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Speaker 0 describes refinancing their mortgage today after rates dropped, saving about $300 a month. They present an amortization schedule to discuss why they believe home buying in America is a scam and why this will be their last house in the country. Key details: - Mortgage is a standard 30-year loan, a VA loan with no down payment and no private mortgage insurance. - They didn’t put anything down and went from owing $784,000 to $795,000. - Original interest rate was 6.2%, now 5.6%. - They plan to sell the house when the husband retires in four years, expecting to exit the U.S. - By 2030 they expect to owe just under $750,000, meaning they will have paid off about $50,000 in four years. - Despite a $50k principal reduction, the monthly payment is $5,700. With 50 payments, that totals about $285,000. - The amortization schedule shows financing $795,000, and if the 5.6% rate continued for thirty years, total payments would be about $1,600,000. - The speaker claims the biggest scam is the interest charged in the first year. They reference past videos about it and acknowledge responsibility for their situation. - Closing costs were $7,000, including $3,500 in upfront interest. - Principal and interest are $4,500; taxes add about $1,000, bringing the monthly total to about $5,700. - The first payment is $1,101; of that, $4,500 is the principal and interest amount, with $3,700 of that going to interest. - After the first payment, only about $849 goes to the principal; every month after that, only about $4 goes toward principal. - Over the next twelve months, they expect roughly $54,000 in principal and interest payments, not including taxes, yet the amortization schedule shows they won’t have paid down the mortgage by more than about $10,000 in that year. - Before refinancing, they owed around $784,000; twelve months from the refinance, they expect to owe about the same amount as the day before refinancing. - They argue refinancing is a scam because even if they save money, “the math” suggests they won’t recoup it; they also plan to cash out the escrow from the previous mortgage and expect to receive about $14,000, framed as a positive in “girl math,” but they feel they are actually spending more money with the bank. - Since they intend to sell in four years, refinancing again with a lower rate wouldn’t be recouped because most first-year payments go to interest. - They hope to reduce the mortgage by about $50,000 (to around $747,000) and sell for perhaps $850,000, though this does not account for realtor fees and other costs. They express uncertainty about ending up with cash, suggesting they might leave the U.S. with about $50,000. - The speaker concludes that home buying in the United States is an absolute scam and laments that the only other options are renting from someone paying a mortgage to the same bank or homelessness.

During my presidency, mortgage rates reached an all-time low of 2.6%. However, currently, it is difficult to obtain loans as banks are reluctant to lend money. With a $2,000 monthly mortgage payment, you can only afford a house valued at less than $295,000. In contrast, under the Trump administration, the same payment would have allowed you to purchase a house worth $460,000 today.

Do you personally expect a recession? I am gonna defer to my economists at this point, but I think probably that's a likely outcome. I always remind people markets aren't always right, but sometimes they are right. I think this time they are right because they're just pricing uncertainty at the macro level and uncertainty at the micro level at the actual company level. and then how it affects consumer sentiment, it's hard to tell. You know, consumers still have jobs. Wages are going up the low end, which I think is a good thing. But if companies start cutting back, yeah, the consumer sentiment changes and business sentiment changes. You know, I think you've already seen business sentiment change a little bit. Hopefully, you know, no one's wishing for that, but, you know, hopefully, if there is one, it'll be short.

The Canadian government has introduced new mortgage guidelines to help homeowners facing high interest rates. Many households are struggling with mortgage renewals, as rates are expected to increase significantly. The guidelines include allowing temporary extensions of payment periods and exempting homeowners from stress tests when switching lenders. However, experts believe these measures won't have a significant impact, as many banks were already implementing similar practices. Some homeowners are already selling their properties due to affordability issues, and if rates remain high, it could lead to further downward pressure on prices. While inflation has stabilized, the governor of the Bank of Canada has warned that interest rates may remain high for a longer period.

In the last 48 hours, there has been bad news. The rating agency has downgraded the American government's ability to repay from AAA to AA. This is concerning because it means the cost of borrowing money to cover our deficits has increased. A double A bond is not as reliable as a triple A bond.

