4 ms·

> I am not alright with paying absurd rent. Then you should either: 1) Buy a house to live in 2) Buy a house to hedge against rents going bananas The 30-yea

> I am not alright with paying absurd rent. Then you should either: 1) Buy a house to live in 2) Buy a house to hedge against rents going bananas The 30-year fixed rate mortgage at negative real rates is the biggest handout the world has ever seen.

idiotsecant 4y ago
the insane mortgage rates we saw in the last few years really are going to be a generational redistribution of wealth that we'll talk about for the next century, I think. That might have been the last train out of town for the middle class to widely own housing in a lot of cases.
- onlyrealcuzzo 4y ago
  People have been making this argument since 1990. The Federal Reserve MANDATES that consumer prices go up 2% per year. If house prices ever go down, they'll be there - waiting - to pump them up. Prices will rarely ever go down substantially for a long period of time unless the Fed completely changes (I doubt it). You can either: 1) try to time the market (difficult in housing, I'd argue not as impossible as equitities) 2) buy into the bubble 3) hope that the US basically turns into a different country 4) be ruined financially by missing out on the biggest handout in the history of the world (the 30-year fixed negative real interest rate mortgage) Pick your poison.
  - notch656a 4y ago
    Housing prices exploded to compensate for the negative real interest rates. The people who got the handouts were rich people who owned multiple houses and sold them off. For the most part others didn't get that hot of a deal. In effect it was a regressive tax that the poor paid for the rich by paying in inflation the cost to make multi-home owners rich.
    - onlyrealcuzzo 4y ago
      > For the most part others didn't get that hot of a deal. How? Dollars are worth $0.5 in 1990. Yet your mortgage payment is unchanged. Your house payment is much less. Rents are much higher. You won.
      - notch656a 4y ago
        >Housing prices exploded to compensate for the negative real interest rates. They didn't "win." They broke even. The people that sold them won. The people with no house but inflated away cash/salary lost.
        onlyrealcuzzo 4y ago
        If your payment is massively lower than your rent would be - you won. Someone else is allowed to win, too. It's a zero sum game, and the only losers have been renters. That can change if there's a massive, sustained housing crash. But I won't hold my breath for that. I'm willing to bet, like always, house prices won't decline. The value of the dollar will decline instead (because the Fed can just easily QE until the only people that lose are renters).
- kasey_junk 4y ago
  No idea about if it’s the last train out of town but home ownership in the US is extremely high[0] (it ought to be we subsidize it like crazy). If you go back to 1900 you see home ownership rates in the US at less than half of households[1] The interesting thing to me is how conflated home ownership has become with housing affordability. As we’ve doubled the numbers of home owners we’ve dramatically removed the options for housing. [0] https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N [1] https://www.census.gov/data/tables/time-series/dec/coh-owner.html https://www.census.gov/data/tables/time-series/dec/coh-owner...
chollida1 4y ago
Yep Millennials, Gen X and Boomers have all been handed a once in a lifetime gift here. Each of those generations made out like bandits with low housing prices until the last few years and low interest rates. Gen Z and the generations to come have a real reason to be pissed at the rest of us.
- Fauntleroy 4y ago
  ...and you are absolutely right that we're pissed. Hopefully y'all will be willing to help out with reasonable public policy at least.
- wizofaus 4y ago
  In Australia at least there's a substantial gap between affordability for millennials and us Gen X'ers, reflected in homeownership rates. The trend only seemed to have been getting worse throughout covid (governments threw a lot of money into economic recovery, combined with super low interest rates, driving up house prices despite near zero immigration and absence of foreign students etc., though they're coming down now). Was that not true in the US? Gen Z are just coming into house- buying age now, though my own son is likely 8-10 years off from being a good position to afford anything at all, and without my help (or a lottery win), it's not going to be a house or even apartment anywhere close to where I live. But a lot could change in that time.
  - chollida1 4y ago
