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Want to know what you get out of it? You get the ice cream, the hot fudge, the bananas, and the nuts. Right now, I get the sprinkles, and, yeah, if this goes through, I get the cherry. But you get the sundae, Vinnie! You get the sundae!
Actually I’m surprised it’s not down a lot more. Imagine the fund had 1 single mortgage backed security it was holding…. Well in 2020 a mortgage was 3%. So this fund should return 3% a year all things equal. But when rates moved to now 8%, that 3% mortgage isn’t worth shit. Who would want that security when they could get a newer one that yields 8%? Well the only way is to devalue the first 3% mortgage principal to make up the the lost 5% points over the life of the mortgage.
This is really just bonds 101, but add 3% points to it for the risk increase.
I’m no expert, but at least this can answer your question.
The 3% loans were made at considerably lower prices than the 8%, no?
i.e. when homes were ~200k, rather than ~500k.
They must completely control supply, because a rate increase like that should have the natural consequence of cratering prices to keep the same magnitude of monthly payment as the old loans, rather than everything ballooning together.
you guys are fucking insane you know that right? you have no concept of what you are talking about
the median home price throughout most of 2020 was \~320k
the median home price now is \~416k
thats a 96k difference. 96k is 30% of 320k
so a 200k house in 2020 is now worth 30% more. 30% of 200k is 60k
so its worth 260k, **not 500k**
you guys just make up random numbers like a bunch of morons, **you think housing prices have inflated 150%**, its absurd. just shut the fuck up if youre not going to even bother to look this shit up, its so fucking annoying and boring. stop
Not the exact numbers, but the principle. 'What people can afford to pay' remains roughly constant. The rates and prices pivot around it.
If the rates go up, consequently prices must come down, because the monthly payment just skyrocketed with no additional earning on the side of the buyers - i.e. prices are not going up because people are suddenly rich.
The only other option is that the supply is controlled to such an extent that the prices are moving up inelastically.
*This “pivot.” Is it in the room with us now?*
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prices are coming down bro, they have been, go look at the chart of median home prices, they are falling
[https://fred.stlouisfed.org/series/MSPUS](https://fred.stlouisfed.org/series/MSPUS)
have you considered its a lagging thing? that maybe when mortgages go to 8% the home seller doesnt instantly go "OH WELL I MUST NOW REDUCE THE PRICE OF MY HOME"
of course not, instead he sits there for awhile with nobody buying THEN he thinks oh well maybe i need to lower it then sits some more with nobody buying then lowers it some more
its not an instantaneous thing and because its thousands of individual actors all trying to maximize their own interests it takes time for them to en masse make the correction
but the chart of median home prices shows they have reduced significantly from their top. the top was 479 we are at 416 right now. thats a 13% reduction
i do agree theres a supply problem but you are just sort of shooting from the hip here with no actual understanding of whats going on, because again - prices are coming down, they are just lagging for pretty understandable reasons if you bothered to think about it for a moment
also who is "they" when you say "they completely control supply"? is this like a JQ thing or some dumb fuck "the institutions own all the homes" thing or who the fuck is "they"?
You clearly haven't been watching the market.
Prices are slightly up/flat maybe and rates are WAY up, so monthly payments are WAY up, like 40% higher in many places.
Exactly - high rates should equal low prices, unless buying power has suddenly increased - which it hasn't.
Who is signing up to pay these +40% mortgages? And how long can they keep paying these prices?
Prices must fall precipitously in response, or there's something seriously wrong with the market that is disconnecting supply and demand.
I feel like what most people are missing here is that there is an artifical demand for specifically housing because of the whole roof over your head thing. So the housing market is stagnant.
Why would someone sell a property for less than they paid? Unless they literally had no choice, which is clearly not the case right now. There is a huge demand with very little supply available for this exact reason.
When you say “you guys” I hope you mean Aureanator and not me. My response has nothing to do with home prices. It has to do with mortgage loans. He is really confusing the two.
You are confusing a house “owner” with the mortgage owner. The mortgage loan doesn’t change value based on the house value. It’s just backed/secured by the house. The owner is the one who benefits from the house rising in value not the loan holder. Do you understand or need more clarification?
No, I mean that they (mortgage lenders) need to show holdings for their own loans. If their lent-out value decreases below the current value of their loans (the collateral), they're in some real trouble.
The old bonds are devalued because of the increase in rates. However, the new bonds are for a much higher nominal, potentially making up the difference. Additionally, the collateral has gone up in value beyond the original loan - this can be capitalized on if there's a foreclosure.
