One thing that blew my mind was how terrible most mortgage companies I contacted are. I lost count of how many places I contacted that were slow and unhelpful about everything, and it kind of blew my mind. I was reaching out to companies offering them thousands of dollars in business and the usual response was "meh". There must be some pretty large moats in this industry because most shops are clearly not competing on competence or customer service.

As housing became more and more expensive to young professionals, some people in this group have worked harder and harder to buy property, even to the point where it no longer seems rational. For example, parents taking a lot of wealth out of their retirement savings or their own homes to assist children in buying. Professionals are working more than otherwise makes sense for their stage in life (young families with two full-time parents). They are committing a large share of their monthly budget, often right until the start of retirement.

They do this because they believe in the importance of owning property - beyond any reasonable narrow economic justification.

Of course, there is an inequality aspect to this - not everyone's parents have capital, not everyone can command a high enough wage.

But crucially, the presence of this group of people arguably turns the bubble into something else. These buyers put a floor on the market. If prices drop even a little, or something else changes to make mortgages slightly more affordable, they rush in and buy the dip. By doing this, they sustain the high prices for everyone else in the market.

This will probably happen now. Higher rates will make current prices unsustainable. As soon as they correct to the point where monthly payments are back to what they were last year, there will be buyers, only too happy to overextend themselves to get out of renting.

It's inaccurate to characterize these people as likely to default. They are actually very good mortgage risks - they have already shown themselves to be very committed to ownership. And the resources which got them into a position to buy mean they will keep on paying short of a disaster. The truly unrealistic borrowers of pre-2008 have never been let back into the market.

> When 90 (?) percent of people simply lack the buying power to participate in the real estate market, but the other 10% happily sell each other estates, that's not a bubble, the real estate market just stopped interfacing with the vast majority of the population.

Nonsense. The home ownership rate is 65%, in-line with the long term average and the same as it was in the year 2000

https://fred.stlouisfed.org/series/RHORUSQ156N

I bought my house in early 2007 and mortgages were indeed crazy back then. My analysis said that at the mortgage rates for a 30 year fixed mortgage back then (a tad over 6%) said that my ideal home financially would be around $H or less, that I could go up to 1.25 $H without house payments being high enough to crimp my currently lifestyle, and maybe I could push it to 1.5 $H if the house and location were really great.

When I went to get a mortgage from the now infamous Countrywide Financial they looked at the same data I had and pre approved my for a loan of around 3 $H.

That was an absolutely ridiculous amount. I had the analysis to prove that, so just laughed and went back to looking at homes in the under 1.5 $H range [1].

A lot of people who didn't know how to do their own analysis thought that the mortgage companies would only approve them up to what they could reasonably afford, and so getting a pre approval for much higher made them think they could actually afford way more expensive houses than they actually could.

[1] In case anyone is curious, I found a house that was almost perfect as far as size, layout, and location for 0.9 $H and almost bought it, but then found that its water source was a well owned and shared by a group of 4 houses. I could not get satisfactory information on how maintenance and repair of the well was handled. I ended up with a place a little bigger, in a better location, but without quite as nice a layout for 1.16 $H.

This. And it was not only happening in the housing market, but also in a few other markets such as arts and certain jewelry. What happened during the last ~10 years is that the huge loads of money pumped into the financial system by central banks ended up with only a select group of people, who just got richer and richer and were looking for ways to spend or invest their excess money. And that caused an inflation in the markets where they liked to spend it.

c) private equity firms are buying up insane amounts of real estate, being able to outbid regular home buyers and (don’t quote me on this b/c I’m not 100% sure) pay cash for the properties they buy.

~20% or my housing "cost" is paid for by a tax break for owning a house. Another ~20% is principal.

When you also factor in that the Fed guarantees to devalue money at AT LEAST ~3% per year, and you have 5x leverage (or more) - that's another ~15% effectively subsidized by the government.

So when you have sufficient cash flow - it's easy to look at your housing "cost" as only ~40% of the actual payment.

Compared to rents, this is a steal.

Many of the investor class had the first mover advantage where they simply bought a house before everyone else and can now leverage those gains into more investment/rental income property. Couple that with foreign investment. Couple that with home equity and margin loans. Couple that with the private sector collecting houses. Couple that with mortgage fraud where people don’t pay investor taxes and continuously buy homes as a first time home owner. Couple that with with all kinds of things. I know a home owner that owns multiple homes, stopped paying taxes on one and had a tax lien discharge. They go on to sell that other home at profit and pay off the IRS. They never took the hit on their first home in any way. Multiple ownership is a problem, period.

We finally end up to where we are today and the only powerful entity that modulates this is the Fed, but not a single politician is taking up the battle over the fact that the multiple home ownership is killing our society at the moment.

The mortgage we took out two years ago (2 year fix, ~60% LTV) had a introductory rate of 1.2%.

