5 ms·

But rents go up even though the mortgage rate is locked in. In some markets a bad 30 year mortgage turns into a great deal 10 years later. I would argue expen

But rents go up even though the mortgage rate is locked in. In some markets a bad 30 year mortgage turns into a great deal 10 years later. I would argue expensive single family homes in supply restricted markets is a toxic product

cammikebrown 5y ago
It’s all bad. I’m not able to save up for a down payment, even if I wanted to buy a home (which I don’t, I want to keep moving around places and I’d rather not worry about maintenance, property taxes, etc.) I feel bad for those who do want to buy and are priced out.
- xwdv 5y ago
  They can always put a smaller down payment and just pay for the PMI so don’t feel too bad. Many people who aren’t buying are really just trying to time the market, it’s not because they can’t put a down payment. No one wants to be caught bag holding a house that may be worth a lot less in a few years.
  - doom2 5y ago
    > They can always put a smaller down payment and just pay for the PMI so don’t feel too bad. Which brings up another piece of "conventional" homebuying: the need for a 20% down payment. Many Americans are still taught this magic number, but the reality in many big cities is that you won't always be able to afford that amount.
    - xwdv 5y ago
      You can do 5% down.
      - cammikebrown 5y ago
        5% down on $600,000 is still $30k, which is at least six months’ salary for many, many people. I know HN skews wealthy but the average median family income in California is $75k. Good luck!
        xwdv 5y ago
        You can keep moving the goal posts, but eventually you must face the moment of truth. If you’re not willing to work hard for a year and put the money down you do not get to own a home. There is no amount of downpayment people will ever be comfortable with, people simply want to have no downpayment at all and jump straight into mortgage payments.
        AnimalMuppet 5y ago
        If you're making $60K/year, I'm not sure that it's reasonable for you to have a $600/000 mortgage, completely apart from the down payment. You might be able to afford it with a 0% loan, but there aren't many of those...
klodolph 5y ago
The mortgage rate is locked in, but that doesn’t save you—if you have a high mortgage rate the rates could go down (but you’re locked in and can’t benefit unless you refinance), if you have a low mortgage rate then the principal is higher.
- sokoloff 5y ago
  If rates go down, you're locked in unless you do this very obvious and fairly painless thing.
  - klodolph 5y ago
    “Obvious and painless” but not inexpensive. If it were trivial to refinance, you’d effectively have a variable rate mortgage where the rates could only go down, not up.
    - sokoloff 5y ago
      That is more or less how I view my mortgage. I bought in 2007 at 6.5%, refinanced in 2011 to 4.25%, then again a few years later to 3.625%, and plan to refinance again soon if I can lock in a 2.75%, no-points sometime soon. There are no points, no closing costs refis available. The biggest hassle in refinancing is making copies/uploading 2 years of tax returns and whatever other paperwork the underwriters want.
    - wbond 5y ago
      If you deal with a small local bank, you may be able to get a portfolio mortgage that they hold, with some unique benefits. I recently did this, they matched the rate my existing lender (big international bank) gave me, plus they offer a float down on the rate once per 12 months for a fixed fee of $975. No refinance necessary.
    - ummonk 5y ago
      That’s exactly what it is, which is why the rate is higher than an actual variable rate mortgage (where rates can go up too).
Retric 5y ago
I personally move around enough that transaction costs from home ownership would have been larger than the rent I actually paid.
mgh2 5y ago
What are the long term consequences of investing in real state? Sure, you will have some who can't afford to own, but for those who can, aren't they growing the economy? Think about the externalities, the fed prints money whenever the economy is in trouble and needs help (ex: recession, pandemic), this money is to be well invested for growth (real state, stocks, etc.): this injection/debt engenders more jobs, construction, population and demand growth. As long as this last part is done right [more money supply = more production] the economy will be kept healthy. The problem arises when the above equation does not balance out- ex: Argentina, Greece, Turkey, etc. (i.e. crypto arguments), when people and governments do not produce to justify that investment (aka corruption and stealing). Money's purpose is to be used for growth, so unlike the popular view of "inflating fiat steals your money", I don't think people understand money's purpose in the 1st place. Except for artificially supply restricted markets (ex: single family zoning in California [recently abolished] or money laundering on empty homes in Canada, UK & Australia), mortgages are not intrinsically toxic.
- mgh2 5y ago
  *Edit: The problem arises when the above equation does not keep pace with growth- you can be in debt as long as you are also growing

cammikebrown 5y ago

It’s all bad. I’m not able to save up for a down payment, even if I wanted to buy a home (which I don’t, I want to keep moving around places and I’d rather not worry about maintenance, property taxes, etc.) I feel bad for those who do want to buy and are priced out.

