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Capitalism is inherently unstable. The policies of the last 18 months have made it less stable. Vanilla mortgages kitted up by Fannie Mae and Freddie Mac which are sold as mortgage backed securities no longer have the problem. This FHA stuff that doesn't meet any rational lending criteria is small compared to what was going on under Dubya. In the high COL regions that have the big housing bubble, you're not buying a house on an FHA loan. The bubble is caused by people buying houses with stock option and stock market run-up money. When the stock market corrects which it always does, that demand vanishes and the high COL region bubble pops. The 1,200 square foot ranch in Sunnyvale won't be worth $1.25 million. Unlike the last one, a stock market correction and high COL region bubble collapse won't crush places like Phoenix, Vegas, and Florida.
I'm more concerned with a return of 1970's stagflation. When you spike the national debt where you're doing huge borrowing and you trash the economy with a trade war, the results could be catastrophic if you adopt the wrong policies at the wrong time.
Real estate in those desert cities and regions listed above are pure scam. No one buys a house to live there, only to speculate. It's the number one scam in America!!! Who has been buying that worthless desert real estate since 2009? Speculators mostly who will run for exits as soon as the music stops playing.
Try to go to Vegas or Phoenix today or tomorrow.....it's literally the hell on earth with temps over 110F. How mentally insane do you have to be to purchase overinflated real estate in Las Vegas or Phoenix today????
And now the government is backstopping all these loans while these fraudsters get rich.. where is our government in all of this? I get it, just like last time they are asleep at the wheel and will wake up only when the financial system collapses again and then it will be time to bail out using taxpayer money QE6..7..8..9 etc. at the expense of future generations.
You must not quite understand what "full force" means. Not only is Subprime lending NOT back in full force, it is barely a force at all at this time.
disclosure: I was a mortgage lender then (pre-2008) and I am still a mortgage lender today.
Capitalism is inherently unstable. The policies of the last 18 months have made it less stable. Vanilla mortgages kitted up by Fannie Mae and Freddie Mac which are sold as mortgage backed securities no longer have the problem. This FHA stuff that doesn't meet any rational lending criteria is small compared to what was going on under Dubya. In the high COL regions that have the big housing bubble, you're not buying a house on an FHA loan. The bubble is caused by people buying houses with stock option and stock market run-up money. When the stock market corrects which it always does, that demand vanishes and the high COL region bubble pops. The 1,200 square foot ranch in Sunnyvale won't be worth $1.25 million. Unlike the last one, a stock market correction and high COL region bubble collapse won't crush places like Phoenix, Vegas, and Florida.
I'm more concerned with a return of 1970's stagflation. When you spike the national debt where you're doing huge borrowing and you trash the economy with a trade war, the results could be catastrophic if you adopt the wrong policies at the wrong time.
That's my thought...The next downturn is going to be worse for those that are riding high on the stock market.
From what I've read, the housing crisis wasn't caused by subprime lending so much as it was lying about what the subprime loans were, and "investors" and flippers that simply borrowed money (sometimes against a current home, sometimes not) on rentals and flips, often flipping houses simply by holding them for a short time period and waiting for them to appreciate, and renting at a monthly loss while trying to keep the appreciation.
I'd be curious to see how many of the homes foreclosed on were never owner occupied.
technicalities... when the Fed creates cheap money out of thin air the taxpayer is indeed on the hook for the risk via debasing of the currency. Yeah it's not a direct liability and debt undertaken by the Treasury but when you think about it the detrimental effects to the average citizen is the same and when the Fed buys toxic assets and those do not perform the losses, again in the form of currency debasing, are real.
The Fed claims it made billions in profits on the last bunch of QEs but who knows the real truth.
Yes the truth along with the real implications of this money creation is a bit technical.
Debasing didn't happen because the bulk of the money has never seen the light of the general circulation. Most QE moneys still sit as excess bank reserves.
It did not affect the general public or general inflation because QE was too weak a stimulus. Demands for new money/loans remained too low. But yes it did favor the banks, as well as some businesses and homeowners that were relieved of some mortgage obligations.
The Fed has made many $B's on these transactions, and all but 6% has been swept back to the Treasury. As it will continue to seep back with continued QE unwinding moving forward. The Taxpayers of today and tomorrow remain on the sidelines to all of this.
Look into audits for specifics, as they are public knowledge.
Capitalism is inherently unstable. The policies of the last 18 months have made it less stable. Vanilla mortgages kitted up by Fannie Mae and Freddie Mac which are sold as mortgage backed securities no longer have the problem. This FHA stuff that doesn't meet any rational lending criteria is small compared to what was going on under Dubya. In the high COL regions that have the big housing bubble, you're not buying a house on an FHA loan.
I'm curious... you say "capitalism is inherently unstable", and then go on to talk about government programs.
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The bubble is caused by people buying houses with stock option and stock market run-up money.
How so? The bubble that popped in '08 was too many people who borrowed money they could never repay, and then all of the backstops for those loans vanished. You cannot buy a house with "stock options"... you have to exercise the options to buy the stock, and then sell. At that point, you have cash, and for that instance don't give a fig what happens in the market. Neither does the seller, because they have, again, cash. There is no "stock market run-up cash" this isn't CASH.
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The 1,200 square foot ranch in Sunnyvale won't be worth $1.25 million.
Based on what? If nobody is willing or able to pay $1.25 million for any given house, then you're correct, it isn't worth that. When there is, it is. The insane housing prices in Silicon Valley are not being driven by any kind of sub-prime lending, but buy incredible demand by people who are largely employed at salaries that can, at least technically, support those prices. There is no "magic" working in Silicon Valley, just more demand and more money chasing the same supply.
Subprime lending is not a four letter word or in an of itself a bad thing. People overreact to the headline of it just as they do adjustable rate mortgages it’s almost comical at times to see
And now the government is backstopping all these loans while these fraudsters get rich.. where is our government in all of this? I get it, just like last time they are asleep at the wheel and will wake up only when the financial system collapses again and then it will be time to bail out using taxpayer money QE6..7..8..9 etc. at the expense of future generations.
The government is not asleep at the wheel. This administration is encouraging this.
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