Originally Posted by RemoveB4flght

While it’s not exactly identical to the years leading up to 2008, many of the same indicators that started the dominos falling in housing are there, along with some new ones. The Philly fed released a report that an investigation revealed mortgage fraud in DSCR loans is over 30%, which is how many investors were able to borrow for short term rentals. It’s the new NINJA loan. New home builders in major metropolitans across the country are sitting on shadow inventory, which is why you see only one or two homes for sale at a time despite most being empty. They don’t have to report the home vacant until it’s given a C/O. Many of these builders are offering 3/2/1 interest rate buy downs, or even offering to eat a part of your interest rate. In other cities saturated with short term rentals, demand has softened and the market is oversupplied, and AirBnB restrictions are on the rise. Meanwhile a few million who deferred mortgage payments under Covid relief programs are now coming to the end of that deferment. Many lenders are backlogged on loan modifications, and each time they pull one from Fannie/Freddy to adjust it, they take a haircut when selling it back. MBS funds have openly petitioned the fed to state there will be no further rate hikes over concern about the solvency of borrowers in their portfolios. If the market softens, the recent years FHA/VA borrowers with 600 credit scores and near nothing down will see any equity vanish.

It’s not a foregone conclusion, but any combination of prices dropping, credit markets drying, or deep recession/stagflation will be detrimental once again to housing. The nice thing is this time around, it’s not derivative markets with all the exposure, but the tax payers directly since Fannie and Freddie now hold some 95% of mortgage debt.