market bubble

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Are you stuck in a rut feeling like nothing is exciting left to do? Think again! If you were lucky enough to inherit $100,000 suddenly, what would be the first thing on your bucket list? Redditors had plenty of ideas for how they’d spend their newfound fortune. From purchasing exotic vacations, high-end home renovations, virtual reality headsets, and dream weddings to community sculpture gardens to more practical investments in college tuition grants—there are plenty of ways to imagine how you’d spend a large inheritance!

1. Attend the Funeral

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One user pointed out, “Attend funerals.”

Another user replied, “It took me a second, but yep.”

One commenter responded, “Goes without saying.”

“First, I would attend the funerals of the deceased. Then I would think about what to do with the money. Just a matter of respect,” another Redditor shared. 

2. Pay Off Debt

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“Become debt free!” exclaimed one user.

Another user added, “Become debt free, stash the rest in savings and CDs for sure. I’ll even get adventurous and go out and have a nice dinner.”

One commenter shared, “You know you’re an elderly millennial when you see the term CDs and start thinking about replacing your beloved but heavily scratched pop-punk and hardcore punk collection from the early and mid-2000s.”

3. Pay Bills

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One user posted, “Pay bills.”

Another user confirmed, “100% this. Pay bills. Pay off debt. Bank the rest against a rainy day.”

One replied, “Smart.”

4. Plan Ahead

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One user shared his own story, “I inherited a little more, roughly $150k total, than that after my mom passed away a few years ago. My dad [had been] a doctor, and she didn’t have to worry about money for her remaining 21 years. When they sold their rental duplex (they never raised the rent in the 30 years they had it), I used my share to open an investment account for both of my kids and used the rest to pay off one credit card.

“With the cash I received from the trust, I paid off the other cards and started my own investment account. I’m 50, and for the first time in my adult life, I don’t have debt other than a student loan (that will hopefully get discharged under the borrower’s defense for false advertising) and our house.

“Before doing that, though, I booked a family vacation to Riviera Maya. I mentioned Dad was a doctor; well, he and Mom traveled the world going to dads medical conferences and just seeing the world. They lived to see new places and do new things. So, to honor and thank them, I spent a small amount and took the family on our first trip outside the US. I cried on the plane, I cried on the beach, I cried when I saw apple pie at the resort like mom made, and I cried when we came home. At one dinner, we talked about Grandma and what we miss most about her. Dad passed before I met my future bride, so only I mentioned him.

“So if I inherited that again, I’d probably do the same thing again. I remembered where it came from, and I prepared for those it would eventually go to.”

One user replied, “This is beautiful, thank you for sharing your incredible story with me.”

“For a person who is not from the US, it’s mind-blowing that you are 50 years old (not that far away from retirement age), and you still have student loans,” one user commented. 

5. Make Sure it’s Not a Scam

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Another user posted, “You know how generational wealth is kind of a thing—well, so is generational poverty, as it turns out. So if I suddenly inherited 100k, the first thing I would do is make sure this wasn’t a prank or a scam.”

One confirmed, “Yes, fortunately, it’s not a scam, as my aunt passed away.”

Another user added, “I missed that part. Condolences and congratulations in whichever order you feel is more appropriate. Take the sincere advice of a generational poor person for what it is—but if I were in your shoes, I would act conservatively. I imagine there are a lot of people with a lot of enticing pitches for the newly rich. Just keep pulling in a regular paycheck for your day-to-day if you can, and make sure you have found a well-regarded accountant before the next tax season. Start inquiring into a money manager that can provide a realistic plan to ensure your long-term retirement.

“(Edit: Also, think of ONE affordable extravagance you could never financially justify before but might have been able to pull off and give to yourself as a gift. For me, that would be a 3-day weekend in some major city.)”

“Sending condolences, I was put in a similar situation when my dad passed away. The best advice I can give is to not rush into any decisions financially, take your time, and the money isn’t going anywhere!” shared one user.

6. Fully Exhale

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“For the first time in my adult life, I could fully exhale,” one user confirmed.

One user pointed, “THIS.”

Another user commented, “YES.”

One Redditor added, “Hell yeah, just to breathe easy is a luxury.”

7. Add It to the Rest

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One user shared, “Throw it on the pile.”

