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foreclosures on the rise thread 2.0

Voodoo

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As for those corporate buyers the flippers are not doing well. Zillow could have succeeded but got greedy and ignored their own numbers. Opendoor looks headed for BK as the are losing money on 42% of purchases.


Edit: Added a Meet Kevin video that goes into their actual finances. Hint it ain't good.

 
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EO 11110

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cherry picking the hottest areas is not an appropriate argument for this thread. reminds me of the time i spent on a leftist forum

the debate is macro/national, not neighborhood
 

Voodoo

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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.

Explain markets like mine then with essentially NO new housing. Certainly almost no spec homes.
 

Voodoo

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cherry picking the hottest areas is not an appropriate argument for this thread. reminds me of the time i spent on a leftist forum

the debate is macro/national, not neighborhood

Not sure what neighborhood or article you are referencing here.??
 

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EO,
Its truly not unlike gim and the pm's over the last 11 years... we are in it to win it, all we need is for Au/Ag to follow suit, but so far they just havn't. Very difficult to be objective on your own investments, especially if its where you sleep at night and party by day. For many a lifetime of memories, raising kids and often get togethers with loved ones long gone.

I really have absolutely no issue with holding on to losing asset, be it earthen or precious. Provided that its not done under an illusion of something its not. Real estate has been a huge winner in several separate waves since the 1950's and it may well be again, but I don't see it in a 8 to 10 year window. Add 8 to 10 to many of us and we are well past our expiration date. So if you have enough jingle to make it outside of the equity in your home, cruise on brother.. many don't and it is their single biggest asset, totally needed for future living. That's where the rubber meets the road and clear thinking is required. Getting real value, especially in a short time frame is going to be increasingly difficult..
 
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Voodoo

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I had seen a really good Pie Chart I think from Howe & Strauss's The Fourth Turning. But I can't find it. It basically laid out the 4 generations (each ~20 years) and the good investments during each generation. The Fourth Turning is the only one where Real Estate is not included. It is also the only one where something like Gold/Commodities are king. I will try to find that graph.
 

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I haven't seen price declines in my area. But I can tell you Ive seen more houses for sale currently than any time I can remember before. Only seen one sell out of about 8 in my neighborhood.

I honestly can't imagine what someone buying right now is thinking.

Then again I've always said to buy when rates are high, then refinance when rates are low. Most people overpay by buying when rates are low. Low rate means "I can afford more price" means people are way overpaying.

With rates going up, a housing crash is inevitable.
 

Lancers32

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Just a matter of time and location to some extent. Some areas are certainly worse than others.
I don't know but there is a lot of new building near me constant so I would guess at some point there will be no shortage of supply. I doubt the veracity of prices on Zillow unless it is a sold for price. Some of the estimates I am seeing are just stupid high.
 

Voodoo

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I don't know but there is a lot of new building near me constant so I would guess at some point there will be no shortage of supply. I doubt the veracity of prices on Zillow unless it is a sold for price. Some of the estimates I am seeing are just stupid high.

It's all still a bit relevant but surprisingly most of the country follows the same trend at similar times. But if all of California decides to move to your town then it will boom while California goes Mad Max. Not going to happen but still emphasizes that there are underlying supports or multiplying problems in specific markets.
 

Lancers32

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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 can't package mortgages they will turn off the spigot but quick. Some areas might be an exception but wages are not keeping up with rising prices. Got the oil changed this morning at Toyota. 29K for a Corolla Hybrid? Seriously?
 

Lancers32

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It's all still a bit relevant but surprisingly most of the country follows the same trend at similar times. But if all of California decides to move to your town then it will boom while California goes Mad Max. Not going to happen but still emphasizes that there are underlying supports or multiplying problems in specific markets.
Lot of tech jobs and Northern transplants have been coming this way so there is demand but at some point the price for a home is too high. How much of your monthly net can you pay for mortgage and property taxes? I guess it's a new paradigm now but I was never comfortable over 25% NET.
 

Voodoo

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Banks can't package mortgages they will turn off the spigot but quick. Some areas might be an exception but wages are not keeping up with rising prices. Got the oil changed this morning at Toyota. 29K for a Corolla Hybrid? Seriously?

Oh yeah they will. I've already seen many. The Big Banks don't hold anything on their books that I've seen so they will go full stop. The small local banks, however, many actually hold loans on their balance sheet old school style. They still seem to be doing some loans but are slow rolling their customers and not real anxious to do new business right now.
 

