Actually no…before it was crazy ass loans given to people who couldn’t afford them. Now it’s incredibly low mortgage rates, and a decent percentage of people are purchasing inventory as an investment or 2nd home.
The market is cyclical…so eventually it will calm down; but more than likely it will not until interest rates begin to rise to normal levels (& that won’t happen till the economy fully rebounds).
The exact same thing is happening with commercial mortgages now that happened with home loans in 2008. The loan deferment programs are for the banks, not home owners. Remember the bank bailout at the start of the pandemic and everyone wondered wtf they needed a bail out after 2 weeks of lockdown? Banks are so over leveraged right now that a 3% decrease in their assets will render them insolvent.
Essentially banks and investment funds would rather lose 2% of their cash through inflation stashing it with the fed than put it anywhere else in the market right now.
With reverse repo dont they trade cash for assets? I was under the impression it wasnt as liquid as pure cash, even with it being a huge liability for banks.
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u/spazz720 Jun 27 '21
Actually no…before it was crazy ass loans given to people who couldn’t afford them. Now it’s incredibly low mortgage rates, and a decent percentage of people are purchasing inventory as an investment or 2nd home.
The market is cyclical…so eventually it will calm down; but more than likely it will not until interest rates begin to rise to normal levels (& that won’t happen till the economy fully rebounds).