FULL MARKET UPDATE: Central Florida Housing Crash!
Updated: Apr 9, 2021
FULL VIDEO: https://youtu.be/KTMZAiv_AE0
Housing wire just came out with an article that says underlying fundamentals are significantly different than what we saw in the early two-thousands. But they're hearing a lot of chatter about the boom and cash-out refinances. And the presumption seems to be that is destined to wreak havoc on the housing market and the economy at some point. Yeah. So Freddie Mac just put out a bit of data that HousingWire reported on. And obviously, towards the end of 2020, people are borrowing a lot of equity out of their homes. Now, this is still not where it was at the peak. I mean, obviously, you can see in the same graph that this raging area right here throughout the middle, you know, throughout 2006, 2007, uh, there was multiple more amount of money taken. I'm only talking like 50 billion on one. And, you know, from, from our last quarter and, and in 2007, you know, you, you could see by the graph, this is over a hundred billion in a single course.
You have double, the quarterly, cash-out, refinance people taking cash out of their house. The reason why this is troubling is that the more money borrowed, it creates a couple of different effects. Uh, number one, it creates, uh, an increased payment. Okay. And number two, it creates a loss of equity. So you're reversing equity. You're basically borrowing against value. You're taking out more money, out of the home itself, and then conceivably, if there is trouble, you know, you're kind of creating two factors that are dangerous at the same time. You're increasing the value, what the home is what's owed against the house that has to be paid off in the sale. If there is duress or some issue, you have to sell the house, but then you've also got the situation where the payment is jumped. So, you know, one might say this is dangerous. This is a sign of, of, uh, of issues of things to come. What do you, you know, would you agree with that?
Yeah, well, I, I would, I would say that the overall context of, of last year was, it's definitely important to take into, I mean, if there was a year to take out the money in an emergency, you is 2020, right? A lot of people lost their jobs. A lot of people had to move. A lot of people like it became a, just a primary issue to like pull out money to make the home nicer because now a lot of people had to work from home, like to when people needed money, they look to their home, they cashed out 80% of the value, which is actually, that's all the cash-out refinances. We'll let you go up to, they won't let you cash-out refinance a hundred percent of the value. They'll go up to 80% because their banks they're their money, they're experts at money, right.
So it's all being done safely. And I think taking into context the COVID market, I think it just makes sense. Something to note here is that, uh, people are sitting on a lot more equity than they were at the bubble, at, during the bubble at the peak of it, uh, they were at $4.6 trillion in total equity in the market, total equity, right? The whole market had that much money. It didn't even reach five right now in our market. We're sitting at $7.3 trillion in cash, routable equity if that makes sense. Right. So we are sitting on a lot more money. So seeing a small bump, in the overall scheme of things, we're actually, we're actually in a pretty safe, I mean if there is going to be a crash, I don't, I don't want to see why, uh, since homes really aren't overpriced, we don't, we're not seeing the mortgage fraud that we saw. Well, we, I mean, yeah, and this is gonna go back and forth, but I mean, we're not seeing people qualify for a home. They're not that they're not actually qualified to have to own. Right. And, uh, payments qualifying for payments from banks that they should never have had just like it, it happened just, you know, a decade ago, right.
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