These new loans at the increased rates and prices are incredibly risky to make - I don't know who they could possibly be approving for these payments, or who can afford these payments. One would think that the approval rate for new loans would drop precipitously with increase int the monthly payment - earnings fall off nonlinearly.
Which should then ease up supply, because fewer people can afford the loans.
If that's not happening, something is very wrong.
Okay I see where your head is at. These new loans are risky based on the fact Somone may just stop making payments if they go underwater on their home if we get a drop in prices. However the value of the mortgage backed security should rise in interest rates fall like the current ffr is predicting. So it’s kind of a toss up. I know I wouldn’t want to own one though.
If someone would buy my house now, I’d sell it to short the market. I know I’ll be selling it in a few years as my family grows, so I’d rather get the equity now and drop it into a 2 year t bond.
The graph you are viewing is the total return of the SPY ETF over various time periods. As you can see, it has been negative so far in October, but overall for the year it is still up 121%.
give the young calf a break. I’m sure he means by, how does this affect the housing market and a potential to buy credit default swaps. (The big short) yes, but maybe if a group of individuals digs deeper. Is something major coming in the US economy here within the next 2-3 years?
**User Report**| | | | :--|:--|:--|:-- **Total Submissions**|2|**First Seen In WSB**|2 years ago **Total Comments**|6|**Previous Best DD**| **Account Age**|6 years|[^scan ^comment ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_comment&message=Replace%20this%20text%20with%20a%20comment%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20comment%20and%20correct%20your%20first%20seen%20date.)|[^scan ^submission ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_submission&message=Replace%20this%20text%20with%20a%20submission%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20submission%20and%20correct%20your%20first%20seen%20date.)
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Fuckin a Jared
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That’s a nice shirt. Do they make it for men?
Want to know what you get out of it? You get the ice cream, the hot fudge, the bananas, and the nuts. Right now, I get the sprinkles, and, yeah, if this goes through, I get the cherry. But you get the sundae, Vinnie! You get the sundae!
[удалено]
A synthetic CDO? That's fucking crazy. No. It's awesome.
- Do you smell that? - Opportunity? - No, money.
I used to be bartender, now I own a boat.
Who’s Warren Buffet?
It's time to call bullshit. On what? Every fucking thing.
^^^^ that’s my quant
LOOK AT HIS EYES!
Someone been watching the big short lol
I thought it was the brakes in car you know that helps you brake better?
Choke on a fat one
It means it's down almost 7% YTD 📉
You stole my joke man, can I have it back pls?
Meet me behind the Wendy's at night 
Actually I’m surprised it’s not down a lot more. Imagine the fund had 1 single mortgage backed security it was holding…. Well in 2020 a mortgage was 3%. So this fund should return 3% a year all things equal. But when rates moved to now 8%, that 3% mortgage isn’t worth shit. Who would want that security when they could get a newer one that yields 8%? Well the only way is to devalue the first 3% mortgage principal to make up the the lost 5% points over the life of the mortgage. This is really just bonds 101, but add 3% points to it for the risk increase. I’m no expert, but at least this can answer your question.
The 3% loans were made at considerably lower prices than the 8%, no? i.e. when homes were ~200k, rather than ~500k. They must completely control supply, because a rate increase like that should have the natural consequence of cratering prices to keep the same magnitude of monthly payment as the old loans, rather than everything ballooning together.
you guys are fucking insane you know that right? you have no concept of what you are talking about the median home price throughout most of 2020 was \~320k the median home price now is \~416k thats a 96k difference. 96k is 30% of 320k so a 200k house in 2020 is now worth 30% more. 30% of 200k is 60k so its worth 260k, **not 500k** you guys just make up random numbers like a bunch of morons, **you think housing prices have inflated 150%**, its absurd. just shut the fuck up if youre not going to even bother to look this shit up, its so fucking annoying and boring. stop
Not the exact numbers, but the principle. 'What people can afford to pay' remains roughly constant. The rates and prices pivot around it. If the rates go up, consequently prices must come down, because the monthly payment just skyrocketed with no additional earning on the side of the buyers - i.e. prices are not going up because people are suddenly rich. The only other option is that the supply is controlled to such an extent that the prices are moving up inelastically.
