• Waldowal@lemmy.world
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    11 months ago

    I tend to agree with you, but then again, I worked in mortgage lending in the lead up to 2007 and we all knew it was coming. There was hope that a government bailout would occur either by a straight dollar investment, cutting rates, or a special refinance program, and a crisis would be avoided. That hope seemed to prop things up long enough to catch people with their pants down when it finally collapsed.

    So, is it truly priced into the market right now, or is hope for a resolution propping things up?

    • rsuri@lemmy.world
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      11 months ago

      The political situation would prevent any new bailouts. If there’s anything it’ll have to come from fed, which doesn’t seem to be in the mood right now.

      One thing to note on rates though - presumably any mortgages held by troubled companies would be a pre-pandemic rates, or were refinanced in the temporary period of low rates during the pandemic. This means in a way inflation is its own bailout because many of these mortgages are below the rate of inflation, and this enhances whatever revenue streams these properties are able to produce.

      Of course it’s a double-edged sword though, because high rates also reduce property values and means that selling has an additional financial cost (losing the favorable mortgage rate). Which also reduces the incentive to sell. As usual, the future is unknowable, but I’m not worried about it because the market has already priced in the worst outcome.

      • Waldowal@lemmy.world
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        11 months ago

        Definately agree on the political climate. I don’t see it happening again. One thing to note: Commercial mortgages are adjustable rate 99% of the time. If there is a fixed rate component, it’s typically only for the first 12 months of the term.