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foreclosures on the rise thread 2.0

EO 11110

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our long running housing discussion got gassed -- what's up? maybe i just couldnt find it...

i came to post that the 30 year mtg rate is at 6.23 today, per cnbc ticker. i dont see how our resident housing bulls can deny the looming price adjustments downward - the hits to that position keep coming
 

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I think a certain bull had it nuked rather than deal with the reality of realty....
 

jbeck57143

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I get this message when I search for it in my browser history:



Oops! We ran into some problems.​






The requested thread could not be found.
 

chieftain

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Goneski.
 

EO 11110

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I think a certain bull had it nuked rather than deal with the reality of realty....
i did notice one poster seeming to get a little unhinged with it's last post or two

surely it didnt go to admin to delete scorpio's thread
 

BackwardsEngineeer

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The scorp himself mentioned his handlers a while back... I think we hit a nerve, and he was instructed to use the nuclear option.

BTW, thanks EO, love them bugs.. changing my world
 

EO 11110

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The scorp himself mentioned his handlers a while back... I think we hit a nerve, and he was instructed to use the nuclear option.

BTW, thanks EO, love them bugs.. changing my world
bugs -- that is GREAT. spreading that message/healing those around me is a primary goal of mine now. i'm thrilled to get some feedback, as i have been wondering if any gim2 friends benefited from the bugs.

now start healing everybody around you! just be sure to explain that it takes a month or two for the healing to kick in. i often forget to include that in my preaching.

cup of kefir per day, one capsule of bacillus coagulans per day. easy money :)
 

Voodoo

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bugs -- that is GREAT. spreading that message/healing those around me is a primary goal of mine now. i'm thrilled to get some feedback, as i have been wondering if any gim2 friends benefited from the bugs.

now start healing everybody around you! just be sure to explain that it takes a month or two for the healing to kick in. i often forget to include that in my preaching.

cup of kefir per day, one capsule of bacillus coagulans per day. easy money :)

So, really ole Klaus is right, we really should eat the bugs... Just a lot smaller than the ones he pushes.

Anyway, it looks like Phoenix is really the canary in the coal mine for this market. BOTH prices and rents are coming down now. He really hits the corporate land lords/investors hard and he is right. They are not gonna buy everything up after the crash. They are just greedy lemmings with a big pocketbook and will look to sell in the crash with everyone else. He also notes that the company tracking evictions Stopped publishing data right after a meeting at the white house.

 

EO 11110

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saw some stats on cnbc yesterday --- national prices have already fallen. asking prices too -

expect this to only get worse. the market is still seized up because sellers are still in fantasy land and normalization of interest rates are reducing buyers' spending power

just as important is the lack of volume. millions of jobs are tied to volume, regardless of price
 

BackwardsEngineeer

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EO,
You are right on top of it... I've never experienced a shift this dramatic. It's like someone shut off the spigot. Buyers still nosing around but sellers are staunch on their position. Its like a huge mexican stand off... regardless the sellers are going to blink first and grab whatever deals are left...

Sitting outside a home as I type waiting on a contractor to help clear some repair for a cl-100, first time I've actually had to do this in 2 1/2 years.. Repair requests, and price negotiations are back in vogue...
 

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The scorp himself mentioned his handlers a while back... I think we hit a nerve, and he was instructed to use the nuclear option.

BTW, thanks EO, love them bugs.. changing my world

I wonder what the nerve was... I really like digging in.... Hit it again.

We had a surge just before/after school starts which is fairly typical and then almost nothing. Heard some guy selling sheds say they also just went to nearly nothing.

It amazes me that a Country with 300 million individuals, all with their own seeming ability to think for themselves, all end up doing almost the exact same things at the same time. How the eff does that work?
 

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In that old thread I posted about my condo and sales prices anecdotal info. Huge price drops in SoCal since April-May timeframe which was the absolute frothy top of the bubble. Price drops of $80k+ for ~1000sqft condos. Was peaking $725k now selling $650k and lower.

I have a pulse on some Nevada and Tennesee markets and the real estate is slowly shifting to buyers market. Have been looking to buy in either of those since over a year ago.

Demand destruction from high energy is one thing but demand destruction due to high rates seems to be even more foreboding. 2009 redux? Sensing a lot of fear.
 

Voodoo

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In that old thread I posted about my condo and sales prices anecdotal info. Huge price drops in SoCal since April-May timeframe which was the absolute frothy top of the bubble. Price drops of $80k+ for ~1000sqft condos. Was peaking $725k now selling $650k and lower.