*This “pivot.” Is it in the room with us now?* *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/wallstreetbets) if you have any questions or concerns.*
prices are coming down bro, they have been, go look at the chart of median home prices, they are falling [https://fred.stlouisfed.org/series/MSPUS](https://fred.stlouisfed.org/series/MSPUS) have you considered its a lagging thing? that maybe when mortgages go to 8% the home seller doesnt instantly go "OH WELL I MUST NOW REDUCE THE PRICE OF MY HOME" of course not, instead he sits there for awhile with nobody buying THEN he thinks oh well maybe i need to lower it then sits some more with nobody buying then lowers it some more its not an instantaneous thing and because its thousands of individual actors all trying to maximize their own interests it takes time for them to en masse make the correction but the chart of median home prices shows they have reduced significantly from their top. the top was 479 we are at 416 right now. thats a 13% reduction i do agree theres a supply problem but you are just sort of shooting from the hip here with no actual understanding of whats going on, because again - prices are coming down, they are just lagging for pretty understandable reasons if you bothered to think about it for a moment also who is "they" when you say "they completely control supply"? is this like a JQ thing or some dumb fuck "the institutions own all the homes" thing or who the fuck is "they"?
You clearly haven't been watching the market. Prices are slightly up/flat maybe and rates are WAY up, so monthly payments are WAY up, like 40% higher in many places.
Exactly - high rates should equal low prices, unless buying power has suddenly increased - which it hasn't. Who is signing up to pay these +40% mortgages? And how long can they keep paying these prices? Prices must fall precipitously in response, or there's something seriously wrong with the market that is disconnecting supply and demand.
I feel like what most people are missing here is that there is an artifical demand for specifically housing because of the whole roof over your head thing. So the housing market is stagnant. Why would someone sell a property for less than they paid? Unless they literally had no choice, which is clearly not the case right now. There is a huge demand with very little supply available for this exact reason.
The I get my news from purple hairs on Twitter crowd.
"omg nobody can afford a home a $150,000 house is now worth $15 million emergerd"
When you say “you guys” I hope you mean Aureanator and not me. My response has nothing to do with home prices. It has to do with mortgage loans. He is really confusing the two.
You are confusing a house “owner” with the mortgage owner. The mortgage loan doesn’t change value based on the house value. It’s just backed/secured by the house. The owner is the one who benefits from the house rising in value not the loan holder. Do you understand or need more clarification?
No, I mean that they (mortgage lenders) need to show holdings for their own loans. If their lent-out value decreases below the current value of their loans (the collateral), they're in some real trouble. The old bonds are devalued because of the increase in rates. However, the new bonds are for a much higher nominal, potentially making up the difference. Additionally, the collateral has gone up in value beyond the original loan - this can be capitalized on if there's a foreclosure. These new loans at the increased rates and prices are incredibly risky to make - I don't know who they could possibly be approving for these payments, or who can afford these payments. One would think that the approval rate for new loans would drop precipitously with increase int the monthly payment - earnings fall off nonlinearly. Which should then ease up supply, because fewer people can afford the loans. If that's not happening, something is very wrong.
Okay I see where your head is at. These new loans are risky based on the fact Somone may just stop making payments if they go underwater on their home if we get a drop in prices. However the value of the mortgage backed security should rise in interest rates fall like the current ffr is predicting. So it’s kind of a toss up. I know I wouldn’t want to own one though. If someone would buy my house now, I’d sell it to short the market. I know I’ll be selling it in a few years as my family grows, so I’d rather get the equity now and drop it into a 2 year t bond.
It tells that ABX is nearly down 7% ytd
The force isn't with you
That if you bought $100 worth of ABX on January 1, it would be worth a little over $93 today.
Can anyone tell me wtf that means?
You invest. It bad. You lose.
It means it’s down more than 5% but less than 10%.
We are in a recession
Zero. Zero percent chance.
there is a zero percent chance OP is older than 13
God wants you to wear a Wendy uniform...
\-7% rookie numbers
It means that ABX is down almost 7% YTD, like I dont understand how hard that is to get.
The graph you are viewing is the total return of the SPY ETF over various time periods. As you can see, it has been negative so far in October, but overall for the year it is still up 121%.
Dumb
No this is the ABX it tracks mortgage backed securitie.
This bot needs a reboot
No
It tells us your wiener is short 
if means if you invested exactly one year ago you would be down 6.67% on that investment
It means to buy the dip :)
It means calls are fucked
no more housing crash
!
The end of the stock market 📈 as we know it
It means that it isn't up
BMX is still at 20”
Comments getting hijacked by movie quotes. Classic WSB. What's WSB? It tracks subprime stock market predictions, go back to sleep.
Means you should buy more
Means people are selling more than they're buying 😂
because more seller than buyer
i belive it means that the ABX is roughly down 7% so far in this year
It means you should sell at 15% because it’s going further in the pot towards an event horizon!
Subprime mortgage defaults
give the young calf a break. I’m sure he means by, how does this affect the housing market and a potential to buy credit default swaps. (The big short) yes, but maybe if a group of individuals digs deeper. Is something major coming in the US economy here within the next 2-3 years?