Subprime, No Problem? FHA Mortgage Delinquencies Hit Record 17.4%, as Fed Triggers Mad Land-Rush in Split Housing Market

Atlanta metro: 53,000 FHA mortgages are delinquent. Houston metro, 47,000. Just FHA, not including other delinquent mortgages. And when forbearance ends? By metro.

By Wolf Richter for WOLF STREET.

Even as the housing market is being whipped into a mad land rush, with new single-family house sales spiking 46% year-over-year, highest since 2007, with existing home sales jumping to the highest since 2006, and with prices in many metros soaring to new records, the other end of the housing market – high-risk government-insured mortgages – is falling apart, and delinquencies rose to another all-time historic high.

The Federal Housing Administration (FHA) which insures about 8 million high-risk mortgages with lower requirements – “low down payments,” “low closing costs,” and “easy credit qualifying,” it says – reported that an all-time record of 17.4% of its mortgages were delinquent in August, up from what had been the all-time record in July of 17.0%, and having doubled from a year ago.

The FHA’s mortgage portfolio always has higher delinquency rates than more risk averse portfolios. Over the past two years, about two-thirds of mortgages had credit scores at origination of 679 or below. To tamp down on the risks, the FHA began tightening up its lending standards in 2019. But it wasn’t prepared for what came next.

“Seriously delinquent” mortgages in the FHA portfolio – meaning, 90 days or more delinquent – rose to an all-time record of 11.2% in August, from 10.9% in June, having nearly tripled from 3.8% August 2019.

This data, released by the FHA’s Early Warning System, differs slightly from the data the FHA releases later in its official monthly report.

The delinquency rate for the top 169 metros (table at the bottom), which account for about 6 million of FHA-insured mortgages, rose to 18.0%, and seriously delinquent mortgages rose to 11.7%.

In 29 of these metros, the delinquency rates are between 20% and 27.7%! Other metros have much lower delinquency rates. Because of these huge differences by metro, we’ll look at them by metro.

The delinquency rates include mortgages that were delinquent and were subsequently moved into forbearance programs, where the lender agrees to not pursue its legal rights due to nonpayment of the mortgage, and where the borrower doesn’t have to make payments for a set period. A form of “extend and pretend.”

During the term of forbearance – six months, under the CARES Act, extendable by another six months – while the borrower doesn’t have to make payments, the unpaid interest is added to the mortgage principal balance, and eventually interest and principal payments will need to be made.

The FHA specializes in low-down-payment higher risk mortgages, including “subprime” mortgages (FICO credit score below 620). And down-payment requirements are minimal for subprime mortgages:

  • Credit score of 580 or higher: down payments as low as 3.5%.
  • Credit score below 580: down payment of 10%.

Many of these borrowers are precisely the ones who got hit hardest by the unemployment crisis.

These delinquencies are not happening because home prices have plunged and people could, but refuse to, make mortgage payments because they’re underwater, the sort of strategic default that happened massively during the Mortgage Crisis, often with investment properties. Home prices have risen, and most of these borrowers are not underwater. The delinquencies are occurring because people lost their jobs or their contract work and cannot make the payments for economic reasons.

In some of the Metropolitan Statistical Areas (MSAs), the FHA insures a relatively small share of mortgages, and a high delinquency rate among FHA mortgages in those metros has less impact on the market. But in other MSAs, the FHA insures a large share of mortgages, and a high delinquency rate in those MSAs puts the housing market at serious risk.

At some point, forbearance will end, and borrowers will have to make payments again, or sell the house and pay off the mortgage, or find themselves in a foreclosure.

The highest delinquency rates among FHA-insured mortgages occur in Nassau County-Suffolk County, NY (27.7%); and New York-New Jersey City-White Plains, NY-NJ (27.0%); in both MSAs, over 20% of the FHA mortgages are “seriously delinquent.”

In the Nassau-Suffolk MSA, the share of FHA-insured mortgages of all mortgages is 12.2%, whereas in the MSA of New York-New Jersey City-White Plains, its share is less than half, 5.9%, which makes that market somewhat less threatened.

The most at-risk metros are those where FHA-insured mortgages have a high market share and a high delinquency rate. The table shows the Top 10 of those markets, according to the American Enterprise Institute’s Housing Center, which collected the data from FHA Neighborhood Watch, sorted by the combination of highest FHA delinquency rates (4th column) and highest shares of FHA mortgages (6th column).

10 Most at Risk Metros, FHA Delinquency Rates, August 2020
MSA #  Delinquent % Delinquent % Seriously Delinquent FHA Share
1 Atlanta-Sandy Springs-Alpharetta, GA 53,135 21.2% 14.2% 21%
2 Houston-The Woodlands-Sugar Land, TX 47,410 22.2% 14.3% 19%
3 Chicago-Naperville-Evanston, IL 39,740 22.4% 15.5% 14%
4 Washington-Arlington-Alexandria, DC-VA-MD-WV 29,855 22.1% 15.5% 14%
5 Dallas-Plano-Irving, TX 27,712 19.2% 12.2% 15%
6 Riverside-San Bernardino-Ontario, CA 22,894 17.3% 11.1% 21%
7 Baltimore-Columbia-Towson, MD 21,425 19.9% 13.2% 19%
8 San Antonio-New Braunfels, TX 17,156 19.0% 11.4% 19%
9 Orlando-Kissimmee-Sanford, FL 16,811 20.2% 13.9% 22%
10 Tampa-St. Petersburg-Clearwater, FL 16,355 17.4% 11.8% 20%

It’s not the lenders that carry the risk, it’s the FHA that insures these mortgages; the taxpayers carry the risk. For taxpayers, it’s a good thing that home prices have risen in recent years, which will in theory allow many defaulted homeowners to sell their home and use the proceeds to pay off the mortgage, and maybe have a little cash left over. That’s why there isn’t a whole lot of official wailing and gnashing of teeth here – in addition to the hope that after forbearance everything will just go back to the old normal.

In practice, a wave of forced sellers like this – and that’s where those housing markets are most at risk – will put sudden downward pressure on home prices, which then suddenly causes other sellers to be underwater.

For example, in the Atlanta metro (#1 above), 53,000 FHA mortgages are delinquent and over 33,000 mortgages are “seriously delinquent.” Those delinquencies that cannot be cured will lead to forced sales. And that’s a lot of houses to suddenly hit the market. In the Houston metro, 47,000 houses with delinquent mortgages are waiting in the wings.

And those are just FHA mortgages and do not include any of the other delinquent mortgages.

The table below shows the 167 MSAs and their FHA loans, in order of the delinquency rate of those FHA loans (4th column), the number (not dollars) of delinquent FHA mortgages in that MSA (3rd column), and the share of FHA mortgages in that market as a percent of total mortgages (5th column). You can use your browser’s search box to find an MSA (if your smartphone clips the 6th column, hold your device in landscape position).

