4 ms·

Doesn't seem to be much movement in mortgage defaults: https://fred.stlouisfed.org/series/DRSFRMACBS https://fred.stlouisfed.org/series/DRSFRMACBS

jraby3 2y ago
Credit cards are probably an earlier indicator than mortgages.
paxys 2y ago
Wait for all the 2.x% 7/1 and 5/1 jumbo ARMs issued between 2015-2022 to renew at 7%+ and we'll see how strong the mortgage market actually is.
- selectodude 2y ago
  All? I’d be shocked if 5 percent of mortgage originations in the US are ARMs.
  - eightysixfour 2y ago
    They were very low leading into the increased interest rates - 4% in 2021. In 2023 it was closer to 10% of originations. https://www.investopedia.com/arm-applications-grow-as-mortgage-rates-remain-high-8350836 https://www.investopedia.com/arm-applications-grow-as-mortga...
  - drewg123 2y ago
    According to https://point.com/blog/arm-report-2024 https://point.com/blog/arm-report-2024, ARMs were 10-20% of mortgages 2015-2020 So I think the GP has a good point.
- rib3ye 2y ago
  Where is the ARM mortgage data?
- jandrese 2y ago
  Why the hell would you get an ARM when the fixed rate was 3%? The only way to go from there is up.
  - dylan604 2y ago
    There are a lot of people just uninformed people that will take whatever deals presented when that deal means getting a house. The person giving them the deal does not care at all about whether they can afford it or not, especially knowing that the loan was going to be repackaged and sold probably before the first payment was due let alone when the rates change
- jancsika 2y ago
  Well, 2015 was about 10 years ago now, and both 5 and 7 are less than ten. So how about you tell us how some of them have already done renewing at 6%+? Did bad things happen? Edit: clarification
hipadev23 2y ago
It did not become particularly easier to qualify for new mortgages over the past five years the way it did in 2004-2008. Nominal prices accelerated, yes, but rates were around 2.5%. Generally speaking people who are in mortgages are able to afford them because they're on fairly decent terms and lent to people who are capable of paying. But nobody is selling if they're going to need a new mortgage.
bearjaws 2y ago
Thats because anyone with a 2.5% mortgage would rather die before losing their home. 34% of mortgages are below 3% interest rate, which means their house payment is at least 30% cheaper than renting. Nobody is going to give that up easily. Here you could easily go from a 3/3 single family home to a 2br apartment for the same price monthly. Which means you would need to move into a 1br apartment to save any money. All this to say, the first thing to go is the credit card payments, then the car payments, and finally the mortgage payments.
- reactordev 2y ago
  This. Anyone I know that has a sub 3% is planning on staying put until their end. The rest of us are never going to see sub 3% in our lifetimes again. 6% is here to stay. Maybe in the distant future we hit 5.5% but unlikely. I went through a divorce and my ex got the house. I thought I would travel for a few years before buying another one and I missed out on the 3% rates.
  - jghn 2y ago
    I don't disagree but people talking about current rates as if they're terrible distort reality. It really wasn't that long ago (aughts) that rates in the 5/6% range were viewed as historically good. And I'm old enough to remember when rates in the teens were normal.
    - polymathemagics 2y ago
      Yeah, and for a lot of earners in high tax states, the effective interest rate you pay is essentially almost half off thanks to the mortgage interest tax deduction. If your marginal tax rate across federal / state / local is high (mine's 46%), then you can get back almost half the interest. Which shortens the gap between a 3% vs 6% mortgage, the effective difference being more like 1.5% than 3%.
  - flatline 2y ago
    I got a 3.25% loan post-divorce in a part of the country I hated, and ended up selling and relocating. I do not plan on buying again soon, current prices combined with current interest rates make it unappealing. If home prices come off or stagnate long enough, I will once again consider buying. Right now I can set aside $1000/mo renting, which is enough to pay someone else for the hassle of maintaining a house.
HaZeust 2y ago
Man, I hate when mortgage defaults are brought up in conversations like this. The next frustration in the economic boom-bust cycle is 99% likely to NOT come from mortgage-backed securities or anything mortgage-based. Yes, we understand it triggered the 2008 recession. No, it probably won't be the canary in the coalmine for the next one.

