5 ms·

> The nightmare scenario for a financial institution is someone getting a mortgage, paying it off early, and not getting another mortgage. I think the nightmar

> The nightmare scenario for a financial institution is someone getting a mortgage, paying it off early, and not getting another mortgage. I think the nightmare scenario for financial institutions is people buying houses for cash. No mortgage, no down-payments, no middlemen. The west coast right now is seeing an increase of such transactions. Add to that the slew of services trying to get around realtors, and the future may be bleak for such financial institutions. One can only hope...

eli_gottlieb 8y ago
Let's set a more ambitious goal. The real nightmare scenario for these institutions should be: people buy houses like refrigerators, as durable goods, with financing being only for the very worst-off.
- lostapathy 8y ago
  Where do you live that people don’t routinely finance appliances for 2-3 years on consumer credit? I don’t, but all the appliances sellers here advertise it so people must do it.
  - droithomme 8y ago
    That is interesting, I wonder how many people do buy appliances on credit. I recently replaced a refrigerator, which was over 40 years old and which I'd done multiple overhauls myself on over the years. Appliance store had lots of refrigerators in the $3,000-$16,000 range. With lots of features and compartments, multiple icemakers, LED zoned glow lighting, exotic hinges, internet connectivity, etc. I got a good fridge for $500 for cash. No icemaker and a single fridge and freezer door so it had the highest energy efficiency rating, higher than all the high tech fridges there with exotic energy saving features. And plenty of room inside because it wasn't taken up by compartments and drawers and icemakers. So... if most people are financing as you speculate, maybe it is because they are going for these $5000 refrigerators that don't work as well as the $500 refrigerators. Also I just know that all the internet, digital stuff, and touchscreens on the $5000+ fridges is going to break down in a few years and cost a fortune to repair. No thanks!
keypusher 8y ago
Majority of Americans have less than $1000 in savings, I don't think "paying for the entire house in cash" is what's going to disrupt the housing market.
marssaxman 8y ago
Have you looked at the price of a house lately? Maybe the 1% can manage to buy houses for cash, but that's not something most of us can realistically aspire to.
- droithomme 8y ago
  I've bought most of my houses for cash. If you start in an up and coming market and upgrade the property after 10 years you can sell at a big profit. So you sell the first one and have a bunch of money that you use to buy the second one outright in a less hot market but one with better lifestyle, and have a bunch of cash left over to buy an investment property. Then you have monthly income, but also a maintenance and tenant headache and you're anchored to that neighborhood. If I had invested the money in my stock portfolio instead, I would be ahead of the game since in the US (I realize the article is about the UK) mortgage rates are ridiculously low, stock returns are good, and mortgage interest is deductible. I like to upgrade my houses though including major demolition which the lienholder of record sometimes doesn't want to go for without trouble. I have more freedom with the property with an outright purchase. Despite the fact I'd have more money taking a mortgage and investing my investment gains have been dramatic enough that I'd rather have the freedom. Anyone working in IT should own at least one house outright by age 30 if they want to and if the can't they need to upgrade their skills, switch jobs, or stop spending irresponsibly. Starting salaries for recent grads from decent colleges are $90k now on average. That's people with no experience. After 10 years everyone should be making a lot more than that and all these rates are vastly more than anyone needs to live on. Save save save in the early years, then invest. Don't spend earned income on anything other than bare essentials. Spend from surplus investment income. Lots of people are in trouble every month spending all their earned income despite making $180-$400k and they never get ahead. There's no excuse for that. Cut expenses to what the poor spend and invest the surplus until you can permanently live well off your investments. But continue working at that point.
  - swagasaurus-rex 8y ago
    > Starting salaries for recent grads from decent colleges are $90k now on average. I graduated ~7 years ago. Besides this figure being far higher than I experienced as a starting salary, 1) These salaries are for high cost of living areas. Rent can and often is $25,000 or more a year. 2) These high cost of living areas, homes can and readily list for $1,000,000 or more, which is, in your estimate, 11 times the starting yearly salary, ignoring every and all expenses. 3) These 'decent colleges' can put you in several hundred thousand dollars in debt. 4) $180-$400k is not in the salary range for most software developers. This is well above average. There's no way I'm buying a home when I'm 30. When I do, there is no way I will own it outright. And I feel like I make a good living for myself.

