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Affordability is only part of the picture though. A higher value loan means higher risk as well. If interest rates rise, or something else happens that reduce

Affordability is only part of the picture though. A higher value loan means higher risk as well. If interest rates rise, or something else happens that reduces the value of the property, then that $500,000 mortgage might be against a house worth less than $500,000. At that point people have to start playing chicken with the banks again, trying to mitigate the losses with strategic defaults.

b9a2cab5 5y ago
2008 had a lot of variable rate mortgages. That's not the case today. Most people (at least I'd hope) don't use their house as an investment so if their mortgage is still the same payment each month and they can afford it there's no reason they'd default and tank their credit. The losses are purely paper losses.
- deleted 5y ago
  [deleted]
- symlinkk 5y ago
  Why do you hope people don’t use houses as an investment? It’s one of the few investments where: * you can get a huge loan with a tiny interest rate * you can actually enjoy the investment by living in it * everyone around you is doing everything they can to keep house prices up and therefore keep your investment growing I mean seriously, the only other option is dumping all your money in a stock market that you can’t touch and have no control over.
  - omgwtfbyobbq 5y ago
    To be fair, people don't have that much control over home values either. The biggest reservation I can think of with housing as an investment is that it's singular in terms of economic sector and geography. With the market people can diversify, although there's no guarantee they will. Being able to leverage a small down payment for a more valuable asset can also be advantageous or disadvantageous depending on what the value of the asset does.
- karakot 5y ago
  it's the other way :D, since i bought the house in 2015, my gains are paper gains (~200%), but my property taxes are real loses, since they've grown almost twice as well.
  - IkmoIkmo 5y ago
    Not sure about that in general, although it can differ for each state and could apply in your state. In general, US tax income from property taxes has not risen, in fact it's slightly come down as a percentage of income. That means that while the tax base (property values) have increased sharply, the tax rate for property has come down. Most municipalities will first establish how much tax revenue they need, then look at the total property values that's taxable, and then set an appropriate rate. If property values double but municipal expenses don't, they can and do lower the property taxes. It's not a 1 on 1 relationship but given average property tax income as a percentage of total income has slightly come down over the past decades, it's clear that tax rates are being reduced as property values go up.
imtringued 5y ago
Ok, I will bite. What will cause interest rates to rise? Do you expect a war that destroys Taiwan or something? (a permanent semiconductor shortage would have a massive impact on modern life). Increasing trust, stability and keeping inflation low will keep interest rates low forever. Japan had decades of deflation.
- 34679 5y ago
  >What will cause interest rates to rise? Banks deciding they want to own more real property.

b9a2cab5 5y ago

2008 had a lot of variable rate mortgages. That's not the case today. Most people (at least I'd hope) don't use their house as an investment so if their mortgage is still the same payment each month and they can afford it there's no reason they'd default and tank their credit. The losses are purely paper losses.

deleted 5y ago
[deleted]
symlinkk 5y ago
Why do you hope people don’t use houses as an investment? It’s one of the few investments where: * you can get a huge loan with a tiny interest rate * you can actually enjoy the investment by living in it * everyone around you is doing everything they can to keep house prices up and therefore keep your investment growing I mean seriously, the only other option is dumping all your money in a stock market that you can’t touch and have no control over.
- omgwtfbyobbq 5y ago
  To be fair, people don't have that much control over home values either. The biggest reservation I can think of with housing as an investment is that it's singular in terms of economic sector and geography. With the market people can diversify, although there's no guarantee they will. Being able to leverage a small down payment for a more valuable asset can also be advantageous or disadvantageous depending on what the value of the asset does.
karakot 5y ago
it's the other way :D, since i bought the house in 2015, my gains are paper gains (~200%), but my property taxes are real loses, since they've grown almost twice as well.
- IkmoIkmo 5y ago
  Not sure about that in general, although it can differ for each state and could apply in your state. In general, US tax income from property taxes has not risen, in fact it's slightly come down as a percentage of income. That means that while the tax base (property values) have increased sharply, the tax rate for property has come down. Most municipalities will first establish how much tax revenue they need, then look at the total property values that's taxable, and then set an appropriate rate. If property values double but municipal expenses don't, they can and do lower the property taxes. It's not a 1 on 1 relationship but given average property tax income as a percentage of total income has slightly come down over the past decades, it's clear that tax rates are being reduced as property values go up.

imtringued 5y ago

Ok, I will bite. What will cause interest rates to rise? Do you expect a war that destroys Taiwan or something? (a permanent semiconductor shortage would have a massive impact on modern life). Increasing trust, stability and keeping inflation low will keep interest rates low forever. Japan had decades of deflation.

34679 5y ago
>What will cause interest rates to rise? Banks deciding they want to own more real property.