Rates are up again today! But economist David Rosenberg reminds us in this post on X that long-term rates always go up after large cuts by the Fed… “Then reality sets in and yields melt like a hot knife through butter.”
China’s Facing A Crisis Like The U.S. Saw In 2008 – But Much Worse
China is panicking…in fact, China is showing 2008-like signs as they are on the brink of a severe recession. That is a post on X by The Kobeissi Letter today. I recommend reading the entire thread, as it is very educational and interesting – and it shows how serious the problem is.
Analyst Alf Peccatiello also weighed in with this excellent thread: Everybody is talking about the Fed. But the real macro mover to watch here is China…
China once again has somewhere around 80 million unsold housing units. In contrast, the U.S. had about 4 million at the peak of the 2008 crisis, and even if you adjust our inventory to match China’s population, we would have only been at 16 million unsold units (1/5 of what China’s facing).
China’s citizens have 60% of their wealth in real estate, compared to about 23% for the U.S.
Long story short: China is way overleveraged, way too dependent on real estate (like Japan was in 1990), and way too big for this not to impact the world.
They are throwing stimulus around like crazy right now, but that did not work for the U.S. or Japan when they faced similar (but less severe) circumstances.
This likely means slower economic growth and lower rates for the world…at some point. These things take a long time to play out, but it appears that the end is getting closer.
Conforming Loan Limits Are Up For 2025
Conforming loan limits for 2025 are increasing by about $36,000 for “low-cost” areas and by about $54,000 in “high-cost” areas.
The new low-cost limit will be $802,650, and the new high-cost limit will be $1,203,975 (for single-unit properties).
Many of our investors are already accepting these new limits – which is unusual, as we used to have to wait until November or December to take advantage of the new loan limits.
The advantage of higher conforming loan limits is much more flexible underwriting guidelines and lower rates compared to jumbo loans. Buyers can now buy a $1.2 million home with only 5% down. And, given that FHA will likely follow suit, buyers will be able to buy a $1.2 million home with only 3.5% down – and I am pretty sure Milton Friedman is now crying in his grave.
Non-QM Loan Rates Plummet
Non-QM rates have plummeted much faster than conventional and FHA rates. As a reminder, Non-QM stands for “Non-Qualified Mortgage” and these are effectively the new “sub-prime loans.” BUT – the down payment requirements are much larger, so there is minimal foreclosure risk this time.
Non-QM loans do not require W2s and Tax Returns for income verifications but can instead use (1) Profit & Loss Statements, (2) Rental Income, and/or (3) Bank Statements for income. Some non-QM loans (“no ratio” loans) require no income at all, but they do, once again, require large down payments.
