What's Wrong With This "Housing Recovery" Picture?

Tyler Durden's picture

We asked this question a quarter ago following the quarterly results by Wells Fargo - America's biggest mortgage lender - but we never got an appropriate answer. So now that the data has been updated for the latest Wells mortgage origination and application numbers, we ask the question again: considering both mortgage originations and applications are crashing to levels not seen since the Lehman crisis, just what is wrong with this "housing recovery" picture?

Mortgage originations:

Mortgage applications:

And a bonus chart: remember when in late 2013 and early 2014 the pundits (probably the same ones who said it was a "stock picker's market") were screeching daily how bank Net Interest Margins were set to soar. Can they please comment on the following Wells NIM chart?

Source: Wells Fargo

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One And Only's picture

Who needs a mortgage when you can rent from Blackstone?

LawsofPhysics's picture

Who needs a mortgage when you can simply squat in just about any home you want?  -  fixed.

101 years and counting's picture

especially when the Fed owns to mortgage and wont do anything about it.  your fellow taxpayers are paying for it, but who really cares?  more power to those doing this.

JailBank's picture

Wells is not going to approve mortgages if they believe Freddie/Fannie won't be there to pass the bad loans off to. I have a pal in Des Moines and that is his job for Wells. Look at the mortgages approved. The worst ones get sold to Freddie/Fannie while the best stay on Wells books. Nice work if you have a group of dumbass govt workers buying the crap on the other end.

BlindMonkey's picture

Oh man. You're telling me the shrinking NIM represents the GOOD loanz?? Uggh

BKbroiler's picture

The slow stratification of the country accelerates.  Money builds up in the major and coastal cities while the suburbs and countryside get blighted.  Past the income inequality trend, it's about cheap gas coming to an end.  No more joy rides, no more driving 40 miles to work, none of that makes sense at over $4 gallon with wages shrinking.  In 20 years there will be more skyscrapers surrounded by wastelands than we can imagine.  

eatthebanksters's picture

Here is the tragic result of Fed intervention to support the housing market.  First off realize that home ownership has been drilled into us as part of the American dream.  American's aspire to own homes for a number of reasons:  1. Pride as an example of being successful, 2. Stability in that as an owner your rent won't go up and no one can kick you out, 3. Security as residential real estate has historically (untll recent times) been a safe place to store wealth.  

What has happened is that the Fed with its cheap money policy coupled with stricter underwriting criteria (which should have always been this way) has killed the market for the individual homebuyer - the heart of a healthy and robust market.  They have replaced the indivdual buyer with investor buyers and in mst cases all cash investor buyers.  Tell me how healthy a market is that is driven by all cash buyers and then add investor into the equation?

Homeownership has always been a pillar of hope in the American dream. It is a visceral part of our national identity and it has been a source of pride that until recently we have used as one of our boasts to the rest of the world of why America is great. It is now gone.  The current adminstration's policies have failed miserably, in part because I do not think our president understands the pulse of the American psyche.

What we have is a brain dead patient being kept alive on life support - the patient is the housing market and the life support is the fed.  It is costing a fortune to keep this patient 'alive' and draining resources with the hope the patient will make a miraculous recovery.  I say let nature take its course, let the patient live or die on its own and stop wasting valuable resources that coud be used in so many more positive ways.

This story won't end well, its just a matter of time before it all grinds to a halt and implodes on its own weight.  Bankers who broke no laws but are guilty of moral and ethical misdeeds need to be identified and cast out (there is a long list here...). Politicians who manipulated the market with e-z loans for unqualified borrowers to buy votes need to be cast out as well (I'm talking about you and your friends Barney).

The market needs to be allowed to balance itself and to start over with thoughtful policy and regulation that creates a stable environment for ownership, equity growth and the pride of ownership.  The Fed needs to back off its cheap money policies and let the real estate market 'correct' itself.  Correct..that's a good word.

failure to perform's picture

Love your name and the second last paragraph. I'd love nothing more than seeing all those evil fucks be forced to live in substandard housing in the worst of the worst neighborhoods and let there be vigilante justice.

Tabarnaque's picture

The recovery has been so good that people no longer need a mortgage to buy a house. They buy cash instead. Every body knows that, right?! sarc.

JailBank's picture

I used shares of Tesla to buy a doublewide. Have my very own slab of concrete overlooking a tractor pull pit. Living the life.

TheReplacement's picture

At least you probably know your neighbors and get along, most of the time.

Whoa Dammit's picture

When I went in to the local convenience store the other day, I asked the clerk how he was doing. He said sarcastically " Oh,just living the American Dream. In another 5 years I can make what, maybe $1.25 an hour more?"  He's from Nigeria. It's pretty bad when a Nigerian refugee is whining about our economy.

therearetoomanyidiots's picture

"If I wanted this I coulda just stayed home!"  -Nigerian refugee working in local convenience store

MachoMan's picture

It's been 10+ years, but this was the exact sentiment from every foreign student I encountered in post graduate studies...  "I thought it was going to be like the tv show Dallas."  They were universally underwhelmed.  Of course, it's BFE, but still not a third world country by any stretch...  I got this from folks across the entire gambit, from belgium to pakistan...

