I was talking to a friend the other day about workplace training and other BS like ‘stocks will go to the moon and beyond’. Her job specifically is a credit analyst for mortgages. She tells me their latest one was huddling everyone into a room and explaining via maps how the housing market is overpriced in the same exact places as in 2007 before the recession. Everyone was rather stunned and confused. Most of the room was like “I thought they fixed all this?”
The condensed version is again, a massive housing bubble that no one wants to talk about or bring up because everything is working as it should for now and banks are making tons of money with people buying and refinancing. They were told that they’re expecting at some point soon for another 2007-2008 housing related crash to come, but can’t pinpoint a time or month. For now however, they’re working on making stricter income and credit rating requirements for individuals wanting to buy.
Overall, they were just made aware that many of the mortgages they’re being asked to finance/refinance are well overvalued. A lot of the residential properties are already coming back appraised much lower than the asking prices and people are having to take out. They still scan people’s finances heavily and a lot more than in 2007/2008, but not as much as you’d think. Most people still get approved. The kicker is that there are just more buyers than in pre-2007 times… thus the amount of debt is still about the same, or larger in total across the entire market.
They were also made aware that there will be an influx of people wanting to refinance as people will slowly begin to not be able to pay their current mortgages. She says about 50% of the homeowners she works with are irate the can’t get approved, then go bitching about it, but eventually get it pushed through by someone. Same deal with refinancing. Banks would rather have someone continue paying at a lower rate, but still continue to pay, rather than just default.
Essentially it’s the same deal as in 2007. Maybe to a lesser extent, but no one really knows. What is known however is that at some point in the near future, prices will burst and people will be paying for a $200k mortgage on a $100k house as an example.
This trickles down to the stock market the same way as in 2008. Not to mention stocks in general are at all time highs, so the impact will be worse. Essentially all they did in the housing sector is kick the can down the road. Same deal with stocks as everything’s interwoven.