Trying to decode some cryptic talk I'm seeing online ... supposedly around having no buyers for MBS now that the Fed is tapering, and mortgages not even being capable of being quoted for a short while on Friday ... any mortgage brokers see something like this recently?

Very bad day for mortgage rates for sure with MBS losing a .250% point more or less. But, I do not know of any investors who suspended rate locks. https://housingbrief.com/article/print/62a405304b29897c86e93b73/5e6f887d13238419a4de4c03?sr=true

Inflation report rocked the market. This was the first time the market did not absorb it as old news

I get the feeling we will find out sooner rather than later just how serious the fed is.

The Fed is going to force a recession they see that as the only way to stop inflation

forget letting the buyers and sellers of goods and services sort it out

I posted this on the business forum and I'll admit I'm still confused about how rates will lower gas prices and fix supply chain issues. Sounds to me like we are headed towards a recession on top of inflation. Good times.

The recession should have happened a long time ago, now it will be worse. These cycles are irrefutable and healthy because they wash out malinvestment.

The problem is the debt won't allow them to raise rates like Volker did. That and they all have their hands in the till for every dollar spent and they can't stop.

Proper ****ed. Debt jubilee or inflate the debt away are the highest possibility in my view. I hope I'm wrong and they keep on cranking rates.

One thing for sure, there are no soft landings in our future but there will be some massive opportunities.

Agreed. To quote a recent podcast "we don't have stagflation, we have Bidenflation, stagflation on steroids.

Tent Magic said:

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The Fed is going to force a recession they see that as the only way to stop inflation

forget letting the buyers and sellers of goods and services sort it out

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The Fed had rates too low for too long, even before the pandemic. This ain't about forcing a recession, it's that they've exhausted everything to prevent one. It's only made it worse.

Exactly. Home prices are the symptom, not the cause. Raising rates may kill the real estate market but it's not going to do anything to fix the cause. The resources required to add inventory to the market are still scarce and expensive. Remove a bunch of buyers via high rates and the result will just be even less new homes being built. So home prices for millions of home owners fail to keep pace with the broad market inflation thats still being driven by fuel prices and a broken supply chain. Whoohoo! Lots of people are going to feel screwed from the front and back. I guess its time to sell houses and swap that money to ExxonMobil.

CS78 said:

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Exactly. Home prices are the symptom, not the cause. Raising rates may kill the real estate market but it's not going to do anything to fix the cause. The resources required to add inventory to the market are still scarce and expensive. Remove a bunch of buyers via high rates and the result will just be even less new homes being built. So home prices for millions of home owners fail to keep pace with the broad market inflation thats still being driven by fuel prices and a broken supply chain. Whoohoo! Lots of people are going to feel screwed from the front and back. I guess its time to sell houses and swap that money to ExxonMobil.

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If there's less buyers in the market and less homes being built the cost of materials will decrease as supply catches up, its needed. Home prices at 2021 levels aren't good in the long run.

Just heard that about 60% of SFR homes have a mortgage and of those about 26% have interest rates under 3%.

Those owners would be fools to become sellers if rates continue to go up. That's a lot of inventory that likey won't hit the market for a long time.

If the fed continues to raise rates prices should come down for sure but something like 6-7 trillion dollars of US debt is set to roll over in the next 18 months.

How can the fed raise rates on the debt it is going g to roll over when we already borrow to service debt and not default heading into a recession?

The highest probability has to be a fed pivot and hyperinflation in my mind. It's a real mess and one that many here have been screaming about for years. I really hope they go ahead and crank rates but this "soft landing" bull**** only leads to more trouble.

You are mixing longs and short debt instruments. Fed can control shorts such as prime or variable debt. They can influence the longs but not control them. The longs get rolled over daily. The market will manage that process.

The cost of that long debt will increase but will be placed. Inflation will drive longs and looks like that is happening.

Long debt hate and fear inflation

This is all so very confusing for sure and I appreciate your answer. I think I understand what you are saying but think perhaps my comment above is misleading. I did not mean to conflate the two, I meant them as two stand alone issues. One that low interest rate mortgages are now the assets on homes and will likely help keep supply down and two that since all the fed debt will roll over they will have no choice but to pivot and lower rates soon or default on that rolled over debt or any new debt.

Now if you are saying that my comment about the fed debt roll overs is mixing the long and short then I will definitely that explained further. Hell I am still trying to figure all that BS out, it all seems so counterintuitive.

Anyone have data on what % ARM make up of the current mortgages out there ?

I've not delivered an ARM in 15 years. But I'm probably about to.

Most ARMS before this rate increase were super jumbo loans. Those buyers have much more tolerance for risk. And most can just payoff if they don't like the terms

1939 said:

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CS78 said:

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Exactly. Home prices are the symptom, not the cause. Raising rates may kill the real estate market but it's not going to do anything to fix the cause. The resources required to add inventory to the market are still scarce and expensive. Remove a bunch of buyers via high rates and the result will just be even less new homes being built. So home prices for millions of home owners fail to keep pace with the broad market inflation thats still being driven by fuel prices and a broken supply chain. Whoohoo! Lots of people are going to feel screwed from the front and back. I guess its time to sell houses and swap that money to ExxonMobil.

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If there's less buyers in the market and less homes being built the cost of materials will decrease as supply catches up, its needed. Home prices at 2021 levels aren't good in the long run.

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Normally, I'd agree with you. But not with $5-$6 diesel.

Back in April is 9% of all mortgages. https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-demand-doubles-as-interest-rates-hit-the-highest-since-2009.html and I am sure that has done nothing but come up.

My current pipeline is about 15% which is higher then it has been in quite a while, but I do expect that to climb. Not for affordability but it just makes sense for a lot of borrowers as there is a substantial premium between say a 30 year fixed and 7/1 ARM or the first time in a while. Even if you were 99% sure that you were only going to own a house for 5 years in the last handful of years the ARM and the fixed rate were more or less the same. But, now you can save half a point or more with a 7/1 ARM. (meaning the rate is fixed for 7 years)

Yep. We modified our mortgage last year to drop the rate to 2.5% and re-amortize over a fresh 30 years. I'm never selling this house while that loan has any meaningful amount of outstanding principal. When we move I'll rent it out and eventually 1031 exchange into something else around 2050.

I locked a Texags poster today on an ARM. Loan amount was conforming but pretty high. Savings on the payment just short of $700 per month. The delta was 1.875% in rate. That's going to narrow. Probably 60-70% of what we originate are ARMs.