    No idea about the US, I'm in Canada and housing has only gone off the rails in the past 4-5 years. So those 3 generations all had legit chances to buy a home at a reasonable price. I'd assume every country is its own special mess:) In Canada last year we had a stat released that said 1 in 5 Millennials that own property own more than one. This was inline with both GenX and Boomer stats. Millennials are just as much a part of the problem as any other generation, assuming you think speculators are part of the problem.
    - wizofaus 4y ago
      "Speculators" sure, but most people who own multiple properties I wouldn't think fall into that category. We own a rental property - it's very much a long term investment, and we charge rent below market rate (it's still positively geared!). I don't believe our purchase locked out any first home buyers, it's a tiny 1BR flat, and priced at a point those just getting onto the property ladder could've afforded it (and outbid us). If we do sell the property it'll be to help my Gen-Z son buy a house. Having had assistance from my own parents (a smallish interest free loan that I paid back within 5 years) that seems fair enough.
matwood 4y ago
> The 30-year fixed rate mortgage at negative real rates is the biggest handout the world has ever seen. Agree. I bought a house around a decade ago. Refied into a sub 3% rate. The house next door now rents for 2.5x my mortgage. That's 10s of thousands of dollars/year extra I have in my pocket.
staindk 4y ago
Yeah this probably is the best bet. Will be keeping in mind as I save up money and figure out where I want to settle down.
sleepdreamy 4y ago
Can you elaborate on your last sentence a bit more? Just trying to get a more thorough explanation. I just got my first 30 year mortgage so, trying to make myself feel better I guess.
- mikestew 4y ago
  I'll take a whack at it. You have your mortgage, and let's say the hypothetical payment is $1000/month. That is all you'll ever be obligated to pay each month in order to live in your house (we'll ignore property taxes for the moment). Whereas your neighbor rents her house for $1000/month. But next year her rent is $1050/month, and so on. In ten years, she'll pay on the order of 50% more to stay in that house. But you'll still be paying $1000/month, and will continue to do so for 30 more years. But that's just how mortgages work, right? Lock into a rate, and have that for 30 years? Only in the U. S., AFAICT. Canadians will correct my details, but as one example in Canada one gets a mortgage for, say, five years at x%. After five years, go renegotiate? (Help me out here, Canucks; as soon as I went to write it out, I knew I had it wrong.) Anyway, point is, the "lock it in at 2.5% for 30 years" seems to be unique to the U. S., and assuming that your wages increase, after a period of years you will keep more money in your pocket than the neighbor that rents.
- onlyrealcuzzo 4y ago
  If you just bought, you don't have a negative real interest rate. Your interest rate is probably 5% or so? The real interest rate is probably 3% or so. That means your REAL interest rate is 2%. When you inevitably get the chance to refinance at below 3% - your REAL interest rate will be negative. The 30-year fixed mortgage is a product that would not exist without a government guarantee on Fannie & Freddie's debt. Even if you have a jumbo loan - it's only because of the MBS market created by Fannie & Freddie. In essence, the tax payer is paying you for you to have a mortgage on your house - regardless of whether Fannie securitized your mortgage.
  - sleepdreamy 4y ago
    My interest rate is 2.7% - We've been in the house for close to a year now. Renting was going to be 700 more MINUMUM. I couldn't justify not buying but also feel..unsure about everything for obvious reasons.
cammikebrown 4y ago
Being able to afford 20% down on a mortgage is something affordable to less people every year. With rates increasingly quickly, it's not going to be much cheaper if prices fall too.
- onlyrealcuzzo 4y ago
  So buy at 3.5% down. The more leverage you have - the more you're taking advantage of The Federal Reserve mandate that prices go up at least 2% per year. 2%x33 = 66% return GUARANTEED by yours truly, the Federal Reserve.
  - bamboozled 4y ago
    Maybe, in the back of peoples minds, we all know "The Fed" isn't magic and crisis do happen. So if this "guaranteed 2%" falls apart, it's going to freaking suck for a lot of people.
  - dayjaby 4y ago
    Isn't it an exponential formula instead of a mere multiplication? 1.02^33 ?
    - onlyrealcuzzo 4y ago
      If you put 3% down on 100k = $3000. If prices appreciate 2% = $2000. $2000 / $3000 = 66%
2OEH8eoCRo0 4y ago
Paying a mortgage is in essence paying yourself.