I have a pulse on some Nevada and Tennesee markets and the real estate is slowly shifting to buyers market. Have been looking to buy in either of those since over a year ago.

Demand destruction from high energy is one thing but demand destruction due to high rates seems to be even more foreboding. 2009 redux? Sensing a lot of fear.

You should also look at the most price sensitive type of house in the market, these show the changes first. In our small community I think it is large older two-story houses. We have a relatively large supply and they have the least amount of demand because they are costly to heat/cool and no one likes the stairs.

I imagine other markets it might be condos, or 2nd home vacation properties, or whatever.
 

EchelonPL

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I’m a newb when it comes to real estate. Have yet to buy a second property but been looking a lot. Stock portfolio is hurting me and I’ve been undisciplined in that regard. The same is likely for many other people. Less digits in stock accounts = less home to buy and the cycle is reinforcing and it feeds back in on itself. People felt the money printing high and now the pain comes?
 

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We bought our out of State place right before the peak...lol. Oh well, I ain't selling it so it doesn't matter that much. I needed to have my back up plan ready to eventually leave Commiefornia. Im still all drugged out on California wages though....mmmmm.....but its harder and harder to stomach living in this alt left assault liberal bubble.
 

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We bought our out of State place right before the peak...lol. Oh well, I ain't selling it so it doesn't matter that much. I needed to have my back up plan ready to eventually leave Commiefornia. Im still all drugged out on California wages though....mmmmm.....but its harder and harder to stomach living in this liberal bubble.
Silver,
Be careful, withdrawal can be a b*tch.... reality what a concept!
 

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Just hung up with a buyer struggling to get into a deal... so thought I'd updates rates

Rates 9:13:22.png
 

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Those jumbo rates Still make no sense... Also what is a 7/6 ARM? Is that fixed for 6 years and then adjustable but what is the difference from a 15/6. Either way probably a bad idea but I'm sure buyers are flocking there because it's the cheapest.
 

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Fixed for 7 years... max increase for the remainder of 6%... so 10.625%...
 

EO 11110

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looks like july 2022 was the top of the zirp insanity housing bubble. median price down about 25k since then

1663271096190.png
 

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I've been traveling so I hope you all weren't talking about me. (;>)

I'm still not seeing lower prices.

Zillow says my house increased 3% in the last month alone. So that is my experience.

These higher interest rates for a year now have not resulted in lower prices. So I have been right there. Sure, they might eventually, but with the shortage of housing prices will still go higher eventually eventually. I mean Congress just passed the $1Trillion inflation reduction act so I think there is a floor under asset prices.

As for median home price data well the data is accurate but its misleading. It just means that more lower priced homes are selling that higher priced homes. Its not controlled for "product mix." That is why you see the fictional median price going down but you don't see actual home prices going down.

But I will agree that mortgage rates above 6% will eventually slow the housing market. Its already slowed. Its just that prices are not dropping.
 

EO 11110

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These higher interest rates for a year now have not resulted in lower prices. So I have been right there.
see chart just above your post -- median price is down 25k. you are fighting a losing battle. falling prices are already happening and they will fall more as more sellers confront reality

too, volume is a leading indicator -- and it is down big
 

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I've been traveling so I hope you all weren't talking about me. (;>)

I'm still not seeing lower prices.

Zillow says my house increased 3% in the last month alone. So that is my experience.

These higher interest rates for a year now have not resulted in lower prices. So I have been right there. Sure, they might eventually, but with the shortage of housing prices will still go higher eventually eventually. I mean Congress just passed the $1Trillion inflation reduction act so I think there is a floor under asset prices.

As for median home price data well the data is accurate but its misleading. It just means that more lower priced homes are selling that higher priced homes. Its not controlled for "product mix." That is why you see the fictional median price going down but you don't see actual home prices going down.

But I will agree that mortgage rates above 6% will eventually slow the housing market. Its already slowed. Its just that prices are not dropping.

Just a matter of time and location to some extent. Some areas are certainly worse than others.
 

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Fiat,
I continue to be impressed with your ability to hang tight with both hands to those rose colored glasses. Real estate moves in waves, for years high price conversations centered on LA, SF, NY and more recently SEA and VAN. So the rest of the nation sat and scoffed at the possibility of high prices coming to their neck of the woods. 2020 onward has driven all markets near record levels simultaneously and it has been quite a ride. A unique combination of events caused the rise, low rates, home bound families and death as a real possibility. Buyers just said "screw it to saving for the future" in unison, bid it to win it and bought sight unseen... Enough time has passed and inflation has set in so that many of those buyers are cash strapped and in remorse. We already have 6 people lined up to list two months prior to their two year holding, thinking they might be able to still cash in. We have strongly advised them to sell NOW, get what you can and pay the vig. No dice, we have those same roses glasses here... Four are in on 10% or less down, currently up 22 - 31%, adding in closing and sale costs they might escape at a 20 - 23% gain.

