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All Encompassing Mortgage and Real Estate Thread

UTPhil2006

By UTPhil2006
in Business and Markets

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mchookem
mchookem

alrighty...i haven't wanted to jinx anything so i've been pretty quiet... but we just closed on our new home in Denver this morning so i can now officially say YEAH! 😃 in a nutshell - we sold

Esque
Esque

Thank you for this - gave me a good laugh.  But also a good reminder of how the general public does not understand what is going on in real estate and thus why so many get caught offsides when the tid

Neonmoon
Neonmoon

Realtor: You should list your house at 500K Client: But three houses down the street sold for 700K Realtor: Yeah, but those are overvalued due to pandemic Fed policy and institutional invest

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jimmyjazz

jimmyjazz 45212

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Austin's latest YOY appreciation was 7.9%.  That roughly added my annual salary to my net worth, in one year.  It's insane.  I'm not arguing, but holy smokes, as many people who have been shut out, there are plenty of people who are benefitting (besides high taxes).

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closetohumping

closetohumping 17302

Posted
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10 hours ago, jimmyjazz said:

Austin's latest YOY appreciation was 7.9%.  That roughly added my annual salary to my net worth, in one year.  It's insane.  I'm not arguing, but holy smokes, as many people who have been shut out, there are plenty of people who are benefitting (besides high taxes).

It's a conundrum for sure.

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royiv

royiv 9045

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10 hours ago, jimmyjazz said:

Austin's latest YOY appreciation was 7.9%.  That roughly added my annual salary to my net worth, in one year.  It's insane.  I'm not arguing, but holy smokes, as many people who have been shut out, there are plenty of people who are benefitting (besides high taxes).

Property taxes are killing a lot of people in Austin, particularly those that are lower income or retired. Their income doesn't increase, but their taxes do. 

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DefinitelyNotHollywoodColt

DefinitelyNotHollywoodColt 12301

Posted
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19 hours ago, jimmyjazz said:

Austin's latest YOY appreciation was 7.9%.  That roughly added my annual salary to my net worth, in one year.  It's insane.  I'm not arguing, but holy smokes, as many people who have been shut out, there are plenty of people who are benefitting (besides high taxes).

Do you have a note on your house?

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52-80

52-80 19001

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Where are people getting that housing supply is tight, and causing prices to ramp up?

Ive been looking at US census page on housing permits, time to completion, new property builds, etc - very cool source

The data says housing supply is as steady as ever, probably matching population growth (as a baseline)

My conjecture is that simply more people want to buy than is the trend, probably due to suppressed rates, which triggers a sort of fomo/momentum effect

Lumber price did spike the punchbowl, but that seemed a 2nd order effect

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Gil Bang

Gil Bang 25689

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3 minutes ago, 52-80 said:

Where are people getting that housing supply is tight, and causing prices to ramp up?

Ive been looking at US census page on housing permits, time to completion, new property builds, etc - very cool source

The data says housing supply is as steady as ever, probably matching population growth (as a baseline)

My conjecture is that simply more people want to buy than is the trend, probably due to suppressed rates, which triggers a sort of fomo/momentum effect

Lumber price did spike the punchbowl, but that seemed a 2nd order effect

Now do rentals

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Hefeweizen

Hefeweizen 5230

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2 minutes ago, 52-80 said:

Where are people getting that housing supply is tight, and causing prices to ramp up?

Ive been looking at US census page on housing permits, time to completion, new property builds, etc - very cool source

The data says housing supply is as steady as ever, probably matching population growth (as a baseline)

My conjecture is that simply more people want to buy than is the trend, probably due to suppressed rates, which triggers a sort of fomo/momentum effect

Lumber price did spike the punchbowl, but that seemed a 2nd order effect

I think it’s in specific locations.  My company is in a lot of these markets and it is as tight as advertised.  I think inventory will catch up as demand slackens but it won’t happen in Austin, for example.  Just takes too long to get new permits and we’re not meeting demand yet.  I think we’re at least 18 months away from that point in central Texas.

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UTPhil2006

UTPhil2006 3773

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32 minutes ago, jimmyjazz said:

For no particular reason, I'm curious:  how does lender profit vary with mortgage rates to the consumer?

If I'm understanding your question right, the higher the rate the more the LO makes.  But different lenders have different payouts, if that's what you're asking.  For instance a 5.25 may pay 160 bps at CMG but may pay 195 bps at UWM.  Lenders compete with each other as well.

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jimmyjazz

jimmyjazz 45212

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3 minutes ago, UTPhil2006 said:

If I'm understanding your question right, the higher the rate the more the LO makes.  But different lenders have different payouts, if that's what you're asking.  For instance a 5.25 may pay 160 bps at CMG but may pay 195 bps at UWM.  Lenders compete with each other as well.

No, not the latter -- let's take your 5.25/160 example at CMG.  What were they making when the rate was 3.75?

