By: Shmuel Shayowitz
Winston Churchill is famously credited with saying, “Never let a good crisis go to waste,” as the world approached the end of WWll while he was serving as Britain’s prime minister. It is said that Churchill was referring to the alliance forged between himself, Stalin and Roosevelt, an unlikely trio that would ultimately lead to the formation of the United Nations.
I propose that a crisis is upon us now, although not the one the media and social feeds would have us believe. Here are some recent news headlines that are gaining widespread attention.
US Housing Market Is Heading for a Crash
The New York Post and MSN report how a significant portion of Americans fear the once-booming housing market is headed for a significant crash in the coming months. Citing a LendingTree survey, 41% of Americans expect the housing market to crash within the next 12 months. “Of those who expect a crash, a whopping 74% believe it will be as bad or worse than the housing market’s implosion in 2008 during the Great Recession,” said the Post article.
The 10-Year US Treasury Will Be Over 4%
Banking darling Jamie Dimon sees the Fed hiking rates to the highest level in 15 years and warns that the 10-year UST will likely top 4%. “Inflation is eroding everything… and the $1.5 trillion (of current excess savings from pandemic relief programs) will run out sometime mid-year next year,” Dimon said during an interview on CNBC. In June, Dimon, CEO of JPMorgan Chase, the largest bank in the U.S., was quoted as saying that the U.S. was headed for an “economic hurricane.”
2022 Originations Make Up 60% Of Underwater Mortgages
According to Black Knight Data & Analytics, one in 12 purchase mortgages originated in 2022 is now underwater as home prices fell for the fourth consecutive month in October. “A clear bifurcation of risk has emerged between mortgaged homes purchased relatively recently versus those bought early in or before the pandemic,” said Ben Graboske, Black Knight Data & Analytics president, in a press release. He continued, “This is an illustrative and, unfortunately, potentially vulnerable cohort that we will continue to keep a close eye on in the months ahead.”
I can give you many more crisis-like headlines spurring the flames of mass pandemonium. All that said, I want to continue to remind readers that everyone has an agenda! The media’s job is to get your attention with alarming headlines because negative news is 10x more likely to be viewed than favorable news. While the housing market is undoubtedly correcting itself, we are merely returning to a “normal” market. Meanwhile, as Jamie Dimon scares the market with his rhetoric, his bank is partnering with a national realty firm to deploy $1 billion to buy hundreds of residential rental properties across the U.S.
I can’t emphasize how important it is not to confuse “opinion” with “information.” It’s astonishing to see how the mainstream media has picked up on data from companies trying to get attention with their skewed “surveys.” Yes, 60% of mortgages that are currently “underwater” were originated in 2022. Is that so surprising, knowing that most of these loans were done under VA and FHA parameters with little to no money down?! So if the market retreats in price, as it has over the past four months, these loans will suddenly be underwater. That doesn’t mean the loans aren’t performing, and it doesn’t mean they represent future problems. It also doesn’t indicate that all markets are seeing a downturn. Bergen County and many surrounding areas are still seeing a robust market with minimal pullbacks.
The bottom line is that home prices are still up over 10% this year, which is currently one of the best returns out there! The bottom line is that the only crisis we have as of now is a “crisis of information.” Always work with a professional who can guide you regarding the particulars of your specific situation.
Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected].
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