That falls back to 3.something variable in September. We'll probably look for another fixed but current 2yr fixed rates seem to be around 2.3% (plus a £1k application). That's an uncomfortable increase on a big loan.

What's interesting is the rates on bigger loans (eg 90% LTV) aren't much more (2.4%+application). That's not what I'd expect a bank to offer if they expected a bursting bubble.

So, obviously, US banks have to price more risk into their rates.

I got mine with about 1% interest two years ago and do almost 5% redemption, fixed almost over the whole time. Just 2 years or so left at the end.

To fix your monthly payment for the next 30 years.

Furthermore, with a fixed rate mortgage you can benefit from interest rate volatility since you can always buy back the debt at par. In practice this means you can:

1. Take out a fixed rate loan for $n at x%

2. If the rate doubles (to 2x%) you can refinance and you now only owe half ($n/2)

3. If the rate falls to x% again you can refinance again and now you owe the original amount ($n/2) at the original rate (x%)

This ignores the cost of refinancing the loan, so you’ll be paying some fixed sum for that (which is lost), but if rates moves sufficiently this is a huge benefit that you don’t get with a variable rate mortgage loan.

* This is based on how the Danish Realkredit mortgage works. I’m not certain, but I believe fixed rate mortgages work the same way in other countries.

https://bebusinessed.com/history/history-of-mortgages/

Fannie and Freddie basically agree to "back" those new mortgages (typically buying them from banks and selling them off later) as long as they conform to certain requirements - 15 or 30 year terms, 10-20% down payments, etc.

It's a massive subsidy for the housing market in the US, but also addresses the social goal of making housing accessible. You can get a mortgage and the monthly payment (interest + principle) never changes over the 30 year life of the loan.

This is an incorrect statement. It is true only if short term interest rates (on average) remain flat or decrease over the next 30 years.

Put another way, by getting a fixed rate loan you are paying for insurance against rising interest rates (+inflation), you’re saying it’s ALWAYS cheaper not to buy insurance - but the honest answer thsts probably been true recently, but not always historically, and may not be true in the future.

Here in Belgium I think most people got those.

>why would you fix for 30yr when you know you're paying multiple points to offset market uncertainty?

Because my rate was 0,98% fixed for 20 years here in Belgium. I'd have done the same if I needed 30 (which is rare here as 20 or 25 is more common) The chances of coming out ahead long term starting out with a higher variable rate are rather slim

Because you are leveraged to the gills and a rate hike could lose you your entire principal.

At least in the US it is always better to get a fixed rate loan (meaning fixed for the life of the loan, typically 30 years).

This means your mortgage payment can never go up no matter how high rates climb in the market.

But if rates go down, you can always refinance to a lower rate and ratchet your payments down and lock them there.

It's as close to a free lunch as thing come. Your housing payment can never go up but can only go down.

In Germany, 15 years, 20 years, and up to 30 years is common. I took 20 years.

A close friend of mine working at a bank has an internal benefit, that the 10 year fixed rate applies for her as a fixed rate for however it takes to pay-off.

Combine that with the fact that these areas are often in National Parks which have restrictions on new-builds and you'll inevitably reduce the amount of people actually living in the area.

It’s an absurd example but cities frequently see these effects when they let AirBNB and rental properties run wild.

Like a pimp, AirBNB is the helpfull middleman for the desperate or the sociopaths.

So, yes, at it's core AirBNB is horrible.

My guess is local banks and credit unions are the most likely source. They keep the loans on their portfolio instead of selling them like the mortgage companies.

You are missing a critical issue. Airbnb makes it way more affordable to have this second home, so now many more only-sorta-wealthy people can afford vacation homes while pricing people out of the local housing market.

why? Do you think the average person is renting out vacation homes for extended stays?

Yes, having cool places to stay is fun but there are better ways to accomplish that then rich people renting out their 2-nth homes.

And I agree with you that number is much lower than I would have expected, and doesn't seem like enough to meaningfully move housing prices overall. Also consider that some number of those listings are people renting out a spare room in their owner-occupied property, which I don't think is fair to count "against" Airbnb; not sure what that number is, though.

It would be interesting to also see more local numbers. Like what percent of units in each of SF, NYC, downtown LA, Chicago, DC, etc. are listed on Airbnb? There are a lot of housing units in small towns and cities across the US that don't have much tourist appeal, so they likely don't see many Airbnb listings. But they also likely don't have housing-cost issues like some cities that are more attractive to tourists.

I think people try to invent complicated reasons for skyrocketing home prices, when it's fairly simple: we aren't building enough in the places where people want to live. Sure, other things (Airbnb, foreign investment[0], cheap credit, etc.) don't help matters, but I think they're pretty minor factors. If there's demand, and you don't meet it, prices go up. Econ 101.