jraby3 2y ago

Credit cards are probably an earlier indicator than mortgages.

paxys 2y ago

Wait for all the 2.x% 7/1 and 5/1 jumbo ARMs issued between 2015-2022 to renew at 7%+ and we'll see how strong the mortgage market actually is.

selectodude 2y ago
All? I’d be shocked if 5 percent of mortgage originations in the US are ARMs.
- eightysixfour 2y ago
  They were very low leading into the increased interest rates - 4% in 2021. In 2023 it was closer to 10% of originations. https://www.investopedia.com/arm-applications-grow-as-mortgage-rates-remain-high-8350836 https://www.investopedia.com/arm-applications-grow-as-mortga...
- drewg123 2y ago
  According to https://point.com/blog/arm-report-2024 https://point.com/blog/arm-report-2024, ARMs were 10-20% of mortgages 2015-2020 So I think the GP has a good point.
rib3ye 2y ago
Where is the ARM mortgage data?
jandrese 2y ago
Why the hell would you get an ARM when the fixed rate was 3%? The only way to go from there is up.
- dylan604 2y ago
  There are a lot of people just uninformed people that will take whatever deals presented when that deal means getting a house. The person giving them the deal does not care at all about whether they can afford it or not, especially knowing that the loan was going to be repackaged and sold probably before the first payment was due let alone when the rates change
jancsika 2y ago
Well, 2015 was about 10 years ago now, and both 5 and 7 are less than ten. So how about you tell us how some of them have already done renewing at 6%+? Did bad things happen? Edit: clarification

hipadev23 2y ago

It did not become particularly easier to qualify for new mortgages over the past five years the way it did in 2004-2008. Nominal prices accelerated, yes, but rates were around 2.5%. Generally speaking people who are in mortgages are able to afford them because they're on fairly decent terms and lent to people who are capable of paying. But nobody is selling if they're going to need a new mortgage.

bearjaws 2y ago

Thats because anyone with a 2.5% mortgage would rather die before losing their home. 34% of mortgages are below 3% interest rate, which means their house payment is at least 30% cheaper than renting. Nobody is going to give that up easily. Here you could easily go from a 3/3 single family home to a 2br apartment for the same price monthly. Which means you would need to move into a 1br apartment to save any money. All this to say, the first thing to go is the credit card payments, then the car payments, and finally the mortgage payments.

reactordev 2y ago
This. Anyone I know that has a sub 3% is planning on staying put until their end. The rest of us are never going to see sub 3% in our lifetimes again. 6% is here to stay. Maybe in the distant future we hit 5.5% but unlikely. I went through a divorce and my ex got the house. I thought I would travel for a few years before buying another one and I missed out on the 3% rates.
- jghn 2y ago
  I don't disagree but people talking about current rates as if they're terrible distort reality. It really wasn't that long ago (aughts) that rates in the 5/6% range were viewed as historically good. And I'm old enough to remember when rates in the teens were normal.
  - polymathemagics 2y ago
    Yeah, and for a lot of earners in high tax states, the effective interest rate you pay is essentially almost half off thanks to the mortgage interest tax deduction. If your marginal tax rate across federal / state / local is high (mine's 46%), then you can get back almost half the interest. Which shortens the gap between a 3% vs 6% mortgage, the effective difference being more like 1.5% than 3%.
- flatline 2y ago
  I got a 3.25% loan post-divorce in a part of the country I hated, and ended up selling and relocating. I do not plan on buying again soon, current prices combined with current interest rates make it unappealing. If home prices come off or stagnate long enough, I will once again consider buying. Right now I can set aside $1000/mo renting, which is enough to pay someone else for the hassle of maintaining a house.

HaZeust 2y ago

Man, I hate when mortgage defaults are brought up in conversations like this. The next frustration in the economic boom-bust cycle is 99% likely to NOT come from mortgage-backed securities or anything mortgage-based. Yes, we understand it triggered the 2008 recession. No, it probably won't be the canary in the coalmine for the next one.