actually “worse” because it creates a new angle for the ultra rich buyers + institutional investors who can still bypass the rate hikes by paying all-cash…only now they have way fewer competitors.

So as long as stock market holds relatively steady (top priority for Fed), the 1% presumably will just continue to hoard real estate assets so they can gouge the general public on the rental side…fun times.

As an aside, my tinfoil hat says we’re about to see some new “vote buying” strategies that center around rate relief, waived down payments, and/or student loan forgiveness for first-time buyers…but I won’t poison this thread any further.


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[UTPhil2006 3,795]

1 hour ago, Neonmoon said:

I think it’s going to get worse before it gets better (rate wise) 

 

Unrelated, but funny exchange I read this week

Person A: Do we know anyone that does stated income loans?

Person B: Yes, but they require 100% down payment. 

Hahahah

[UTPhil2006 3,795]

2 hours ago, Wulaw Horn said:

- it’s just a refinance I know the people I’m working with are going to be a clown show but I don’t care bc it’s just a refinance- that’s fine as far as it goes- but you are rewarding people unaccountable to the consumer and taking money out the community. Every time we do a loan we are committing to creating a community of past customers.

This is my biggest thing. Several of you can attest I’ll admit if I’m getting beat and I can’t match. A lot of the time I match. But I feel like over the last 14 years of HornFans, Shaggy and now Surly like you said we’ve built a community. I think at this point We’ve done like 60 happy hours and have the war wounds and stories to prove it. Speaking of which we need to get a Houston and Austin Prodigy HH on the books. Suggestions on places?

[tokamak 6,353]

18 hours ago, Muny_Tex said:

1.) What is the cumulative effect of eliminating an entire segment of a lending industry (ReFi’s) seemingly overnight…without a corresponding drop in housing prices that stimulates new deals on the buyer side to offset that shift? How long until lending shops start laying ppl off en masse? What about the big box banks that rely on revenue from these same deals? What about the title companies?

A dude in my hood owns a title company and I just saw him rolling down the street in a brand new Model X Plaid so I’m guessing he thinks the outlook is OK. 

[mchookem 16,259]

realy good posts above, lots to think about...all i know is i'm very nervous about the next two months and every time i open this thread* it gets worse...i'm terrified of making a financially catastrophic life decision. 😕

my hope/consolation is we make so much on our sale that we basically insulate ourselves from the current shitshow.

 

*i realize there's an easy solution to this specifically 😄

 

ETA i'm now a four-time repeat customer...make the HH in Austin in the next two months and i'm in! 🤘

Edited March 26, 2022 by mchookem

[UTPhil2006 3,795]

Should we do it at Dirty martins before it closes down? 

[Guest Lobo]

Absolutely.  I got a lotta questions for you people and beers 'n burgers seems like a good place to start! 

[mchookem 16,259]

[Bozo_Casanova 26,378]

On 3/26/2022 at 12:11 AM, LCHorn said:

I just got the kids down three hours late so I'll take a swing:

1. Thank God; refi lenders are a blight and the Better.com's of the world and that model are empty calories from a business sense (from a consumer side they provide the least competent hand holding on the biggest financial transaction most consumers will make in their life and on the competitor's side we see them as a "good time" friend who isn't there in the community, accountable to a local network for referrals and they pinch down on margins from the folks that are local, will be sponsoring the T-ball team, volunteering for the volunteer fire department, and still around when you're escrows are screwed up by the servicing company and you're panicking because the servicer told you that you owe $5k for back taxes and you need someone to advise you). 

2.  The "free cash" is still there, it's just going to be in the form of a second lien and right now their rates are much closer to 2nd lien rates from six months ago, while mine are 2% higher (i.e., 2nd lien money is considerably more demand driven).

3.  At least in Austin the builders have so much demand that nobody is lowering prices or increasing incentives, and I'd surmise that's broadly true nationally.  The unfortunate consequence of the demand* crunch is that builders are the only ones creating entry level housing for borrowers making around the median family income and while I think the model of the KB homes of the world is somewhat unhealthy (a house should be built for multiple generations of ownership, not as a disposable entity as a result of compromised quality), a healthy market must provide housing that's a natural step up from renting and not require six figures of income to graduate to home ownership ( for example, @Bozo_Casanova, when he opines on building codes, would agree that a diversity of housing is a part of an egalitarian society that isn't simply providing an asset class for the wealthy). 

*My position that most of the current demand in the housing market is principally driven by millenials coming onto the market, not easy money lending exacerbated by the Fed). 

