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Just today (in Austin) I saw a banner by the road outside a bank offering "100% financing" for homebuyers. If banks breathlessly pitching to lend buyers the ent

by CamTin 8y ago

Just today (in Austin) I saw a banner by the road outside a bank offering "100% financing" for homebuyers. If banks breathlessly pitching to lend buyers the entirety of a home's price is not a sign of an overheated debt-led housing market, I don't know what is.

danjoc 8y ago
It gets worse than that, https://www.lendingtree.com/home/mortgage/interest-only-mortgages/ https://www.lendingtree.com/home/mortgage/interest-only-mort...
- twoheadedboy 8y ago
  What the hell did I just read..?
- mark212 8y ago
  Is this the first you’re hearing of an interest only mortgage? They have been very popular in Southern California for a couple of decades. The theory is that it allows the speculator / owner to get a much more expensive home and just pay the interest for 3 to 10 years. Then sell and reap the massive appreciation. Except of course when the market goes the other way and you’re underwater and then whoops! the payment flips to fully amortized (interest and principal) and you can’t afford it. Welcome to 2007! But don’t worry you’ll be unemployed in another year too!
  - frankc 8y ago
    There are also perfectly valid use cases for interest only mortgages. The classic case is for people with highly variable incomes, for instance people working on commission or people working in bonus driven industries. In lean years you pay just then interest and in healthy years you pay down some principle.
- matheweis 8y ago
  “Adjustable-rate interest-only mortgage“ ... how is that even legal?
  - perl4ever 8y ago
    I don't know exactly how they work, but hasn't everybody heard about "NINJA" loans? "No Income, No Job, (no) Assets"
froindt 8y ago
For what it's worth, I saw the same in a hot market in Iowa. I was taken aback, because generally speaking we saw a much less bad 2008-era than other places across the country. We have particularly low unemployment, which could be leading things to get stupid.
raincom 8y ago
Must be a new construction. Usually big builders offer that when they can't unload units quick.
- CamTin 8y ago
  It was an ad for a bank, not a housing development.
AnimalMuppet 8y ago
I was in a bank yesterday, and saw the same thing. They had a person from their mortgage department approaching customers and informing them that they had 0 down loans available. This I take to be a bad sign. We're in "this time it's different" territory.
- perl4ever 8y ago
  A stranger on LinkedIn sent a connection request to me within the last couple of days, and it was not a recruiter (the usual), but a real estate agent. First time that's happened. And I haven't been looking to buy a house, nor given anyone any indication that I'm interested, that I'm aware of. Probably nothing, but now I'm wondering if it's an indication people are getting hungrier.
- IgniteTheSun 8y ago
  "I was in a bank yesterday, and saw the same thing. They had a person from their mortgage department approaching customers and informing them that they had 0 down loans available." Considering that home sales volume has dropped a lot as affordability has fallen (due to higher interest rates + higher prices), banks mortgage business is likely falling - not due to foreclosures but rather due to lower home sales volume. They may feel that, with lending standards now higher than 10 years ago, the risk of losing money in a potential foreclosure is now low enough that the risk is justified given the loss of business.

by CamTin 8y ago

danjoc 8y ago

It gets worse than that, https://www.lendingtree.com/home/mortgage/interest-only-mortgages/ https://www.lendingtree.com/home/mortgage/interest-only-mort...

twoheadedboy 8y ago
What the hell did I just read..?
mark212 8y ago
Is this the first you’re hearing of an interest only mortgage? They have been very popular in Southern California for a couple of decades. The theory is that it allows the speculator / owner to get a much more expensive home and just pay the interest for 3 to 10 years. Then sell and reap the massive appreciation. Except of course when the market goes the other way and you’re underwater and then whoops! the payment flips to fully amortized (interest and principal) and you can’t afford it. Welcome to 2007! But don’t worry you’ll be unemployed in another year too!
- frankc 8y ago
  There are also perfectly valid use cases for interest only mortgages. The classic case is for people with highly variable incomes, for instance people working on commission or people working in bonus driven industries. In lean years you pay just then interest and in healthy years you pay down some principle.
matheweis 8y ago
“Adjustable-rate interest-only mortgage“ ... how is that even legal?
- perl4ever 8y ago
  I don't know exactly how they work, but hasn't everybody heard about "NINJA" loans? "No Income, No Job, (no) Assets"

froindt 8y ago

For what it's worth, I saw the same in a hot market in Iowa. I was taken aback, because generally speaking we saw a much less bad 2008-era than other places across the country. We have particularly low unemployment, which could be leading things to get stupid.

raincom 8y ago

Must be a new construction. Usually big builders offer that when they can't unload units quick.

CamTin 8y ago
It was an ad for a bank, not a housing development.

AnimalMuppet 8y ago

I was in a bank yesterday, and saw the same thing. They had a person from their mortgage department approaching customers and informing them that they had 0 down loans available. This I take to be a bad sign. We're in "this time it's different" territory.

perl4ever 8y ago
A stranger on LinkedIn sent a connection request to me within the last couple of days, and it was not a recruiter (the usual), but a real estate agent. First time that's happened. And I haven't been looking to buy a house, nor given anyone any indication that I'm interested, that I'm aware of. Probably nothing, but now I'm wondering if it's an indication people are getting hungrier.
IgniteTheSun 8y ago
"I was in a bank yesterday, and saw the same thing. They had a person from their mortgage department approaching customers and informing them that they had 0 down loans available." Considering that home sales volume has dropped a lot as affordability has fallen (due to higher interest rates + higher prices), banks mortgage business is likely falling - not due to foreclosures but rather due to lower home sales volume. They may feel that, with lending standards now higher than 10 years ago, the risk of losing money in a potential foreclosure is now low enough that the risk is justified given the loss of business.