I haven’t purchased a home in over 20 years. So perhaps it’s been like this for a while and I’m just now finding out about it.
I came across a listing for a house. Reasonable price, right off a lake. I then get to daydreaming. That would make a nice retirement home. Curious, I go online to one of those “home loan calculators”.
Before the thing calculates your loan for you, it first asks for your email and phone number. Now I’m not naïve, I knew I was opening myself up to spam, but jeez! Not like this!
As soon as I hit submit on the online form I get my first phone call. Literally like 2 seconds later! And from there the phone calls just never stopped. So far in the past two weeks nearly 300 calls from lenders. 63 of which were from a single person. Another 37 from "loan Depot… And the list goes on.
It’s so bad, my phone has been on “Do not disturb” for the past two weeks. Crazy!!
I tried to refi my house a few years ago and couldn’t understand why with so much equity I couldn’t pull $40K out. Well it was my credit score. As it was explained to me, the refi mortgage would be bundled and sold off to a company that makes money on servicing the loan and that was true of any bank or mortgage company so ain’t no one gonna refi my house. I said, “Wait, isn’t that effectively the same thing you guys were doing in 2008?” “Yep.”
So their practices haven’t changed, just who they gave mortgages too. Incidently, we finally got the refi to pay off our debt due to an awesome broker that took two years to work our application through the system and so we paid off our debt and now our credit scores are high enough to get a refi
Not only has the residential real estate bubble inflated to its previous levels, it has now been joined by the commercial real estate bubble, the student loan bubble and the auto loan bubble. All of which are on super shaky ground, and all of which have been bundled and tranched as toxic bags of shit that are trading around for mind boggling levels of money. Right now all it will take is one little pebble tipping over and the whole fucking mess is going to blow and if you thought '08 was bad, well, you’re in for a whole 'nother level of suck to experience.
One big factor in the residential bubble is that huge financial corps and hedge funds have been snapping up houses for inflated amounts using “cash” for the buys. Thing is, that cash is realized by them leveraging something else, and if that something else is say a whole shit ton of junk Chinese real estate bonds or default swaps or any one of a number of toxic financial products (dogshit wrapped in catshit) then when those tumble, as they inevitably will, that real estate is going to come flooding back on the market at discount prices. Of course by then nobody will have money to lend to buy it so gods know what it will do then. Probably have millions of empty houses sitting around because nobody can get a loan to buy them. It’s gonna be fun.
ETA: You might find this video interesting–a Canadian MP talking about their housing crisis, which is just about a half step ahead of ours in suckage but we’re catching up:
Seriously, all of the modern monetary policy wonks and financial overseers are fervently assuring us that the housing market totally isn’t a bubble and prices have nowhere to go but up, and every time I hear this I keep having panic flashbacks to 2007 when I looked at the crazy, 10%+ growth per year across the board in valuations and wondered how this could possibly be sustainable when total economic growth was in the mid-single digits (and lower if you discount the stock market going absolute nuts over one tech stock and startup IPO after another). At some point, I started doubting not only my own sanity but the essential competence of every microeconomist who talked about consumer theory and the limits of market elasticity because it seemed like anybody from a hairdresser to a newly barred law school graduate with $200K in debt could get a mortgage on a million-dollar McMansion that I couldn’t even get close to coming up with the previously-mandated 20% down payment on, and then Margot Robbie drinking champaign in a bubble bath explained “subprime mortgages” too me in best economics mini-lecture I’ve ever attended.
There is definitely a housing bubble on top of commercial real estate; I don’t know about auto loans but it would explain how households at the median line can afford a Lexus and a BMW in the driveway, and totally undermines the notion that we’re all going to junk our SUVs and go buy electric vehicles en masse to “save the planet”. I wouldn’t call student debt so much of a bubble as a ready-to-erupt volcano as the older generation starts liquidating their assets in death or downsizing but millennials lack the capital to buy them because they are spending their avocado toast money just servicing the interest on the student debt that they’ll never pay off and can’t escape from, and in general we’re looking at the combination of an underemployment problem (of people for whom it is more profitable to not work) combined with not enough qualified or interested people to work in critical roles because we’ve offshored so many industries and service jobs while sneering at the idea of skilled trades as valued occupations.
I’m sure Adam McKay is already working on a sequel tentatively titled ˆThe Long Con” where Jared Vennett goes on to become Secretary of the Treasury under President Flumpper, and Steve Crrell makes a return cameo as the angriest investment banker who isn’t “jacked to the tits” on coke and steroids.
I think there’s gonna be a student loan uprising when people figure out that “credit scores” didn’t exist forty years ago and are not actually something that determines your ability to get by in life. Lenders gotta lend–when your entire business model consists of rent seeking you’ll find a way to skim and if every person with student loans flatly refuses to pay them back there’s basically nothing anyone can do about it. Sure, you can make an example of a few people but there aren’t enough slots in the debtor’s prisons to house everyone with student loans who decides to default and after that, where’s your big stick? Can’t repossess their degrees, nobody is going to care about credit scores real soon because if you can’t afford to buy a house what difference does it make how good a loan risk you are? Once enough people figure out they are kept enslaved by imaginary shackles there will be hell to pay and I am here for it. Once the student loan bubble collapses and takes a bunch of overleveraged banks and hedge funds with it we can get along with life–and how much better is a person’s life who no longer has a monumental level of debt hanging over their head?
