Conor Dougherty on transferring low-rate mortgages to new home buyers

Because so little is for sale, home prices have remained stable, and even resumed their ascent, despite a huge increase in borrowing costs.  The refrain among real estate agents and economists is that anyone who secured a mortgage rate of 3 percent or lower owns a valuable asset that they are loath to give up. 

But every asset has a price.  And now an emerging cadre of investors and real estate agents are trying to, in effect, sell mortgage rates from several years ago by transferring them to new buyers. 

Redfin, the real estate brokerage, has seen a steep rise in listings like Mr. Kilboy’s that have comments like “beautiful home with assumable loan at 3.25 percent.”  Facebook groups have popped up to find buyers for them, while new companies are pitching services to speed up the transfer. 

“Homeowners with mortgages that are capable of being assumed have something valuable that many home buyers want and would be willing to pay for,” said Daryl Fairweather, chief economist at Redfin.  “For people who bought when home prices were near the peak but mortgage rates were still low, it may be an attractive way to get out of a remorseful purchase.”

~ Conor Dougherty, "The Hot New Thing Is a Loan From 2021," The New York Times, June 11, 2023

Ben Stein says monetary stimulus is generating a recovery, housing is next

I wouldn't say [the recovery] has come from federal stimulus, I would say it's come from incredibly accomodative monetary policy. The next natural driver will be the consumer recovering and the consumer feeling more confident, it's already happening in autos. If someone had predicted, a year and a half ago, that the auto-business would be whirring, no one would've believed him. But, because of very accomodative credit terms at the car dealerships, the car dealership business, the car selling and making business, is booming!

I think the next stage is, if somehow the Federal Reserve can convince the banks to be accomodative about lending for housing, housing will recover. I mean, there's no reason that the banks can not get back into housing. They don't have to be as wild and crazy as they were in the late '90s and early 2000s, but they should get back into lending. And when they do, then that will recover, too, and that will be another leg of the recovery.

~Ben Stein, actor, author and economist, WSJ's Markets Hub, April 19, 2011

Dick Bove says banking problems are ancient history, fuhgeddaboutit

Bank of America in 2009 wrote off just under $50 billion in bad loans. How ya gonna do that again? I mean, where are you going to find $50 billion worth of bad loans to write off? You're not.

Essentially, we're talking about ancient history when we talk about all this, housing "stuff," if you will.

~Dick Bove, Rochdale Securities, CNBC interview

Ken Fisher: "Housing sector is already making a comeback" (2007)

Don't buy it. For months now the debate has been over whether America will have a hard landing of soft landing, the answer hinging on how big 2007's housing disaster turns out to be. Well, there won't be any housing disaster. We won't have a landing at all, soft or hard. Right now the U.S. and global economies are both accelerating.

You can see right through the housing crash story by looking at the prices of housing stocks. The market knows what the economic worrywarts do not, which is that the housing sector is already making a comeback. In the last six months housing stocks are up 24%, well ahead of the overall market. If housing were destined to fall apart in 2007 these stocks wouldn't be so strong now.

~ Ken Fisher, "Housing Boom!," Forbes, February 26, 2007 (He recommend Pulte Homes (34, PHM), Toll Brothers (34, TOL), and Beazer Homes (44, BZH).)

Frederic Mishkin: Housing market "bottoming out" (2007)

We do see some stabilization of demand in the housing market ... there is some indication that the market could be bottoming out.

~ Frederic Mishkin, Federal Reserve Governor, Reuters, April 20, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Janet Yellen: "Waking up less at night" over housing (2007)

I'm waking up less at night than I was [over the slowdown in housing]. So far, there's been remarkably little effect [from housing] on the rest of the economy.

~ Janet Yellen, San Francisco Fed President, MarketWatch, February 21, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Ara Hovnanian on housing

It's hard to tell if the worst is over. I would have hoped for a little bolder move (recent rate cut).

~ Ara Hovnanian, CEO Hovnanian Enterprises, Bloomberg TV, December 15, 2007

D.R. Horton CEO: "’07 is going to suck"

I don’t want to be too sophisticated here, but ’07 is going to suck, all 12 months of the calendar year.

