https://www.wsj.com/articles/rising-home-prices-push-borrowers-deeper-into-debt-1523356200
is this part 2?
I didn’t look into these claims but they trend to pick post crisis starting points, where things look very different from pre crisis. Things got really tight afterwards so you’d expect some loosening
Credit Markets are a joke right now across the board in terms of censorship/underwriting standards. However, corporate debt is probably going to be the first chip to fall. Commercial RE not looking great either. In all seriousness though, the MAIN problem I see is the craft brewery bubble. That’s really getting out of hand haha
One difference, of course, is that financial institutions are safer now. So even with higher rates of mortgage defaults, like in a recession, we won’t probably see cascading bank failures like Lehman Brothers, Bear Stearns, and so on.
[quote=“ohai”]
One difference, of course, is that financial institutions are safer now. So even with higher rates of mortgage defaults, like in a recession, we won’t probably see cascading bank failures like Lehman Brothers, Bear Stearns, and so on.
[/quote
+1
i dont see bank failures again but these subprime securitizations could cause some pain.
add this: https://www.autofinancenews.net/auto-abs-delinquencies-rise-to-22-year-high/
and there could be some issues
US financial system is definitely safer, but I think the middle class never quite fully recovered from the last recession, sovereign finances are a mess, corporate leverage is definitely higher (on low rates) and China is definitely not positioned to withstand a major disruption in its end markets.
So if things were to slow down today (not my base case) it seems like it would be a more protracted but maybe less severe downturn. I do scratch my head at the economics of consumer lending and real estate prices right now though. Makes no sense.
i know 4 people that in the last 1-2 years became part time realtors. they are making bank the demand is crazy i have no idea where people are getting money to buy more homes. it has to be looser lending standards.
Yep! Dude I worked with at a restaurant during undergrad is now a realtor and posts obnoxiously on instagram about all the $$$ he’s making and “poppin bottles”. Probably won’t have a job in 12 months, told him he better start saving now.
Funny, I know two people that became real estate agents in the last 18 months both having left established careers.
Make Housing Bubble Again.
there was a wsj article that showed that mortgage payments are more than half of incomes now. also the credit of fha borrowers has fallen from 700 in 2012 to 670 in 2018. for comparison fha score in 2007 was 630.
House of cards. China shakes the table.
Is this PA 2.0? China isn’t exactly in a much better situation either given it is at or surpassed 300% debt/GDP; this represents a 2x increase in under a decade or so. I think the IMF stated that there are only a handful of times in history that kind of debt binge hasn’t resulted in some financial calamity.
Technically the us is just as bad. It’s juse our debt is comprised of public debt while theirs is mostly private. But we are both around 250 to 300. The most fucked place is Japan though with 400 percent. The funniest thing is their rates are like slightly negative or 0.
This stops short of reaching a valid conclusion. About half of Japan’s sovereign debt is held interagency, so it could be netted out. They owe it to themselves.
Beyond that, CN vs US, rate of accumulation matters, given the likelihood of bubbles having developed and misallocated resources. This is why to the IMF’s point, such hurried debt builds almost never end well.
would love to see China’s economy just absolutely dive into the shi**er. i think the mother of all crash is coming for them
given that, would you buy japan debt or china? cuz really thats what the bottomline is.
people who make the most money (highest roi) should borrow more money (assuming its a lot lower) to make more money (make the difference). china makes money.
Yeah but you do have to factor in stability. Kind of like how utilities have high leverage and nobody cares.