House Prices Are Going Up Because Everyone Is Moving Here (Plano: insurance, lenders)

[EDS_]

Originally Posted by turf3

Guess which governmental entity has been buying vast amounts of mortgage-backed securities?

If mortgage issuers don't worry about getting the loans repaid in full, because they're going to sell the mortgages in bundles - mixing some lousy debt in with some good debt - and if those buying the mortgage backed securities aren't worried that their value will go down, because the Feds keep buying up vast quantities of them to keep the price up, where is the incentive to tighten up on lending?

They're going to keep the pedal to the floor till the engine seizes up.

The only problem with your thesis is the quality of all mortgage paper floating around right now is exceptionally high vs. the past with the newer stuff being the best. There really isn't much lousy newer mortgage paper floating around.

[walker1962]

Originally Posted by Leonard123

I drive on the roads all the time. I've lived here all of my adult life, and I know exactly what I'm talking about. My whole family and pretty much everyone I know that drives on those monstrous roller coasters has said the same thing.

The roads and the streets have too high a speed limit for the volume of traffic and developments on them. The rollercoasters are too fast to be so loopy and stacked so high curving in multiple directions leading one never to know where he or she is going. I don't know how people figure it out at such a high rate of speed. My dad drives on those all the time and always has problems until he gains experience with it, and then they change signs and lanes all over again. The signs are all in the wrong places. They point to something in one direction when it's the opposite and they post of lane closures and forced turns that never happen while failing to post signs where they do. Road "repairs" happen where they are not needed and not where they are. Roads are missing or not expanded where they should be and they are built up where they don't need to be. It's a mess. If even the speed limits were cut, it would go a long way to solving the problems. Several intersections have forced turn lanes that will force you onto the rollercoaster, and there isn't any warning, or there is a warning and it turns out to not be correct.

To the contrary, I don't think anyone in TxDOT management or leadership has ever driven their roads or highways. I don't think they could even pass a driver's license exam.

Frisco is bad because the streets are so congested. I've never driven along Main or Eldorado not to get tied up in some traffic jam backed up multiple intersections at all hours all days. The western portion (west of Preston) has excessive speed limits to boot.

380 is a death trap. That thing is horrifying. How businesses and housing developments are allowed to build there with that as their only entrance or exit (and no signal) and cities are OK with a 50-60 mph speed limit is beyond me. And people will fall over themselves to plunk down $1M+ to live there (which can't be quiet).

I've been to California multiple times. They planned their roads, and they maintain them. They should be setting an example. It's one thing they do very well there. From my visits there, LA traffic was not ever as bad as it is and was in Dallas.

There's more, but that's just a start.

Dude, L.A. CONSISTENTLY is rated the worse in north America but INDEPENDENT analysts. Its not EVEN close to being as free-flowing as that in DFW. Now, Austin is another story because for one, it has no bypass beltway as does Houston, Dallas, Fort Worth and San Antonio. Something that stems from Austin's size back in the 1950s/60s when the interstate system was being built out.

[TheOverdog]

The only problem with your thesis is the quality of all mortgage paper floating around right now is exceptionally high vs. the past with the newer stuff being the best. There really isn't much lousy newer mortgage paper floating around.

And by exceptionally high, the last time I saw some stats, 80% of people getting a mortgage had a credit score of higher than 750, with 10% of the remaining 20% higher than 700, on an 850 point scale. So only 10% of mortgages are even going to people with average credit or worse.

[Rakin]

Originally Posted by TheOverdog

And by exceptionally high, the last time I saw some stats, 80% of people getting a mortgage had a credit score of higher than 750, with 10% of the remaining 20% higher than 700, on an 850 point scale. So only 10% of mortgages are even going to people with average credit or worse.

If that's true, Our new Democrat run Govt won't be happy and will figure out a program to make Mortgages to high risk people with low scores and many times can't afford the house.

Just like the 1990's

[debtex]

Originally Posted by EDS_

There's another side to that. Some banks make mortgage loans and hold on to some or all of the paper permanently or at least season each mote for a a long while.

Generally, outstanding credit and ratios are required. And these loans are a very small slice of the pie.

It's an incredibly small portion of the portfolio that they will hold. The banks don't want to hold loans with those kinds of terms...15/30 years. It's too much of a hassle for the ALCO to hedge. Usually just insider loans or similar.