What I cannot fully describe is the change in attitude of both buyers and sellers. Sellers have been lulled into belief of a golden path bull market. They are indifferent to the market drivers, knowledgeable in all things and expect multiple offers and no repairs or costs..

Buyers are ready to ponce, they want property but on their terms. Best place, best price, perfect places or priced below wholesale...

Which is why I called it a mexican stand off, and its coming to your market too!
 

Voodoo

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I Alledgedly just threw a stat out that 50% of new mortgages are going ARM's. I'm predicted that but still those people are gonna be in trouble. Also the 7/6 ARM was fixed 7 years but the 6 was just that it adjusts every 6 months afterwards. There is another set of numbers hidden somewhere like a 2/2/5 that dictates the max changes to the rate.

I would possibly consider the 15/6 ARM and just pay it off like a 15 year loan. A lot can happen in 15 years.
 

Voodoo

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Hey VD,
Called that lender, after 7 years rate can fluctuate 2% per year, up to a 6% max...

Thanks, but that is a separate number that just happens to be the same. Or at least that was the info from a large online lender. That was probably a 7/6 ARM with a 3/2/6.

 

EO 11110

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dramatic increase in the number of sellers reducing their asking price

1663372960872.png


1663372594512.png
 

EO 11110

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volume of sales is ugly

1663372850835.png


1663372877482.png


1663372899532.png
 

EO 11110

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frbny is allegedly reducing their role in manipulating mortgages lower and houses prices higher



The Fed Stopped Buying MBS Today.​


by Wolf Richter • Sep 16, 2022 • 148 Comments



The purpose of MBS purchases was to repress mortgage rates and inflate home prices. That process has already started to reverse.

By Wolf Richter for WOLF STREET.​

A date for history: Today, September 15, the Fed stopped buying mortgage-backed securities altogether. It had been tapering its purchases since late last year. Since June, when the phase-in of QT started, it still purchased MBS to replace some of the pass-through principal payments from mortgage payoffs and mortgage payments that reduced the balance of its MBS faster than the cap of $17.5 billion. The idea was to keep the run-off of MBS within the cap of $17.5 billion in June, July, and August. But this circus is finally over.
On today’s release of scheduled purchases by the New York Fed, there were zero MBS purchases scheduled:
US-Fed-Balance-sheet-2022-09-15-MBS-schedule.png

The Fed’s final trade in MBS.​

Yesterday, September 14, the Fed conducted its final purchase of MBS. The Fed bought $387 million in MBS in the To Be Announced (TBA) market, which is a minuscule amount by the Fed’s standards. It went out with a whimper, so to speak.

This is a screenshot of the trade that the New York Fed posted on its website. I underlined the operation date (Sep 14) and the settlement date (Oct 20):
US-Fed-Balance-sheet-2022-09-15-MBS-trade.png

Trades in the TBA market settle after one to three months. As you can see in the image of the trade info above, this particular trade will settle on October 20.
The Fed books these trades when they settle. So, it will book this trade on October 20, which is a Thursday. Its weekly balance sheets are always as of Wednesday evening, and are published on Thursday. This trade will show up on the next balance sheet after October 20, which is the balance sheet to be released on October 27.
So halleluiah, the balance sheet on October 27 will show the final purchases of MBS. And then it’s over.

A trickle of trades haven’t settled yet.​

The MBS that were purchased over the past two months will still trickle into the weekly balance sheet until October 27.
This includes a batch of MBS trades that the Fed conducted on July 25 and that settled on September 14, and that showed up on today’s balance sheet. Here is one of the trades that settled yesterday and was included today:
US-Fed-Balance-sheet-2022-09-15-MBS-trade-settlement.png

In total, $9.2 billion in MBS trades showed up on the balance sheet today. It is these trades, when they settle, that cause the balance of MBS to rise in the jagged manner.
MBS come off the balance sheet mostly through pass-through principal payments. When the underlying mortgages are paid off because a home is sold or a mortgage is refinanced, or when regular mortgage payments are made, the principal portion is forwarded by the mortgage servicer (such as your bank) to the entity that securitized the mortgage (such as Fannie Mae), which then forwards those principal payments to the holders of the MBS (such as the Fed).
The book value of the MBS shrinks with each pass-through principal payment. This reduces the amount of MBS on the Fed’s balance sheet.
These pass-through principal payments are uneven and unpredictable, and do not match the purchases in the TBA market. So the MBS balances form this jagged line of increases when TBA purchases settle, and the decreases when the pass-through-principal payments come off.
The upticks are the purchases from one to three months ago, when the Fed was still phasing in QT and was still purchasing MBS to replace pass-through principal payments. The downticks are the pass-through principal payments. Sometimes both coincide, and the net moves are smaller:
US-Fed-Balance-sheet-2022-09-15-mbs-.png

The last time the Fed did QT Nov 2017 – Feb 2020.

