One simple fix to save the housing market
Latest entry on the housing "crisis" with a glance at the real value of homes, plus which mortgagers are running intro trouble (and why it's nothing to worry about, probably)
One simple fix to unglue the housing market
ibuyer dishes on the real story of home values
housing supply is now higher than it was in 2017, despite the affordability-crisis-shortage
capital shortage, not a dwelling shortage
the good news is that delinquencies are a rounding error, except . . .
👉👉👉Reminder to sign up for the Weekly Recap only, if daily emails is too much. Find me on twitter, for more fun. How to “fix” the housing market, and other hot takes on residential real estate
The simplest way to “unstick” the housing market would be to eliminate the 30-year fixed rate mortgage, and convert everything to a floating rate mortgage instead.
That would free banks from “mortgage rate lock-in” (and their “unrealized losses”), and it would force existing homeowners to carry the real cost of their debt. That would create an actual “lock-in” effect—locked-in with the reality of higher-for-longer-for-now.
Suddenly, selling one’s home would become more attractive—either because the carrying costs are too high, or because the tradeoff for a new home is not quite so steep.
Naturally, at that point, owners would lower their asking prices to match the bids, and transactions would start clearing again.
“Unfixing” mortgage rates is the solution that makes sense, when the “fixed” rate is the only (or primary) thing that’s “broken” in the housing market right now. It's really pretty simple. If you got a mortgage before 2022, then banks are subsidizing the massive increase in borrowing costs. If you’re trying to get one after 2022, they will not.
That’s it.
It’s that subsidy which puts a chasm between existing homeowners and aspiring homeowners.
Not a housing shortage, and not NIMBYism. There was a limited supply of cheap coupons for life, and if you got one, you’re good, and if you didn’t, you’re less good.
Making matters more cruel, is that it looked like cheap coupons were coming back . . . and now we’re back to a 7 handle.
None of this, of course, is going to stop people from casually referring to a “housing crisis” or “housing shortage” or “affordability crisis” or any of those definitely-not-true things, but it bears repeating for as long they do.
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ibuyer says “it’s tough out there”
Anyways, the latest in the “there is no housing shortage” saga, comes from Opendoor OPEN 0.00%↑, the ibuyer (or really market-maker).
Random Walk likes Opendoor because they’re actually in the business of selling existing homes, which means they can’t hide from price discovery. Plus Opendoor is pretty forthright in its earnings about the price of homes.
To wit:
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