As for economists, any of those fucking morons who drone on about anything that isn’t firmly grounded in MMT is a fucking shill talking head for the corporate oligarchy and about as worth listening to as a wet fart. Screw the lot of them, useless hacks.
I don’t disagree with anything you’ve written but the fundamental problem is that that the estimated US$1.75T in student debt has been leveraged into even more investment; crashing the student debt market has larger ramifications underpinning the entire commercial economy, and unlike the housing market where Freddie Mac and Fannie Mae were major holders of mortgages that the government could accept default without declaring bankruptcy the way private investors did, most student debt is held by private investors, and although much if it is ‘guaranteed’ by the federal government what does that actually mean when a US$2T bill comes due? It’s all discretionary spending and if there is anyone more hated than mortgage lenders it is college loan sharks, so there will be no public or political pressure to bail them out…which means their obligations crash, et cetera, ad domino. I shudder to think how much of the economy that student debt is actually propping up through its used to secure other investments. And oh, by the way, how bizarre is it that you can use owed debt as virtual capital to secure other investments that are leveraged out to Pluto?
I like to think of economists, and particularly macroeconomists, as the dumbest smart guys in the room. There is a lot of knowledge and individually valid hypotheses that are being misapplied to highly simplified or abstracted systems, and in the case of macroecon, often not even tested or demonstrated in any measurable way before being translated into fiscal policy. The result is that you essentially get a new “school of economics” about every fifteen years that essentially contradicts the previous thinking on the matter but still fails to predict or explain the next boom/bust cycle. And people complain about how theoretical particle physics is stalled with string theory and quantum loop gravity…
I think my favorite description of an economist is the person who stands by the side of an empty pool watching a guy rushing down the high dive board while whispering, “I don’t think you should do that” then after the guy is broken and bleeding on the floor of the swimming pool he loudly shouts, “I told you so!”
And our biggest problem, globally, is that the financial sector has been allowed to do anything it fucking well pleases with the full expectation that sovereign governments will bail them out of any and all difficulties under the rubric of “too big to fail.” It’s especially pernicious in the US, with levels of outright corruption and criminality being accepted on every level as just part of the landscape and the only consequences are monetary fines that are so token they’re just part of the cost of doing business.
Any sane society would have sent the major players in the '08 debacle to long stints in federal penitentiaries but we did nothing and indeed have removed any sort of brakes or safety equipment to prevent another catastrophe from occurring. We gave them the solid majority of a trillion dollars in outright bailout money, following up by continually giving them more and more, with QE and tax cuts and flirting with NEGATIVE INTEREST RATES (and what insane fucktard thought THAT was a good idea?) to stoke the financial fires higher and higher. The SEC is a goddamned toothless joke, the IRS has been gutted, you can’t get the Attorney General to indict anyone for any reason let along try and convict, the DOJ appears to be on endless vacation and the fucking gargoyles have taken over the cathedral as the endless Goldman Sachs/BCG/Cabinet post revolving door whirls madly, exuding Wall Street insider drafted “legislation” that endlessly advantages financial institutions and further enables their predatory leeching on the bloodstream of the American economy.
Any sane society would have come down with the million pound shithammer to firmly put an end to default swaps and other scammy debt vehicles once and for all. Any sane society would have required the Chinese walls separating the differing categories of financial corporations from being consolidated together under one umbrella. Any sane society would have ended the ability of naked abusive shorting of companies by vulture capitalists and hedge funds. Shit, any sane society would explicitly forbid any sitting congress member or cabinet member and their families from holding and trading in specific stocks but nooooooooooooooo, we let ours profit from insider knowledge to vastly enrich themselves as they pretend to regulate the sectors they’re actively involved in trading in.
And the really fun thing is all this is being done out of fear of the consequences, the very natural and simple and easily foreseen consequences of their actions and lack of actions over decades. It’s GOING to happen, things are going to crash and they need to crash in order to have any hope of fixing this cataclysmic mess. Yes, it will suck, it already sucks but the only variable at this time is whether or not the rich people hang on to their money as it crashes or if that money gets wrenched from their cold wrinkly claws and flows to the rest of the economy. I pretty much know where I stand on the matter.
I am very concerned about the giant equity folks buying up everything. We will all be renters with a wall of customer avoidance system in place. Then there will be the issue of them mutating the municipal tax schemes to their advantage. We rent crap places with no recourse, as well as live in a municipality that has infrastructure crumbling due to not enough taxes being collected.
A bought and paid for local political echelon.
I might be construed by some as having an opinion…