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LCHorn

LCHorn 2564

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30 minutes ago, jimmyjazz said:

No, not the latter -- let's take your 5.25/160 example at CMG.  What were they making when the rate was 3.75?

It doesn’t change (or shouldn’t thanks to Dodd-Frank).  Lenders are expected to charge the same margin on every loan (that’s what Phil was quoting in bps).  That said, we obviously compete with each other so need to adjust pricing accordingly.  The originator, however, must be paid the same on every loan absent a couple of exceptions (I.e., the regulators wanted to remove the incentive for an LO to charge extra so they could make more).  

Last week’s optimal blue survey (that’s a pricing engine or software in common use) reported the national average yield spread premium on conventional loans at 350 bps.  I’m not clear whether that’s including or excluding points but it also exceeds the market in Austin.

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Wulaw Horn

Wulaw Horn 18919

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21 minutes ago, LCHorn said:

It doesn’t change (or shouldn’t thanks to Dodd-Frank).  Lenders are expected to charge the same margin on every loan (that’s what Phil was quoting in bps).  That said, we obviously compete with each other so need to adjust pricing accordingly.  The originator, however, must be paid the same on every loan absent a couple of exceptions (I.e., the regulators wanted to remove the incentive for an LO to charge extra so they could make more).  

Last week’s optimal blue survey (that’s a pricing engine or software in common use) reported the national average yield spread premium on conventional loans at 350 bps.  I’m not clear whether that’s including or excluding points but it also exceeds the market in Austin.

That seems incredibly high to me. Rates going up, for my business and anecdotally from many I talk to, seems to be squeezing margins as more people are willing to do loans for less money increasing competition. 

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Wulaw Horn

Wulaw Horn 18919

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1 hour ago, jimmyjazz said:

For no particular reason, I'm curious:  how does lender profit vary with mortgage rates to the consumer?

For me personally I think the higher rates are losing comp for lenders massively. You just weren’t getting shopped at 2.75% the way you do at 5.5%. 
Also, because there were so many deals, more than could be handled well by the system, you had plenty of mortgage guys refusing to do small loans, poor credit, anyone who seemed like it might be a hassle bc there was so much going on in the system.  In a world where everyone is hungry and competing with higher rates it just seems likely margins will decrease. 
but if optimal blue is saying the average spread is 3.5% I guess I’m just a dumbass, because the house makes less than 2% on my average deal. 

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Neonmoon

Neonmoon 38126

Posted
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2 hours ago, jimmyjazz said:

For no particular reason, I'm curious:  how does lender profit vary with mortgage rates to the consumer?

Mortgages are sold to investors, mainly Fannie/Freddie, but others buy mortgages too. Fannie/Freddie bundle these mortgages and sell them as Mortage Backed Securities in the bond market. Investors pay a certain amount of basis points to buy each loan, let’s say 350. This fee is then split between the lender/broker/LO however they have agreed in contract. The splits don’t change per loan. It’s the same for every loan unless you renegotiate your contracts. Rates don’t matter. 
 

Now, does that answer your question? Or do you mean, does the yield paid by an investor, the hypothetical 350 basis points, change because of the market? That answer is a little more complicated, but at the end of the day, not really, but a little depending on bond markets. 
 

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Dbeasy

Dbeasy 14791

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Just a reminder that large increases in your home value only translate into true additional wealth IF and WHEN you decide to live somewhere where home appreciation and values are much less.

It’s not quite the incredible lottery ticket many people think it is if they want to live somewhere comparable after they cash out. In fact, because of property taxes and the need for home loans, increased values could actually reduce usable wealth. It’s counterintuitive for sure. 

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jimmyjazz

jimmyjazz 45212

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27 minutes ago, Dbeasy said:

Just a reminder that large increases in your home value only translate into true additional wealth IF and WHEN you decide to live somewhere where home appreciation and values are much less.

It’s not quite the incredible lottery ticket many people think it is if they want to live somewhere comparable after they cash out. In fact, because of property taxes and the need for home loans, increased values could actually reduce usable wealth. It’s counterintuitive for sure. 

That tends to imply one would buy a similar house when they move.  If I'm downsizing, even at higher rates, if my monthly nut is similar and I bank the equity from the last home (minus fees and taxes, if any), then I think there is a least some benefit to getting out.  We're going through this calculus now, and we aren't totally sure what we'll do.

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Neonmoon

Neonmoon 38126

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39 minutes ago, Gil Bang said:

Thanks for the PM, but there's no problem keeping it on here so others can learn.

He's selling in AL, buying in NC.  Price point 275,000.  Currently in a VA loan that will be paid off. 

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``

 

Why would he want to put money down to do a conventional? Just curious 

Even with the VA funding fee, he could get around 0.50% better on rates

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Wulaw Horn

Wulaw Horn 18919

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20 minutes ago, Neonmoon said:

Why would he want to put money down to do a conventional? Just curious 

Even with the VA funding fee, he could get around 0.50% better on rates

Because in a VA active duty military situation it’s likely he gets shipped out in less than 3 years, so he’s out the funding fee and the savings aren’t going to make up for that funding fee if he’s on a 2 year time frame or something like that. 