MSA  # Delinquent Loans % Delinquent % Seriously Delinquent FHA Share
1 Nassau County-Suffolk County, NY 15,715 27.7% 20.8% 12%
2 New York-Jersey City-White Plains, NY-NJ 24,348 27.0% 20.6% 6%
3 Newark, NJ-PA 13,854 26.1% 19.0% 14%
4 Fort Lauderdale-Pompano Beach-Sunrise, FL 12,577 25.6% 18.5% 15%
5 Poughkeepsie-Newburgh-Middletown, NY 3,639 25.2% 18.0% 15%
6 Bridgeport-Stamford-Norwalk, CT 3,881 24.2% 17.4% 7%
7 Miami-Miami Beach-Kendall, FL 13,181 23.8% 17.3% 15%
8 New Orleans-Metairie, LA 8,682 23.2% 15.2% 12%
9 McAllen-Edinburg-Mission, TX 4,421 22.4% 14.3% 32%
10 Chicago-Naperville-Evanston, IL 39,740 22.4% 15.5% 10%
11 San Rafael, CA 53 22.3% 19.7% 1%
12 Houston-The Woodlands-Sugar Land, TX 47,410 22.2% 14.3% 14%
13 Lafayette, LA 2,324 22.2% 14.0% 15%
14 Washington-Arlington-Alexandria, DC-VA-MD-WV 29,855 22.1% 15.5% 10%
15 West Palm Beach-Boca Raton-Boynton Beach, FL 7,371 21.9% 15.4% 13%
16 Camden, NJ 12,714 21.6% 14.7% 22%
17 Naples-Marco Island, FL 1,645 21.3% 15.4% 10%
18 Atlanta-Sandy Springs-Alpharetta, GA 53,135 21.2% 14.2% 15%
19 Philadelphia, PA 15,095 20.5% 13.1% 11%
20 Barnstable Town, MA 612 20.5% 13.6% 6%
21 Corpus Christi, TX 2,832 20.5% 12.6% 20%
22 Baton Rouge, LA 5,764 20.4% 12.5% 16%
23 Frederick-Gaithersburg-Rockville, MD 5,808 20.3% 14.5% 10%
24 New Haven-Milford, CT 5,725 20.2% 13.7% 17%
25 Beaumont-Port Arthur, TX 2,058 20.2% 11.5% 21%
26 Orlando-Kissimmee-Sanford, FL 16,811 20.2% 13.9% 17%
27 Boston, MA 4,423 20.1% 13.2% 7%
28 Gary, IN 6,406 20.0% 12.4% 20%
29 Shreveport-Bossier City, LA 3,057 20.0% 12.2% 18%
30 Baltimore-Columbia-Towson, MD 21,425 19.9% 13.2% 15%
31 Las Vegas-Henderson-Paradise, NV 13,984 19.6% 13.8% 13%
32 Dallas-Plano-Irving, TX 27,712 19.2% 12.2% 11%
33 Charleston-North Charleston, SC 4,164 19.2% 12.2% 9%
34 Port St. Lucie, FL 3,322 19.1% 12.6% 22%
35 Cambridge-Newton-Framingham, MA 4,470 19.0% 12.8% 7%
36 San Antonio-New Braunfels, TX 17,156 19.0% 11.4% 16%
37 Oakland-Berkeley-Livermore, CA 3,935 18.9% 13.0% 5%
38 Birmingham-Hoover, AL 7,458 18.8% 11.5% 13%
39 Savannah, GA 2,373 18.8% 11.5% 12%
40 Lakeland-Winter Haven, FL 6,007 18.8% 12.4% 31%
41 Mobile, AL 3,205 18.8% 11.5% 21%
42 Wilmington, DE-MD-NJ 5,630 18.7% 12.3% 20%
43 Columbia, SC 5,681 18.7% 11.4% 14%
44 Elgin, IL 4,697 18.5% 12.1% 18%
45 Fort Worth-Arlington-Grapevine, TX 15,533 18.5% 11.6% 15%
46 Cape Coral-Fort Myers, FL 4,831 18.4% 12.1% 16%
47 El Paso, TX 6,651 18.4% 11.1% 24%
48 San Jose-Sunnyvale-Santa Clara, CA 810 18.4% 13.5% 2%
49 Worcester, MA-CT 3,770 18.4% 11.6% 13%
50 Los Angeles-Long Beach-Glendale, CA 16,826 18.3% 12.3% 7%
51 Urban Honolulu, HI 852 18.3% 13.6% 3%
52 Hartford-East Hartford-Middletown, CT 7,859 18.2% 11.8% 16%
53 San Diego-Chula Vista-Carlsbad, CA 4,661 18.2% 12.8% 6%
54 Springfield, MA 2,862 18.0% 11.0% 16%
55 Greeley, CO 2,089 18.0% 10.8% 19%
56 Allentown-Bethlehem-Easton, Pa-NJ 5,422 18.0% 11.8% 19%
57 Oxnard-Thousand Oaks-Ventura, CA 1,362 17.9% 12.6% 7%
58 Charlotte-Concord-Gastonia, NC-SC 13,587 17.8% 11.0% 10%
59 Albany-Schenectady-Troy, NY 4,440 17.8% 11.9% 10%
60 Jacksonville, FL 8,732 17.8% 11.8% 13%
61 Anaheim-Santa Ana-Irvine, CA 2,652 17.7% 13.0% 4%
62 Memphis, TN-MS-AR 10,396 17.7% 11.1% 18%
63 Lake County-Kenosha County, Il-WI 3,929 17.6% 11.7% 9%
64 Vallejo, CA 1,670 17.6% 11.7% 16%
65 Little Rock-North Little Rock-Conway, AR 4,798 17.5% 11.2% 13%
66 Tampa-St. Petersburg-Clearwater, FL 16,355 17.4% 11.8% 15%
67 Riverside-San Bernardino-Ontario, CA 22,894 17.3% 11.1% 18%
68 Durham-Chapel Hill, NC 1,899 17.3% 10.7% 6%
69 Raleigh-Cary, NC 5,243 17.2% 10.8% 7%
70 Montgomery County-Bucks County-Chester County, PA 7,262 17.2% 11.6% 9%
71 Cleveland-Elyria, OH 11,789 17.1% 11.3% 13%
72 Stockton, CA 3,148 17.0% 11.0% 16%
73 Greensboro-High Point, NC 4,040 16.9% 10.2% 12%
74 Augusta-Richmond County, GA-SC 3,553 16.8% 9.8% 14%
75 Detroit-Dearborn-Livonia, MI 7,798 16.7% 10.6% 15%
76 Austin-Round Rock-Georgetown, TX 8,905 16.7% 10.4% 8%
77 Reading, PA 2,504 16.6% 10.8% 19%
78 North Port-Sarasota-Bradenton, FL 3,074 16.5% 11.2% 12%
79 Providence-Warwick, RI-MA 7,546 16.5% 10.5% 17%
80 Virginia Beach-Norfolk-Newport News, VA-NC 10,238 16.4% 10.3% 11%
81 Sacramento-Roseville-Folsom, CA 7,063 16.4% 11.1% 12%
82 Lubbock, TX 1,904 16.2% 9.3% 17%
83 Denver-Aurora-Lakewood, CO 11,534 16.2% 10.5% 12%
84 Greenville-Anderson, SC 4,171 16.2% 10.0% 13%
85 Winston-Salem, NC 3,212 16.1% 9.5% 12%
86 Anchorage, AK 1,857 16.0% 10.8% 13%
87 Punta Gorda, FL 810 16.0% 10.3% 14%
88 Tacoma-Lakewood, WA 3,948 16.0% 10.1% 15%
89 Warren-Troy-Farmington Hills, MI 10,452 16.0% 10.2% 9%
90 Toledo, OH 2,672 15.9% 10.1% 10%
91 Scranton–Wilkes-Barre, PA 2,298 15.9% 9.8% 18%
92 Syracuse, NY 3,491 15.9% 10.1% 13%
93 Milwaukee-Waukesha, WI 4,165 15.9% 10.3% 6%
94 Santa Rosa-Petaluma, CA 525 15.9% 11.7% 6%
95 St. Louis, MO-IL 15,572 15.8% 9.5% 11%
96 Richmond, VA 8,167 15.8% 9.6% 13%
97 Wichita, KS 3,426 15.7% 9.4% 13%
98 Deltona-Daytona Beach-Ormond Beach, FL 3,523 15.6% 9.7% 20%
99 Salisbury, MD-DE 1,548 15.6% 9.4% 8%
100 Indianapolis-Carmel-Anderson, IN 13,427 15.6% 9.4% 15%
101 Columbus, OH 10,232 15.6% 9.9% 10%
102 Tulsa, OK 5,414 15.6% 9.5% 16%
103 Oklahoma City, OK 8,282 15.5% 9.5% 15%
104 Flint, MI 2,100 15.5% 9.6% 17%
105 Bakersfield, CA 5,270 15.5% 9.9% 24%
106 Seattle-Bellevue-Kent, WA 5,496 15.5% 10.7% 5%
107 Rochester, NY 5,233 15.4% 9.8% 12%
108 Chattanooga, TN-GA 2,894 15.4% 9.2% 14%
109 Modesto, CA 2,277 15.3% 9.6% 21%
110 Daphne-Fairhope-Foley, AL 882 15.1% 9.8% 9%
111 Palm Bay-Melbourne-Titusville, FL 2,676 15.1% 9.9% 14%
112 Minneapolis-St. Paul-Bloomington, MN-WI 13,935 15.1% 9.7% 9%
113 Myrtle Beach-Conway-North Myrtle Beach, SC-NC 1,636 15.1% 9.4% 8%
114 Tallahassee, FL 1,517 15.1% 9.8% 11%
115 Nashville-Davidson–Murfreesboro–Franklin, TN 9,977 15.0% 9.2% 13%
116 Huntsville, AL 2,351 15.0% 8.8% 10%
117 Cincinnati, Oh-KY-IN 10,889 14.9% 9.3% 12%
118 Wilmington, NC 888 14.9% 9.1% 7%
119 San Francisco-San Mateo-Redwood City, CA 132 14.9% 11.7% 0%
120 York-Hanover, PA 2,688 14.8% 9.0% 19%
121 Ogden-Clearfield, UT 3,216 14.8% 8.2% 15%
122 Boulder, CO 411 14.8% 9.6% 3%
123 Clarksville, TN-KY 1,263 14.8% 9.1% 12%
124 Ocala, FL 1,457 14.8% 9.0% 19%
125 Asheville, NC 789 14.7% 8.8% 6%
126 Fort Wayne, IN 2,382 14.7% 8.4% 13%
127 Pittsburgh, PA 10,016 14.7% 9.0% 11%
128 Killeen-Temple, TX 1,704 14.7% 8.3% 10%
129 Kansas City, MO-KS 10,316 14.7% 8.9% 12%
130 Salt Lake City, UT 5,271 14.5% 8.5% 13%
131 Lancaster, PA 1,974 14.5% 9.0% 12%
132 Akron, OH 3,372 14.4% 9.1% 13%
133 Phoenix-Mesa-Chandler, AZ 19,636 14.4% 8.6% 12%
134 Fort Collins, CO 672 14.4% 9.4% 8%
135 Des Moines-West Des Moines, IA 2,651 14.4% 8.6% 8%
136 Youngstown-Warren-Boardman, OH-PA 2,264 14.4% 8.8% 17%
137 Pensacola-Ferry Pass-Brent, FL 1,885 14.3% 8.9% 10%
138 Grand Rapids-Kentwood, MI 3,488 14.3% 8.5% 9%
139 Manchester-Nashua, NH 1,435 14.2% 9.1% 12%
140 Crestview-Fort Walton Beach-Destin, FL 736 14.2% 8.9% 5%
141 Buffalo-Cheektowaga, NY 4,991 14.1% 8.8% 10%
142 Louisville/Jefferson County, KY-IN 6,487 14.0% 8.6% 13%
143 Omaha-Council Bluffs, NE-IA 4,107 14.0% 8.2% 9%
144 Knoxville, TN 3,468 14.0% 8.1% 12%
145 Colorado Springs, CO 2,527 14.0% 8.6% 9%
146 Albuquerque, NM 5,389 13.9% 8.3% 16%
147 Portland-Vancouver-Hillsboro, OR-WA 5,252 13.9% 9.5% 9%
148 Tucson, AZ 4,358 13.8% 8.3% 13%
149 Fresno, CA 3,671 13.8% 8.5% 16%
150 Canton-Massillon, OH 2,011 13.8% 7.9% 17%
151 Dayton-Kettering, OH 3,907 13.7% 8.3% 12%
152 Provo-Orem, UT 1,986 13.6% 7.9% 12%
153 Madison, WI 647 13.5% 8.6% 4%
154 Harrisburg-Carlisle, PA 2,355 13.3% 8.2% 12%
155 Lansing-East Lansing, MI 1,890 12.8% 7.7% 12%
156 Visalia, CA 2,208 12.8% 7.3% 28%
157 Eugene-Springfield, OR 829 12.5% 7.8% 10%
158 Bend, OR 377 12.5% 8.1% 8%
159 Kalamazoo-Portage, MI 828 12.4% 7.5% 10%
160 Prescott Valley-Prescott, AZ 509 12.2% 7.1% 10%
161 Lexington-Fayette, KY 1,651 12.0% 7.4% 10%
162 Spokane-Spokane Valley, WA 1,707 11.8% 7.0% 10%
163 Salem, OR 1,168 11.7% 7.1% 15%
164 Reno, NV 1,105 11.6% 7.6% 11%
165 Boise City, ID 2,435 11.6% 6.3% 10%
166 Panama City, FL 495 11.4% 7.2% 12%
167 Springfield, MO 1,464 11.0% 6.5% 12%
168 Lake Havasu City-Kingman, AZ 463 10.9% 6.1% 12%
169 Fayetteville-Springdale-Rogers, AR 1,723 10.5% 5.9% 10%

