4 ms·

Whats the issue with your home not being worth the debt you took on? Obviously it isn't great to have an asset like that loose value, but most people don't chan

Whats the issue with your home not being worth the debt you took on? Obviously it isn't great to have an asset like that loose value, but most people don't change homes very often, so the value of the home shouldn't have much impact on your life until later. Even if the value goes to 0, you can still live in it just as well as if it's value stayed constant.

brink 8y ago
Nobody likes to feel stuck in a house.
fhrow4484 8y ago
> Whats the issue with your home not being worth the debt you took on? The issue mentioned in the article is: What if you need to sell? Like what if you lost your job, found a new one but in a completely new city, far away from where you bought your house: will you be able with the new salary to pay for both a rental near your new work, and continue paying the mortgage on your original house? > most people don't change homes very often, so the value of the home shouldn't have much impact on your life until later. This is the assumption that people might disagree with. Does it make sense?
- GhostVII 8y ago
  You disagree with the claim that most people don't change homes very often? The average time someone owns the same home is over 5 years. I mean I get the argument that, if you loose your job and sell your house it would be bad. But for me, I would only buy a house if I was sure I was going to stay in the area.
sovietmudkipz 8y ago
> Whats the issue with your home not being worth the debt you took on? Good point. The problem would arise if I lost my job, had to broaden the cities I apply to jobs for and I had to sell my house to move to a new city. Presumably, the market would contract forcing employers to downsize. My employer would downsize and I would get caught up in it. I would then have to choose to keep the house but limit my job prospects or cast a wider net by applying in other cities. At that point, I would have to realize a loss on my house, potentially tapping into my already constrained finances. However; best case scenario I wouldn't lose my job and I get to weather a deleveraging in the house I just bought.
- joering2 8y ago
  Last crash was before AirBnB that’s one. Second you could always rent the whole unit just to cover the cost of mortage. I seen friends houses going from 180,000 to 30,000 during crash, only to get back to 170,000 some 8 years later. So so long as you can get hired as McDonald burger flipper, you should be able to withstand next crisis, even if it chops off 80% of your home value.
  - refurb 8y ago
    Second you could always rent the whole unit just to cover the cost of mortage. That’s not always possible. A great example is Vancouver right now. A 2 bedroom condo is around $600k. That’s almost $5000k when you include mortgage, insurance, property taxes and opportunity cost of your down payment. Units like that usually rent for $3000 tops.
    - Bombthecat 8y ago
      But that is an indication where rent will go to, no?
      - kgwgk 8y ago
        Or an indication of where the selling price will go to....
      - refurb 8y ago
        The rental and purchase markets are linked, but don’t necessarily need to be equal (cost of renting = cost of owning). There is a ton of speculation happening in the hot markets so people will take the monthly loss in rent hoping that the equity gain will offset it.
  - irq11 8y ago
    If we enter an economic correction strong enough to drop housing prices by 20% nationwide, AirBnB activity will tank. Travel is a discretionary expense, and people cut back on those in a downturn. If you need a frame of reference, check what happened to marriott during the 2008 crash (fell by almost 2/3).
twblalock 8y ago
> Whats the issue with your home not being worth the debt you took on? There were tons of short sales during the last recession because people could not afford their mortgage payments and their houses were worth less than they owed. It's a very bad situation to be in, and if you lose your job you might have no choice. Another less bad situation is that you might need to turn down better career opportunities in other cities because you aren't able to sell your house. Being in that kind of a jam really diminishes your control over your future.
- GhostVII 8y ago
  The morgage payments don't change with the house price though, right? People couldn't afford to pay their morgage because they got more house than they could afford initially. But yeah being stuck in the same house because it lost value wouldn't be good.
  - twblalock 8y ago
    > People couldn't afford to pay their morgage because they got more house than they could afford initially. Or they lost their jobs because of the recession.
    - derekp7 8y ago
      Not just that, but they got talked into 5-year balloon mortgages, where they would be forced to refinance after 5 years (the upside being that they got lower monthly payments than a 30-year fixed). Well, 5 years later rates have gone up to where they can't afford the new payments, so end up losing the house.
- bradleyjg 8y ago
  > Another less bad situation is that you might need to turn down better career opportunities in other cities because you aren't able to sell your house. If the house price stays the same this still ends up costing you roughly 6%.
  - 8y ago

brink 8y ago

Nobody likes to feel stuck in a house.