As to your larger point I'm far less pessimistic; I had the privilege of working for one of the best loan teams in the country (in excess of $1b in 2021 loan production and for the originators like @Wulaw Horn that's as a branch, not the whole bank, though we left in 2020 when we were only doing about $70m a month :-), and I'd like to think that our unit totals count as as sufficient exposure to the greater lending environment in multiple markets.  This is purely anecdotal, but I don't see our borrowers utilizing their equity as cash machines, particularly to what I recall seeing in 2007-2008.  Qualification requirements are so much stricter, and those that are exploiting equity gains are most frequently reinvesting the proceeds in the subject property or for the purchase of another piece of real property.  There are definitely losers in this (anyone renting trying to buy), but it's not the institutional malfeasance that was the result of overly permissive underwriting guidelines a decade ago.  

I don't expect rates to stay where they are; when I was leading our morning meeting with our production team today I described it as a ball thrown up in the air--I don't know when but at some point gravity is going to work and that ball is coming down and everyone buying today is going to be refinancing.  Wulaw follows Habib and while I think he's wrong with enough frequency that I like to poke fun at him he's also a bit of a canary for the minds of California lenders*, and there's a growing confidence a recession is coming and EVERYTHING about the market can be boiled down to this--if enough people believe it then it becomes true.  If enough market participants believe demand will fall then money will be moving into bonds, driving down rates.  Given the fast increase in retail pricing over the first quarter I'd like to think that it's a result in a lack of confidence about where prices (on bonds) and inflation will be tomorrow; once that appears to stabilize (as regards inflation, not necessarily decrease, but stabilize), I think we'll see a subsequent fall in rates and it very well may happen with surprising speed.   

*at least in our business, everything good and bad seems to come out of California before spreading nationally

 

I disagree without you about the relative significance of cheap debt to demographics, but this is a really great post.

[Assman 1,830]

My mom has a new build here in DFW.  She locked in her rate in late Feb since she was due to close on Mar 23rd.  Well the builder had to push closing to Mar 30th due to a shortage of garage doors, which means she lost her rate lock.  Her new rate is 1% higher than it was last month.  She said fuck it, I'm paying cash (even though I advised against this).

[Wulaw Horn 19,019]

Up 5 MBS points this morning so far.  Last time we had a boring opening (remember MBS up is good) an hour later we lost 80 points (very bad) so I'm hoping this is more "calm before the storm"

From a technical perspective we are sitting on a support floor. If we break through that floor the next support is 45 basis points to the worse.   The good news, however, is the next ceiling of resistance is something like 110 points away- so much more room for the good right now than to the bad.

When people were calling me in September and October of last year and asking me what I thought about rates I told them all to lock.  The reason I said that was "you might get 1/8 or 1/4 better but we are so close to historical lows that if there is a big move it's almost guaranteed to be against you- there's very little chance of moving much down but there's a decent chance that it all gets away from you".  Fast forward to now and we are incredibly oversold.  I think @LCHorn's analogy about the ball thrown up in the air is correct, eventually gravity has to take over and I just don't see an environment where interest rates should be high for a long time due to economic strength.  When this turns (and it will at some point in time- (I've been saying for 2 weeks I think we might have hit a top and for 2 weeks (or at least last week) looking like an idiot) and it will, we could see retracement back down pretty well.

Habib is saying arms- that we are going recessionary in the next year to two and we will see rates come down and people will have the ability to get out.  Almost always I say don't buy points and pay attention to how much it costs you at least as much as what your rate is and this will be especially true if that's right. 

In the meantime- here is the chart I post weekly.  Cover your eyes its bad. As always, these are actual rates (average locked in America according to my pricing software) that show average, not my rates.  The average surly well qualified dude should be able to do better, this isn't an offer to lend, blah blah blah:

 

30-YR. CONFORMING

4.865% +0.162

30-YR. JUMBO

4.397% +0.051

30-YR. FHA

4.786% +0.090

30-YR. VA

4.570% +0.123

30-YR. USDA

4.699% +0.096

15-YR. CONFORMING

3.779% +0.063

[Neonmoon 38,127]

Arms and Buydowns 

(also the name of my next punk band)

[Wulaw Horn 19,019]

40 minutes ago, Neonmoon said:

Arms and Buydowns 

(also the name of my next punk band)

If you think the market is topping why pay points? What’s the strategy there in your mind? 

[Neonmoon 38,127]

1 hour ago, Wulaw Horn said:

If you think the market is topping why pay points? What’s the strategy there in your mind? 