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  136 comments for “Subprime, No Problem? FHA Mortgage Delinquencies Hit Record 17.4%, as Fed Triggers Mad Land-Rush in Split Housing Market

  1. OutWest says:

    Florida – a sunny place for shady people. If the snowbirds don’t return this winter to pump up the local economy it looks like things could get bad.

    • Brian says:

      I live in Canada. I don’t think we’re going to be opening the border any time soon and it seems likely that the USA will keep their side closed to match. So, no snowbirds unless they’re dual-citizenship.

      • Paulo says:

        Every winterized camping spot in BC is already booked for this winter. Apparently, they need another 35K spots, and some kind of association is scrambling to find docking/rental accommodations for snowbirds that live full time in their (unsuitable for winter) RVs.

        Big electricity bills coming for them. We have many grey cold days just above 0 deg C, and the occasional snow event. My son rents out a spot to a local RVer and during winter the renter is buying propane every week, it seems.

        • Tony22 says:

          Just say “I’m driving to Alaska” and they will let you through.

        • Lynn says:

          That sounds dire. I don’t know if the cost would justify the savings, but there is a foam insulative roofing material that is used on top of existing roofs of RVs and mobile homes. That and some quilts on the walls might help as long as their are NO propane leaks and adequate vents for any propane appliances.

      • Ed says:

        They call Americans who migrate the same thing. They too may hesitate to take the yearly trip south to “what pandemic?” Florida.

        I lived in the U.P. of Michigan and still have family there. The elderly who are well-to-do are almost all snow birds, not that so very many there ARE well-to-do.

      • MiTurn says:


        I think if a Canadian owns property in the US he or she can enter. At least that appears to the the case where I live. During the last housing downturn a lot of local homes were bought by Canadians – peobably both as investments and as vacation property. We are accustomed to seeing BC and Alberta license plates in the neighborhoods.

        • Brian says:

          I didn’t know that. I wonder if they will, though. Canada isn’t virus free by any stretch but it’s a lot less than the USA. I expect most older people would prefer to brave the cold over Covid. I guess we’ll see.

    • Jessy James says:

      Florida? Just pitch a tent in sunny Sacramento–hell, everybody else is. You really don’t even need a tent, there are PLENTY of empty residential housing shells that will never be finished in Folsum.

  2. DawnsEarlyLight says:

    It seems the government (taxpayer) has been the debt payer of last resort, for the past couple of decades. Maybe the government should recoup much more, maybe all, of the assets , in these fantastic deals with banks and mortgage companies. Let them feel the pain, and loss, of such ridiculous contracts!

    • Joe Saba says:

      get this
      If you have FHA mortgage and are in forbearance
      per RULES
      a Realtor friend who had contract on house was trying to get FHA financing
      contract price $208k
      2018 paid $183k
      Appraised price today – $185k
      DEAL = NO GO – ie dead
      is this reason???
      conventional lender would easily appraise at contract price

    • Top-GUN says:

      Dawns Early Light,,,,
      Banks and Mortgage Companies are middle men that process mortgages in accordance with government standards,,, why should they take a hit..
      The big question is where in the Constitution is the federal government authorized to have anything to do with loans and mortgages… answer is they aren’t! !!! Totally UnConstitutional. .. we should be prosecuting Congressmen….

