Graham Stephan | The Housing Market Is Going INSANE (40 Year Mortgages) @GrahamStephan | Uploaded April 2023 | Updated October 2024, 1 day ago.
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BANKING LENDING:
According to a recent report by Bloomberg, “the last two weeks of March saw the largest contraction in lending on record…with almost $105 billion dollars erased from the market.”
In addition to that, it’s said that “trillions of dollars are draining out of the banks and into money market funds. That weakens the banks….not to mention, Fear that the banks are AT RISK is driving this trend…and thus making the banks even weaker.”
The overall effect is that, while the faith in banking declines, so does lending - and, the net result is a significant drop in what banks are willing to give. Or, more simply put: Banks believe the market is going down, their borrowers may not pay them back - and, that means they have to be REALLY CAREFUL to who they give money to, which means: they’re tightening up their checkbook.
In fact, last week…the American Bankers Association index of credit conditions “fell to the lowest level since the onset of the pandemic, indicating bank economists see credit conditions weakening over the next six months.”
40 YEAR MORTGAGES:
On April 7th, The Federal Housing Administration announced that they’ll begin rolling out “40-year mortgages in May."
But, as of now - the 40-year term is ONLY AVAILABLE to those who have fallen behind on their payments and need a way to save a little bit of money. In THOSE CASES, the FHA is allowed to take their existing loan and spread it out to 40-years, essentially allowing the buyer to save a little money - and, hopefully, not fall into foreclosure.
Basically, in order to get a 40-year term - you must be delinquent on your loan, approved for a loan modification, and be able to resume payments on a brand new 40-year term (so, it’s not like you can go to your bank and ask for it when you’re going to make your next purchase).
Really, the way I see it, this is simply a way for the banks to avoid the costs and hassles of foreclosure - while, keeping a homeowner in a property for very marginal savings.
Overall, though - in terms of my own thoughts as a real estate agent, real estate investor, and landlord: personally, the 40-year mortgage options seem more like a way to reduce foreclosures than it is about saving homeowners on cost. I tend to believe that the housing market is in a precarious spot, and - if lenders can prevent mortgage defaults by extending out a loan - so be it.
But, let's not pretend that this is in the best interest of the homeowner…for them, I think it’s a TERRIBLE CHOICE to extend payments 10 years just to have a 5-7% reduction in payments…financially, it makes very little sense...UNLESS you’re able to recast your mortgage at a rate under 4%, in which case…congratulations.
As far as everything else, though…it’s understandable that lending is drying up. Businesses are no longer expanding like they used to, borrowing is expensive, and people have to be very careful about what they commit themselves to. I personally believe that now is a GREAT time to reduce your overhead, pay down expensive debts, and keep cash on the sidelines for an emergency if at all possible - so, overextending yourself is probably not a wise choice given all the risk and cost.
My ENTIRE Camera and Recording Equipment:
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For business inquiries, you can reach me at graham@night.co
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan receives cash compensation from Public for sponsored advertising materials. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures
Paid Sponsorship By Public: Receive a Free Stock Valued Up To $1,000 when you open an account and make a deposit! Go to public.com/graham and use code GRAHAM | Add me on Instagram: GPStephan
NEW BANKROLL COFFEE NOW FOR SALE: bankrollcoffee.com
GET MY WEEKLY EMAIL MARKET RECAP NEWSLETTER: grahamstephan.com/newsletter
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: the-real-estate-agent-academy.teachable.com/p/the-youtube-creator-academy/?product_id=1010756&coupon_code=100OFF - $100 OFF WITH CODE 100OFF
BANKING LENDING:
According to a recent report by Bloomberg, “the last two weeks of March saw the largest contraction in lending on record…with almost $105 billion dollars erased from the market.”
In addition to that, it’s said that “trillions of dollars are draining out of the banks and into money market funds. That weakens the banks….not to mention, Fear that the banks are AT RISK is driving this trend…and thus making the banks even weaker.”
The overall effect is that, while the faith in banking declines, so does lending - and, the net result is a significant drop in what banks are willing to give. Or, more simply put: Banks believe the market is going down, their borrowers may not pay them back - and, that means they have to be REALLY CAREFUL to who they give money to, which means: they’re tightening up their checkbook.
In fact, last week…the American Bankers Association index of credit conditions “fell to the lowest level since the onset of the pandemic, indicating bank economists see credit conditions weakening over the next six months.”
40 YEAR MORTGAGES:
On April 7th, The Federal Housing Administration announced that they’ll begin rolling out “40-year mortgages in May."
But, as of now - the 40-year term is ONLY AVAILABLE to those who have fallen behind on their payments and need a way to save a little bit of money. In THOSE CASES, the FHA is allowed to take their existing loan and spread it out to 40-years, essentially allowing the buyer to save a little money - and, hopefully, not fall into foreclosure.
Basically, in order to get a 40-year term - you must be delinquent on your loan, approved for a loan modification, and be able to resume payments on a brand new 40-year term (so, it’s not like you can go to your bank and ask for it when you’re going to make your next purchase).
Really, the way I see it, this is simply a way for the banks to avoid the costs and hassles of foreclosure - while, keeping a homeowner in a property for very marginal savings.
Overall, though - in terms of my own thoughts as a real estate agent, real estate investor, and landlord: personally, the 40-year mortgage options seem more like a way to reduce foreclosures than it is about saving homeowners on cost. I tend to believe that the housing market is in a precarious spot, and - if lenders can prevent mortgage defaults by extending out a loan - so be it.
But, let's not pretend that this is in the best interest of the homeowner…for them, I think it’s a TERRIBLE CHOICE to extend payments 10 years just to have a 5-7% reduction in payments…financially, it makes very little sense...UNLESS you’re able to recast your mortgage at a rate under 4%, in which case…congratulations.
As far as everything else, though…it’s understandable that lending is drying up. Businesses are no longer expanding like they used to, borrowing is expensive, and people have to be very careful about what they commit themselves to. I personally believe that now is a GREAT time to reduce your overhead, pay down expensive debts, and keep cash on the sidelines for an emergency if at all possible - so, overextending yourself is probably not a wise choice given all the risk and cost.
My ENTIRE Camera and Recording Equipment:
amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
For business inquiries, you can reach me at graham@night.co
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan receives cash compensation from Public for sponsored advertising materials. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures
