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I just bought a house! Like, literally yesterday. And I was recently quoted in the Wall Street Journal regarding my home buying process: https://www.wsj.com/art

I just bought a house! Like, literally yesterday. And I was recently quoted in the Wall Street Journal regarding my home buying process: https://www.wsj.com/articles/home-buyers-are-finding-creative-ways-to-make-cash-offers-11654767001 https://www.wsj.com/articles/home-buyers-are-finding-creativ... Someone in the comments there made a metaphor about "catching a falling knife." I respect this skepticism, and suspect I may have safely caught such a knife. More thoughts: - If interest rates rise, the asset price bubble may deflate. This suggests the house's value on paper will fall — but unless the economy collapses, overall rents ought to be stable, and the cost of living on a typical property ought remain broadly similar. In the meantime, prices are still rising substantially in the area where I bought the house, notwithstanding recent headwinds in the mortgage market. - I expect real rents to rise over the next few years, due to general supply-and-demand issues and the dearth of new construction. I expect this nationwide; I further expect them to rise in the city where I bought. This should mitigate the pressure on the value of my asset. - I locked in a 4% interest rate. With a conforming loan of $647,200 that's something like $2200/mo in debt that's evaporating due to inflation. This is a substantial portion of the monthly payment. You will not get this good a deal, because rates are already going up. However, at current rates, you will still get free-money financing -- just not as much or for as long. - I sold stocks to pay for my down payment. The stock market fell a good little bit since I sold. If your equity is still in equities you have already taken a hit that I avoided. (I got lucky, I guess; I also sold company stock at a very attractive price.) And note that even though stocks have fallen, they are by many measures still somewhat overpriced by historical standards, particularly if rising rates brings about a recession, which it might. If my real estate is at risk from rising rates and falling asset prices, it has lots of company. (Even a nice safe bank account is losing value daily.) In conclusion, a lot depends on the specifics of where you're buying, how you're paying for it, and what you would do with the money instead. If you've got a wad of cash and wanted to make an all-cash offer, I'd preserve as much as you can against inflation, and save it for the recession in a year or two; you'll probably come out ahead.

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01100011 4y ago
> but unless the economy collapses This is a very real possibility in the next 18 months. Even if Russia stops attacking Ukraine, we have plenty of money that the fed is going to drain out of the economy. QT has barely even started yet. I'm not saying it is a certainty, but the chances are uncomfortably high that we will have a "hard landing", including high unemployment and a stagnant economy due to high borrowing costs. > dearth of new construction People thought we had a shortage of homes in 2005 as well. The market crashed and suddenly we did not. Supply is a function of what people are willing to pay and what sellers are willing to accept to relocate. > You will not get this good a deal Absolutely. Rates jumped 0.5% on Friday alone as the mortgage backed security market went "no-bid"(no one was willing to buy the securitized mortgages at current rates). > If my real estate is at risk from rising rates and falling asset prices, it has lots of company. This is not a good strategy to manage your money but you do you. Fortunately you do have tax advantages as a home owner so that does work in your favor vs other asset classes. This may not make sense for many people though. I'll say though that buying a home may turn out to be a wise move if you can keep making the payments and things recover. It is likely that we will continue to see inflation above the target rate because the fed is trapped between its mandates and the financial insolvency of the US government(currently running $1T USD deficits annually, and that after a spike in tax receipts due to asset inflation).
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- fennecfoxen 4y ago
  > I'll say though that buying a home may turn out to be a wise move if you can keep making the payments and things recover. Oh yes. I could lose my job and get a new one with zero equity compensation and a 33% cut to base, and I’d still be pretty comfortable paying everything. And that’s by myself, not accounting for any of my wife’s income. > currently running $1T USD deficits annually, and that after a spike in tax receipts due to asset inflation Yes. I forecast this means more inflation. Or politicians choosing to actually make hard decisions and pay the price for their policies, which will happen only after much more inflation. I have locked in the price of shelter for the next 30 years and the more inflation the better this real estate deal looks.

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01100011 4y ago

> but unless the economy collapses This is a very real possibility in the next 18 months. Even if Russia stops attacking Ukraine, we have plenty of money that the fed is going to drain out of the economy. QT has barely even started yet. I'm not saying it is a certainty, but the chances are uncomfortably high that we will have a "hard landing", including high unemployment and a stagnant economy due to high borrowing costs. > dearth of new construction People thought we had a shortage of homes in 2005 as well. The market crashed and suddenly we did not. Supply is a function of what people are willing to pay and what sellers are willing to accept to relocate. > You will not get this good a deal Absolutely. Rates jumped 0.5% on Friday alone as the mortgage backed security market went "no-bid"(no one was willing to buy the securitized mortgages at current rates). > If my real estate is at risk from rising rates and falling asset prices, it has lots of company. This is not a good strategy to manage your money but you do you. Fortunately you do have tax advantages as a home owner so that does work in your favor vs other asset classes. This may not make sense for many people though. I'll say though that buying a home may turn out to be a wise move if you can keep making the payments and things recover. It is likely that we will continue to see inflation above the target rate because the fed is trapped between its mandates and the financial insolvency of the US government(currently running $1T USD deficits annually, and that after a spike in tax receipts due to asset inflation).

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fennecfoxen 4y ago
> I'll say though that buying a home may turn out to be a wise move if you can keep making the payments and things recover. Oh yes. I could lose my job and get a new one with zero equity compensation and a 33% cut to base, and I’d still be pretty comfortable paying everything. And that’s by myself, not accounting for any of my wife’s income. > currently running $1T USD deficits annually, and that after a spike in tax receipts due to asset inflation Yes. I forecast this means more inflation. Or politicians choosing to actually make hard decisions and pay the price for their policies, which will happen only after much more inflation. I have locked in the price of shelter for the next 30 years and the more inflation the better this real estate deal looks.