Monday, September 09, 2013

Can anyone help me untangle this circular logic?

It's pretty hard to figure out the mortgage market right now. And I spend a great deal of time at it. I own property. One being a rental. No one wants the property recovery to be real more than I do.

It used to be pretty easy to figure this market out. Now it seems obvious you have these dark pools of investors. When 30%-50% of people are buying houses with cash - you know this are not "first time buyers". That is completely out of the norms for as long as I have owned property. These are probably flippers. Which in a normal world provide a valuable element to the market. Most people who buy a house don't want to have to do any work. They just want to move in and enjoy their lives. Still, flippers need to sell to someone. Or at least rent to someone.

Sooooo - it's kinda alarming news that 1.50-ish percent rise in mortgage rates this year results in a 30% loss in loans for Wells Fargo. Here. And if that weren't bad enough, refi's are down 63%. I think it was last week I said these idiots were a full point roughly from blowing up their refi segment. Here. This seems to confirm I am right.

I guess Wells thinks it can make up the revenue with other segments. Presumably on higher bond rates. The very thing that is killing them! 30% is a lot of percent. But what do they care Dear Taxpayer?

I think it was last week my twitter feed was filled with loan officer layoffs. So I'm guessing they don't think this is temporary. I'd just like to know how they are making money at all. Banks are in business to loan money to people. Those cash buyers plus a 30% drop in loans doesn't sound like banks are making money to me.

I guess I'm the only person around that thinks the Fed will not tighten.

Update- Bank of America announces 2,100 job cuts over decline in loans due to higher interest rates. Here.

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