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Mortgages are being given away now that the mortgage rate is about the same as inflation. The mortgage is now the asset and the home is the liability. It is pro

Mortgages are being given away now that the mortgage rate is about the same as inflation. The mortgage is now the asset and the home is the liability. It is probably you can make more by paying off the mortgage then investing the down payment and try to bring that investment up to the level of the mortgage (plus having enough for capital gains tax). It may be a unique situation in our lifetime that is only possible because the fed is buying trillions of dollars of mortgage backed securities while the base rates are already bottomed out. However, the overall value depends a lot on inflation, how much property value will go down in the future in real terms (home prices in many markets are now at levels of the previous housing crises), and how much you have to spend to repair the house in addition to known fixed costs such as home owner's insurance and property tax (actually this rate may go up where state and local governments are insolvent).

imtringued 6y ago
I wonder how many weird deflationary forces are acting on this economy. Fed buying mortgages causes people to get into debt for their house, ironically they end up consuming less, which drags down inflation and the cycle repeats endlessly with no hope of inflation going up to justify increasing the interest rates.
- gregwebs 6y ago
  In the long-term I think buying a house at a low fixed rate builds wealth and leads to greater consumption and less reliance on government transfer payments (although the mortgage itself could be considered a government transfer payment). As the fixed mortgage payment gets reduced over time due to inflation the homeowner has greater ability to consume if their wages keep up with inflation. The only thing we know for sure is that the fed buying MBS has a strong inflationary effect on the housing market that can be seen in the record housing prices.

imtringued 6y ago

I wonder how many weird deflationary forces are acting on this economy. Fed buying mortgages causes people to get into debt for their house, ironically they end up consuming less, which drags down inflation and the cycle repeats endlessly with no hope of inflation going up to justify increasing the interest rates.

gregwebs 6y ago
In the long-term I think buying a house at a low fixed rate builds wealth and leads to greater consumption and less reliance on government transfer payments (although the mortgage itself could be considered a government transfer payment). As the fixed mortgage payment gets reduced over time due to inflation the homeowner has greater ability to consume if their wages keep up with inflation. The only thing we know for sure is that the fed buying MBS has a strong inflationary effect on the housing market that can be seen in the record housing prices.