4 ms·

We all need a place to live but we all didn't take a risk in taking out a mortgage like Bob did. Bob's risks shouldn't negatively influence people who have mor

by Teever 5y ago

We all need a place to live but we all didn't take a risk in taking out a mortgage like Bob did. Bob's risks shouldn't negatively influence people who have more risk aversion to the point where it's less risky to take risks like Bob because then we'll all take risks like Bob and then end up in the situation where we are now.

selcuka 5y ago
It's not all Bob's fault though. He had to live in somewhere and the only way for him to afford a house (theoretically worth $200K, inflated to $500K in the above example) even if he had $200K in savings was to get a $300K loan. Now if you reduce the house prices back to $200K levels he won't be able to refinance it anymore and his current bank will screw him even more.
- forgotmyoldname 5y ago
  It’s not the first time this happened. Houses lose desirability due to jobs moving out of town, crime rising, and so on. Buying an overpriced house shouldn’t guarantee you a solid return in the future. We’re at a point where we’d rather Bob secure his “investment” while younger generations can’t afford a home to live in.
  - selcuka 5y ago
    That's a bit out of context. My comment was a reply to: > We all need a place to live but we all didn't take a risk in taking out a mortgage like Bob did. My point is it wasn't necessarily a risk Bob has voluntarily taken. I'm not saying that we shouldn't do something to fix this but we shouldn't cause Bob to go bankrupt while trying to help younger generations as Bob may not be the opportunist here.
    - salawat 5y ago
      Correct. The bank, and the seller are. The seller has his money already. The bank created money out of nowhere to service that mortgage. To my point of view, I see exactly where the haircut makes the most sense.
      - selcuka 5y ago
        > The bank created money out of nowhere This is the part most people don't know or understand. We should fix the banking system first. Only one entity should be able to print money, not all banks.
      - montblanc 5y ago
        One man's debt is another's asset. If the banks don't collect their mortgages they might collapse. Will I trust a bank to save my money if I knew their balance sheet is negative?
        vineyardmike 5y ago
        it is negative. Real banks run negative in practice (in USA).
- salawat 5y ago
  Risk folks. The availability of that loan due to artificially low interest rates propped up the bubbled price. The fact is, a seller is shopping for someone with more capital or less risk aversion to take a liability off their hands. My issue with this, is younger people are on the hook for it and many are not even advised on how they can vote with feet/wallets. That's wrong. Without refusal to participate, there is no braking effect on Asset inflation. Someone quite literally has to lose their ass for things to correct so that the next generation has a sane foundation to build from, and Lord only knows, the centralization hacks pulled off by the last handful of folks have been so stupidly effective, we're even having this conversation. So, who is in the best spot to take haircuts? I assure you, it isn't the people on the lower side of the income/wealth curve.
slt2021 5y ago
taking a mortgage is less risky, because it removes uncertainty over the future cash outflows for housing. It fixes your house payment and interest payment. renting is actually more risky, because you are left exposed to interest rate risk, and housing market risk, etc in form of ever increasing rent prices. in my opinion the proper solution would be increasing property taxes across the board and spending that money locally on schools and other community reinvestments, applying them on market prices and heavily taxing investment properties in single family homes (second and third house, house in title of LLC/S-corp, etc). also tax heavily houses located in restricted zoning areas, like Palo Alto, CA. If NIMBYs don't want to see new housing in their backyard, they gotta pay up even more on market prices of their homes. provide tax incentives for YIMBYs
- Teever 5y ago
  If Bob taking a mortgage is less risky why are we even having a discussion about Bob's risk?
  - SilasX 5y ago
    Because the discussion was centered around the decision of whether policymakers should create said risk by reversing previous policies. The risk came from the choice of policy, not from the environment Bob was originally playing in.
    - CogitoCogito 5y ago
      Isn't a change in policy just another factor in overall risk? Why should anyone assume that policy will not change?
  - ivalm 5y ago
    Implied volatility on buying a house is lower than on renting, we are discussing policy changes that cause realized volatility to be different. If you use the government to change the market then you cant claim “free market.”
- koliber 5y ago

by Teever 5y ago

selcuka 5y ago

It's not all Bob's fault though. He had to live in somewhere and the only way for him to afford a house (theoretically worth $200K, inflated to $500K in the above example) even if he had $200K in savings was to get a $300K loan. Now if you reduce the house prices back to $200K levels he won't be able to refinance it anymore and his current bank will screw him even more.