One user added, “New paint job for the jet.”

“Ya know, my old boss traded in his propeller plane for a jet and got $100,000 in tax write-offs…” a user commented.

One user commented, “I get it… sometimes it’s just super exhausting just thinking of all the money I have.” 

8. Invest

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“Invest,” one user shared.

Another user replied, “All in SPY 0DTE 0.5% OTM calls.”

One user commented, “Invest half, and with the other half, live pretty much the same life, stay at my job, etc., but with complete financial security.” 

Another user said, “Invest, invest, invest.”

The OP asked, “What would you invest in?”

The user answered, “The reality is 100k is just the starting point to getting anywhere financially. If you did inherit 100k like you say you did in another comment, it’s worth knowing that if you’re still young (30 or under), you have a huge head start in a secure financial future. I’ll get crap for this, but only spend up to 15% or so of the actual money you get from this. For the rest of it, you should first look to invest in a tax-advantaged account like a Roth IRA. If you max out that annual limit ($6500 for 2023), then either open up high-yield savings (if you’re in a place to buy a house soon) or put it in something simple like the S&P 500 index fund (if you can put this money away for a long time you’ll be shocked at how much it’s grown in 20 years). But most importantly, if you have any high-interest debt, pay that off first.”

9. Buy Lottery Tickets

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One user shared, “50,000 lottery tickets.”

The OP commented, “Love this, thanks for a laugh.”

Another user shared, “Laugh?”

One user commented, “And then you get $70k back if the MrBeast videos are any indication.”

10. Pay Off Mortgage

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A user shared, “Pay off my mortgage and other debts, then go back to living as normal, just with more disposable income since I won’t be making repayments anymore. It’s such a boring adult answer, but it’s accurate.”

Another user replied, ‘I agree with it; I would do the same.”

11. Save As a Safety Net

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One user shared, “Wife and I inherited around $175k. What we did was largely just keep living life, exhale finally, and catch up on some… debts we had. Used the money as a safety net to get out of construction and into something else, and now our lives are, without a shred of doubt, 100x easier than they were before.”

The OP of the thread replied, “This is my hope.”

12. Ask a Financial Advisor

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One user posted, “I’m 50F on a disability pension with high rent and living costs. It’s an unexpected windfall, and I am not financially literate. I don’t want to blow it. Yes, I am going to get a financial advisor!”

One user commented, “Go to a personal finance Reddit or something and ask how to choose a good advisor. Some are shady!”

“It’s honestly not that much these days, a down payment on a house at most. Pay off any debt, but otherwise, live as you have been. Hopefully, with a safety net for the next financial speedbump,” replied one user. 

13. Trucks and Good Times

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One user freely posted, “Trucks and H–kers. It would be best if I didn’t get 100k.”

Another user replied, “That’s like 1 of each, lol”

One replied, “Each? You must have gotten a cheap truck.”

14. Government Bonds

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One user commented, “After potentially paying estate/ inheritance tax, Spend [40k] on settling debts (I don’t have much, so there’s going to be leftovers, but I will put them in government bonds as savings $. Spend [10k] on online courses and career certifications. Spend [10k] on buying stuff I’ve wanted for a while. Spend [10k] on new tech. Spend [5k] on a mini solo budget vacation to somewhere random. Keep [5k] as pocket cash. Save [20k] in a high-interest account or maybe split into government bonds, high-interest accounts, green tech stock options, etc. ( I am hesitant investing real estate because of the obvious market bubble).” 

“Love this detail; much appreciated. No tax and I’m debt free. I’ll be making a list off this,” replied one user.

15. Donate

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“Help out a lot of people,” one user shared.

Another user replied, “Yes. I’ve already decided who I’m going to help and how much. Giving back is important. I couldn’t imagine not sharing my blessing with those closest to me. I also need help as I have been living on the disability pension, so I’d also like to be out of poverty if at all possible, lol.”

Do you agree with the things listed above? Comment below!

Source: Reddit.

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Source: financequickfix.com

Apache is functioning normally

The Laborers’ International Union of North America (LIUNA) has suggested that a new assembly bill be introduced in California to bar homebuilders from involvement in the mortgage business.

In their new report, they argue that corporate homebuilders in California systematically pressured homebuyers to finance their new home purchases via directly-owned or affiliated mortgage lenders that pushed exotic, high-risk loan programs.