      • happy_man says:



        It’s really fun to think of all the things the Fedgov does (or allows to happen) which are unconstitutional. If the Fedgov, which collectively is by far the most dangerous and abusive lawbreaker in the USA, simply followed the Constitution the govt would become unrecognizable to the typical public school & university indoctrinated, leftist (including so called conservative republicans), communist (including so called conservative republicans), partisan (both parties) American.

        But it would be beautiful I believe there would be much less poverty, and it would be so much easier for families to provide for themselves. I also believe there would be a lot less pollution and environmental damage! Possibly zero pollution!

        Even more so if a return to Constitutional government were accompanied by an interest in or increase of faith.

        The degree of peace could also be very high. Not only in the USA but also in all the countries oppressed or tormented today by the USA military and abused by the current USA “businesses” of today.

        • drg1234 says:

          It’s “hear, hear”

        • Intelligent yet idiot says:

          “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” Frédéric Bastiat

        • Ed says:

          The government allowed a lot as the housing crisis got rolling, though the mortgage originators violated even what few rules were left.

          Now why did the Feds allow so much? Because that’s what the banks wanted and demanded!

          “Intelligent” is dead right.

      • Jdog says:

        The Federal Government does so many things that are unconstitutional, they have no more legitimacy. They are a fake government without the support of the people…

        • Thomas Roberts says:

          Unfortunately, they do have support to stay as is. Too many of the older generations will fight for the status quo as they think it benefits them the most, regardless, of any of their “rebel” talk.

          If enough of the older generations “age out” or are simply ignored, real change could happen. One possible change would be fully eliminating judicial precedent to the maximum possible extent. Instead, the only court which has any legislative ability, would be the newly created constitutional Court, which, has elected judges, who don’t serve lifetime roles and essentially have a veto power, if a law would violate the constitution, they can veto it. If a bill is vetoed is has to be changed, disregarded, or sent to the public to decide. Any changes to the constitution needs an overwhelming majority of the public across multiple dates (possibly months to years apart).

          There are alot of possibilities, but, the fact is the overall current government status quo has a lot of support, even among many who claim otherwise.

    • Old School says:

      I was thinking the same thing. Once debt bubble burst in 2008 the US balance sheet backed by Fed printing has been the go to move by politicians. It is not rational to make a loan where the asset can loose 20% of it’s value only requiring a no down payment or 3% down payment loan. Same with student loans. If we have severe recession most of those loans will never get repaid. Doesn’t make sense except it’s a government subsidy to certain people at expense of others.

  3. Richard says:

    The last housing bubble crisis appeared in 2006 bursted in 2007, didn’t really crash the market until 2008 when the big boss gave up on Lehman. How many years before this one crashes is unknown, but we all know it really depends on Fed and the owners behind it. I say it won’t crash until the political game either settles or completely gone nuts. Until then these bubbles continue to grow.

    • Here it comes says:

      I agree. I sincerely believe some serious storm clouds are on the horizon but it’s like 4-5 years away, and before that we are about to witness an explosion upward in the stock market and home prices.

      There’s a speculation bubble about to be formed the likes of which we haven’t seen, then it will pop and take down everything for a decade or more.

      • economicminor says:

        It would take a lot of liquidity to do what you suggest. I mean a lot of liquidity. And demand? Seems like demand destruction with 30 million already collecting subsidies plus all those who are unemployed and don’t.

        I don’t know but with all the demand for liquidity from Unicorns and Zombie corporations and the demand by the government to fill the holes in revenue due to declining revenues from restaurants and other B&M businesses, where do you see all this added liquidity coming from?

      • Frederick says:

        Agree with the storm clouds but don’t think we have 4 to 5 years before a big catastrophe More like 4 to 5 months

        • Lisa_Hooker says:

          I agree. It’s been 4-5 months for at least 10 years. Maybe 15. I’ve been watching constantly since 2002-3 with Greenspan’s rate cut.

        • J P says:

          Agree. Likely blow up early 2021.

      • sunny129 says:

        Covid 19 doesn’t agree!
        it is NOT going away any time soon! 2nd wave on the way. 50-60% of budinesses shut down permanently (YELP)

        Next 3-4 months are critical!

        -no 2nd stimulus in sight
        -Dems in fight GOP re SCOTUS
        -uncertain Pres election
        -possible civil unrest later+++

        This time, it is different, right?

    • Paulo says:


      Your scenario is just months, not years. You should also factor in exploding numbers of Covid deaths as a near event, especially in Florida thanks for full restaurants and a ban on local restrictions.

      • Richard says:

        Covid means nothing for now, it hasn’t since April with the explosive growth in infection and death. Unemployment means nothing if 2/3 of them get better pay at home than work. Fundamentals can mean nothing for some years when the house change rules, players can only play along. Tho I do feel like this bubble is coming to an end in the next few months or so.

        • sunny129 says:

          The End will come faster than you think!

          This 3rd largest ‘Everything’ Bubble of the 21st century will burst or more likely leak badly within 3-4 months!

          See my reasons ABOVE in my reply to Frederick
          Let’s wait & see!
          (Been in the mkt since ’82)

    • Jimny says:

      Feds doing everything in their power to push the asset pain to 2021. But if you’re buying expecting post election accommodation policies to stay in effect, I have a 500k starter home for you to get a mortgage on.

  4. GotCollateral says:

    Wolf, don’t you know that this forbearance kick the can will never end?

    Debt cures all, more debt to roll over bad debt is the greatest American past time since 2008!

    • rhodium says:

      As long as creditors don’t expect the money back, what’s the problem?

    • Nik says:

      Why just limit the Roll-over Circus to the past 12years..? Since,its been going on in the World’s Treasury/Bond Markets..’ad infinitum’ lolol aloha amigos

      • GotCollateral says:

        Yeah, and since forever there have never been any major defaults, currency pegs failing, or relative declines in standards of living between countries at various income/wealth levels!

    • Old School says:

      Read a long time ago that you can’t have a bubble without debt.

    • economicminor says:

      Because the debt payments are someone else’s income.

      Are you suggesting a debt jubilee?

      A hard reset?

      What a chaotic idea!

      • GotCollateral says:

        What I want to happen is irrelevant. The fact is that most people are on the same side of this insolvent debt rollover game and face significant downside risk

  5. Anthony A. says:

    The stuff going on around here: Houston-The Woodlands-Sugar Land, TX, has to do with the large number of oil & gas jobs that vanished this year.

    Besides the high paid employees (engineers, management personnel, etc), the lower tier workers that staff oilfield support companies have been seriously displaced. One family member of our, an oil & gas accountant who made $120K per year, has been unemployed since March and no jobs leads on the horizon.

  6. TownNorth says:

    Dallas-PLano-Irving is one of the markets I’ve been watching, and the # delinquent in the chart above is higher than the total inventory for sale now. And as Wolf points out, that’s just the FHA mortgages.

    • happy_man says:


      I think you have discovered a signal for home prices: # in forbearance > # for sale!

      sounds like then that with all these mortgages in forbearance prices in DFW are about to go UP, right?


  7. 2banana says:

    Folks want more affordable housing.

    This is the road on how you get it.

    Let it happen and the states will all be better off in the long run.

    • economicminor says:

      Unfortunately it may reset a lot, even lower wages, but it won’t reset the need for tax revenues which have been based upon these higher property values and incomes. Deflation scares the daylights out of governments. Our entire system is built on constant inflation, not deflation.

      • 2banana says:

        A key part of affordable housing is low property taxes.

        Which means public unions need to be reigned in.

  8. Brant Lee says:

    620 down to 580 credit? What could go wrong there? I wouldn’t loan a wooden nickel to someone with that kind of rating. Everyone here who has rented property knows where sub 700 will get you. Does anyone want to guess what kind of shape those foreclosed houses will be in?

    I suppose most people will attempt to live way beyond their means if they can only get approved for it. My 2010 Camry is still purring like a cat and that’s where I get my jollies.

    • lenert says:

      That’s what the mortgage-backed-securities are for – to spread the risk… and attract excess speculative capital chasing yield during a period of secular stagnation… and generate fees.

