Surprised I haven't seen this posted yet:

https://www.zerohedge.com/markets/trump-lauches-his-own-qe-directs-gses-purchase-200-billion-mortgage-bonds

Not surprising the government will recycle old failed policies. The logic appears to be that since home prices have become unaffordable, it only makes sense to do the exact same thing that made them unaffordable. I'm considering selling a decent chunk of my RE holdings so this may benefit me personally, but damn if it isn't stupid.

That's roughly 2% of the $9,000,000,000,000 MBS total.

Until recently, the Fed was letting $35B per month roll off the balance sheet.

This isn't a face shredding number - the more scary thing in that article is a 50 year mortgage. I think you'd be safer with a 15 year car note!

The things ppl want to have happen are detached from the reality of the consequences.

Would someone smarter than me about the mortgage market explain to me what this is supposed to achieve?

Paging Dr. Michael Burry. Please pick up the white courtesy phone.

fc2112 said:

---

Would someone smarter than me about the mortgage market explain to me what this is supposed to achieve?

---

Increases the supply of money pointed toward mortgage bonds which, academically, should lower mortgage financing rates.

Sims said:

---

That's roughly 2% of the $9,000,000,000,000 MBS total.

Until recently, the Fed was letting $35B per month roll off the balance sheet.

This isn't a face shredding number - the more scary thing in that article is a 50 year mortgage. I think you'd be safer with a 15 year car note!

---

The point isn't that it's a huge number…well it sorta is. $200b USED to be a whole lot. All the idiotic money printing we've done has made that number relatively small. Yes the 50 year mortgage is stupid and of course the answer is right there in the first lesson of economics: supply and demand. If a lender and borrower can come to a voluntary agreement on the terms of a 50 year mortgage, I see no problem with that.

The point of bringing this up is that the only policies govt won't try are the ones that will actually fix things. This example is like if you stuck a fork in an electrical socket and shocked yourself. Then you think, hmm what could I try next time…I know! Let's stick a fork in an electrical socket!

The theory is iirc that govt takes these loans off the books of the lending institutions and the lending institutions go out and approve more mortgages loans

One of the unintended consequences if the banks know they can make the loan and flip it to the govt then eventually the banks will disregard all lending standards as they re-loan that same money over and over

Sims said:

---

Increases the supply of money pointed toward mortgage bonds which, academically, should lower mortgage financing rates.

---

Yes, but you're leaving out an important part. If monthly payments are lower because interest rates come down, what effect would that have on the sale price? Hopefully I don't need to answer that…

MouthBQ98 said:

---

Supply. Supply is the problem. Adjust regulations such that smaller and lower cost homes are more available AND profitable to build and sell.

---

Correct. These are the real solutions that would actually work. And of course they are the ones govt will never try. And by "adjust" regulations, I mean slash them. Let free market supply and demand direct the housing market.

Helicopter Ben said:

---

Sims said:

---

That's roughly 2% of the $9,000,000,000,000 MBS total.

Until recently, the Fed was letting $35B per month roll off the balance sheet.

This isn't a face shredding number - the more scary thing in that article is a 50 year mortgage. I think you'd be safer with a 15 year car note!

---

The point isn't that it's a huge number…well it sorta is. $200b USED to be a whole lot. All the idiotic money printing we've done has made that number relatively small. Yes the 50 year mortgage is stupid and of course the answer is right there in the first lesson of economics: supply and demand. If a lender and borrower can come to a voluntary agreement on the terms of a 50 year mortgage, I see no problem with that.

The point of bringing this up is that the only policies govt won't try are the ones that will actually fix things. This example is like if you stuck a fork in an electrical socket and shocked yourself. Then you think, hmm what could I try next time…I know! Let's stick a fork in an electrical socket!

---

I understand - I was only trying to add context to the number and I agree it is the wrong policy.

MBS on the Fed balance sheet has dropped by about $650B in the last three years. I mentioned the $9T total MBS market, but the Fed only holds $2T of that. So it would be a larger increase of govt holdings...about 10%.

