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For all of these people "over extending" it is hard to imagine anything besides an economic implosion that causes mass unemployment among homeowners. If COVID didn't already do that, what will? What's the catalyst? Increasingly it seems the only reasonable catalysts are global-scale disasters like a meteor impact, super volcano eruption, world war, a pandemic (much) worse than COVID, etc.. Given the amount of investors involved now (and since the mortgage crisis) buying up properties to rent, I could see one trigger being (some reason) that causes it to no longer be a good (or optimal) investment, and them dumping huge inventory onto the market. The government cracking down via regulation on investment ownership (or mass ownership) of single-family homes could be one route to that, although somehow that doesn't feel likely to happen. It is not the same this time where people with a credit score of 450 were buying multiple homes. This time the people "over extending", in my experience, are on relatively solid financial ground. In my opinion almost anyone that is borrowing 500k+ (because they don't have it, not because it's financial strategy) are "over extending". They are in fact exposed to risk of default, but that doesn't at all correlate to the probability of default. The real risk, meaning probability of occurrence, is most likely pegged to the risk of them losing their source of income, which could (and seems for a while now) in reality to be quite low. Anecdotally, many I know that are "over extending" could afford to be out of work for months and not lose their home. Either through their own savings, or safety nets in the form of their now retired baby-boomer parents sitting on substantial nest eggs. Very common since all it took for the boomers was to make some average stock investments and own a home to easily become relatively rich over the past 30 years. I would be interested most to know the % of current homeowners that could make mortgage payments for 3-6 months if one or more jobs in the household were lost. I guess that would be a decent proxy for how likely any implosion of the housing market would be, if it would be triggered by owner-occupants defaulting. |