eli_gottlieb 8y ago

Let's set a more ambitious goal. The real nightmare scenario for these institutions should be: people buy houses like refrigerators, as durable goods, with financing being only for the very worst-off.

lostapathy 8y ago
Where do you live that people don’t routinely finance appliances for 2-3 years on consumer credit? I don’t, but all the appliances sellers here advertise it so people must do it.
- droithomme 8y ago
  That is interesting, I wonder how many people do buy appliances on credit. I recently replaced a refrigerator, which was over 40 years old and which I'd done multiple overhauls myself on over the years. Appliance store had lots of refrigerators in the $3,000-$16,000 range. With lots of features and compartments, multiple icemakers, LED zoned glow lighting, exotic hinges, internet connectivity, etc. I got a good fridge for $500 for cash. No icemaker and a single fridge and freezer door so it had the highest energy efficiency rating, higher than all the high tech fridges there with exotic energy saving features. And plenty of room inside because it wasn't taken up by compartments and drawers and icemakers. So... if most people are financing as you speculate, maybe it is because they are going for these $5000 refrigerators that don't work as well as the $500 refrigerators. Also I just know that all the internet, digital stuff, and touchscreens on the $5000+ fridges is going to break down in a few years and cost a fortune to repair. No thanks!

keypusher 8y ago

Majority of Americans have less than $1000 in savings, I don't think "paying for the entire house in cash" is what's going to disrupt the housing market.

marssaxman 8y ago

Have you looked at the price of a house lately? Maybe the 1% can manage to buy houses for cash, but that's not something most of us can realistically aspire to.

droithomme 8y ago
I've bought most of my houses for cash. If you start in an up and coming market and upgrade the property after 10 years you can sell at a big profit. So you sell the first one and have a bunch of money that you use to buy the second one outright in a less hot market but one with better lifestyle, and have a bunch of cash left over to buy an investment property. Then you have monthly income, but also a maintenance and tenant headache and you're anchored to that neighborhood. If I had invested the money in my stock portfolio instead, I would be ahead of the game since in the US (I realize the article is about the UK) mortgage rates are ridiculously low, stock returns are good, and mortgage interest is deductible. I like to upgrade my houses though including major demolition which the lienholder of record sometimes doesn't want to go for without trouble. I have more freedom with the property with an outright purchase. Despite the fact I'd have more money taking a mortgage and investing my investment gains have been dramatic enough that I'd rather have the freedom. Anyone working in IT should own at least one house outright by age 30 if they want to and if the can't they need to upgrade their skills, switch jobs, or stop spending irresponsibly. Starting salaries for recent grads from decent colleges are $90k now on average. That's people with no experience. After 10 years everyone should be making a lot more than that and all these rates are vastly more than anyone needs to live on. Save save save in the early years, then invest. Don't spend earned income on anything other than bare essentials. Spend from surplus investment income. Lots of people are in trouble every month spending all their earned income despite making $180-$400k and they never get ahead. There's no excuse for that. Cut expenses to what the poor spend and invest the surplus until you can permanently live well off your investments. But continue working at that point.
- swagasaurus-rex 8y ago
  > Starting salaries for recent grads from decent colleges are $90k now on average. I graduated ~7 years ago. Besides this figure being far higher than I experienced as a starting salary, 1) These salaries are for high cost of living areas. Rent can and often is $25,000 or more a year. 2) These high cost of living areas, homes can and readily list for $1,000,000 or more, which is, in your estimate, 11 times the starting yearly salary, ignoring every and all expenses. 3) These 'decent colleges' can put you in several hundred thousand dollars in debt. 4) $180-$400k is not in the salary range for most software developers. This is well above average. There's no way I'm buying a home when I'm 30. When I do, there is no way I will own it outright. And I feel like I make a good living for myself.