 Temporary Buydowns paid by seller. Of course getting the seller to agree to that is this 30 offer market is probably slim

[KYHorn 16,895]

3 hours ago, Neonmoon said:

Arms and Buydowns 

(also the name of my next punk band)

 

4 hours ago, Wulaw Horn said:

Up 5 MBS points this morning so far.  Last time we had a boring opening (remember MBS up is good) an hour later we lost 80 points (very bad) so I'm hoping this is more "calm before the storm"

From a technical perspective we are sitting on a support floor. If we break through that floor the next support is 45 basis points to the worse.   The good news, however, is the next ceiling of resistance is something like 110 points away- so much more room for the good right now than to the bad.

When people were calling me in September and October of last year and asking me what I thought about rates I told them all to lock.  The reason I said that was "you might get 1/8 or 1/4 better but we are so close to historical lows that if there is a big move it's almost guaranteed to be against you- there's very little chance of moving much down but there's a decent chance that it all gets away from you".  Fast forward to now and we are incredibly oversold.  I think @LCHorn's analogy about the ball thrown up in the air is correct, eventually gravity has to take over and I just don't see an environment where interest rates should be high for a long time due to economic strength.  When this turns (and it will at some point in time- (I've been saying for 2 weeks I think we might have hit a top and for 2 weeks (or at least last week) looking like an idiot) and it will, we could see retracement back down pretty well.

Habib is saying arms- that we are going recessionary in the next year to two and we will see rates come down and people will have the ability to get out.  Almost always I say don't buy points and pay attention to how much it costs you at least as much as what your rate is and this will be especially true if that's right. 

In the meantime- here is the chart I post weekly.  Cover your eyes its bad. As always, these are actual rates (average locked in America according to my pricing software) that show average, not my rates.  The average surly well qualified dude should be able to do better, this isn't an offer to lend, blah blah blah:

 

30-YR. CONFORMING

4.865% +0.162

30-YR. JUMBO

4.397% +0.051

30-YR. FHA

4.786% +0.090

30-YR. VA

4.570% +0.123

30-YR. USDA

4.699% +0.096

15-YR. CONFORMING

3.779% +0.063

If you expect that the rates will be a bit lower in the next few years, does an ARM still make sense? Or would the temporary buydown or just grin and bear it until it drops be the way to go?

[Gil Bang 25,905]

15 hours ago, Assman said:

My mom has a new build here in DFW.  She locked in her rate in late Feb since she was due to close on Mar 23rd.  Well the builder had to push closing to Mar 30th due to a shortage of garage doors, which means she lost her rate lock.  Her new rate is 1% higher than it was last month.  She said fuck it, I'm paying cash (even though I advised against this).

If she has the ability to pay cash, an adjustable may work well for her.  

[Wulaw Horn 19,019]

1 hour ago, KYHorn said:

 

If you expect that the rates will be a bit lower in the next few years, does an ARM still make sense? Or would the temporary buydown or just grin and bear it until it drops be the way to go?

Shorter term arm if you like that bet. Not a big down imo. 

[Wulaw Horn 19,019]

2 hours ago, Neonmoon said:

 Temporary Buydowns paid by seller. Of course getting the seller to agree to that is this 30 offer market is probably slim

Roger. And yes.  Yes indeed. 

[jimmyjazz 45,630]

Isn't there a continuum between "all cash" and "80% loan" (or whatever) if one is worried about higher rates?  If the rate jump is enough to make you consider all cash, why not do the math to see if there's a sweet spot in terms of monthly payment, total interest paid, etc.?

[Wulaw Horn 19,019]

4 minutes ago, jimmyjazz said:

Isn't there a continuum between "all cash" and "80% loan" (or whatever) if one is worried about higher rates?  If the rate jump is enough to make you consider all cash, why not do the math to see if there's a sweet spot in terms of monthly payment, total interest paid, etc.?

Sure. If I had to guess her thing was probably as much irritation as a rational decision that 80% made sense at 3.5% but the only option at 4.5% is all cash. Hell, if your tax deduction number is right it might make sense to do the loan just for that reason alone. 

[Catpfish 618]

39 minutes ago, Wulaw Horn said:

Sure. If I had to guess her thing was probably as much irritation as a rational decision that 80% made sense at 3.5% but the only option at 4.5% is all cash. Hell, if your tax deduction number is right it might make sense to do the loan just for that reason alone. 

I've never understood this logic on a personal home.  You are paying $XXXX to save 28%.  I realize that things get a little grayer when you are near the point where you itemize vs just take the standard deduction.  

