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> without considering that the declining interest rates that fueled past appreciation don't have much room left to move down Negative is inevitable, imo If th

> without considering that the declining interest rates that fueled past appreciation don't have much room left to move down Negative is inevitable, imo If the value of your home rises, you've effectively taken out a hugely profitable leveraged loan, which is historically pretty common. Which is far from guaranteed of course, but broadly speaking it was an amazingly lucrative move for many many people.

civilized 5y ago
Why would I lend you a million dollars only to be paid back over 30 years and have less than I started with at the end of the 30 years? I'd be better off doing nothing with the money.
- ytpete 5y ago
  You wouldn't, but the government might - to keep the economy propped up. I think this is what parent meant, anyway. Not sure that's a healthy point for the government or the economy to get to, but with politics the way they are these days it doesn't sound that farfetched of an outcome...
  - civilized 5y ago
    If things get to that point, the government might as well just buy all the housing.
    - s1artibartfast 5y ago
      It has already been done. https://www.investopedia.com/articles/personal-finance/051415/5-countries-lowest-interest-rates.asp https://www.investopedia.com/articles/personal-finance/05141...
- spywaregorilla 5y ago
  Because you don't want to keep 1 million dollars under your mattress.
  - civilized 5y ago
    Maybe I do if my other options are this bad. Although if the reason the government is doing negative interest rates is to prop up home prices forever and ever, I guess I better put my money into housing.
lottin 5y ago
Your home is not special. If the value of your home rises, the value of other homes also rises, which means for most homeowners an increase in the value of their home can't be turned into a profit.
- spywaregorilla 5y ago
  If Alice buys a home for $100k and it appreciates $1M over ten years, and Bob rents for ten years for $100k, total. Alice has $1M more than Bob does. That isn't nullified if Alice chooses to buy a $1M home next. She can also go buy another $100k home instead and pocket the $900k. Bob, obviously, cannot pocket anything.
  - lottin 5y ago
    > She can also go buy another $100k home instead and pocket the $900k No, that's my point. A home that cost $100k when Alice bought hers, now costs $1M, therefore if Alice sells her home for $1M and buys another one for $1M, she makes a profit of $0.
    - spywaregorilla 5y ago
      Bob, with a net worth $1M lower than Alice, would probably disagree that she has not profited.
      - lottin 5y ago
        Only if you do fraudulent accounting. Mark-to-market is limited to assets held for trading, as far as I can tell, and for a good reason.
        spywaregorilla 5y ago
        If you sell your home for $1M more than you bought it, it would be fraud if you didn't consider it a gain.
imtringued 5y ago
There is a reason why they must go negative... Inflation is going up because of a mix of supply shocks and fiscal stimulus. Not necessarily a bad thing but it's out of the realm of monetary stimulus. Low interest rates in Japan failed to drive inflation. Ask any Austrian economist and they would tell you that low interest rates are guaranteed lead to malinvestment, an artificial business boom and high inflation. You know, if it was that easy then central banks would have raised interest rates a long time ago. Probably shortly after 2008. Whatever is going on is way beyond what monetary policy can do. At 0%, monetary policy simply stops. Game over for monetary policy. Central banks do not matter anymore.
- jdhn 5y ago
  >You know, if it was that easy then central banks would have raised interest rates a long time ago. Probably shortly after 2008. The Fed attempted to raise rates in 2011 which lead to the so-called "Taper Tantrum" where stocks plunged. The Fed either got scared, or received a phonecall, and promptly held off on increasing rates.

civilized 5y ago

Why would I lend you a million dollars only to be paid back over 30 years and have less than I started with at the end of the 30 years? I'd be better off doing nothing with the money.

ytpete 5y ago
You wouldn't, but the government might - to keep the economy propped up. I think this is what parent meant, anyway. Not sure that's a healthy point for the government or the economy to get to, but with politics the way they are these days it doesn't sound that farfetched of an outcome...
- civilized 5y ago
  If things get to that point, the government might as well just buy all the housing.
  - s1artibartfast 5y ago
    It has already been done. https://www.investopedia.com/articles/personal-finance/051415/5-countries-lowest-interest-rates.asp https://www.investopedia.com/articles/personal-finance/05141...
spywaregorilla 5y ago
Because you don't want to keep 1 million dollars under your mattress.
- civilized 5y ago
  Maybe I do if my other options are this bad. Although if the reason the government is doing negative interest rates is to prop up home prices forever and ever, I guess I better put my money into housing.

lottin 5y ago

Your home is not special. If the value of your home rises, the value of other homes also rises, which means for most homeowners an increase in the value of their home can't be turned into a profit.

spywaregorilla 5y ago
If Alice buys a home for $100k and it appreciates $1M over ten years, and Bob rents for ten years for $100k, total. Alice has $1M more than Bob does. That isn't nullified if Alice chooses to buy a $1M home next. She can also go buy another $100k home instead and pocket the $900k. Bob, obviously, cannot pocket anything.
- lottin 5y ago
  > She can also go buy another $100k home instead and pocket the $900k No, that's my point. A home that cost $100k when Alice bought hers, now costs $1M, therefore if Alice sells her home for $1M and buys another one for $1M, she makes a profit of $0.
  - spywaregorilla 5y ago
    Bob, with a net worth $1M lower than Alice, would probably disagree that she has not profited.
    - lottin 5y ago
      Only if you do fraudulent accounting. Mark-to-market is limited to assets held for trading, as far as I can tell, and for a good reason.
      - spywaregorilla 5y ago
        If you sell your home for $1M more than you bought it, it would be fraud if you didn't consider it a gain.

imtringued 5y ago

There is a reason why they must go negative... Inflation is going up because of a mix of supply shocks and fiscal stimulus. Not necessarily a bad thing but it's out of the realm of monetary stimulus. Low interest rates in Japan failed to drive inflation. Ask any Austrian economist and they would tell you that low interest rates are guaranteed lead to malinvestment, an artificial business boom and high inflation. You know, if it was that easy then central banks would have raised interest rates a long time ago. Probably shortly after 2008. Whatever is going on is way beyond what monetary policy can do. At 0%, monetary policy simply stops. Game over for monetary policy. Central banks do not matter anymore.

jdhn 5y ago
>You know, if it was that easy then central banks would have raised interest rates a long time ago. Probably shortly after 2008. The Fed attempted to raise rates in 2011 which lead to the so-called "Taper Tantrum" where stocks plunged. The Fed either got scared, or received a phonecall, and promptly held off on increasing rates.