Principal payments (mortgages being paid down makes MBS totals go down) are about $15B per month. They've been slow because the real estate market is so stagnant. They'd like be higher if the market picked up.

Helicopter Ben said:

---

Sims said:

---

Increases the supply of money pointed toward mortgage bonds which, academically, should lower mortgage financing rates.

---

Yes, but you're leaving out an important part. If monthly payments are lower because interest rates come down, what effect would that have on the sale price? Hopefully I don't need to answer that…

---

I actually didn't leave anything out since I was answering a question directly.

Well, I guess I did leave something out...I didn't opine about my opinion on the matter in response to someone's question.

Sims said:

---

Helicopter Ben said:

---

Sims said:

---

Increases the supply of money pointed toward mortgage bonds which, academically, should lower mortgage financing rates.

---

Yes, but you're leaving out an important part. If monthly payments are lower because interest rates come down, what effect would that have on the sale price? Hopefully I don't need to answer that…

---

I actually didn't leave anything out since I was answering a question directly.

Well, I guess I did leave something out...I didn't opine about my opinion on the matter in response to someone's question.

---

Oh ok I see from your last two posts it seems we agree. Apologies if that came off as combative.

MouthBQ98 said:

---

I agteee these short term market manipulations will not help and may do longer term harm. Quit tweaking demand.

Supply. Supply is the problem. Adjust regulations such that smaller and lower cost homes are more available AND profitable to build and sell.

---

I've heard politicians and people in housing say the same things.

Trump should be pushing hard for those things as well.

That's going to take action on the state and local level.

If you want more affordable housing, you don't do it by building "affordable housing" with tax credits and all that mess. You do it by building more upper end housing.

HTownAg98 said:

---

That's going to take action on the state and local level.

If you want more affordable housing, you don't do it by building "affordable housing" with tax credits and all that mess. You do it by building more upper end housing.

---

How will that help working middle class people buy a brand new houses?

As a card-carrying libtard socialist, I think this is a great idea!

Sims said:

---

fc2112 said:

---

Would someone smarter than me about the mortgage market explain to me what this is supposed to achieve?

---

Increases the supply of money pointed toward mortgage bonds which, academically, should lower mortgage financing rates.

---

And increase inflation rate. Printing money during COVID was the primary cause of Biden inflation.

That and supply side constraints bigly squeezing demand generated from that excess money creation.

Could not have asked for a more incompetent gaggle last go around.

Sims said:

---

fc2112 said:

---

Would someone smarter than me about the mortgage market explain to me what this is supposed to achieve?

---

Increases the supply of money pointed toward mortgage bonds which, academically, should lower mortgage financing rates.

---

And typically when rates go down, it causes inflation on housing cost because people can now borrow more money for the same house. This plays right into the hands of guys like Mamdani who stand on the platform of housing being too expensive.

Unforced Trump error


Government dumping money into a market very rarely doesn't result in inflation

No Spin Ag said:

---

HTownAg98 said:

---

That's going to take action on the state and local level.

If you want more affordable housing, you don't do it by building "affordable housing" with tax credits and all that mess. You do it by building more upper end housing.

---

How will that help working middle class people buy a brand new houses?

---

Why do you think the goal should be for working middle class (whatever that emotionally laden term means, all middle class works) buy a "brand new" home.


You ease regulations, new homes are built, those that can afford them (whatever class they are and however they get their money) buy them, moving out of their former homes allowing those to be purchased by those that can afford those homes. Overall prices will stabilize as supply and demand come closer together.

The people who complain that housing is too expensive but are "working middle class" need to change their expectations in my opinion to be happier. I did and it was one of the greatest blessings ever. My truck is 24 years old, I keep it up and it runs great, have no payments, its worth about $4k, my wife's car is 14 years old, no payments, runs well, only worth about $4k as well. Our house is a 1980's rancher in a very middle class neighbor hood, nothing fancy still has the 1990's kitchen, bathrooms, etc, and our mortgage payment is only about 1/8th our take home income. And we are just as happy with no financial stress, if something breaks on the cars or house we just fix it, but it took a mentality change, I just like everyone else likes nice things, but you have to stop caring what other people think, and realize long term happiness comes more from a piece of mind and stability than super nice new things.

