BigHornRam
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Interesting perspective.
Another Housing Market Crash Looming?
- Thread starter BigHornRam
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ShootsManyBullets
Well-known member
There will be additional moves coming to assist the mortgage industry. The next issue is all of the servicers will need a credit facility when millions of people stop paying or request forbearance. The mortgage servicers are still responsible for making the payments to the investors even if the homeowner stops paying. They don't have the money to pay the investors when the public stops paying. See the issue?
The iBuyers like Zillow stopped buying and cancelled their purchase contracts because their funding dried up. The secondary market for non-traditional or Non-QM loans evaporated when the markets crashed so they couldn't purchase anything. The issue they don't tell you is that they really were not profitable with their iBuyer programs as they had such thin margins that they were a hiccup away from being a complete dumpster fire. They were basically trying to bully all the other investors out of the markets with their cheap money, massive scale, and thin at best margins. The strategy had a chance in rising markets, but flat or declining market = black death.
Airbnb owners with high leverage should rightfully be sh*tt*ng their pants right now.
The real pain in housing comes when we have 20-30% unemployment for an extended period combined with little economic activity. In the long run everyone needs a place to live or shelter in place and we've had demand for housing far outpace supply for a long time, especially in the west.
The iBuyers like Zillow stopped buying and cancelled their purchase contracts because their funding dried up. The secondary market for non-traditional or Non-QM loans evaporated when the markets crashed so they couldn't purchase anything. The issue they don't tell you is that they really were not profitable with their iBuyer programs as they had such thin margins that they were a hiccup away from being a complete dumpster fire. They were basically trying to bully all the other investors out of the markets with their cheap money, massive scale, and thin at best margins. The strategy had a chance in rising markets, but flat or declining market = black death.
Airbnb owners with high leverage should rightfully be sh*tt*ng their pants right now.
The real pain in housing comes when we have 20-30% unemployment for an extended period combined with little economic activity. In the long run everyone needs a place to live or shelter in place and we've had demand for housing far outpace supply for a long time, especially in the west.
noharleyyet
Well-known member
Let's rorschach all the worst case scenarios, put them in a thread...and lock that sonofabisch
D
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BigHornRam
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Our we can discuss them like adults and see if we can improve the the situation. This seems like an adult move to me.
California governor, big banks agree to 90-day mortgage grace period
California Gov. Gavin Newsom (D) announced Wednesday that major banks have agreed to a 90-day grace period for mortgage payments in the state. During a Wednesday briefing, Newsom said more tha…
thehill.com
Bigjay73
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SAJ-99
Well-known member
I haven't seen the details, but as was pointed out, many will be able to get a freeze of paying the mortgage. Some indication are for up to a year. Goodness I hope it's not needed for that long. As to whether this applies to second homes used for vacations and rented on AirBnB, who knows.
https://www.npr.org/2020/03/19/8183...y-by-the-coronavirus-may-get-a-mortgage-break
https://www.npr.org/2020/03/19/8183...y-by-the-coronavirus-may-get-a-mortgage-break
Tiredofthebickering
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I still like the AirBnB/VRBO model for investment real estate, but now is not the time to be buying one. Anyone who bought one and wasn't aggressively paying it down has made a terrible mistake. Those properties can generate impressive cash flow but can sink in a hurry with a long period of vacancy. If you're going to be an owner or property like that you really should have something like 6 months of reserves saved up.
Doublecluck
Well-known member
Have you called your mortgage company? 3 months deferred payments at which point 3 months will be due in a lump sum is what quicken is offering... right! Because someone who doesn’t have the money to pay their 2000 dollar mortgage in April or may will have 6000 to pay it in July after sitting home for 3 months... hopefully is not needed that long? If the virus was gone today, right now! The effects would last that long.
This is a bomb waiting to explode... tic tok..
Maybe print more money, then it will be ok..
ShootsManyBullets
Well-known member
Nailed it. And you kill your credit which is the double whammy when you don't have cash. Does anyone really trust our systems to not ding people's credit on forbearance?
If you're having trouble call your mortgage company and talk to them about a modification. Even if you get payments tacked onto the back of your loan it's better than getting hit with the lump sum in a few months or the credit hit for not making payments.
Tiredofthebickering
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My best guess is that many lenders will end up pushing maturity dates back by 3 - 12 months on a lot of residential mortgages. I think commercial mortgages will just get an increased balloon payment or a pushed maturity date if fully amortizing. Lenders don't want to be property managers, it's expense and outside their expertise. It's in their best interest to let otherwise good borrowers keep their homes.
Tradewind
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Yes
Succinct statement of the day.
Tradewind
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Just the facts, Sytes
Banks are offering a 90 loan suspension. If you can’t make the suspended payments after the 90 days, repayment plans and loan modifications are available. Should Covid-19 continue to be an issue, further payments maybe suspended.
Jape
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I wonder how/if this will be different from the mortgage crisis of 2008. It seems like the current crisis will be more short lived, but it is on such a large scale that it's difficult to predict. I'm hoping there is just a reduction in transactions and things get leveled out within a year or two.
BigHornRam
Well-known member
Wood is not good right now.
www.wsj.com
Lumber Markets Hint at Housing Slowdown
Lumber futures have plummeted of late and mills are dramatically dialing back production of two-by-fours, plywood and other building materials.
www.wsj.com
This crisis is way worse than anything I saw in 2008 as a commercial banker. Entire industries shut down. Businesses running at 50% of sales volume.
The shorter this lasts the better. Unfortunately, the small business stimulus package is way too small for those in need. It’ll run out of money within a day or two of accepting applications.