idiotsecant 4y ago

the insane mortgage rates we saw in the last few years really are going to be a generational redistribution of wealth that we'll talk about for the next century, I think. That might have been the last train out of town for the middle class to widely own housing in a lot of cases.

onlyrealcuzzo 4y ago
People have been making this argument since 1990. The Federal Reserve MANDATES that consumer prices go up 2% per year. If house prices ever go down, they'll be there - waiting - to pump them up. Prices will rarely ever go down substantially for a long period of time unless the Fed completely changes (I doubt it). You can either: 1) try to time the market (difficult in housing, I'd argue not as impossible as equitities) 2) buy into the bubble 3) hope that the US basically turns into a different country 4) be ruined financially by missing out on the biggest handout in the history of the world (the 30-year fixed negative real interest rate mortgage) Pick your poison.
- notch656a 4y ago
  Housing prices exploded to compensate for the negative real interest rates. The people who got the handouts were rich people who owned multiple houses and sold them off. For the most part others didn't get that hot of a deal. In effect it was a regressive tax that the poor paid for the rich by paying in inflation the cost to make multi-home owners rich.
  - onlyrealcuzzo 4y ago
    > For the most part others didn't get that hot of a deal. How? Dollars are worth $0.5 in 1990. Yet your mortgage payment is unchanged. Your house payment is much less. Rents are much higher. You won.
    - notch656a 4y ago
      >Housing prices exploded to compensate for the negative real interest rates. They didn't "win." They broke even. The people that sold them won. The people with no house but inflated away cash/salary lost.
      - onlyrealcuzzo 4y ago
        If your payment is massively lower than your rent would be - you won. Someone else is allowed to win, too. It's a zero sum game, and the only losers have been renters. That can change if there's a massive, sustained housing crash. But I won't hold my breath for that. I'm willing to bet, like always, house prices won't decline. The value of the dollar will decline instead (because the Fed can just easily QE until the only people that lose are renters).
kasey_junk 4y ago
No idea about if it’s the last train out of town but home ownership in the US is extremely high[0] (it ought to be we subsidize it like crazy). If you go back to 1900 you see home ownership rates in the US at less than half of households[1] The interesting thing to me is how conflated home ownership has become with housing affordability. As we’ve doubled the numbers of home owners we’ve dramatically removed the options for housing. [0] https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N [1] https://www.census.gov/data/tables/time-series/dec/coh-owner.html https://www.census.gov/data/tables/time-series/dec/coh-owner...

chollida1 4y ago

Yep Millennials, Gen X and Boomers have all been handed a once in a lifetime gift here. Each of those generations made out like bandits with low housing prices until the last few years and low interest rates. Gen Z and the generations to come have a real reason to be pissed at the rest of us.

Fauntleroy 4y ago
...and you are absolutely right that we're pissed. Hopefully y'all will be willing to help out with reasonable public policy at least.
wizofaus 4y ago
In Australia at least there's a substantial gap between affordability for millennials and us Gen X'ers, reflected in homeownership rates. The trend only seemed to have been getting worse throughout covid (governments threw a lot of money into economic recovery, combined with super low interest rates, driving up house prices despite near zero immigration and absence of foreign students etc., though they're coming down now). Was that not true in the US? Gen Z are just coming into house- buying age now, though my own son is likely 8-10 years off from being a good position to afford anything at all, and without my help (or a lottery win), it's not going to be a house or even apartment anywhere close to where I live. But a lot could change in that time.
- chollida1 4y ago
  No idea about the US, I'm in Canada and housing has only gone off the rails in the past 4-5 years. So those 3 generations all had legit chances to buy a home at a reasonable price. I'd assume every country is its own special mess:) In Canada last year we had a stat released that said 1 in 5 Millennials that own property own more than one. This was inline with both GenX and Boomer stats. Millennials are just as much a part of the problem as any other generation, assuming you think speculators are part of the problem.
  - wizofaus 4y ago
    "Speculators" sure, but most people who own multiple properties I wouldn't think fall into that category. We own a rental property - it's very much a long term investment, and we charge rent below market rate (it's still positively geared!). I don't believe our purchase locked out any first home buyers, it's a tiny 1BR flat, and priced at a point those just getting onto the property ladder could've afforded it (and outbid us). If we do sell the property it'll be to help my Gen-Z son buy a house. Having had assistance from my own parents (a smallish interest free loan that I paid back within 5 years) that seems fair enough.