~ Donald J. Tomnitz, D.R. Horton CEO, speaking at an investor conference in New York, "D.R. Horton CEO: 2007 will ‘suck’," MarketWatch, March 7, 2007

OFHEO director James Lockhart on GSE reform

There may come a time, I hope we never get to that time, when we may have to relax. I'd hate to relax the capital requirement just because they are losing money. That is not the reason to relax the capital requirement.

There was a lot of pressure on the agency to ease the portfolios (in August) and now we are hearing more and more about the capital. I can tell you in retrospect that we made the exact right decision in August.

It does look like the portfolio limits could come off as early as late February. There is a reasonable chance that may happen. We will be looking at the capital. I told both (Fannie Mae and Freddie Mac chief financial officers) when they put out their financial statements we will start to look at the capital. And we are going to go through a list of what needs to be done.

~ James Lockhart, Director of Office, Federal Housing Enterprise Oversight, Reuters, December 13, 2007

Ken Lewis on housing slump

The drag stops in the next few months. It's just about to be over. We're seeing the worst of it.

We do not see a recession. Because that drag stops, you'll see the economy begin to pick up in the third and fourth quarters.

~ Ken Lewis, CEO, Bank of America, "Lewis Says Housing Slump Just About Over," Bloomberg, June 20, 2007

Robert Toll: "We may witness a faster and stronger recovery than anticipated"

We believe that motivated sellers, excess supply, and low interest rates make now an attractive time to buy a home, but weak consumer confidence continues to buck these positives. Broader concerns about the nation's economy have magnified worries about potential price declines in the housing market.

It's not a matter of if, but a matter of when, this oversupply is absorbed. Then we shall return to better times. I believe those who wanted to buy but didn't will kick themselves for their reticence, but the biggest hurdle for our clients right now is their concern about their ability to sell their old homes. An inability to obtain mortgages does not appear to be a problem for our buyers, but probably is a problem for our buyers' buyers.

This downturn may be our toughest test yet, but I believe our great team is up to the challenge. We still believe the demographics exist to hugely support the housing market. Pent-up demand has to be building. Immigration is at record levels and large amounts of wealth have been created. With interest rates still quite low and very few new lots moving through the approval process, as soon as we remove the fear of dropping home prices, we may witness a faster and stronger recovery than anticipated.

~ Robert I. Toll, chairman and CEO, Toll Brothers, "Toll Brothers Reports 4th Qtr and FY 2007 Results," December 6, 2007

Ben Stein: Housing fears overblown

Yes, the housing market has slowed from a spectacular bubble level to a simply pretty good level. Housing sales and starts are now about what they were in 2002, and no one thought we were in a housing depression then.

In any event, housing is only about 5 percent of the economy. If it falls by 15 percent, that would represent a fall-off of about .75 percent. That's not trivial, but it's also not the stuff of which recessions are made.

The fact is that there is no recession. The economy is suffering from a labor shortage, not a surplus of unemployment. The Fed is worried about excess demand, not slack demand.
Corporate profits set new records every day. Whatever's happening in residential sales and building is simply not slowing down the economy. Why should a Boeing or a Merck or a Pfizer have any reaction to housing at all? Because the speculators sell everything they can when nervousness sets in -- and for no other reason.

~ Ben Stein, "How Speculators Exploit Market Fears," Yahoo! Finance, August 2, 2007

Prechter: "A home is not an investment"

Many people say the "invest" in their homes. But a home is not an investment. It is an item that loses value through deterioration even if no one lives in it. A home is expensive to finance, expensive to maintain and expensive to buy or sell. Ironically, it is also very costly to realize the loss of value on a home. How can it be? Well there are two costs that few consider:

(1) Did you know that if you sell your home at a loss and the bank agrees to cancel your mortgage for less than you owe, your taxes will rise? It's true. The IRS considers forgiven mortgage debt to be a payment to the homeowner, and it's not considered a capital gain but rather is taxed at the ordinary-income rate. But wait; it gets worse. Suppose your income that year was $30,000, so you were in the 15% federal tax bracket. If your bank forgives $70,000 worth of mortgage debt, your "income" suddenly jumps to $100,000, pushing you up into the 28% tax bracket, which for most taxpayers is effectively the 32-35% bracket inclusive of federal and state income taxes. Your average tax rate would be 30% or more, taking into account the Social Security taxes on your labor income. So taxes would consume every last penny of your gross job income.