Edited March 28, 2022 by Catpfish

[DalTxHornFan 3,089]

21 minutes ago, Catpfish said:

I've never understood this logic on a personal home.  You are paying $XXXX to save 28%.  I realize that things get a little grayer when you are near the point where you itemize vs just take the standard deduction.  

It's not just about taxes.  Leverage can be valuable depending upon what else you are doing with the money that you don't have to plunk down on a residence.  That 1% increase changes the investment hurdle rate considerably.

Edited March 28, 2022 by DalTxHornFan

[Wulaw Horn 19,019]

2 hours ago, Catpfish said:

I've never understood this logic on a personal home.  You are paying $XXXX to save 28%.  I realize that things get a little grayer when you are near the point where you itemize vs just take the standard deduction.  

What @DalTxHornFansaid. 
She’s getting a 28% break on every dollar in interest she pays on her taxes, potentially. 

Would you be better off keeping the other 72 cents too?  Sure, in a binary world. But, you also have to consider the opportunity costs on what you’d do with the money. So- simple deal is if you borrowed 100k and your interest was $4,000 a year then with your tax savings it’s like paying effectively say- 2900. So, now you have to figure out if you can invest that 100k in something that’s going to make you more than $2900 a year- not more than 4000 a year when you are calculating your break even and whether to borrow or not. 

[Neonmoon 38,127]

I fucking hate condos 

[mchookem 16,259]

 

[Wulaw Horn 19,019]

Finished yesterday up 2 basis points. Huge win. Not the 2 we got but the 50 or 100 we didn’t lose. Up 27 so far this morning. Fun stuff. 

[Wulaw Horn 19,019]

Yesterdays action for rate chart.  We had a flat day, so this is up from the Monday chart because some people probably held out from locks on Friday to see if we'd get a bounce back.  4.93.  Dangerously close to 5.  Literally end of the year was talking about how we were holding the line on people in the 2's.  Crazy.  Maybe it's a top.

 

30-YR. CONFORMING

4.934% +0.069

30-YR. JUMBO

4.363% -0.034

30-YR. FHA

4.873% +0.087

30-YR. VA

4.658% +0.088

30-YR. USDA

4.799% +0.100

15-YR. CONFORMING

3.939% +0.160

[Catpfish 618]

15 hours ago, Wulaw Horn said:

What @DalTxHornFansaid. 
She’s getting a 28% break on every dollar in interest she pays on her taxes, potentially. 

Would you be better off keeping the other 72 cents too?  Sure, in a binary world. But, you also have to consider the opportunity costs on what you’d do with the money. So- simple deal is if you borrowed 100k and your interest was $4,000 a year then with your tax savings it’s like paying effectively say- 2900. So, now you have to figure out if you can invest that 100k in something that’s going to make you more than $2900 a year- not more than 4000 a year when you are calculating your break even and whether to borrow or not. 

I fully understand that, and, technically, you'd have to make over $3700 when taxes on gains (assuming same 28% bracket) are realized.  I'm speaking more to the general statement that I have heard many times from people that the interest deduction is a good thing in and of itself.

[Wulaw Horn 19,019]

45 minutes ago, Catpfish said:

I fully understand that, and, technically, you'd have to make over $3700 when taxes on gains (assuming same 28% bracket) are realized.  I'm speaking more to the general statement that I have heard many times from people that the interest deduction is a good thing in and of itself.

People are simple?  

[Catpfish 618]

1 minute ago, Wulaw Horn said:

People are simple?  

There's always that.  Plus you add in that very few people itemize now and so they get no deduction for the home interest paid even when you factor in real estate taxes.

 

 

[Wulaw Horn 19,019]

13 minutes ago, Catpfish said:

There's always that.  Plus you add in that very few people itemize now and so they get no deduction for the home interest paid even when you factor in real estate taxes.

 

 

Yeah- that was a big part of the last tax cuts, you have to give away a lot of money to charity and/or have a big tax and interest bill to bother with itemization over just the standard deduction.  Whenever my borrowers ask me about "their tax deduction" from being a home owner I typically ask- so- you going to give away $10k plus to charity/church this year or nah.  B/c if Nah I doubt you are going to itemize you will just probably stick with standard deduction. There are other deductions than that of course- but that's where most people would get there I'd wager. 

[Neonmoon 38,127]

LOCKKKKKKKKKKKKKKKKK

[UTPhil2006 3,795]

1 hour ago, Neonmoon said:

LOCKKKKKKKKKKKKKKKKK

Yep take the valley and lock it if you got em