  9. Michael Francis says:

    Speaking of subprime mortgage lending, here in Australia, the LNP Federal Government just announced the full removal of the Responsible Lending Laws adopted by the Hayne Royal Commission Report last year into irresponsible bank lending.

    Banks no longer need to check the credit worthiness of borrowers and are no longer held accountable when loans go bad as the taxpayer will make the bank good.

    • Lee says:


      They announced the changes to the law, passed the law, and got Royal assent all in two days?

      I think not.

      The proposed changes haven’t even made it to Parliament although that didn’t stop the ASX from surging in price.

    • Fat Chewer. says:

      Hes annoying, ain’t he? He THINKS not. I would have to question the intelligence of this guy. Obviously doesn’t watch the news (or possibly only watches Sky after dark), is more worried about China than Oz and can’t even be told straight up that the Treasurer has, in fact, dumped those laws. No royal assent was needed, Lee. The ignorance is strong in this one.

  10. Educated but poor Millennial says:

    When this houses hit the market, will this bring the housing price down? Will this effect the untouchable housing in Los Angeles?
    Any news?
    Thank you.

    • Glenn says:

      What makes you think that houses will hit the market? Don’t be surprised if you see Steve Mnuchin working (once again) with his friends at BlackRock. They are the 4th branch of the U.S. government, aren’t they? This is a deja vu of the 2008 – 2009 Subprime. Check out Indy Mac / One West. ~ The Soviet Union was liquidated December 8, 1991. I think that we have the same “liquidators” (just may have, that is).

    • Beardawg says:


      As a former So Cal homeowner (1989-2002) and residential RE investor (2004- Present), best guess is prices after foreclosures (2021-23, barring govt takeover of privately owned RE) will make some areas affordable, meaning a $500K cracketbox in IngleWatts might drop to $300K.

      The desired burbs will move less, say $700K to $600K, but with ZERO interest (net 2.5% or so), you can prolly slide into a decent house for $2500/mo in a couple years.

      Good luck with the tax rates, smog, CA flake-a-sauruses and neverending traffic. Left 20 years ago and only go back to visit and try to avoid rental cars and hotels. I can afford the travel/lodging but don’t like subsidizing idiocy.

  11. Petunia says:

    This looks a lot worse than 2008, when only a few states imploded. The number of high end neighborhoods on the list is surprising. These are high property tax areas, and if they are not paying the taxes, will that be added to the end of the loans.

    The high prices in my area don’t reflect the level of potential delinquencies. It looks like a bloodbath is right around the corner.

    • Old School says:

      Real estate also has a historical component. Right now I am renting a structure for very little that is probably near the end of its life. It started about 100 years ago as a small school. Very well constructed. Later it was moved and used as a church. Added onto (not very well done) and used as a residence. Now converted to a 2 bedroom apartment with half of the structure empty. As far as I know a real estate broker or banker has never made a dime on the place.

      The land value will soon be worth more than the structure and it will eventually get torn down and a McMansion be built on it as it’s a 2.5 acre lot in a nice area. Being single and relatively old I feel pretty good about living here. I could afford (barely) to have a nice new home constructed, but in a way it’s kind of wasteful not to use the last years of a structure especially if it meets my needs. There is a certain charm about living in a place where doors and floors are a 100 years old.

      It’s kind of living in a gray market where there is no rental contract, not much is to modern code as it’s all grandfathered in. It’s about as free as one can get these days.

  12. Mike says:

    ” And when forbearance ends? By metro.”


    • Wolf Richter says:


      I wish I’d made that typo so I could add it — after readers point it out — to my list of infamously funny typos.

      • Wes says:

        Alpharetta, Naperville, Palm Springs, Boca Ratan….?

        • Shiloh1 says:

          I’d have to figure Naperville is just lumped together with Chicago for the stars. Hard to imagine many FHA loans in Naperville.

        • Wolf Richter says:

          These are the official MSAs as defined by the Census Bureau. They’re all huge, some huger than others.

        • nodecentrepublicansleft says:

          Boca RATan?

          Boca = Mouth
          Raton = of the Rat (see shape of coast)

          PS: Boca Raton is an awful town. I know because I lived there from 1979-1991. Giving a 16 year old kid a fancy car or fast motorcycle is a recipe for disaster.

        • Frederick says:

          Whenever I hear Boca Raton I think of Red Buttons the comedian from advertisements as a kid growing up Trying to get NYers to retire there Looks like it worked

        • Petunia says:

          I haven’t been to Boca in 5 years, but at least it had a nice mall, Town Center, and the fanciest Publix in south Florida. The Publix had fancy columns surrounding the parking lot, we used to call it Imperial Publix.

  13. breamrod says:

    no worries ! blackrock will buy them all for .40 cents on the dollar and then rent them back to you. Just like they did in Atlanta back in 2010. After all it’s government for the “people”

    • GotCollateral says:

      Sorry… 40 cents on the dollar is history…

      > youtube-dl -f mp4 ‘ytsearch: The Fed Has Few Options, Says Danielle DiMartino Booth CFA Global Investors’

      > 35-38 min

      > non covanent -> from 40c/dollar to 14c/dollar recovery

      > covanent -> from 71c/dollar to 60c/dollar

      That was 2018… collateralization levels on Junk anything (including junk houses) are around 8.5% now…

      Blackrock will buy at 8.5 cents on the dollar from “homeowners” liquidated underlying on their “death pledges”… sorry mortgages is the preferred euphemism lol

      • Shiloh1 says:

        Yes, that’s how it went for the RTC insiders buying ~ 30 years ago.

      • MarkinSF says:

        I like her and watched that clip but isn’t she referring to corporate bonds?

        • GotCollateral says:

          With the amount of collateral transformation going on, i dont really think it matters… when the liquidation train comes, the thing that matters is that there is far more claims on assets than actual assets available.

          What we saw what happened to long dated UST, paper gold and IG corp in march was just a taste.

  14. BuySome says:

    Quantitative Pot Easing (QPE) is not working…it’s time for a massive program of Helicopter Qualudes. Keep calm and defer on!

  15. MonkeyBusiness says:

    The state of the economy continues to be weird. Supposedly container demand is pretty strong. Triton, one of the big container-equipment lessors “expects to see sustained heightened activity through the fourth quarter, while demand could remain strong through the Chinese New Year [in mid-February 2021]”

    Yes, I am aware that Wolf wrote a housing post, but there’s also strength in the economy and I am just not sure yet how the economy is going to play out.

  16. Josap says:

    I wonder how many of these loans are small RE investors whose tenants aren’t paying rent.

    • Seneca’s Cliff says:

      Or Airbnb superhosts

      • KGC says:

        I think this is definitely a concern. I’ve been seeing a lot of furnishings on CL and OfferUp that are coming out of AirBnB’s.

  17. DR DOOM says:

    If the fed does stumble into inflation with wage growth then forbearance for a year is a winner for the mortgage holder. If the fed stumbles into deflation then dropping the house keys off in the mail box on a depreciating house is also a winner. Not paying is always a winner. This will add a new victim class to the multitude of existing victim classes. We could call them Covid 19 Economic Refugees. Congress will have to pass more laws in the future to protect them from the mean old world wanting payment. The schmucks staying current by paying are looking like suckers. Extend and Pretend is evolving into being a reality. In America you are better off being a member of a victim class looking for a political savior for your salvation than being independent and questioning the political class . Submit and be made whole so sayeth the savior.

    • Beardawg says:


      That is prophetic. I recently watched a social documentary establishing what you describe. The more victimized a person can present to others, the greater his/her/their status in their peer group.

      With enough legislative momentum, it could become a bizarre reality where emotional and/or financial challenges, real or simply expressed, equate to new sets of rights without responsibilities.

      Brave new world ?

      • Intelligent yet idiot says:

        What you are seeing now has happened many times before, it’s the signs of big societal changes on the horizon that play out over decades. The most obvious was the French Revolution where you had Voltaire the king of reason and on the other side Rousseau the king of feeling that gave birth to romanticism and the demotion of reason.
        Also when the romans adopted Christianity there was a huge upheaval against anything rational in the society until Rome was eventually destroyed.
        We are entering a period where truth and reason are toxic, get ready for a lot of stress and anxiety, every one is in some way better or worse off than the neighbor, the list of grievances will be endless going forward, when you take away personal responsibility, we are all victims.

