Thread by @gianlucac1

THE US COVID19 PACKAGES: I LOVE IT WHEN A PLAN COMES TOGETHER 1/n

Fed, Treasury launched various Covid19 mitigation plans

They are massively frontloaded

so...Personal saving rate shoot massively up...

it is ok..it will be reabsorbed later as tranfers are not gonna be repeated

Saving rates goes up as everything pretty much closed during lockdown...

you cant spend money...phisically...rite?

well except for......

MORTGAGES

after going down 42% in January, Mortgage applications are back at 2019 level 2/n

and this while unemployment is record high at 15% circa

Due to high saving rate, new mortgages cannot really be re-mortgaging as the House is used as an ATM due to lower income

REASONS
The Fed action has pushed Mortgage rates to a very low level 3/n

Normally low mortgage rates and house purchases are quite correlated 4/n

Even if for now there is no reaction in real este price expectations 5/n

and even in 2008 mortgage applications didnt transform in existing home sales.

at that time Mortgage applications were probably one of the few possibilities to have money amid tight credit conditions (House-ATM effect) 6/n

Contrary to 2007-11 those looking for a bargain (discount of 20% or so) are not going to find a massive stock of unsold homes.

Remember? 2007-11 crises was about repricing a levered Real estate bubble.

so bargains could be found

Offer doesnt appear to be the same now
7/n

as a side note banks are tightening lending standards while Debt To Income ratio is dropping back (DTI) 8/n

so....

wall of cash sidelining, no incremental offer, stable prices....savings rate high....

another RE bubble in USA?

we will see....

for sure the mortgage application increase is very puzzling

9/9

@ThManfredi @CrossWordsCW

@jeuasommenulle