[turf3]

The point is that massive government purchases of mortgage backed securities is another factor in keeping interest rates bizarrely low. The combination of investor sentiment (hurry, hurry, get yours now before they're all gone) and low interest rates is the main factor driving this particular bubble. Eventually, when US Treasury obligations get harder and harder to sell, their interest rates will have to go up. Combine that with the inflation no one in the Government wants to admit to, and sooner or later mortgage interest rates have to go up.

History over the last 500 years or so shows us that it doesn't take a HUGE black swan to turn investor sentiment, and once you've got a small surplus of sellers over buyers, prices drop. No one can predict what it is that'll turn investor sentiment, or when it'll happen, but sooner or later it will.

For me, as I near retirement age, the question becomes "Will this bubble pop while I still care?"

[Igor Blevin]

Originally Posted by KathrynAragon

I agree that prices are inflated and going up up up just about everywhere.

Here's what is interesting to me - banks are still making HUGE loans to people for these properties. These loans aren't mandated by the government, and houses must appraise for the loan amount. So private banks and mortgage companies apparently think their investment is safe.

I just find that to be an interesting point.

Who says that banks think their investments are safe?

The lesson learned from 2008 is that the US taxpayers will foot the bill to make the banks whole for making risky loans. The bankers know this, so they don't care how much risk they take and losses they absorb. The 2008 bailouts taught them that Fannie Mae is going to take all the debt off their hands anyways, so party like it is 2006, baby!

Here is some news. If we let the banks fail in 2008 and made them take their losses instead of bailing them out, the current housing bubble would never have happened. The banks are doing it again, because they were rewarded for screwing up back in 2000-2006.

You get more of what you subsidize. If you bailout banks for stupidity, you will get more banking stupidity. I adamantly disagree the bankers honestly think they are making safe investments today. They don't care, because they know Uncle Sugar will make them whole, using my tax dollars.

They don't care.

[Igor Blevin]

Meanwhile, the national debt was $8 trillion in 2005.

Today, it is $28 trillion.

[KathrynAragon]

Originally Posted by Igor Blevin

Who says that banks think their investments are safe?

The lesson learned from 2008 is that the US taxpayers will foot the bill to make the banks whole for making risky loans. The bankers know this, so they don't care how much risk they take and losses they absorb. The 2008 bailouts taught them that Fannie Mae is going to take all the debt off their hands anyways, so party like it is 2006, baby!

Here is some news. If we let the banks fail in 2008 and made them take their losses instead of bailing them out, the current housing bubble would never have happened. The banks are doing it again, because they were rewarded for screwing up back in 2000-2006.

You get more of what you subsidize. If you bailout banks for stupidity, you will get more banking stupidity. I adamantly disagree the bankers honestly think they are making safe investments today. They don't care, because they know Uncle Sugar will make them whole, using my tax dollars.

They don't care.

I worked in banking for many years. Banks don't want to make bad loans, they want to make good loans. Don't forget that mortgage lenders were required by law to fund mortgages that were riskier.

Only about ten percent of banks received "bailout money" by the way.

[Kenro911]

The loan notes floating around are head and shoulders above what they used to be pre 2008. Especially right now.

There is underlying issue that people miss that I'm making. The excuse that 'people moving' hence the prices is completely false. Not only due to data I posted in OP and other posts (specific to DFW, Frisco, Mckiney) but like someone said - if people were moving so much why on earth are prices up EVERYWHERE.

The prices should have gone down in places people are moving FROM. But they have not.

The reality is that either these houses are going to stick as the new norm just because. Or we will see a cool off when supply increases.

Once supply increases, the market will realize that a median house is no longer affordable to median income. The only reason why things are selling now is because the supply is so low that people buying are hardly 'median' income families. Once supply goes up, the pool of over-qualified buyers will disappear and buying power will move back to median income.

Maybe they will convince 'median income' family to buy a 1500 sqft bungalow in Frisco for 490k. Maybe that will be the new norm. Its hard to say.

Perhaps new cars and two story houses will be reserved for upper middle class only. I'm sure we'll eat it up.

If our country actually worked as a competing market economy - there should be a major price correction. However, going back to light-bulb days, the companies love to fix the market. The gov has its own goals too, they are not going to let housing market crash. Just as the stock-market, if that means printing trillions - so be it.

I would not be surprised by further gov programs for home-owners. 1% down, 45 or 60 year loans. People will eat it up, banks/funds love it too - houses will go up even more.