If We're Heading for a Housing Crash, Why Are Lenders Giving Away Mortgages?

No one believes the market is crashing and is willing to back it up with data, all we are seeing report is either fake headlines or some other dishonest reporting.

Let’s start with a question: How much value does a real estate agent bring to a real estate transaction? When we charge fees, do we help the seller net more money than if they sold it on their own?

Well, it's a complicated answer to prove. One complication is how do you prove it. The Federal Reserve of Atlanta attempted to in a recent survey, but their data was limited to 3 metro areas: Charlotte, Minneapolis, and Houston. That’s it.

Again, we can go through the details, but let’s jump to their conclusion on page 30: “...we conclude that there are high-performing agents who add significant value to the home selling process, but they constitute a minority of agents.”

So, is the market crashing? Well, we may be at the end of the typical end-of-year slower market as the market is distracted by holidays, etc. We’re only 6 weeks away from the beginning of the Spring buying season.

But, let’s look at the data.

Here is Los Angeles, when you look at $ sold per square foot, it has continued its slow climb. If the market was crashing, we would see a decline and a move to smaller homes. We’re not seeing that.

So, what do our major banks and government officials do?

Well, to quote Forrest Gump,

Uh, oh, Bill, who are you calling stupid?

Well, our government seems intent on helping as many people as possible get into trouble. In fact, the only segment of the market that appears to have a risk of significant foreclosures is government loans.

Notice that conventional loans are experiencing near-normal or below-normal delinquencies, but government loans are heading toward 2008-2009 levels. It's almost like the government wants to hand out loans, then find a way to forgive them, like student loans.

Government loans are typically 3.5% down for FHA loans and 0% down for VA loans. After you purchase a home, if it costs you about 7-8% in selling costs, everyone is underwater when it starts, and the combination of inflation and home appreciation are required to keep homebuyers in homes.

For an overview 8% of mortgages taken out this year are underwater — about one in 12 homes purchased in 2022, according to data source Black Knight.

So, its not enough that we have government loans that are underwater, Bank of America, one of the worst offenders in 2008-2009, and the company that purchased Countrywide Home Loans so they could get MORE involved in the housing disaster, NOW is going to target underserved markets to add more wood on the fire. 

They are offering loans with no down payment and no closing costs to borrowers who otherwise would not qualify and have limited financial experience. How can that go wrong, again? 

This is while their CEO Brian Moynihan “predicts two years of pain ahead in the housing market.” Something is wrong. BofA is making these loans while they expect prices to go down. Crash? What are BofA’s thoughts? Not enough bad loans, not enough lives ruined, let's do more?

So this is their plan to make loans and profits as their customers experience pain.

The fake real estate news continues. This week’s worst offender is Forbes, which actually contradicts its own headline.

Their fake headline says “Housing Market Crash 2023: Where Will Prices Drop? And Why?”

Yet, the same article concludes: “The housing market is likely to lose value through 2024, but it’s more of a market correction than a market crash.”

What if prices dropped 20%? What would that mean? Not that anyone is predicting that today, but let’s put it in context. Housing prices rose 41% in the last 3 years during a historic period, and even a 20% drop would not give back half of that.

All that said, the industry expert and infinitely more sober Corelogic projects housing prices to rise 4.1%  in 2023.
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Bill Gross, The LAProbate Expert
I am a real estate broker in Los Angeles, CA focused on probate real estate and the leader of a team of over 1,100 agents nationally probate experts.

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