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It's all still a bit relevant but surprisingly most of the country follows the same trend at similar times. But if all of California decides to move to your town then it will boom while California goes Mad Max. Not going to happen but still emphasizes that there are underlying supports or multiplying problems in specific markets.
Ok VD,
Say that happens and God forbid CA desends on your market, making Omaha a truly wild kingdom... As an appraiser do you allow lock step increases as big money floods your shores.. It is THE question facing appraisers across the land. Most just roll it in and party on, but what would you do? You've done three similars in an area over six months at say 350k, then one hits 425k, another 465k and month later 495k.. did your market really increase almost 40%? That to me is the issue, the 350k was earned growth, but the rest could just be fluff. If the left coasters decide Omaha isn't wild, where are those similars going? More important, how do you defend that 495k appraisal back to the lender, who is pretty PO'd?
 

Voodoo

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Ok VD,
Say that happens and God forbid CA desends on your market, making Omaha a truly wild kingdom... As an appraiser do you allow lock step increases as big money floods your shores.. It is THE question facing appraisers across the land. Most just roll it in and party on, but what would you do? You've done three similars in an area over six months at say 350k, then one hits 425k, another 465k and month later 495k.. did your market really increase almost 40%? That to me is the issue, the 350k was earned growth, but the rest could just be fluff. If the left coasters decide Omaha isn't wild, where are those similars going? More important, how do you defend that 495k appraisal back to the lender, who is pretty PO'd?

An appraisal does NOT look into the future AT All. It's a value as of that day. So if all of California wants to move to Omaha then the demand/supply is going to be whacked and should be easy to show. All I have to do is show them the numbers, put in the comparable data and some regression for my adjustments and there is nothing else to show. I usually put in a few places my market analysis and I clearly state that Q2 this year is likely to form a top. But not 1/1000 will actually read that statement.

In my experience everyone is more than happy at those huge numbers. It is difficult for appraisers or anyone to really accurately reflect a market that really is broken and because of the slowness of Real Estate we would probably be "low" just because of a data lag more than anything else. It's kinda of like trying to value Gamestop during the short squeeze by trying to do fundamental analysis. That ain't gonna work. Though we all know later on they will love to come back and somehow blame the short squeeze on some sap doing fundamental analysis.

It's all a pretty silly system... Because of course it was created Of, By, and For the bankers.
 

Lancers32

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Oh yeah they will. I've already seen many. The Big Banks don't hold anything on their books that I've seen so they will go full stop. The small local banks, however, many actually hold loans on their balance sheet old school style. They still seem to be doing some loans but are slow rolling their customers and not real anxious to do new business right now.
Yeah I had a loan with a regional bank Suntrust now Truist and while I paid it off in 6 years so I don't know what they would have done they did hold on to the mortgage.
 

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VD,
Thanks you said exactly what I was hoping you would say...

That is that at this phase of the market, with this topping and appraisals on a delay, the numbers could well reflect the peak as opposed to the nose dive... meaning now is the hardest to correctly assess. Slow build up establish a value reflected in comps, but slashing prices are not accounted for..
posted yesterday then removed all brand new, all complete by 9/30, all high numbers justified by comps..

edit to add.. all of these homes would have been less than $550k in 2019!
Screen Shot 2022-09-19 at 6.19.33 PM.png
 

EO 11110

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Not sure what neighborhood or article you are referencing here.??
the poster trying to defend an obvious losing position/prediction -- by moving the goalposts
 
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BackwardsEngineeer

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the poster trying to defend a losing position -- by moving the goalposts
Ok EO, just spit tea all over my monitor... that was funny.

Honestly have been wondering if said poster is paid opposition? He seems very intelligent, so he either has an agenda or is too dependent on a positive outcome.. been there wishing and hoping for something to go up. Really like no debt and a low overhead a whole lot better, not as fancy but much more piece of mind..
 

EO 11110

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Ok EO, just spit tea all over my monitor... that was funny.

Honestly have been wondering if said poster is paid opposition? He seems very intelligent, so he either has an agenda or is too dependent on a positive outcome.. been there wishing and hoping for something to go up. Really like no debt and a low overhead a whole lot better, not as fancy but much more piece of mind..
spot on. and low/no debt people will have their chances at the end of this thing. the high interest rates are a blessing for those in that situation. can buy for cash or take on some high interest rate debt and refi when the fed cheeses and heads back to zirp. i'm looking forward to doing some shopping

i hope the wrong way bettor is just late -- the other possibilities are less dignified
 

Voodoo

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the poster trying to defend an obvious losing position/prediction -- by moving the goalposts

I just realized I must have said poster on ignore and didn't even see the post.... Like a tree falling in the woods, I didn't hear a thing.
 

Voodoo

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VD,
Thanks you said exactly what I was hoping you would say...