It's interesting to note that Vancouver and Toronto instituted 20% and 15% (respectively) foreign buyer taxes for home purchases a bunch of years ago. These taxes did actually do their job of deterring foreign buyers, but, sadly, home prices still continued to go up, undeterred. And now Canada overall has barred foreign buyers for two years. I doubt it will help. I expect Airbnb bans would have a similar non-effect.

The site hostsorter.com uses a citation from muchneeded.com[2].

When looking at the muchneeded.com link I see: "11. There are 660,000 listings in the United States."

However he citation for the above statistic is a site called pulse.ng[3].

When I get to the pulse.ng site I finally see the root source of the 660K figure you quoted. I also see that not only is the article from 5 years ago(2017) but there is no citation given at all for the statistic that is regurgitated from the previously 3 links.

[1] https://hostsorter.com/airbnb-statistics/

[2] https://muchneeded.com/Airbnb-statistics/

[3] https://www.pulse.ng/bi/tech/tech-airbnb-now-has-more-listin...

I prefer having discussion about the underlying issues causing these emotions though, they keep being mentioned here all the time but I guess its easier to just bash the messenger rather than fight government and selfishness/greed in general population.

Of course, the housing crisis is death by a thousand different cuts, but there are studies out there indicating in many cities AirBnB is responsible for around ~5% of the rental price.

For my apartment, that translates to paying ~$180/mo because of the induced demand from AirBnB.

That's not healthy

https://archive.ph/9uU3j

The other side is that anyone who sells right now will need to buy at the top of the market, possibly incur the 5%+ interests rates(if they didn't make out extremely well) and afford the increase in taxes on their new home's possibly insane property valuation. This is of course in addition to all the other current inflationary concerns of maintaining a house right now.

"Return on investment" shouldn't be more important than housing people affordably.

Are homes for living in, or for making money? That's the fundamental question we need to resolve. Because if its the former, then we are doing an abysmal job at satisfying that need. If its the latter, then we're doing a bang up job.

The Toronto suburbs are already falling in price and Canada is only ~1 month into 4-5 rate hikes this year. And unlike the US: 1) most mortgages need to be renewed in a much higher interest rate environment and 2) a lot of Canada has recourse loans - they can come after your other assets if you sell you house for less than the loan value. No sending the keys to bank and walking away like in the US.

Toronto and Vancouver cores will correct, but rebound. Small towns and suburbs? It's going to be a bloodbath.

All that said, our local CU does in fact keep their own mortgage portfolio. This may be rare, I don't know. They're a large CU associated with a government contractor.

When I bought my house they had the best deal (rate + closing costs) hands down. When I refinanced they were no longer offering 30yr loans on their portfolio (and I wasn't interested in 10/15), but still were originating them to sell. Unfortunately the 30yr rates were not as quite good as I could get elsewhere and closing costs were close to a wash so I went another direction.

That said, they were phenomenal during the whole origination process, and they gave us a rock bottom rate (2.375%).

My only fear is servicing being transferred multiple times, rapidly, then having to decipher who to pay now.

Credit Unions tend to be different (at least the 3 I'm a member of, maybe this is not universal) in keeping loans in-house.

The banks will indeed most likely sell off the loan as soon as it's done.

Not that it matters either way.

As times get tougher, the edge cases will probably become a lucrative section of market. Rocket's been troublesome before. I doubt they have the capacity to pivot (given, again, their apparent lack of skilled brokers/underwriters).

Spending a lot of time to work with an individual client in order to make $1k-$2k or whatever they make ushering a loan over to fannie or freddie is not good business- especially during the recent market.

They should have been honest with OP about what the limitations are. Conforming loans (i.e. Fannie & Freddie) are notoriously tricky for self-employed borrowers. Salespeople gonna salesperson, though.

That is a wild revelation to someone comparing greater Denver housing market, where adding 30% is required just to be considered....

I've been watching Zillow pretty consistently over the past few weeks, and have noticed price drops as well as longer days on the market in the Chicago area.

Knowing values don't increase much isn't really a deterrent considering the desirability of the location.

Something like 25% of loan holders refinanced during Covid.

With 30-year rates around 6% right now, the math becomes a lot tighter as well. Where are you going to find 6%+ investments right now?

Second, your mortgage interest (plus other deductions) need to be high enough to warrant itemizing deductions. At the start of 2021, my mortgage balance was $270K with a rate of 2.275%. Even including a $7,000 donation to charity, it wasn't enough for my wife and I to itemize.

That said, it's much better to mortgage than pay cash for reasons outlined already in this thread.

Would you say that mortgage is probably driven down 8% because just can't afford the down payment anymore, or people like me who seem to have an irrational aversion to it?

1. All remodels lose money, except MAYBE a minor kitchen remodel.

2. Ergo, if you buy a house that was remodeled, you win.

3. Ergo, upgrade instead of add-on, so start small and buy up.