xwdv 5y ago
They can always put a smaller down payment and just pay for the PMI so don’t feel too bad. Many people who aren’t buying are really just trying to time the market, it’s not because they can’t put a down payment. No one wants to be caught bag holding a house that may be worth a lot less in a few years.
- doom2 5y ago
  > They can always put a smaller down payment and just pay for the PMI so don’t feel too bad. Which brings up another piece of "conventional" homebuying: the need for a 20% down payment. Many Americans are still taught this magic number, but the reality in many big cities is that you won't always be able to afford that amount.
  - xwdv 5y ago
    You can do 5% down.
    - cammikebrown 5y ago
      5% down on $600,000 is still $30k, which is at least six months’ salary for many, many people. I know HN skews wealthy but the average median family income in California is $75k. Good luck!
      - xwdv 5y ago
        You can keep moving the goal posts, but eventually you must face the moment of truth. If you’re not willing to work hard for a year and put the money down you do not get to own a home. There is no amount of downpayment people will ever be comfortable with, people simply want to have no downpayment at all and jump straight into mortgage payments.
      - AnimalMuppet 5y ago
        If you're making $60K/year, I'm not sure that it's reasonable for you to have a $600/000 mortgage, completely apart from the down payment. You might be able to afford it with a 0% loan, but there aren't many of those...

klodolph 5y ago

The mortgage rate is locked in, but that doesn’t save you—if you have a high mortgage rate the rates could go down (but you’re locked in and can’t benefit unless you refinance), if you have a low mortgage rate then the principal is higher.

sokoloff 5y ago
If rates go down, you're locked in unless you do this very obvious and fairly painless thing.
- klodolph 5y ago
  “Obvious and painless” but not inexpensive. If it were trivial to refinance, you’d effectively have a variable rate mortgage where the rates could only go down, not up.
  - sokoloff 5y ago
    That is more or less how I view my mortgage. I bought in 2007 at 6.5%, refinanced in 2011 to 4.25%, then again a few years later to 3.625%, and plan to refinance again soon if I can lock in a 2.75%, no-points sometime soon. There are no points, no closing costs refis available. The biggest hassle in refinancing is making copies/uploading 2 years of tax returns and whatever other paperwork the underwriters want.
  - wbond 5y ago
    If you deal with a small local bank, you may be able to get a portfolio mortgage that they hold, with some unique benefits. I recently did this, they matched the rate my existing lender (big international bank) gave me, plus they offer a float down on the rate once per 12 months for a fixed fee of $975. No refinance necessary.
  - ummonk 5y ago
    That’s exactly what it is, which is why the rate is higher than an actual variable rate mortgage (where rates can go up too).

Retric 5y ago

I personally move around enough that transaction costs from home ownership would have been larger than the rent I actually paid.

mgh2 5y ago

What are the long term consequences of investing in real state? Sure, you will have some who can't afford to own, but for those who can, aren't they growing the economy? Think about the externalities, the fed prints money whenever the economy is in trouble and needs help (ex: recession, pandemic), this money is to be well invested for growth (real state, stocks, etc.): this injection/debt engenders more jobs, construction, population and demand growth. As long as this last part is done right [more money supply = more production] the economy will be kept healthy. The problem arises when the above equation does not balance out- ex: Argentina, Greece, Turkey, etc. (i.e. crypto arguments), when people and governments do not produce to justify that investment (aka corruption and stealing). Money's purpose is to be used for growth, so unlike the popular view of "inflating fiat steals your money", I don't think people understand money's purpose in the 1st place. Except for artificially supply restricted markets (ex: single family zoning in California [recently abolished] or money laundering on empty homes in Canada, UK & Australia), mortgages are not intrinsically toxic.

mgh2 5y ago
*Edit: The problem arises when the above equation does not keep pace with growth- you can be in debt as long as you are also growing