      • Lisa_Hooker says:

        Oh, I don’t know about that. I’ve been victimized by the FOMC for 15 years and I haven’t gotten any benefits.

    • Yertrippin says:

      It’s amazing that people are faulted for playing by the rules. Why would people not work in their own interest? Or is that only for the rich? The moral stigma applied to lower class people exploiting legal loopholes as opposed to the laissez faire attitude toward massive theft by the wealthy is hysterically myopic. Almost as if there is a double standard.

      • 91B20 1stCav (AUS) says:

        C’mon, Yer, you know very well that one’s not supposed to pay attention to those behind the curtain!

        May we all find a better day.

  18. Lynn says:

    Thank you Wolf.

  19. raxadian says:

    One of Biden’s campaign promises is debt forgiveness… granted is mostly for student loans and is a campaign promise he only said one time. Is on Youtube if you wanna look it up.

    But however win the election will have to deal with this anyway, I wonder what they will do?

    • DawnsEarlyLight says:

      Forgive student loans? Better repay the thousands of people who paid for student education. Do we think people actually tow the party line? Get your hands out of my pockets!

      • MCH says:

        I think somewhere there must be a tally of promises been made by both sides at this point. Wonder how much of it gets collected. And who really pays for it.

        Haha… what a stupid comment, of course it’s the usual suckers. US.

      • cd says:

        exactly, American debt slaves are just fodder for the debt pushers, much worse than drug pushers….

        they can pay me back for paying for my kids education, all these little liberal whiners who used 200K to go to college for 4 years and come out with nothing but a sleepy grin can stuff their crying somewhere else….make them start cleaning up America one piece of litter a minute or raking some forests…..sheep of America are at all time high

        • 91B20 1stCav (AUS) says:

          cd-raking forests (and you’re welcome to come and help rake our 40 hilly acres any time) doesn’t make a god****ned bit of difference if you can’t make it rain reliably, or undo 100 years of what’s now understood as poor forest and profit-over-safety investor-owned public utility management (…what was W’s, take? Oh yeah,’…we don’t know what we don’t know…’). Might agree with you somewhat if a general and compulsory ‘National Service’ (WPA-type options as well as military) strategy for post-high school18-20 year-olds could be implemented, with a limited ‘NS Bill’ for future education available at end of term. Doubt it would ever fly in today’s society. (History’s wheel groans again upon turning…).

          Thank goodness my rant’s over.

          May we all find a better day.

    • David Hall says:

      On the other side of the equation Trump said he wanted to make payroll tax cuts permanent. He said this twice. That is to defund social security and medicare, sending another wave of foreclosures as a number of retirees have not paid off their mortgages. I met a real estate agent who told me she knows of people in a 55+ community are paying 9% interest on their mortgages.

    • Frederick says:

      Trouble is can Biden make that happen as POTUS and the taxpayer will just get saddled with more debt Doesnt sound responsible to me but what does today?

    • Jdog says:

      There is no such thing as debt forgiveness. It is another example of “New Speak” which is becoming so common now.
      In reality, there is only debt reassignment, where one persons debt is transferred to someone else.
      About all this accomplishes is to undermine the ethics of the country, and to create division and hatred.
      IMO, when they get people pissed off enough, and their hatred is at a high enough level, they will start a war to direct that hatred in a
      predetermined direction.

  20. Lee says:

    In the RE sector in China, home of the official ripoff company and ponzi scheme listed companies galore, Evergrande looks like it it is big trouble.

    Wonder if the Chinese government will bail them out to the tune of some $120 billion or so………………..

  21. Beardawg says:

    As a private lender for residential RE investors, the terms are straightforward and Borrowers have SITG (Skin in the Game). Without SITG, neither a homeowner nor investor will pay if the asset drops below the loan value – it is calc’d into the amount lent (Loan to Value aka LTV). An investor is more likely to ride it out if they have a tenant in the property to at least make the bills.

    In this go around, I agree there seems to be a setup by the proverbial “Big Boys” who can orchestrate the LTV tipping point in targeted markets (the ones Wolf is highlighting above). Fannie/Fred will wholesale these en masse to the Big Boys at 20-30 cents/dollar who will then trickle them to Mom n Pops for 40-70 cents (depending on locale).

    Ma’s n Pa’s will be labeled greedy as they try to make a go if it (been there). The Big Boys are just sliding paper around and making bank – everyday Joe does not see their faces and displaces the vitriol onto Ma n Pa.

    Solution? Buy stock in the Big Boys I guess, then at least you won’t get your rental home (asset) trashed.

    • happy_man says:


      You suggest buying stock in the big boys, what makes you believe that the incestuous management in control of the big boys will return anything to the shareholders? Did shareholders suddenly stand up and exercise their rights?

    • Petunia says:

      I checked the HUD website for houses in my area recently, there was one house listed. Doesn’t look like they are foreclosing on anybody.

      • Anthony A. says:

        No foreclosures just before the holidays…’s not politically correct.

  22. Theblackknight says:

    Come on! Tis’ but a scratch!

  23. Michael Engel says:

    1) If FHA, the big whale, decide to sell : LI, White plain, Jersy-City, Atlanta, Houston, Chicago…on big red falling prices & on high volume,
    – because they care, – there will be a “change of character” in the US RE market.
    2) When they don’t care, when they kick the can down, absorb the extreme delinquencies for a while, the RE market trend is still up, after the temp CV19 bump.
    3) SPY weekly : the trend is up, backing up, above/ under Feb high, because there was no “change of character”. Until there will be a “change of character” the trend is still up.
    4) The weekly bar is slightly smaller than the previous bar, on slightly higher volume.
    5) It landed on top of the June 8 2020 bar and bounced backup.
    6) It landed on top of the “change of character” bar, on the open
    of the big red/ high volume bar from Feb 24 2020, – x4 times it’s size / on higher volume, – and bounced backup, still in the Feb 18/ 24 gap, to close slightly < the Feb 18 close.
    7) SPY daily approached the top of the cloud in direction to the bumps above, possibly to form x2 or x3 camel back humps and LPS.

  24. roddy6667 says:

    I just watched the movie “The Big Short” again. I wonder how soon before the CMOs and CDOs collapse like a house of cards in a 9.0 earthquake.
    That would 9.0 on the Richter Scale. Pun intended.

    • OutWest says:

      ‘Margin Call’ is another good one. It’s all about being the first one out the door when the markets head south in a big way….

  25. Norma Lacy says:

    to Happy Man Well said sir.

    to Wolf, et. al. I believe I read that there is a proposal for the FED – not the Treasury, to have direct access to all people’s bank accounts, for the purpose of “making deposits” such as unemployment supplements. The FED is as we know composed of member private banks such as JPMorgan, which has the food stamps/welfare bezel. (I realize I have left out a step in describing the FED, but I think I am correct in essence.) Anyway, I have a memory that con=gress passed a bail-in “law.” So I’m having definitely the jim-jams. Comments?
    Thanks and cheers

    • Wolf Richter says:

      Norma Lacy,

      My upcoming WOLF STREET REPORT will be about this. This has nothing to do with “bail in.” Deposits already get bailed in routinely (they’re unsecured credit in a bank’s capital structure), but deposits are insured by the FDIC, and the FDIC makes you whole, and the FDIC = federal government, and the government is backed by the Fed, and so it doesn’t matter for you the depositor when deposits are bailed in. This proposal by the Fed is about something else entirely. And I’ll cover it in my podcast, to come out on Sunday. So make sure you listen to it :-]

      • There is a Senate Bill, by Sherrod (D) of Ohio. This would allow Fed to direct MMT. Not sure how the chain of command would function. The real upside as I see it is the Fed might lend money directly (or nearly so) to consumers at low interest rates.