That is that at this phase of the market, with this topping and appraisals on a delay, the numbers could well reflect the peak as opposed to the nose dive... meaning now is the hardest to correctly assess. Slow build up establish a value reflected in comps, but slashing prices are not accounted for..
posted yesterday then removed all brand new, all complete by 9/30, all high numbers justified by comps..

edit to add.. all of these homes would have been less than $550k in 2019!
View attachment 273679

You have to think much more like a stock trader. Look at both sides with a Bid / Ask spread. However, in Real Estate we have great book of depth on the Ask side Only. You can see all the ask/offers all day long but the Bid side is hidden. In a bubble (analogous to my Gamestop short squeeze) buyers just slap that ask and could care less about the price. In an actual short squeeze they are Forced to slap that ask regardless of price. In a declining market you might have a seller who just wants to hit the bid, but again that is hard to know because it's not available. You run the risk of not cutting enough to find a bid. Hence, in a crash you go No Bid. That is where short sellers save the day in stocks because they provide a bid to lock in profits.

Zillow or any other RE site could help solve this problem but hey, don't steal my million dollar idea.
 

Voodoo

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VD,
Thanks you said exactly what I was hoping you would say...

That is that at this phase of the market, with this topping and appraisals on a delay, the numbers could well reflect the peak as opposed to the nose dive... meaning now is the hardest to correctly assess. Slow build up establish a value reflected in comps, but slashing prices are not accounted for..
posted yesterday then removed all brand new, all complete by 9/30, all high numbers justified by comps..

edit to add.. all of these homes would have been less than $550k in 2019!
View attachment 273679

One last thing to keep in mind. The market value of those homes is not simply the sales price. This is the BIGGEST problem in economics. Prices is NOT equal to value. Appraisers are supposed to adjust to cash equivalent pricing. So whether Option 1 or 2 is selected the market value of the house is the same. I don't do those calcs much, as i said we have like no new construction, but the data can be hard to pry out of builders and lenders. Likely Option 1 is closer to the value. Homes using option 2 should show an adjustment.
 

Fiat Metaler

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I had seen a really good Pie Chart I think from Howe & Strauss's The Fourth Turning. But I can't find it. It basically laid out the 4 generations (each ~20 years) and the good investments during each generation. The Fourth Turning is the only one where Real Estate is not included. It is also the only one where something like Gold/Commodities are king. I will try to find that graph.

People have been talking about the 4th turning for about 20 years. As a predictive tool, that book is worthless.
 

Fiat Metaler

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You have to think much more like a stock trader. Look at both sides with a Bid / Ask spread. However, in Real Estate we have great book of depth on the Ask side Only. You can see all the ask/offers all day long but the Bid side is hidden. In a bubble (analogous to my Gamestop short squeeze) buyers just slap that ask and could care less about the price. In an actual short squeeze they are Forced to slap that ask regardless of price. In a declining market you might have a seller who just wants to hit the bid, but again that is hard to know because it's not available. You run the risk of not cutting enough to find a bid. Hence, in a crash you go No Bid. That is where short sellers save the day in stocks because they provide a bid to lock in profits.


This is a good analogy. I think its interesting to compare the real estate market to stocks and think about how its alike and different.

You correctly note that you can see the ask book easily but the bid is hidden mostly or only seen through a rear view mirror (sales data).

At different points in the past 2 years we had a bull market where buyers just hit the ask.

But the real estate market is different from the stock market in two important ways.

First, most homes are owner occupied and have fixed rate financing. So even if prices go up, people don't take profits because they need somewhere to live. Even if rates go up, people don't sell because they are financed with a fixed rate and not affected by the rate increase. This is largely true for investor properties as well. So the takeaway is market changes have a muted impact on the stock of homes available for sale.

Second, homes cost more, the transaction costs are higher, and a transaction takes more time. So there are fewer trades and less liquidity.

Both of these factors create a lot of inertia in prices. So we've seen rates double but prices continue to rise, albeit more slowly. You only see short squeezes rarely, when people are speculating and holding multiple homes or are unable to pay the carrying costs due to job loss - both occurred 2006-2008. I dont' expect either in the near future - few people other than the Blackrocks have been speculating with multiple homes (it was a lot easier to jump into tech stocks or bitcoin) and there is a labor shortage.

You also need to put 2006-8 in perspective. Until then, housing prices basically didn't go down except for a few isolated cases. So banks had modest reserves. Historically people defaulted on everything else but paid their house. This time, because the recession hit so suddenly and deeply, because job losses were so profound, and because housing prices fell so deep so quickly, people just mailed their keys to the banks. So the housing market suffered a double whammy with huge job losses at a time of overleveraged speculation, which fueled the banking crisis and accelerated the housing crash as banks liquidated houses and loans.