matwood 4y ago

> The 30-year fixed rate mortgage at negative real rates is the biggest handout the world has ever seen. Agree. I bought a house around a decade ago. Refied into a sub 3% rate. The house next door now rents for 2.5x my mortgage. That's 10s of thousands of dollars/year extra I have in my pocket.

staindk 4y ago

Yeah this probably is the best bet. Will be keeping in mind as I save up money and figure out where I want to settle down.

sleepdreamy 4y ago

Can you elaborate on your last sentence a bit more? Just trying to get a more thorough explanation. I just got my first 30 year mortgage so, trying to make myself feel better I guess.

mikestew 4y ago
I'll take a whack at it. You have your mortgage, and let's say the hypothetical payment is $1000/month. That is all you'll ever be obligated to pay each month in order to live in your house (we'll ignore property taxes for the moment). Whereas your neighbor rents her house for $1000/month. But next year her rent is $1050/month, and so on. In ten years, she'll pay on the order of 50% more to stay in that house. But you'll still be paying $1000/month, and will continue to do so for 30 more years. But that's just how mortgages work, right? Lock into a rate, and have that for 30 years? Only in the U. S., AFAICT. Canadians will correct my details, but as one example in Canada one gets a mortgage for, say, five years at x%. After five years, go renegotiate? (Help me out here, Canucks; as soon as I went to write it out, I knew I had it wrong.) Anyway, point is, the "lock it in at 2.5% for 30 years" seems to be unique to the U. S., and assuming that your wages increase, after a period of years you will keep more money in your pocket than the neighbor that rents.
onlyrealcuzzo 4y ago
If you just bought, you don't have a negative real interest rate. Your interest rate is probably 5% or so? The real interest rate is probably 3% or so. That means your REAL interest rate is 2%. When you inevitably get the chance to refinance at below 3% - your REAL interest rate will be negative. The 30-year fixed mortgage is a product that would not exist without a government guarantee on Fannie & Freddie's debt. Even if you have a jumbo loan - it's only because of the MBS market created by Fannie & Freddie. In essence, the tax payer is paying you for you to have a mortgage on your house - regardless of whether Fannie securitized your mortgage.
- sleepdreamy 4y ago
  My interest rate is 2.7% - We've been in the house for close to a year now. Renting was going to be 700 more MINUMUM. I couldn't justify not buying but also feel..unsure about everything for obvious reasons.

cammikebrown 4y ago

Being able to afford 20% down on a mortgage is something affordable to less people every year. With rates increasingly quickly, it's not going to be much cheaper if prices fall too.

onlyrealcuzzo 4y ago
So buy at 3.5% down. The more leverage you have - the more you're taking advantage of The Federal Reserve mandate that prices go up at least 2% per year. 2%x33 = 66% return GUARANTEED by yours truly, the Federal Reserve.
- bamboozled 4y ago
  Maybe, in the back of peoples minds, we all know "The Fed" isn't magic and crisis do happen. So if this "guaranteed 2%" falls apart, it's going to freaking suck for a lot of people.
- dayjaby 4y ago
  Isn't it an exponential formula instead of a mere multiplication? 1.02^33 ?
  - onlyrealcuzzo 4y ago
    If you put 3% down on 100k = $3000. If prices appreciate 2% = $2000. $2000 / $3000 = 66%

2OEH8eoCRo0 4y ago

Paying a mortgage is in essence paying yourself.