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Wulaw Horn

Wulaw Horn 18919

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59 minutes ago, Gil Bang said:

Hey Wu, just checked, score is 780+

No difference in analysis from the 740 I used. Maybe slides it ever so slightly to conventional being closer in monthly payment if that causes PMI to go down but it would be minor- like 10 a month minor. 

1 hour ago, Gil Bang said:

Thanks for the PM, but there's no problem keeping it on here so others can learn.

He's selling in AL, buying in NC.  Price point 275,000.  Currently in a VA loan that will be paid off. 

  Reveal hidden contents

``

 

You can post it. I didn’t want to put his stuff on blast if there was any issue that came up. 

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closetohumping

closetohumping 17302

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2 hours ago, Dbeasy said:

Just a reminder that large increases in your home value only translate into true additional wealth IF and WHEN you decide to live somewhere where home appreciation and values are much less.

It’s not quite the incredible lottery ticket many people think it is if they want to live somewhere comparable after they cash out. In fact, because of property taxes and the need for home loans, increased values could actually reduce usable wealth. It’s counterintuitive for sure. 

This needs to be emphasized.  You’re gonna have to “downgrade” your life to save money.  And remember home equity is great….if you use it.  Otherwise you’re just living in an expensive house

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LCHorn

LCHorn 2564

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4 hours ago, Wulaw Horn said:

In a world where everyone is hungry and competing with higher rates it just seems likely margins will decrease. 
but if optimal blue is saying the average spread is 3.5% I guess I’m just a dumbass, because the house makes less than 2% on my average deal

2-2.5% is about the gross we are making most of the time but our average loan is close to $500k.  I did get beat by some out of town lender on a $800k loan the other day and my gross was 83 bps to match (I can’t get quite that cheap on jumbo).  

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Wulaw Horn

Wulaw Horn 18919

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10 minutes ago, LCHorn said:

2-2.5% is about the gross we are making most of the time but our average loan is close to $500k.  I did get beat by some out of town lender on a $800k loan the other day and my gross was 83 bps to match (I can’t get quite that cheap on jumbo).  

Yeah that’s crazy how often you make less on a 900k deal than a 500k deal. 

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Dbeasy

Dbeasy 14791

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20 hours ago, jimmyjazz said:

That tends to imply one would buy a similar house when they move.  If I'm downsizing, even at higher rates, if my monthly nut is similar and I bank the equity from the last home (minus fees and taxes, if any), then I think there is a least some benefit to getting out.  We're going through this calculus now, and we aren't totally sure what we'll do.

Agree, when I said lower value I was including the scenario of moving into a smaller home, but my post didn’t make that very clear. 

Interesting side note, when we downsized we ended up in a house that was almost as big, and because we were moving from Dallas/Houston to Austin we didn’t unlock much home value.

Of course, I’ve always chosen to live in smaller, less expensive homes because I liked the freedom of having more wealth outside my primary residence.

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closetohumping

closetohumping 17302

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20 hours ago, jimmyjazz said:

That tends to imply one would buy a similar house when they move.  If I'm downsizing, even at higher rates, if my monthly nut is similar and I bank the equity from the last home (minus fees and taxes, if any), then I think there is a least some benefit to getting out.  We're going through this calculus now, and we aren't totally sure what we'll do.

Us too.  A downgrade for us would be to leave California and get a bigger house, yard, etc in another state.  But with higher interest rates, it sort of evens it out.  Could I refi later?  Sure.  Will I ever see 2.5% again?  Hard to say.

 

So we're basically frozen.  Plus what we owe on our California house is probably less than what a house in flyover country would cost. Caveat being I'm not going to move to Houston or wherever and live in a townhouse or the hood.

 

 

Also saw 1/3 of listings in Austin were reduced in June.  Boise, SF and Phoenix had major reductions as well.  Essentially the hottest markets are seeing pullbacks, now that also has to do with buyers who are just pricing for "I want stupid money or I ain't leaving." 

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UTPhil2006

UTPhil2006 3773

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On 7/29/2022 at 9:45 AM, UTPhil2006 said:

Flat but down so far.  Will gladly take an end of the week/month 10 year at 2.67

Went down some more on Friday and down .04 to 2.60 today so far.  Last time we were at 2.60 was mid April.

Also we're listing this for a buddy if anyone is interested - https://www.redfin.com/TX/Liberty-Hill/104-Stag-Leap-Ct-78642/home/112999340

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closetohumping

closetohumping 17302

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55 minutes ago, UTPhil2006 said:

Went down some more on Friday and down .04 to 2.60 today so far.  Last time we were at 2.60 was mid April.

Also we're listing this for a buddy if anyone is interested - https://www.redfin.com/TX/Liberty-Hill/104-Stag-Leap-Ct-78642/home/112999340

It's beautiful but holy crap isn't LH way out there?

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