Existing home sales have dropped for the fourth time in five months, marking a 23-month consecutive decline compared to the previous year. This is the worst streak since the housing boom and subsequent crash. The main factor contributing to this situation is the injection of trillions of dollars into the economy, leading to high inflation levels not seen in decades. As a result, the average home price in America has surpassed $400,000, making it increasingly unaffordable for the average person. The Goldman Sachs affordability index is currently at its lowest point ever, with monthly payments for a house with a 20% down payment averaging around $2,310.

The Fed's decision to pivot its policy and the market's reaction were the main highlights of Chair Powell's comments. The market seemed surprised by Powell's clear indication that the economic path next year is not necessarily linked to easing. Three key points stood out: the market's exaggerated reaction, the Fed's increasing comfort with rate cuts, and the expectation of three cuts as indicated in the dot plot. Overall, the move towards rate cuts was more decisive than anticipated.

The perception of a housing shortage is wrong, similar to 2005-2008. The pandemic caused a temporary surge in housing demand as people fled cities, mirroring historical trends. However, with a shrinking population, deportations, slowing immigration, and low birth rates, long-term housing demand is questionable. Major homebuilders monopolistically control supply in needed locations and have unique access to financing. New homes purchased, a large proportion financed with teaser rates like in 2004-2006, are now facing rate roll-offs. Homeowners who gambled on Fed rate cuts are seeing mortgage rates increase from 2% to potentially 7%, impairing their spending ability.

Moody's, downgraded The US's credit rating from its highest triple a rating to double a one. Moody's cited the growing US debt currently at about $36,000,000,000,000 and the inability of politicians on both sides to manage it. This means The US does not have a perfect credit rating at any major agency for the first time since the invention of government credit ratings in the nineteen tens. S and P downgraded The US in 2011 to its second highest ranking after that year's debt ceiling fight. Fitch downgraded The US also to its second highest ranking in 2023 over similar concerns raised by S and P and specifically citing The US's, quote, erosion of governance. So why does this matter? A credit rating from these agencies signifies how likely a country is to meet its debt obligations and affect borrowing costs for projects.

The Federal Reserve just said that the expectation is higher inflation and higher unemployment in 2025. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged. The risks of higher unemployment and higher inflation appear to have risen, and we believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments. So it's primarily being driven by the tariffs. If the large increases in tariffs that have been announced are sustained, they're likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short lived, reflecting a one time shift in the price level. It is also possible that the inflationary effects could instead be more persistent.

The speaker argues that the mortgage and housing markets are being distorted because underwriting relies heavily on credit scores, while lenders and brokerages aren’t focusing on debt-to-income ratios or credit quality. They note that credit scores were inflated due to reporting gaps and moratoriums during forbearance, which hid delinquencies. A Federal Reserve study indicated that student loans can cause drops of over 180 points in credit scores overnight, because student loan reporting to credit agencies occurs only when you are 90 days delinquent, with no earlier indicators like 30- or 60-day delinquencies. The speaker mentions that many people thought loans wouldn’t be collected, but the contracts were signed. They point out that Department of Education data show about 20% delinquency on student loans, contradicting a claim that delinquency was minimal. Additionally, around 4.5 million people are currently in payment plans (through PAYE or SAVE) that involve paying nothing, and if a broad new repayment plan passes, millions could be required to start paying around $600 a month. Since GDP is about 70% consumption, the speaker warns that many people unable to spend $600 could have a large negative impact on the economy. Affirm, a major buy now, pay later lender, began reporting to credit on May 1, which could affect credit scores as people stack multiple small loans (e.g., for shoes and groceries). This stacking behavior would be viewed negatively by lenders, yet the impact may not appear in Fed numbers until after Q2. The speaker asserts ongoing inflation in everyday items, rising property taxes, insurance costs due to widespread events (including tornadoes and floods across the country), and higher replacement costs, all contributing to financial strain. Appraisals were previously inflated; Fannie Mae analyzed 7,000,000 comparables and found that 55% did not list seller concessions properly, inflating values. Consequently, many homeowners may believe they are wealthier than they actually are, leading to increased borrowing against perceived equity via buy now, pay later or credit cards. The Fed reported a February 2023 spike in mortgage refinance rejection rates, at 41.8%, the highest since tracking began in 2013; the prior month was 27%. The speaker concludes that the doors of credit are closing across the system, affecting individuals who previously qualified based on current payments rather than long-term affordability. They emphasize that people qualified for credit because they could make a payment at the time, but now broader credit constraints are emerging.