Edit to add: if you can afford all the super nice new things and have financial peace of mind go for it with all relish. Just don't expect the government to find away for you to afford your heart's desire.


One more edit to add: If the housing you desire is unaffordable and you are hell bent on it, then the only solution is to increase your income at a rate faster than the increasie in housing inflation and rather quickly.

I think this hits the "smaller, more affordable homes" issue on the nose. Are first time home buyers going to buy entry level, 1200 square foot houses on 4000 square foot lots? Or are they expecting their first house to be like the last house they left, which is probably their parents 3rd or 4th house?

HTownAg98 said:

---

That's going to take action on the state and local level.

If you want more affordable housing, you don't do it by building "affordable housing" with tax credits and all that mess. You do it by building more upper end housing.

---

No. All that does is build a housing supply that becomes unaffordable over time. The biggest drivers in housing costs over the last 40-50 years have been the ever increasing available of cheaper and cheaper credit accompanied by an increasing size of the average home. Average home size has gone from 1500 sf on average to 2500 sf in that time range, with no decrease in $/sf cost to build, adjusted for inflation. Even with no other factors like interest rates, homes would cost 65% more than they did in 1975 after adjusting for inflation. Individual income adjusted for inflation over that time frame has only risen around 40%. Based purely on size, the average house in the housing supply is about 18% more expensive relative to income. There is a lack of affordably sized homes that will not be fixed by building bigger or nicer ones.

If anything, that compounds the issue because homeowners leaving their older homes for the newer, nicer, bigger homes will have to borrow more money to make the transition and ask for higher prices for their existing homes. The answer to unaffordable cars wouldn't be to build more Lexuses, it would be to build more base Kias with fewer options.

ABATTBQ11 said:

---

HTownAg98 said:

---

That's going to take action on the state and local level.

If you want more affordable housing, you don't do it by building "affordable housing" with tax credits and all that mess. You do it by building more upper end housing.

---

No. All that does is build a housing supply that becomes unaffordable over time. The biggest drivers in housing costs over the last 40-50 years have been the ever increasing available of cheaper and cheaper credit accompanied by an increasing size of the average home. Average home size has gone from 1500 sf on average to 2500 sf in that time range, with no decrease in $/sf cost to build, adjusted for inflation. Even with no other factors like interest rates, homes would cost 65% more than they did in 1975 after adjusting for inflation. Individual income adjusted for inflation over that time frame has only risen around 40%. Based purely on size, the average house in the housing supply is about 18% more expensive relative to income. There is a lack of affordably sized homes that will not be fixed by building bigger or nicer ones.

If anything, that compounds the issue because homeowners leaving their older homes for the newer, nicer, bigger homes will have to borrow more money to make the transition and ask for higher prices for their existing homes. The answer to unaffordable cars wouldn't be to build more Lexuses, it would be to build more base Kias with fewer options.

---

The first paragraph was great,, but homeowners always ask for the highest price they can get. Moving to a more or less expensive home will not change that, they will always seek to maximize.

Cars aren't an apples to apples comparison because they physically and functional depreciate more than a house.

But the interesting thing is this is what is happening in the car market, less "base" models are being made and mostly those with more options are being made, and new car prices are higher than in the past relative to income.The solution is to not to overpay for a new car but buy a used one. Same would be the solution in the housing market.

For example you can get a 2020 Lexus for cheaper than a new Kia.

Kansas Kid said:

---

Sims said:

---

fc2112 said:

---

Would someone smarter than me about the mortgage market explain to me what this is supposed to achieve?

---

Increases the supply of money pointed toward mortgage bonds which, academically, should lower mortgage financing rates.

---

And increase inflation rate. Printing money during COVID was the primary cause of Biden inflation.

---

And the former has already happened (at least temporarily). Rates hit 5.99% today. Lowest in years.

Stupid policy though.