        • GotCollateral says:

          Which would be extremely bearish for banks/priv lenders who would have to compete with the fed on origination… though if consumers could keep getting 10bps or less for overnight loans for direct purchases (not cash transfers), for any amount in notional and continue to roll over balances, could be a good kickstart for (monetary) inflation…

          I don’t see it working if anything less than above.

      • DawnsEarlyLight says:

        Depredation shields set to maximum! Phasers set to plunder! Waiting with ‘baited’ (pun intended) breath!

      • Yort says:

        I think the Golden Chalice for “CryptoFed” daydreaming will be for the Fed to send us all digital money that has to be spent within a certain time limit during recessions. That might work actually, it will be like a life video game so as long as everyone gets some, I’m game. Yet what concerns me with this sort of control is the Fed could then say for the next two months that there will be a negative interest rate on any electronic account that has over “X” dollars. Digital Fed accounts will most likely punish savers at some point, as for some reason the Fed refuses to acknowledge that it is the folks who save and invest which increases productivity via entrepreneurship and other real wealth creative ventures. BofA Research has a data chart that shows that lower rates force households to save more, exactly the opposite needed for a healthy and productive economy. That is exactly what I have done myself, saving 100-200% more per year than when I had a bunch of safe 4-5% CDs only 13 years ago (although I did get 3.1% brokered CDs in that narrow 3 month window in early 2019, and my advisors said I was a bad move but has since appreciated almost 8%, HA). The data shows 3.75 to 4.25% interest rates is the sweet spot to get savers to invest and spend, yet the Fed is too trapped by the fear of the Stock Market “crashing” over 10% and the corporate American addiction/dependence to ZIRP to ever push rates up again, “voluntarily”. Having destroyed the time value of money, the fed is trapped…yet at some point something “Fed unfixable” will force a change that nobody can predict or see coming with any degree of accuracy, minus a large dose of lady luck. And a CrytoFed is only going to pull that moment forward in time, IMHO…

        BofA Chart via ZH (sorry for the link to ZH, but they do have “some” excellent, somewhat expensive, yet free data caches once one filters out the “other stuff”…HA):

    • Old School says:

      In my opinion the Fed and European Central Bank need to be slapped down a couple of knotches by congress. A central banker should never make a statement about inequality or climate change as these are issues to be solved by a representative democracy, not an unelected body.

      I have lost faith in the Fed and until asset prices reset will purchase precious metals with excess incime (something I have never done) because the current policies look too much like John Law foolishness. Will they blow up the currency? I am not smart enough to know, but want to hold something that is relatively immune to their expanded role.

    • Petunia says:

      I’ve heard many comments on this “fed digital money” but none from official looking or sounding types. The general idea is that fiat will be replaced by an individual account at the fed. This cuts out the middlemen, the member banks. I guess at that point the fed will keep the fees to itself or eliminate them(not likely).

      This is very dangerous because at that point people have no freedom anymore. Your money will only be yours, if you spend it, how they want you to.

      • Frederick says:

        Hence the beauty of things like Gold and Bitcoin

        • GotCollateral says:

          Yeah, calls for stuff like that give legitimacy to non central bank crypto that exists and traded today and not vaporware that is largely CBDC.

          Not exactly safe calls to make for those who want to maintain the status quo lol

          Then again, the fact that there are futures/options/swaps/swaptions/forwards/etc for btc now on “official” exchanges like CME… the writing is already on the wall

        • elysianfield says:

          “Hence the beauty of things like Gold and Bitcoin”

          The real beauty is that gold can be made illegal with the stroke of a pen…already done several times to gold during the 20th century in the US…Bitcoin? Pbffft.

        • Frederick says:

          Made illegal? That’s about as dumb a concept as making pot illegal in my opinion How does any human being or government have the right to make a naturally occuring metal or plant illegal It’s an insane thought

        • elysianfield says:


          Insane? Maybe. Historical precedent? Without question. FDR and Nixon. How does the government have the right?

          How many divisions can you or other gold bugs field?

  26. Michael Engel says:

    1) We might be facing a rough year and a half, or two, until mid 2021, or early 2022.
    2) US gov will stimulate, in repetition, to bootstrap home owners,
    renters and the unemployed.
    3) Those who try to pay, will stay. Those who play will be out. Their houses will be transferred from the weak hands to the strong hands.
    4) By the end of this period, the bootstrapping will create inflation.
    5) When delinquent owners will realize that their house value is rising,
    they will do whatever it take to stay.

  27. Crystal ball: the GFC papered over a new generation of zero equity deadbeat mortgage holders. These people have milked the REFI cow and now owe well past their own expiration date. Another group extracted their equity, and will die penniless before they sell. Step in people with real collateral, who want the property these squatters are sitting on. Soon 90% of California land will be in high risk fire zones. A house on the beach (or just above) never had more appeal. Similar to stock share buybacks the no equity home owners are being cashed out at a premium, with a ticket to a new sagebrush tinder box rancho, just outside redneck hell. (To facilitate we could use a pop culture movement to sell them on the beauty of rural America, John Denver, RIP) The well capitalized buyers don’t care if the ticket price takes a hit, they are all in, no more than Buffett cares if the stock market loses 20%. He must have the stock, cash is not an option. Once everybody has what they want then price discovery can occur. The downwardly mobile will find their new digs are a bigger liability than they thought. They saw climate change coming they just didn’t get out of the way.

  28. Yort says:

    Wolf – Perhaps I am missing something but I can not figure out how house prices can continue to rise “IF” the Fed does not allow negative mortgage rates, which I believe even if they do go negative rates on fed funds, consumers will never see less than perhaps a 1.1%, 30 year mortgage rate, and that is a very crazy optimistic guess.

    So being know that most people do not buy a house, they buy a “payment”, how does housing continue to go up when the “payment” reduction will hit a hard lower limit soon? For example, a $500,000, 30 year mortgage at 3.1% (today national rate) would be $2,135/month. “IF” that rate falls to 2.1%, the payment drops 12.3% to $1,873. “IF” that rate falls to 1.1%, the payment drops 23.6% to $1,631/month. So how on earth can home prices continue much more than that hard lower limit of 1.1% 30 year mortgage rate, at best another 23.6% house “paper appreciation” from today’s values? I understand it is easy to double the “value” of a home when mortgage rates dropped from 9.7% to 3.1% over previous years (exactly cutting the payment in half, doubling the house “value”), but the low hanging fruit of cheap money is done, UNLESS the Fed goes deeply negative rates, TBD???

    And note that none of this takes into consideration the property taxes going up much faster each year than the rate of inflation. I’ve have seen a 50% rise in property tax on my house in 11 years. I have others who have seen 100% increase in the same 11 years. Even my farm properties are increasing at rates that are insane, 376% rise in 5 years in one state located in the midwest. And how about home insurance, I’ve seen mine go up over 120% in 11 years. Even to flush my toilets is $3,100/year, $800 a year to connect to city sewer and $2,300 MUD tax on sewer system that borrowed via 20 year bonds. And water runs $120 to $300 per month, as city HOAs love to require drinkable conditioned water placed on yards at the tune of about $1,000/year per half an acre. It is even higher in Socal according to a friend though, $270 to $600 a month. At least electric is cheap where I live at about $250/month, as the Socal friend pays $600/month to run AC only at night in three rooms. So I do realize prices vary yet that is the point, unpredictable over even a short 11 year time span. Point being, Houses are consumables, plain and simple, and require high carry costs with never ending property tax “RENT” payments for life (that may double in 10 years, and I’ve yet to see one go DOWN) even if you own it free and clear. A $500k home in this area carries a $14,000 property tax alone, and with all other costs, excluding a mortgage, you are spending around $60/day for shelter. Say you sell and put that $500k into a high dividend value stock (and live under a bridge down by the river :0 ) that appreciates only an average 2% a year and carries a 2% dividend rate, then that would be $20,000 per year income. Add in the $60/day carry cost, which excludes the mortgage (thus why I included the $20k income), you have a $42,900 annual cost, approximately $3,500 per month. One would need about $120k income to carry such costs, almost twice the mediam home income. Zillow has the median national house price at $256,633 currently so the $59,000 median income for 2016 fits the median home price. Yet again how can median house prices continue to spike further if national incomes stagnate? What is the end game exactly? As for any type of euphoric market, at some point mean reversion will pay a visit. Add on all the future, currently delayed without a solution, short sales and bankruptcies, and now you have a very uncertain situation for the largest hard asset that most Americans own is at risk of finally mean reverting over the next 5 to 10 years (barring “The Great Reset”). Thus why I still avoid bank and Reit stocks, there is just too many unknown unknowns, and even the knowns do not seem to have a logical, mathmatical solution…yet. Like all things this will get resolved, investors just needs to be sure they do not put all their eggs in the typical single homeowners basket…

    • Petunia says:

      There’s a lot of talk about MMT coming because the politicians expect they can funnel that money to mega landlords, utility companies, and big agra. But what they don’t want to talk about, is what is also coming besides MMT, which is rent control. Rent control puts the breaks on out of control asset appreciation and the associated tax increases.