During the last episode of QT, the Fed shed MBS from November 2017 through February 2020. The chart below shows this phase of the MBS reduction. During the phase-in, it took about three months before the first declines became recognizable. QT back then was much slower, and the phase in was much longer, than in the current era of QT.
Note how the upticks essentially vanished as the Fed bought fewer or no MBS to maintain the cap of the runoff, and the line smoothened out on the way down:
US-Fed-Balance-sheet-2022-09-15-MBS-QT_2017_2020.png

Going to zero?

Going forward, after October 27, 2022, after the last MBS purchases have shown up, the upticks will disappear, and the line will smoothen as it heads down. But this time, the decline will be steeper and faster.
The Fed has said many times over the years that it wants to get rid of its MBS entirely, and that it wants only Treasury securities as assets. So if everything goes according to plan, the MBS balances will go to zero. And this might require that the Fed starts selling MBS outright later in the process to supplement the pass-through principal payments. The Fed has already put this option on the table.
The entire episode of MBS on the Fed’s balance sheet started in late 2008, when the Fed for the first time started buying MBS as part of QE-1. By the peak in April, 2022, the Fed had $2.74 trillion in MBS on its balance sheet.
The purpose of MBS purchases was to repress mortgage rates and inflate home prices. That process has already started to reverse.
US-Fed-Balance-sheet-2022-09-15-MBS-long.png
 

Fiat Metaler

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Fiat,
I continue to be impressed with your ability to hang tight with both hands to those rose colored glasses.

Well allow me to correct a few mis-impressions.

First, i'm just reporting what I see. I'm up every month since I bought in Dec. 2020. Another 3% this year. Now, I bought in an area where white flight is moving to. I chose well, and I was ahead of the curve. I don't pretend my results are typical.

Second, I'm mostly looking in the rear view mirror. I'm not seeing price declines. I've seen articles for months and months predicting price declines but they are not coming. Are you seeing price declines at the grocery car or auto dealer? Why would you expect price declines in homes then? I don't know what is going to happen, I'm just skeptical that price declines are coming. I have two reasons for this - the Fed can't stomach these high rates, nor can most banks. Banks generally are more profitable (net interest margin) when rates are higher but we are in a recession and any excess profits are eaten up by credit losses and something called CECL (basically allowance for bad debt). I just think the balance of probabilities lies with steady or higher prices. If the MSM were honest, we would see articles about the stubborn persistence of high RE prices despite interest rates doubling and the economy tanking during the Biden administration. The MSM is trying to tank the RE market for more than a year but have failed.

My personal situation is I need to relocate to another market, and my two years is up in December. I'm not going to be able to sell sooner for personal reasons regardless. But in weighing whether and when to sell, it dawns on me that replacement housing is pretty damn expensive too, and interest rates are more than double than when I bought. For the same mortgage payment, I'm going to get about half as much house. So a lot of folks are not selling. That is constraining an already tight market which puts a floor under prices. This isn't like 2008 when people bought multiple houses on spec and mailed the keys back to the bank. You are not seeing the mass layoffs and foreclosures (yet). If they sell now there is nowhere for them to go. So don't credit me with any particular courage regarding holding tight. My situation is that I cant sell yet, and even if I did then where would I go? Still, I'm up more than 50% in less than 2 years, so if some small correction comes I'm still way ahead.
 

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Fiat,
Thanks for expanding and fully detailing the mexican stand off I mentioned above. The difference between us is that you're betting it breaks to the upside and I'm certain it doesn't. Just that simple, you believe in buyers getting less and I'm seeing them gaining everyday.

My own situation is similar to yours, bought Jan 2021, currently up almost 60%. Right house, right view at the right time... so if given my druthers, would love to see it breakout to the upside.... who is going to push it higher?
 

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in the next 1-2 years, it depends on a few things.

I think there is a floor under prices
If we lose a ton of jobs, then that might hurt prices. So far that hasn't happened and we've been in a recession now for a while, despite what the MSM and govt tell you. Inflation may make it worse. We shall see.