“Corporate homebuilders profited from the loans and from the artificial inflation of the housing market bubble. Their practices contributed to the current housing and economic crisis and families and communities were devastated when the bubble burst,” the release said.

One example cited in the report found that the mortgage subsidiary of homebuilder DR Horton increased its use of subprime lending in Riverside and San Bernardino Counties from six percent in 2004 to 36 percent by 2006.

Once subprime lending phased out, builders turned to FHA loans for financing; 5.5 percent of the government-backed loans originated by Lennar’s mortgage subsidiary Universal American in 2007-2008 have already defaulted.

That compares to a 2.8 percent default rate seen within the first two years on the FHA loans the company originated in 2005 and 2006.

LIUNA is pushing Assembly Bill 1534, which would prohibit homebuilders from writing mortgages on the homes they build, protect buyers from “pressure tactics,” and provide buyers with more options and the ability to make more responsible choices.

So just to review, the homebuilders created the tremendous oversupply of housing and provided toxic funding to get the overpriced properties off their hands, and pushed for low mortgage rates to shed inventory without reducing prices.

Source: thetruthaboutmortgage.com

Apache is functioning normally

In several previous articles I have opined that an increase in mortgage rates may be our only hope for slowing the escalation of home prices that we’ve been experiencing for the past year. With mortgage rates hitting above 3% last week for the first time since June, it’s a good time to revisit this conversation and what we should expect next for mortgage rates.

Since the summer of 2020, I have argued that if mortgage rates could get over 3.75%, days on market would rise and the rate of price growth would cool. This will be bullish for housing because the price gains we have been seeing are extremely unhealthy. 

A common theme in the interviews I have done in 2021 has been that this is the unhealthiest housing market since 2010 — not because we have a credit boom or a bubble forming, but because we have forced bidding on too few homes. We need the days on market to grow out of the teenager stage.

If the antidote to our housing market ills is higher mortgage rates, when can we expect getting this cure? The unfortunate answer is not anytime soon.

If you are familiar with my work, you are aware that I rely heavily on the movements of the 10-year yield to guide my mortgage rate predictions. Even though I have been extremely bullish on the U.S. economy, my bond market forecast for the 10-year yield in 2021 was that it wouldn’t go above 1.94%, with the lower end of the range being 0.62%. This translates into the upper range of mortgage rates to be 3.375%-3.625% at best, and lower end of the range to be 2.25% – 2.375%.

In my America Is Back recovery model that was published on April 7, 2020, I wrote that the goal for the 10-year yield would be to create a range between 1.33% – 1.60%. This is something that couldn’t have happened in 2020 but in 2021 should be the case.

Considering the strength of the economic recovery we have been having since April 2020, I would have been shocked and disappointed if the 10-year never got to 1.60%. Like clockwork, the 10-year yield did what I thought it should do.  As much as I love Van Gogh and Monet, the chart below may be the best piece of art I’ve seen this year.

In 2021, we have had the fastest growth and hottest inflation data in recent history. This has led some to predict that mortgage rates would skyrocket. I am sympathetic to those who are shocked that the 10-year yield is at 1.48% in October, but the 10-year yield has been in a downtrend since 1981 and that needs to be respected.

Trust me, in recent years it hasn’t been easy trying to convince people that mortgage rates would have a 2 handle before a 6 handle. During November 2018, when the 10-year yield was at 3.24%, I was speaking at a conference and got scolded by another economist for talking about the 10-year yield falling in 2019 and the thought of a 1 handle on the 10-year yield. This isn’t surprising since The Wall Street Journal polled 50 economists that year and all said rates were going up. However, using the chart above, I made a prediction that we could see a 1 handle in the 10-year yield in 2019. This happened as well.

I was recently asked in a podcast interview why I always talk about 1.94% as a key level since 2019. When the inverted yield curve happened in 2019, this was something I had forecast at the end of 2017 for 2018. I truly believe we inverted the yield curve in 2018. However, after the accepted inversion happened, I talked about the 1.94% level on the 10-year yield being a key level in 2019 and even in the 2020 forecast article, I made sure to emphasize that again. (More on that topic and the entire AB economic recovery model in this podcast, where Wall Street has taken notice of my work here at HousingWire.)

