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11-08-2016, 04:19 PM #1
Germany Figures Out How to Slow Mortgage Credit Growth
It looks like Germany has found the answer to mortgage credit growth: prevent lenders from taking into account price appreciation. Instead, they must focus like a laser on a borrower's ability to repay.
As we look at our own mortgage credit bubble re-infltating here in the US, maybe we should take a look at what Germany is doing.
11-08-2016, 07:46 PM #2
In the US, property already is appraised based on current value; expected appreciation is not taken into account.
11-09-2016, 10:09 AM #3
Maybe the problem here in the US is we put too much stock in recent market highs for home prices. Require more borrower equity, and that could solve the problem.
11-11-2016, 10:18 AM #4
Boris, you're idea is good in practice. But it is not going to happen here any time soon. Fannie and Freddie having been pumping credit into mortgages since the early 1990s, relaxing down payment requirements, creating credit bubbles, and pumping up housing prices along the way.
That is not going to stop until they are forced to stop it.
11-17-2016, 08:21 AM #5
Didn't we already have a housing bust? I think we've learned our lessons here.
11-23-2016, 10:33 AM #6
I think grail is on to something. Its like the bureaucrats looked at something like homeownership and noticed it was a good indication of middle class lifestyle. So they'd decided more people should be homeowners - as if that status would turn them into being middle class.
When, in fact, owning a home was an indication of a willingness to work hard and save.
So expanding ownership just brought more people into bigger debt situations.
And, yes, it sure beats renting. But asking people to pay a mortgage who cannot save enough money to pay for repairs is a recipe for disaster.
11-26-2016, 12:11 PM #7
Stagnant salaries + rising mortgage rates should do the trick here. And that seems to be on track right now.
12-01-2016, 11:37 AM #8
Well, clearly we are learning nothing in the US. Fannie and Freddie just raised the ceiling on confirming mortgages. Just keep on reinstalling the bubble.
12-21-2016, 11:38 AM #9
Rising mortgage rates should do the trick. I know several potential homebuyers now on the sideline. Rates went up too far too fast. And yet everything they look at gets multiple offers. They think it is madness and refuse to play the game.
Once more people get that mindset - and a 1% rise in rates should do it - then the prices will cool.
12-23-2016, 11:09 AM #10
Rising mortgage rates are going to cause a major pain.
Yes, a lot of people shrewdly refi’d their mortgages. But there are many who are still exposed to a near-term rise in rates.
First, approx, 12 million households still have negative equity in their homes. So they were not able to re-fi.
Add to that the current homeowners’ equity ratio, at 57%, still hasn't retired to its pre-bubble days -- which were then record lows. So it would not take much to see many more join the ranks of negative equity again.
Second, even the modest uptick in rates since early in the summer is causing pain. According to RealtyTrac, foreclosures surged +27% in October—the largest one-month gain since August, 2007.
Third, let's not forget what will happen as HELOC rates adjust.
If you took out a 10-year HELOC at the peak of the bubble, it is resetting soon. Already this year, delinquencies on HELOC's rose from 2.2% to 4%.
There is going to be more interest rate and home equity pain to come.