Twaddlefree's picture

Which is better, being dead or imprisoned in Nigeria or alive in America? 

Lewshine's picture

I don't play this chirade of a market - But, I'm calling it NOW; The Fed has very little patience in watching this fraud melt down, today they will pull the trigger with a huge liquidity pump.

Watch. By 11:00 am EST....Dow will be GREEEEEEN. Shazzam! No problem - FIXED!

Lewshine's picture

WAALAA! When am I gonna miss one?

Twaddlefree's picture

Perhaps, now....3:08 pm....when the market is down over 140????

ChanceIs's picture

What is the average squatting duration these days?  I think ZH had an article on it about a month ago.  I believe it was two plus years.  That is to say the average time (locale dependent of course) betwen when a former owner made the last mortgage payment and the time the sheriff knocked on the door was two plus years.

Back in the '89 boom I sold a condo to "move up" to buy a house.  Did it slightly after that bubble peak - took about six years to get even.  Anyway, I held a second on the condo.  Purchaserer defaulted.  It took me about 18 months to foreclose and get the sheriff to throw the "illegal detainees" out.  I had to be there.  He pulled his gun before he kncked on the door.  I melted into the wall.  Nothing came of it.  They left peacefully and didn't trash the place.  Just saying, when I saw that piece come out, I was beginning to think that I should have just walked away from the deal.  You know...life is more precious.

Having said that and had that experience, anybody who said that the whole '05 bubble was a 100 year event that nobody could have seen is either a total idiot or has no market experience - or a bankster shill.

AGuy's picture

"It took me about 18 months to foreclose and get the sheriff to throw the "illegal detainees""

Yup thats very common. A friend of mine had a simular experience. The renter turned squarter sold all of the furniture and applicances for cash. Needless my friend did want to wait the 18 month eviction process. He waited for the squatter to go out, then proceeded get a dumpster delivered and tossed all of the squatters possession in the condo and changed the locks.

Almost Solvent's picture

I think you two are talking about different things.


A tenant, who never owned the home, or is staying past the foreclosure sale, is evicted, takes about a month, maybe two to get the sheriff there to cart out the shit. 


A foreclosure to take back property owned by someone, takes about a year to 18 months (judicial state, some are much faster). Of course, if the person doesn't move out after the property is sold at auction, then you have to evict them.


MachoMan's picture

Bingo.  I'll have a tenant out in 3 weeks or less (landlord friendly state, but still use the old unlawful detainer statutes)...  [In my jurisdiction, tenants who want to contest an eviction have to pony the back rent into the registry of the court or they don't get to defend the suit...  tends to make quick work of the bullshitters].  Foreclosures are usually 6+ months...  although, I recently "successfully" defended a foreclosure suit from a TBTF...  show me the note fuckers...  the parties ended up with a settlement after a much longer dispute.  Generally speaking, foreclosures are all about priority rather than the Defendant(s) having some legitimate defense.  Most all of the foreclosures I've been a part of (both sides) have been notes that were never sold up the food chain.   

thamnosma's picture

If it's a bank-owned foreclosure, you might have up to 4 years since they want to keep those foreclosures on their books at mark-to-model valuations.  If they actually put the house on the market, there's price discovery.   They don't want that.

MachoMan's picture

Especially if it's a local bank that has too much exposure on your loans... 

j0nx's picture

Come to the DC area. Any house that was $450k two years ago now has multiple offers at $650k. Shit is ridiculous. GD money thieving carpet baggers.

Handful of Dust's picture

Come to Houston or Austin or Dallas...bulers are offering so many incentives it's crazy.

As it gets worse and the housing market slows to a crawl, and they offer "Two-4-One" I may jump in.

Zerozen's picture

Don't know which Houston you're in, but in the one I'm in, housing has become unaffordable in most any decent place in the city, especially so inside the Loop. The house my wife and I bought in Dec '12 has supposedly appreciated by 20%, based on comp sales. Our realtor has called a couple of times asking if we might be interested in selling and making a quick $100k. It's full-retard crazy.

Who is paying these prices? Transplants from Cali and northerneastern states.

The conception that rising home values are a good thing is a total canard. It does nothing to improve your quality of life, not unless you sell to realize the profit and then move away to somewhere cheaper...but it sure hurts your pocketbook when the property tax assessor does his yearly rounds.

j0nx's picture

Agreed. I hear Austin is insane right now too. Did not know about Houston as it's such a shithole I can't believe anyone would even want to live there.

Zerozen's picture

Shithole? That would mean things are broken, city services don't work, there's a lot of blight, etc. I think a better description is 'urban wasteland'. So, a Texan Los Angeles, but with flat topography, hurricanes instead of earthquakes, and lots of allergens.

This town is swimming in money right now. Every other middle-aged professional drives a 911, they're a dime a dozen. Not that I believe this will continue, but at current growth rates the population of the city is supposed to double by 2035. It's bubblicious!