Since the start of 2015, when I began incorporating bond yield forecast in my prediction articles, I have always stated that the 10-year yield should be in a range between 1.60%-3%. During COVID-19, I forecast recessionary yields of -0.21% – 0.62%. Given that the recession ended in April of 2020 and we have been in recovery mode ever since, we should see the range of 0.62% – 1.94%, which is what I forecast for the economic expansion period.

What can take bond yields higher than 1.94% and get mortgage rates to 4% and higher? And why is this important? The most important data line I want to see grow is the days on market, as it’s simply too low currently and creating too much price growth in housing.

One common thing I see is that people say when QE (quantitative easing) ends, the bond market bubble will end and bond yields and mortgage rates will rise and housing will collapse. Let me just make this is as simple as possible, by referencing the chart below:

  • QE1 ended, bond yields fell.
  • QE2 ended, bond yields fell.
  • Tapering started to go into the final stages in 2014 and bond yields fell.
  • QE3 was supposed to be the end of humanity when it finished. After the end of QE3, bond yields fell.

Just be careful of putting all your eggs in the “bond market is a bubble and rates have to skyrocket when QE ends” basket. It didn’t end well for those forecasting much higher mortgage rates and bond yields, as you can see below.

While bond yields are historically low, that long-term downtrend stayed intact even with the best economic growth and hottest inflation data in years. Can the bond market have an algo model bond selling fit? Yes, it can. However, nothing of note will happen as long as we are below 1.94% on the 10-year yield. I am just sticking to my guns here, the same way as in 2019, 2020, and 2021.

In 2021, when the mention of tapering started at some point, bond yields fell.

The most realistic scenario I have come up with to break that 1.94% level is that the world economies start to come together and move past this COVID-19 historical stage. This means Japan and Germany bond yields move up as well. It’s really hard for the U.S. to break away too much from Germany and Japan’s 10-year yield.

When the world economies are running in a more normal fashion, that could serve as a reasonable premise to get the 10-year yield above 1.94%. My next-level peak would be only 2.42%. However, that bridge has not only not been crossed, but it’s not close enough to be tested. So, until that happens, no 4% plus mortgage rates here in America.

As crazy as this sounds, 2021 looks remarkably normal with regard to the bond market and mortgage rates.

I am big believer in range-yield work — it’s been a staple of mine for many years and a big factor in writing my American recovery model back on April 7, 2020. Economic models keep us in line and we always look for things that can break it with live events daily. However, for now everything looks just right to me.

While I do understand that bond yields being this low with our economic growth and inflation data seems strange, just remember: respect the trend as it is your friend. Don’t betray it and you will be fine at the end.

On Oct. 5, I will be speaking at the virtual California Association Of Realtors REImagine Conference and Expo with other economists about the state of the U.S. housing market and what to look for in 2022. I will be attending the Mortgage Bankers Association Annual conference in San Diego Oct. 17-20 and hope to see many of you there.
 

Source: housingwire.com

Apache is functioning normally

The housing market is cooling. There’s really no debate. Things are slowing down. You can mostly thank a doubling in mortgage rates and high home prices for that.

However, talks of a more severe housing bubble might be overstated.

Sure, it’s easy to compare today to 2007 or 2008, if you don’t take time to dig down into the details.

After all, home prices are lofty, the stock market is shaky, and the economy is looking as uncertain as ever.

But let’s talk about why things aren’t the same as they were 15 years ago.

Yes, Home Prices Are Too High

First things first, home prices are too high. Similar to pretty much every other asset, whether it’s a tech stock or bitcoin, home prices overshot the mark.

This was arguably driven by the easy money days of the past decade, exacerbated by a pandemic and a frenzy to own real estate, especially in the suburbs and exurbs.

For example, everyone wanted lots of space all of a sudden, far from urban centers.

This ran counter to the trend of moving into cities and ditching cars for pedestrian-friendly, urban hubs.

The reason was COVID-19, which has now mostly abated, making those who purchased in far out places question the decision.

Certain cities saw massive inflows, like Boise, Idaho, which are now expected to see the biggest declines.

We’ve also had a massive supply/demand imbalance, with far too few homes available to satisfy the appetite of prospective home buyers.