AtomicActuator said:

---

As a card-carrying libtard socialist, I think this is a great idea!

---

At least you admit you are an economic dunce! Respect to you, sir.

aggrad02 said:

---

No Spin Ag said:

---

HTownAg98 said:

---

That's going to take action on the state and local level.

If you want more affordable housing, you don't do it by building "affordable housing" with tax credits and all that mess. You do it by building more upper end housing.

---

How will that help working middle class people buy a brand new houses?

---

Why do you think the goal should be for working middle class (whatever that emotionally laden term means, all middle class works) buy a "brand new" home.


You ease regulations, new homes are built, those that can afford them (whatever class they are and however they get their money) buy them, moving out of their former homes allowing those to be purchased by those that can afford those homes. Overall prices will stabilize as supply and demand come closer together.

The people who complain that housing is too expensive but are "working middle class" need to change their expectations in my opinion to be happier. I did and it was one of the greatest blessings ever. My truck is 24 years old, I keep it up and it runs great, have no payments, its worth about $4k, my wife's car is 14 years old, no payments, runs well, only worth about $4k as well. Our house is a 1980's rancher in a very middle class neighbor hood, nothing fancy still has the 1990's kitchen, bathrooms, etc, and our mortgage payment is only about 1/8th our take home income. And we are just as happy with no financial stress, if something breaks on the cars or house we just fix it, but it took a mentality change, I just like everyone else likes nice things, but you have to stop caring what other people think, and realize long term happiness comes more from a piece of mind and stability than super nice new things.

Edit to add: if you can afford all the super nice new things and have financial peace of mind go for it with all relish. Just don't expect the government to find away for you to afford your heart's desire.


One more edit to add: If the housing you desire is unaffordable and you are hell bent on it, then the only solution is to increase your income at a rate faster than the increasie in housing inflation and rather quickly.

---

You're not wrong, and I agree with you for the most part.

I'm just looking at things through the lens of the masses who will be voting this year and housing, along with anything price related, will be at the top of their minds.

So true

I haven't done my homework as much as I should on this issue, but I do have a hypothesis. Home values are going naturally crash in the next 10 years from one cause: Baby boomers control vast swarths of the housing inventory, and they will die off. There will structurally be more supply than demand. It is a massive headache for the younger generation today, but home ownership will in one short decade be affordable to the masses.

Rapier108 said:

---

Bad & Dumb Trump

But somehow a bunch of "conservatives" will come out and defend failed, leftwing policies because this time it is Trump doing it.

---

Trump is not and has never been a conservative, he is a populist. Policies like this are a reminder of that.

Malibu said:

---

I haven't done my homework as much as I should on this issue, but I do have a hypothesis. Home values are going naturally crash in the next 10 years from one cause: Baby boomers control vast swarths of the housing inventory, and they will die off. There will structurally be more supply than demand. It is a massive headache for the younger generation today, but home ownership will in one short decade be affordable to the masses.

---

This will absolutely be an ameliorating factor to housing affordability.

To the degree it makes everyone happy? Nope, but it will definitely influence things in the cheaper direction...all else being equal.

Kansas Kid said:

---

Sims said:

---

fc2112 said:

---

Would someone smarter than me about the mortgage market explain to me what this is supposed to achieve?

---

Increases the supply of money pointed toward mortgage bonds which, academically, should lower mortgage financing rates.

---

And increase inflation rate. Printing money during COVID was the primary cause of Biden inflation.

---

How so? That's not new money; it's part of the total supply. The Fed is not involved here. It won't increase inflation. The Fed buying the securities would increase inflation.

MV = PQ

Money Supply x Velocity = Prices x Output

If supply and output are stable, an increase in velocity would increase prices.

This is an increase to velocity of money (with respect to MBS purchases).

YouBet said:

---

AtomicActuator said:

---

As a card-carrying libtard socialist, I think this is a great idea!

---

At least you admit you are an economic dunce! Respect to you, sir.

---

Be advised, that was a bit of performance art.

More of a small government libertarian - this is and always was a bad idea.