Doubleguns's picture

I would love for the value of my house to go to one dollar. I would still live there but my taxes would drop significantly. Deflation has many advantages....unless your a banker. 

thamnosma's picture

Agree, Zerozen -- Houston is no Detroit, Baltimore, Philadelphia, Newark, etc.   An urban wasteland it surely is.  Plus all that toxic oil industry nearby.   At least in Los Angeles, they have mountains, ocean and deserts nearby.

CheapBastard's picture

Austin has turned to crap. It's even rated as "The Most Congested Mid-Sized American City."

Crime downtown has skyrocketed and daily pollution alerts are usually moderate to severe. I moved out of there a few years ago when I saw this and moved to a cleaner, safer area. Interstingly, as the poster above said people from Cali and the north are the majority there now. The local newspaper has done two polls downtown and 80% of the people they stopped on the street were from Cali, usually LA. They also said more then 80% of the downtown condo owners are from Cali. Crazy. Austin Natives [the few ho are still there] call Austin "The Little LA."

As far as RE, they are flooding the market with hundreds of apartments complexes there and I read builders will add over 8,000 houses just north of Austin. I don;t see prices there rising much more anymore. Most likely will correct at some point more towards the hisotric mean.

The Houston burbs (Woodlands, Cinco Ranch, Cross Creek, etc) are nice but downtown still stinks. Job creation there is still crazy strong.

Dallas has sucked for a long time. Fort Worth is nicer.


Just goes to show 'all RE is local."


NoDebt's picture

There's never a recession in Washington, DC.

AmericasCicero's picture

It would seem so, but I pass more and more homeless people in McPherson Sq each day.  Pigeons looking for K st crums.

Offthebeach's picture

During the Hoover/FDR depression, FDR got, and Washington was flooded by, Dollar-A-Year men. They came from weathy families, were self made wealthy and did what the could do to alleviate The Depression for no salary, just a dollar a year. No in Versailles On The Potomac you can't get your affirmative action, transgendered, in by 9 out by 3, illiterate clerk for under $100k/yr.

Bunders's picture

I guess what remains of the middle class is willing to pay top dollar to move away from the nouveau poor before the value of their property is detroited by contagion / association.

If your parents pass and leave you an inheritance are you thinking early retirement in this neighborhood or keep working and move somewhere you can be reasonably confident that your neighbors are on top of their mortgage payments? Where you might get to see their kids graduate University in your retirement rather than standing on your porch in your pyjamas waving a shit gum at crackheads?

I got a little carried away there, maybe I paint too colourful a picture.

Never One Roach's picture

My former co-worker moved outside Houston to an area called Telfair or near there ... said the property taxes were eating him alive...over 3% on his $675,000 house. He said job market for engineers there [esp in oil & gas]  is strong but if there's a pull back it's gonna get nasty.


That's alot of cahola out the door ... over $20,000 a year ...  wtf!

crtune's picture

Well said.  There is this old school mindset where one watches the "market value" of Real Estate, and contemplates taking equity out of properties.  We need to consider new models of how healthy valuation of real estate fits in with the real needs of real estate owners and consumers, and with the wider markets for providing loans, and building new homes / multi-family etc. 

For those who are owning as primary residence, that is a different situation from those who are investing in rental real estate, yet again different if you are renting.  Still different are those who are in the market to move and must transact in the property.  High rates of rise in market value, I believe, are actually UNHEALTHY (for a large number of reasons).  Modest market value rises are more sustainable, and make for better balance between invest/primaryResi/transact.

My modest hypothesis, but then I'm just some guy, albeit having "been around the block" a bit, and some "school of hard knocks" as well.

TexasAggie's picture

Houston has Exxon consolidating just to the North in The Woodlands and many other oil companies consolidating into houston.

TexasAggie's picture

Houston has Exxon consolidating just to the North in The Woodlands and many other oil companies consolidating into houston.

PT's picture

With Blackstone and friends in the game, it'll only be a matter of time before every week you'll need to increase your "mortgage" so that you can afford to pay the rent.

q99x2's picture

They have copper plumbing and wiring in those homes?

Cursive's picture

Yeah, but WFC said everything was great and good, so buy, buy, buy!

ArkansasAngie's picture

It's a sell, sell, sell market


there ain't no buy, buy, buying going on.

Why?  Because the Fed gave all that money to people who were ... and still are ... insolvent ... aka the 1%'ers.

Screw liquidity.

LawsofPhysics's picture

Please, these people are the Fed!  They are the product of the same schools, travel in the same circles and belong to the same country clubs.

Look at the fed's balance sheet!  There is no "taper". 

They will keep enriching themselves as long as they can, the East, and Russia in particular, has finally had enough...

chunga's picture

Fuck you Wells Fargo.

ebworthen's picture

Precisely, they are crooks, they make Pirates look bad.

chunga's picture

Not very articulate by me...I know.

But I'm so sick and tired of fraud and scandals I can't even hardly stand it. I already cut the cord on cable and I'm tempted to do the same with internet. Since there isn't anything one can do about it why bother even knowing about this shit?