forgotmyoldname 5y ago
It’s not the first time this happened. Houses lose desirability due to jobs moving out of town, crime rising, and so on. Buying an overpriced house shouldn’t guarantee you a solid return in the future. We’re at a point where we’d rather Bob secure his “investment” while younger generations can’t afford a home to live in.
- selcuka 5y ago
  That's a bit out of context. My comment was a reply to: > We all need a place to live but we all didn't take a risk in taking out a mortgage like Bob did. My point is it wasn't necessarily a risk Bob has voluntarily taken. I'm not saying that we shouldn't do something to fix this but we shouldn't cause Bob to go bankrupt while trying to help younger generations as Bob may not be the opportunist here.
  - salawat 5y ago
    Correct. The bank, and the seller are. The seller has his money already. The bank created money out of nowhere to service that mortgage. To my point of view, I see exactly where the haircut makes the most sense.
    - selcuka 5y ago
      > The bank created money out of nowhere This is the part most people don't know or understand. We should fix the banking system first. Only one entity should be able to print money, not all banks.
    - montblanc 5y ago
      One man's debt is another's asset. If the banks don't collect their mortgages they might collapse. Will I trust a bank to save my money if I knew their balance sheet is negative?
      - vineyardmike 5y ago
        it is negative. Real banks run negative in practice (in USA).
salawat 5y ago
Risk folks. The availability of that loan due to artificially low interest rates propped up the bubbled price. The fact is, a seller is shopping for someone with more capital or less risk aversion to take a liability off their hands. My issue with this, is younger people are on the hook for it and many are not even advised on how they can vote with feet/wallets. That's wrong. Without refusal to participate, there is no braking effect on Asset inflation. Someone quite literally has to lose their ass for things to correct so that the next generation has a sane foundation to build from, and Lord only knows, the centralization hacks pulled off by the last handful of folks have been so stupidly effective, we're even having this conversation. So, who is in the best spot to take haircuts? I assure you, it isn't the people on the lower side of the income/wealth curve.

slt2021 5y ago

taking a mortgage is less risky, because it removes uncertainty over the future cash outflows for housing. It fixes your house payment and interest payment. renting is actually more risky, because you are left exposed to interest rate risk, and housing market risk, etc in form of ever increasing rent prices. in my opinion the proper solution would be increasing property taxes across the board and spending that money locally on schools and other community reinvestments, applying them on market prices and heavily taxing investment properties in single family homes (second and third house, house in title of LLC/S-corp, etc). also tax heavily houses located in restricted zoning areas, like Palo Alto, CA. If NIMBYs don't want to see new housing in their backyard, they gotta pay up even more on market prices of their homes. provide tax incentives for YIMBYs

Teever 5y ago
If Bob taking a mortgage is less risky why are we even having a discussion about Bob's risk?
- SilasX 5y ago
  Because the discussion was centered around the decision of whether policymakers should create said risk by reversing previous policies. The risk came from the choice of policy, not from the environment Bob was originally playing in.
  - CogitoCogito 5y ago
    Isn't a change in policy just another factor in overall risk? Why should anyone assume that policy will not change?
- ivalm 5y ago
  Implied volatility on buying a house is lower than on renting, we are discussing policy changes that cause realized volatility to be different. If you use the government to change the market then you cant claim “free market.”
koliber 5y ago