As an aside, some people were talking about banking. True banks can get funds cheaply to make loans, mostly from deposits. However, once they make a loan, the capital charge to keep it on its books is high (also known as the risk-weighting under Basel III), so they sell conforming loans to Fannie or Freddie. They are stuck keeping nonconforming loans, a lot of HELOCs and second mortgages, lot loans, and most things that are not conforming. That's why in 2007 they canceled undrawn HELOCs and took a bath on their lot loans. Those things went no-bid. And the folks who were not true banks, lending outfits that were funded by issuing debt in the market rather than taking deposits, those guys went out of business because they were unable to raise capital to stay in business.
 

Lancers32

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Back in 2007 the banks even cancelled credit cards and reduced available credit on open cards. Citi was a major culprit. Let's see if this occurs again in this cycle.
 

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Back in 2007 the banks even cancelled credit cards and reduced available credit on open cards. Citi was a major culprit. Let's see if this occurs again in this cycle.
yup. citi removed the rewards - so i stopped using it. that was their intent

now the cc offers in the mail have dropped at my house. almost daily to almost never...
 

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Fiat,
No matter how many words you use to describe the lipstick, its color, texture and ease of use... When its applied to something that oink's, with a curly tail and fly's all around... it's still a pig and lipstick can't change that..

The fact still remains pigs get fed, hogs get slaughtered. To be plain, in this example, pigs are one home out of debtors and hogs are large loan or multi house w/loan owners..
 

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Fiat,
No matter how many words you use to describe the lipstick, its color, texture and ease of use... When its applied to something that oink's, with a curly tail and fly's all around... it's still a pig and lipstick can't change that..

The fact still remains pigs get fed, hogs get slaughtered. To be plain, in this example, pigs are one home out of debtors and hogs are large loan or multi house w/loan owners..
lol.....and the vultures are circling
 

Voodoo

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People have been talking about the 4th turning for about 20 years. As a predictive tool, that book is worthless.

That book was in no way meant to be predictive... I also flipped through it last night and it was not in that book. They just generalized the generations and now even defining the dates is near impossible. People have screwed that up and I think have shortened them too much. The generations are marked by MAJOR events in life and we won't really know that till they happen. I would guess they should be well over 20 year generations now.
 

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As an aside, some people were talking about banking. True banks can get funds cheaply to make loans, mostly from deposits. However, once they make a loan, the capital charge to keep it on its books is high (also known as the risk-weighting under Basel III), so they sell conforming loans to Fannie or Freddie. They are stuck keeping nonconforming loans, a lot of HELOCs and second mortgages, lot loans, and most things that are not conforming. That's why in 2007 they canceled undrawn HELOCs and took a bath on their lot loans. Those things went no-bid. And the folks who were not true banks, lending outfits that were funded by issuing debt in the market rather than taking deposits, those guys went out of business because they were unable to raise capital to stay in business.

I'm not going to pretend to understand banking regs or Basel III... :sick

But the conforming first lean loans should be the LEAST risky mortgage loans. Those should be the ones they hold on the books. All of those others are riskier. However, they also are shorter terms and probably have higher interest rates which is really why the banks would look to hold those.
 

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Those nonconforming loans are more risky in some sense - lot loans are not owner occupied yet but are owned by builders and developers, and HELOCs are second lien position. But both are secured by land.

Basel III is complicated but the idea behind it is not. In the classic example, if you deposit $100 in the bank and there is a 10% capital requirement, then the bank can make 10X in loans, or $1,000. Basel III is a series of capital requirements, but there are different risk weightings depending on the asset. Conforming mortgages have a 50% risk weight, meaning they lower the leverage available for the bank to 2:1. Government bonds have a zero risk weight, so everybody load up on those. Thats not so controversial here, but in Europe a Greek or Italian bond has the same zero risk weight as a German bond, because these rules were forced on the entire world by the Bank for International Settlements. So the BIS took something that should not be controversial - capital requirements for banks - and inserted politics to achieve certain results.
 

Fiat Metaler

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That book was in no way meant to be predictive... I also flipped through it last night and it was not in that book.

The edition I read was all about 20 and 80 year cycles and gave specific historic events that corresponded to these cycles. You really have to stretch to pretend it wasn't intended to be predictive.
 

Voodoo

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Those nonconforming loans are more risky in some sense - lot loans are not owner occupied yet but are owned by builders and developers, and HELOCs are second lien position. But both are secured by land.