      • The battle for the hearts and minds at the ballot box is already underway in Ca. The corporate sponsored bills came first, now the people movements are running ads. You hit it right, the corporations, and REITs, are going to try and divert MMT for their benefit, and eschew (rent) controls. The Virus has destroyed private businesses leaving a void to be filled. Wall St knows their bread is buttered on both sides, politically, and that will power the stock market before during and after the election.

    • Paulo says:

      Geez Yort.

      As I read your comment I came to one conclusion. Time to move.

      I have a 500K house, anyway. Taxes $900 per year. Water, $0 (I have a well with submersible pump). Garbage collection once per week, $135 per year. Sewage is septic….pumped every five years for $200 cash. Homeowners insurance including earthquake coverage and fire + flood, $1900 per year.

      In our jurisdiction buying a home is the only way to get ahead as an average wage earner. Rent is forever, but when you pay off a mortgage the above expenses plus ongoing maint is the final bill. Maint can be DIY for any homeowner. Heat? Wood with electric backup. Our electricity bill is about $80/month. The wood stove is 85% efficient and emits no smoke if used properly. Wood heat is considered to be carbon neutral. I cut the wood myself and it’s great exercise.

      The USA is a big and varied country. I’m sure there are many many good options out there. I am doubly sure many WS readers have already moved on to better pastures than CA, at least more affordable ones.

      From your comment I appreciated the frustration and anger in the examples. It seems more than appropriate. If this is ‘housing’, you bet it is a lousy investment.


      • Tony22 says:

        Paulo, and all the others sharing numbers and opinions, just curious, where you at?
        It helps put things in perspective. Not mentioned by most people is the cost of heating and air conditioning in the typical American hellhole~freezer.

        Yort, re property taxes.
        Thank god for Proposition 13 in California.

    • Josap says:

      Phx, Az Townhouse. Vlaue $180K

      Taxes 850. yr
      Insur 600. yr ( includes personel items.
      Elec 2400. yr all teh A/C we want
      HOA 3000. yr incl trash, water, pool gardening, pest cont. roof etc

      F&C, taxes frozen for over age 65.

      • Old School says:

        Housing is consumption and can be a speculation or investment depending on leverage and time horizon. I felt like I had to do a nice home for my family, but they are all grown and gone. Now a cheap old rental in a safe neighborhood is all I need.

        All in rent and utilities $550. When it’s cold and raining it still gets the job done.

        • Frederick says:

          Your water is not zero as it takes electricity to run the well pump but I get your drift Paulo and you are lucky to be in a location with available potable water Not everyone has that option

    • Lee says:

      “A $500k home in this area carries a $14,000 property tax alone…………” So about A$700,000 or so.

      What a ripoff – most of that is probably going to pay for the local school district that produces sub-standard outcomes for the students at the school.

      Here in Oz, we don’t pay for school districts through real estate taxes.

      Each area in Melbourne is different, but new, ‘growing’ areas generally have higher taxes than older, established areas.

      With the virus crisis going on the prices of some property especially in the CBD especially apartments will be falling. Same for all the units/condos/apartments that were recently built for the international student market which has basically disappeared which will make the taxes on them seem high taxes on them until the next valuation happens.

      Real Esate taxes (rates in Australian lingo) which include garbage collection costs and now the fire levy here in Victoria can run from as little as A$1000 on a million dollar property in an older area to about 2 – 3% of market value for a place in a growing area.

      Rates have more than doubled here in the last ten years or so – they used to be cheap, cheap, cheap. The garbage collection cost has gone way up and a fire levy was imposed when they stopped the stamp duty on insurance policies. Of course the fire levy is multiples of what the stamp duty was.

      After the big fires here we all got socked for that levy as the people that didn’t have fire insurance wound up getting all sorts of benefits from the State even though they had no real legal claim to get anything.

      There was also a sweetheart deal done between the State Labor government and the union that the firefighters belonged to that increased the pay by a huge amount and caused a lot of trouble between the paid firefighters and the volunteer ones.

      Another factor is the cost of water and sewerage. Years ago when we had the desal plant built in Victoria the cost of water and sewerage exploded upwards.

      The cost for 1000 liters of water went from about A$1 to over $3. Plus there were huge increases in the fixed charges as well. They also like to add extra charges for ‘Parks’ and “Drainage’ to the water bills here too which IMO should actually be on the rates bill.

      No need for flood insurance where I live as if we were ever flooded the entire city would be under water. No earthquakes to speak of – we did have one about 3.5 or so about 4 or 5 years ago.

      No typhoons, hurricanes, and few tornadoes here in Victoria either although we do get 60 – 80 kilometer an hour gusts once in awhile that end up knocking down trees and killing people.

      Rent last year for a 2 bedroom apartment about half way between where I live and the CBD was about A$2200 a month…………….wonder what the rent would be now?

  29. Lee says:

    New article here in the left wing rag about the estimates for the upcoming Australian federal budget and deficit and the numbers are huge.

    As with all things done by professional ECONOMISTS the numbers vary: from a low of A$150 billion to a high of $A270 billion.

    Guess that as a ‘professional’ you can do that – make a guess without seeing the papers and plans beforehand.

    In any event the numbers are huge and with the way things work here in Australia where throwing money at a problem is usually the ‘solution’, the numbers will be huge.

    I also know that our family will not be the beneficiaries of any of that largesse either. Every time a new plan or budget comes out the only thing we wonder about is how badly we will get reamed.

  30. Josap says:

    Phx, Az Townhouse. Vlaue $180K

    Taxes 850. yr
    Insur 600. yr ( includes personel items.
    Elec 2400. yr all teh A/C we want
    HOA 3000. yr incl trash, water, pool gardening, pest cont. roof etc

    F&C, taxes frozen for over age 65.

  31. Miss Lacy says:

    Thank you Wolf. I look forward to your podcast. Cheers.

  32. Michael Engel says:

    – Fred chart by volume, not percentage : New Houses Sold By Sale Prices :
    1) Between 200,000 to 299,000.
    2) Between 500,000 to 749,000.
    3) Between 500,000 and Above.

  33. A says:

    These delinquent rates are before Forbearance as I read it, so how do the rates compare to historical rates. Based on timing I assume most of the COVID impact is not in here so these rates, say 15% in some locales were when times were pretty darn good. That would be great context to have. I really like the % of FHA column. Seattle, a pretty wealthy area, is only 5%. South in Tacoma is 15% – makes a lot of sense.

    • Turtle says:

      That is interesting. The difference between San Diego / Los Angeles and Riverside / San Bernardino is about 4x.

  34. jon says:

    The housing market in Southern Ca is on fire. Home prices are rising quite fast.
    I don’t see any adverse impact of Virus on home prices yet.

    • Turtle says:

      Anybody struggling is on forbearance. They don’t have to pay their mortgage for 12 months! And supply was low to begin with in SoCal. Combine that with low interest rates and the result is what you see.

      2 beds and 1 bath for $780K? What a find! You’ve arrived, Mr. and Mrs. Homeowner. Your very own “cottage”. Feel safe behind your security door. No need for a patio roof; utility lines have got you covered.

      I perceive unnatural things happening.

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