fhrow4484 8y ago

> Whats the issue with your home not being worth the debt you took on? The issue mentioned in the article is: What if you need to sell? Like what if you lost your job, found a new one but in a completely new city, far away from where you bought your house: will you be able with the new salary to pay for both a rental near your new work, and continue paying the mortgage on your original house? > most people don't change homes very often, so the value of the home shouldn't have much impact on your life until later. This is the assumption that people might disagree with. Does it make sense?

GhostVII 8y ago
You disagree with the claim that most people don't change homes very often? The average time someone owns the same home is over 5 years. I mean I get the argument that, if you loose your job and sell your house it would be bad. But for me, I would only buy a house if I was sure I was going to stay in the area.

sovietmudkipz 8y ago

> Whats the issue with your home not being worth the debt you took on? Good point. The problem would arise if I lost my job, had to broaden the cities I apply to jobs for and I had to sell my house to move to a new city. Presumably, the market would contract forcing employers to downsize. My employer would downsize and I would get caught up in it. I would then have to choose to keep the house but limit my job prospects or cast a wider net by applying in other cities. At that point, I would have to realize a loss on my house, potentially tapping into my already constrained finances. However; best case scenario I wouldn't lose my job and I get to weather a deleveraging in the house I just bought.

joering2 8y ago
Last crash was before AirBnB that’s one. Second you could always rent the whole unit just to cover the cost of mortage. I seen friends houses going from 180,000 to 30,000 during crash, only to get back to 170,000 some 8 years later. So so long as you can get hired as McDonald burger flipper, you should be able to withstand next crisis, even if it chops off 80% of your home value.
- refurb 8y ago
  Second you could always rent the whole unit just to cover the cost of mortage. That’s not always possible. A great example is Vancouver right now. A 2 bedroom condo is around $600k. That’s almost $5000k when you include mortgage, insurance, property taxes and opportunity cost of your down payment. Units like that usually rent for $3000 tops.
  - Bombthecat 8y ago
    But that is an indication where rent will go to, no?
    - kgwgk 8y ago
      Or an indication of where the selling price will go to....
    - refurb 8y ago
      The rental and purchase markets are linked, but don’t necessarily need to be equal (cost of renting = cost of owning). There is a ton of speculation happening in the hot markets so people will take the monthly loss in rent hoping that the equity gain will offset it.
- irq11 8y ago
  If we enter an economic correction strong enough to drop housing prices by 20% nationwide, AirBnB activity will tank. Travel is a discretionary expense, and people cut back on those in a downturn. If you need a frame of reference, check what happened to marriott during the 2008 crash (fell by almost 2/3).

twblalock 8y ago

> Whats the issue with your home not being worth the debt you took on? There were tons of short sales during the last recession because people could not afford their mortgage payments and their houses were worth less than they owed. It's a very bad situation to be in, and if you lose your job you might have no choice. Another less bad situation is that you might need to turn down better career opportunities in other cities because you aren't able to sell your house. Being in that kind of a jam really diminishes your control over your future.

GhostVII 8y ago
The morgage payments don't change with the house price though, right? People couldn't afford to pay their morgage because they got more house than they could afford initially. But yeah being stuck in the same house because it lost value wouldn't be good.
- twblalock 8y ago
  > People couldn't afford to pay their morgage because they got more house than they could afford initially. Or they lost their jobs because of the recession.
  - derekp7 8y ago
    Not just that, but they got talked into 5-year balloon mortgages, where they would be forced to refinance after 5 years (the upside being that they got lower monthly payments than a 30-year fixed). Well, 5 years later rates have gone up to where they can't afford the new payments, so end up losing the house.
bradleyjg 8y ago
> Another less bad situation is that you might need to turn down better career opportunities in other cities because you aren't able to sell your house. If the house price stays the same this still ends up costing you roughly 6%.
- 8y ago