Basel III is complicated but the idea behind it is not. In the classic example, if you deposit $100 in the bank and there is a 10% capital requirement, then the bank can make 10X in loans, or $1,000. Basel III is a series of capital requirements, but there are different risk weightings depending on the asset. Conforming mortgages have a 50% risk weight, meaning they lower the leverage available for the bank to 2:1. Government bonds have a zero risk weight, so everybody load up on those. Thats not so controversial here, but in Europe a Greek or Italian bond has the same zero risk weight as a German bond, because these rules were forced on the entire world by the Bank for International Settlements. So the BIS took something that should not be controversial - capital requirements for banks - and inserted politics to achieve certain results.

Thanks for the info.

I spy the MAJOR assumption that will crash the system... Lol

Government bonds have a zero risk weight, so everybody load up on those. Thats not so controversial here

This also tells you why they are so Loathe to give your money back " if you deposit $100 in the bank and there is a 10% capital requirement, then the bank can make 10X in loans, or $1,000."
 

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The edition I read was all about 20 and 80 year cycles and gave specific historic events that corresponded to these cycles. You really have to stretch to pretend it wasn't intended to be predictive.

Well its predictive in the long-term... as in there will always be Four Generations and they will have similarities. But it's not predictive in that the Year 2027 will see the XYZ Generation be born. Because the dates and length of each generation are Not fixed lengths.
 

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Fiat,
No matter how many words you use to describe the lipstick, its color, texture and ease of use... When its applied to something that oink's, with a curly tail and fly's all around... it's still a pig and lipstick can't change that..

The fact still remains pigs get fed, hogs get slaughtered. To be plain, in this example, pigs are one home out of debtors and hogs are large loan or multi house w/loan owners..
Well I never told anyone to buy more than one house. I did buy my house with an 80/20 and a 10% Heloc. Is that what you mean by "large loan"?

And I'll disagree with you - I don't think price reductions are coming. Maybe in a few niche markets like Boise or Austin. And I'm up 50% unlevered (500% cash on cash) in 18 months so I have a pretty big cushion for a so called price reduction before it matters to me.
 

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The BIS is the head or high up of the WEF'ers and pretty much above the politics. They just use them as the smoke screen.
 

Voodoo

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Well I never told anyone to buy more than one house. I did buy my house with an 80/20 and a 10% Heloc. Is that what you mean by "large loan"?

And I'll disagree with you - I don't think price reductions are coming. Maybe in a few niche markets like Boise or Austin. And I'm up 50% unlevered (500% cash on cash) in 18 months so I have a pretty big cushion for a so called price reduction before it matters to me.

I'm up big on our house as we bought a Repo in crap condition in like 2012. But it's just a house to live in so I don't care about my return. Pretty close to paying it off now, so happy about that.
 

Fiat Metaler

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Thanks for the info.

I spy the MAJOR assumption that will crash the system... Lol

Government bonds have a zero risk weight, so everybody load up on those. Thats not so controversial here

This also tells you why they are so Loathe to give your money back " if you deposit $100 in the bank and there is a 10% capital requirement, then the bank can make 10X in loans, or $1,000."

cash and gold have a zero risk weight, so they can hold those and not have any additional capital. Those are on the left side of the balance sheet.

If they loan that cash or gold out, the loan is an asset that is also on the left side of the balance sheet. The risk weight of the loan depends on the type of loan. At some point, loan activity requires them to raise capital, which dilutes the profitability of the profits. But the reality is that most commercial banks are not that levered, and their loan book is roughly equal to their deposits, maybe as much as 1.5x. But not 10x like everyone assumes. I was discussing the risk weights because you see there is in effect a penalty for banks to hold residential mortgages or unsecured loans. Thats why they flip them to Fannie or Freddie as soon as they can.

CT-Basel2-5c0584a3c9e77c00016c567a
 

BackwardsEngineeer

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Well I never told anyone to buy more than one house. I did buy my house with an 80/20 and a 10% Heloc. Is that what you mean by "large loan"?

And I'll disagree with you - I don't think price reductions are coming. Maybe in a few niche markets like Boise or Austin. And I'm up 50% unlevered (500% cash on cash) in 18 months so I have a pretty big cushion for a so called price reduction before it matters to me.
Ok fiat i'll play..
What mls market are you in? What size home, age and style? I have access to a whole world of RE data and will gladly plug you in and see what it gives us... then I'll keep it up to date, for free! yes, just for you, i'll chart your market...
 

Voodoo

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I have access to a whole world of RE data and will gladly plug you in and see what it gives us

That's pricey...how did you manage to pull that off? Through a brokerage company? MLS fees are exorbitant.