(2) But wait. Your forgiving bank is hit just as hard. According to The Boston Globe (8/24/07), "Foreclosing on a house and selling it in an auction costs $50,000 on average, in New England, and that amount is on top of the funds the lender needs to pay off the loan itself."

Think about these costs. While you are paying extra taxes on the forgiven loan, the bank must pay all the fees required to dispose of the house on top of taking a loss on its value. These costs combined could amount to a significant portion of the value of the sale! Under such circumstances, can anyone say with a straight face that you owned an "investment?" Even a desired home costs money, but an unwanted home is nothing less than a giant albatross of decay and expense.

~ Robert Prechter, The Elliott Wave Theorist, August 26, 2007

Atlanta Fed study: Why the rise in homeownership?

After three decades of stability, the national rate of homeownership suddenly began rising around 1995. The rush to buy homes fueled an enormous surge in housing construction and home prices. Experts differed on the cause of the increase in homeownership, from 64.2% of households in early 1995 to 69.1% in early 2005. Was it the aging of the population? Or was it an expression of what President George W. Bush calls the "ownership society"?

Neither. Surprising new research published by the Federal Reserve Bank of Atlanta concludes that the bulk of the increase was caused by innovations in the mortgage market, in particular the explosion of "piggyback" or "combo" loans that made it possible for people to make small or zero down payments. Young families with little savings flocked to those loans to buy first homes.
Trouble is, lenders aren't making many of those loans anymore because default rates on the smaller, second loans have been extremely high. That means that one of the main props of the housing market has been kicked away. If the homeownership rate drifts back to where it was in 1995, the outlook for housing construction and home prices could turn out even worse than the pessimistic projections.

The Atlanta Fed paper, "Accounting for Changes in the Homeownership Rate," was published in September. Its authors are Matthew Chambers, an economist at Towson University in Maryland; Carlos Garriga, an economist at the Federal Reserve Bank of St. Louis; and Don Schlagenhauf, an economist at Florida State University and a visiting scholar at the Atlanta Fed.

Many analysts have fingered easy lending as a contributor to the housing boom, but the Atlanta Fed paper may be the first to quantify its effect in a rigorous way. Using math-heavy econometric analysis, the authors conclude that the availability of new kinds of mortgages, mainly ones with low down payments, accounted for 56% to 70% of the decade-long increase in the U.S. homeownership rate, while demographic changes accounted for only 16% to 31% of the effect.

~ BusinessWeek, "A Troubled 'Ownership Society'," October 22, 2007, by Peter Coy

Gene Epstein: Housing isn't killing the economy (2007)

What doesn't kill the economy, to borrow a phrase from Nietzsche, only seems to make it stronger. You'd think that, if the bust in residential housing didn't fatally wound the economy, it would make it much weaker.

But so far, the standard measure of gross domestic product shows just the opposite. Ever since the housing bust began, GDP growth, excluding residential investment, has accelerated.

How could this be? The answer is probably that, if housing hadn't gone bust, the rest of the economy would have expanded even faster. But the fact that we even need this counter-factual to find collateral damage is not only testimony to the economy's astonishing resilience. It also suggests that, if the housing sector worsens even further -- which now seems likely -- the economy will nonetheless muddle through.

~ Gene Epstein, Barron's "Economic Beat" editor, "Housing Isn't Clobbering GDP," October 22, 2007

Steve Forbes on housing

Thanks to Fed-created inflation, housing prices in most of the U.S. will firm and then rise. This won't save overextended subprime lenders and most come-lately speculators. But it will give much of the industry something of a second--albeit brief--wind.

~ Steve Forbes, "Fact and Comment: Housing," Forbes, June 18, 2007