Ty said yesterday,
The thing I think you miss most or maybe overlook is how overleveraged the average person is. I do commercial real estate and routinely have access to small business owners financials. Equity rich in their homes but cash poor with credit card debt and car loans up the wazoo. Any bump in the road will send them into disarray. Selling the house may be the only way they can survive. I think rocky times ahead.
We can speculate about what might be or what could happen, but in the end we’re all just guessing. Blog reader ‘Another Investor’ believes the opposite – that boomers are flush and not moving until they go feet first…..so we have balance here at bubbleinfo.com!
Let’s use statistics to help guide us.
If there were trouble brewing, then more people would be trying to sell.
Not everyone would sell, because their motivation might not be strong enough to take what the market would bear. So let’s just consider the number of listings – and also consider that there are probably more re-lists now than ever:
NSDCC Total Number of Listings Between Jan-Oct:
| Year | |
| 2014 | |
| 2015 | |
| 2016 | |
| 2017 | |
| 2018 | |
| 2019 |
Boomers or others aren’t trying to sell any more than they used to – so no obvious surge yet.
But the number of cash-out refinances was somewhat alarming yesterday. But everyone has to qualify for those mortgages, so even if more people are tapping their equity, they must be able to afford it.
But like Eddie89 said, the rules have changed, so all previous assumptions don’t apply.
I think any distressed homeowners will wait until the very end before deciding to sell because they really don’t want to move. It will drag out the inevitable, but it might just cause a softer landing because each homeowners ability to last longer will vary.
Let’s keep an eye on the number of new listings – that’s where you’ll see it first!
Mortgage rates fell back near all-time lows. It makes all the sense in the world to do a cash-out to consolidate debt and lock in a rate in the 3’s for 30 years.
Agree, and even though it would tack on another 10-20 years of payments, at least those who are strapped can say, “This will be the last time I refi, honey!”
It’s simple. When owners have skin in the games they don’t default. If they don’t default, then prices don’t crater. Drop 5 or even 10 percent in a recession? Sure. But without NINJA loans and the like, we’re not seeing another liquidation event.
It would take a unicorn event to cause any rash downturn at this point – a big earthquake or….?
“I think we have it under control.”
That’s what Federal Reserve Chair Jerome Powell said when lawmakers in Washington asked him last week about the mid-September turmoil in short-term funding markets. New York Fed President John Williams said something similar on Tuesday.
If Powell didn’t sound entirely sure, it’s for good reason — the Federal Open Market Committee apparently isn’t, either. Minutes of the FOMC’s October meeting released on Wednesday showed that officials are puzzled about how to best regain their handle on short-term interest rates. According to the minutes, policy makers were presented with two possible options: either frequent repo operations like the past two months, or establishing a standing fixed-rate facility.
https://www.bloomberg.com/opinion/articles/2019-11-20/fed-throws-the-kitchen-sink-at-short-rates-and-still-struggles