On the other hand, I don't think rates will stay this high for too long. If we see rates come down, then buying pressure will increase.

Also, the current slowing sales doesn't mean demand is being satisfied. Its just being more patient.

A year ago I was selling another house. I rented one of those construction dumpsters to clear it out. There were about 10 houses with dumpsters in my neighborhood. Everyone else was remodeling, updating, etc. It doesn't make sense to move but they want to splurge and improve their 15-year old houses with new finishes. Gets the house ready for resale too.

If the inflation gets much worse, and if the rate environment stays this high, it will cap prices. It would take a lot to see significant price reductions imho though.

Comparing to 2006-8, we have a housing shortage, not a glut. There is a labor shortage, not a set up for mass layoffs.

I could be wrong, I call it like I see it.

Happy to have folks poke holes in my argument; its how we all learn.

I will concede that rates have gone higher, and stayed higher, than I expected. I was wrong there. Even so, prices haven't fallen.
 

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please explain what a "seasonally adjusted annual rate" means. How does one calculate that.

NYFed MBS purchases are secondary market. Fannie and Fred buy them in the primary market. That is key. Primary market means they buy from the banks who package up the loans, like an IPO. Secondary market means resale on the bond market. Lack of demand in the secondary market just impacts price. Lack of demand in the primary market would shut down the housing market.
 

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Are you seeing price declines at the grocery car or auto dealer?

One big difference here. Those are all NEW goods and are generally price on costs. The housing market is almost All used or secondary market pricing based on supply and demand. Even with new homes in the market the cost to build is not as important, it just determines how much profit the builder might receive and ultimately how many new homes get built.
 

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Comparing to 2006-8, we have a housing shortage, not a glut.

I could be wrong, I call it like I see it.

Happy to have folks poke holes in my argument; its how we all learn.

There is no housing shortage. Not one place that puts out that info shows any of their work. The study I read on our local market was just crap using the typical last few years and projecting steady growth. These people are funded by places like the NAR which make a shit ton of money selling homes.

We have major demographic & economic trends Against housing right now. 1.) Just made a 5,000 year low in interest rates, do you really think that's getting better soon? 2.) Boomers are getting older 3.) Pandemic / jab die off, regardless of reason we are seeing WAAAY out of normal excess deaths 4.) Few births

Then think of the other things going against housing... How many second homes and Air B & B places out there? Economic recession means people dumb these as no longer affordable. Energy costs are going to soar. Also goes to affordability and the trend towards McMansions. Now, I know that the local Mexican population is really good about this as they pack waaay too many people into a small house. But we have some giant old homes that are hardly used. Just looked at a giant 5,000 sf home built <1900 with at least 4 br, 4 baths. Selling for like $120,000. Huge old think in rough shape but just one couple living there. That is not efficient housing especially energy wise. So it could hold waay more people living in it or it will just be abandon.

I just think we need to see at least one generation come through thinking housing is the worst investment ever before I get excited about buying investment RE. And I'll probably be too old to care by then.
 

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please explain what a "seasonally adjusted annual rate" means. How does one calculate that.

NYFed MBS purchases are secondary market. Fannie and Fred buy them in the primary market. That is key. Primary market means they buy from the banks who package up the loans, like an IPO. Secondary market means resale on the bond market. Lack of demand in the secondary market just impacts price. Lack of demand in the primary market would shut down the housing market.

Well sure. But if banks find they can't sell to the government then they put on the brakes and don't make loans. There is no way they want to hold those things for 30 years. At least all the large banks.

Seasonally adjusted annual rate is pretty straight forward. If the price of something is up 1% in a month then you multiply by 12 and would have a 12% adj annual rate.
 

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Well sure. But if banks find they can't sell to the government then they put on the brakes and don't make loans. There is no way they want to hold those things for 30 years. At least all the large banks.

Seasonally adjusted annual rate is pretty straight forward. If the price of something is up 1% in a month then you multiply by 12 and would have a 12% adj annual rate.
Banks sell to Fannie and Freddie which are basically the government. I agree with you that Fannie and Freddie buying is critical. But NY Fed buying is almost irrelevant.
 

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One big difference here. Those are all NEW goods and are generally price on costs. The housing market is almost All used or secondary market pricing based on supply and demand. Even with new homes in the market the cost to build is not as important, it just determines how much profit the builder might receive and ultimately how many new homes get built.

I'll disagree with you slightly.

You are right that new is a fraction of resale. But the prices of new are hugely influential.

The price of new homes is anywhere from 20%-50% higher than resale. It acts as both a cieling and magnet on used home prices. Its an alternative.