Together, this led to record home price appreciation, with property values rising 125 straight months on a year-over-year basis.

In fact, home prices were up 18.3% in June 2022 from a year earlier, per CoreLogic. However, home price gains slowed from the prior month for the second consecutive month.

Home Price Gains Are Slowing, Cooling the Housing Market

There’s been a lot of confusion regarding home prices lately. Some folks seem to be jumbling slowing appreciation with falling prices, as if they’re the same thing.

But as noted, home price GAINS are dropping. In other words, if your home was appreciating 10% year-over-year, it might only rise 5% next year.

The takeaway is that it’s still rising in price, which might be the best way to look at today’s housing market.

CoreLogic still expects home prices to rise 4.3% from June 2022 to June 2023 on a year-over-year basis.

This differs from the stock market, which has actually fallen quite a bit to the point of being in a bear market.

Because we experienced the worst housing crisis in our lifetimes just over a decade ago, it’s natural to start having those same concerns.

There are probably also sharks waiting and hoping for home prices to plummet so they can scoop up homes on the cheap.

But as of now, it doesn’t appear that an outright housing bubble is in the cards, as expensive as real estate is these days.

A Housing Bubble Should Burst, Right?

The term “housing bubble” is a somewhat loose phrase that may be defined in numerous different ways.

But the general thinking is that a bubble should pop if it’s a truly a bubble.

That means it’s unsustainable, and a soft landing isn’t possible. The air isn’t slowly let out of the balloon. It pops, violently.

With regard to a housing market bubble, this would mean plummeting home prices and a deluge of distressed inventory, including short sales and foreclosures.

I think if you asked the average American if they foresaw a housing market like that, they’d probably say no.

Instead, they might say “home prices are too high, they need to come down.” They might also express that it’s a bad time to buy a home.

This could mean slowing appreciation, or zero appreciation in the hardest hit markets.

It could also mean lower listing prices, price reductions, more days on the market, and fewer bidding wars.

Does that equate to a “pop,” or is it more of a fizzle?

Economist Mark Zandi already called a housing market correction back in June, but merely referred to it as the end of the housing boom.

The end of a boom isn’t synonymous with a bubble burst. It might simply mean that the housing market has peaked and is now expected to cool.

Why No Housing Bubble Burst This Time Around?

A housing market bubble is typically accompanied by rampant speculation, a huge run up in prices, and lots of questionable home loan financing.

It’s generally also driven by a supply glut, that is, too many homes for sale and not enough demand.

If you consider all of the above, the only thing that seems to stand out is a “huge run up in prices.”

There hasn’t been crazy speculation, there isn’t shoddy financing, and there certainly hasn’t been an oversupply of homes.

On the contrary, there’s been too few homes for sale and a mortgage market dominated by 30-year fixed mortgages priced at all-time lows.

To that end, how many existing homeowners with 2-3% 30-year fixed mortgages and tons of home equity are going to lose their homes if the housing market cools?

In 2007/2008, the typical homeowner had no equity, an option ARM for a mortgage, and wasn’t qualified to be in the property to begin with.

There was also a huge oversupply of homes on the market and more actively being built, which led to the worst housing bubble burst in recent memory.

This doesn’t mean home builders today won’t have to lower prices, or that prospective buyers will walk away from purchases.

That likely will happen as home price appreciation comes to a halt. And you’ll see all the negative headlines regarding the housing market along the way.

But unless something significant takes place, a housing bubble burst doesn’t appear likely at this juncture.

Source: thetruthaboutmortgage.com

How Risky Mortgages Might Make You Money

The recent trend of mortgage lenders requiring less and less money down might actually be a boon for investors everywhere. In case you haven’t noticed, big lenders like Wells Fargo and Bank of America only require 3% down for a home purchase, and lately the number has dropped to 1% down thanks to other players… Read More »How Risky Mortgages Might Make You Money

The post How Risky Mortgages Might Make You Money appeared first on The Truth About Mortgage.

June 2021 Signals Indicate Housing Market Easing

Buyer sentiment data shows that potential new homeowners are chilling out about purchasing in this seller’s market.

The post June 2021 Signals Indicate Housing Market Easing appeared first on RealtyBizNews: Real Estate Marketing & Beyond.