4 ms·

The owner does have skin in the game. It's their home. If the down payment is too high, many people are prevented from owning a home. This causes these people t

The owner does have skin in the game. It's their home. If the down payment is too high, many people are prevented from owning a home. This causes these people to be stuck in the rental trap, paying >2x what a mortgage payment would cost. Good for landlords & those in the rental industry, bad for everyone else.

ejb999 4y ago
They don't have skin in the game if they borrow 100% of the value of a house - house drops 20% in value, they just return the keys and walk away - heads I win, tails you lose. Banks don't want to play that game and I can't blame them.
- cool_dude85 4y ago
  You're describing a "heads I win, tails you win" situation with no down payment. If the house drops in value, the borrower walks away and "wins". If the house appreciates in value, the borrower stays and the bank receives X% interest, on time, in full, for 30 years and "wins."
- hd95489 4y ago
  Only in a non recourse state
- briantakita 4y ago
  Who would want to walk away from their home? The people living on the streets perhaps? Credit inflates the housing markets. Houses used to be bought outright without credit. Credit is top heavy, where a small number of parties can obtain enough credit to buy many houses while an increasing amount of people cannot obtain credit to buy a house to live in. The people who already own property benefit from increasing valuations, while people entering into the housing market bear the costs. It's gotten to the point to where people with 6 figure incomes cannot afford a house. It seems like the instability of the housing prices is largely due to the volatility of credit markets. If housing was not emphasized as an appreciating asset class to be hoarded by speculators who want to grow rich from housing, then more people, who are now stuck in the rental trap, can live in their own home. The situation we have now is that non-speculators who want to own a home have to bear the risk of a credit inflated & volatile asset when all they want to do is own a house & not pay > 2x rental costs. Those who do successfully play the game now live with neighbors who also play the game, instead of a more diverse crowd of people they would rather be neighbors with. The banks created & profit from this mess & are bailed out. The non-speculating aspiring home owner pays the costs.
hd95489 4y ago
There is no rental trap. The problem is runaway inflation that destroys savings and taxes investment gains. The only reason housing is such a good deal is that the first 500k is tax free.
- AstralStorm 4y ago
  The rental trap is a very real thing for people who are below middle class. (Which is thinning out.) They are extremely unlikely to be able to save for even a downpayment on a property in two lifetimes combined. It gets worse when you cannot inherit, which is a situation all too common these days.
- briantakita 4y ago
  > There is no rental trap Your decree does not invalidate the lived experiences of the people who want to own a home but can't afford the > $80k down payment, so they are stuck paying rent. The problem is credit inflates housing prices. Some parties, such as speculators, have plenty of credit, so they can buy multiple houses & inflate the markets using credit. Those who cannot obtain credit or are not willing to play the game are stuck trying to save up > $80k for the down payment on top of their regular living expenses that are under rapid inflation. The middle class used to be able to buy a home or large acreage outright without credit.

ejb999 4y ago

They don't have skin in the game if they borrow 100% of the value of a house - house drops 20% in value, they just return the keys and walk away - heads I win, tails you lose. Banks don't want to play that game and I can't blame them.

cool_dude85 4y ago
You're describing a "heads I win, tails you win" situation with no down payment. If the house drops in value, the borrower walks away and "wins". If the house appreciates in value, the borrower stays and the bank receives X% interest, on time, in full, for 30 years and "wins."
hd95489 4y ago
Only in a non recourse state
briantakita 4y ago
Who would want to walk away from their home? The people living on the streets perhaps? Credit inflates the housing markets. Houses used to be bought outright without credit. Credit is top heavy, where a small number of parties can obtain enough credit to buy many houses while an increasing amount of people cannot obtain credit to buy a house to live in. The people who already own property benefit from increasing valuations, while people entering into the housing market bear the costs. It's gotten to the point to where people with 6 figure incomes cannot afford a house. It seems like the instability of the housing prices is largely due to the volatility of credit markets. If housing was not emphasized as an appreciating asset class to be hoarded by speculators who want to grow rich from housing, then more people, who are now stuck in the rental trap, can live in their own home. The situation we have now is that non-speculators who want to own a home have to bear the risk of a credit inflated & volatile asset when all they want to do is own a house & not pay > 2x rental costs. Those who do successfully play the game now live with neighbors who also play the game, instead of a more diverse crowd of people they would rather be neighbors with. The banks created & profit from this mess & are bailed out. The non-speculating aspiring home owner pays the costs.

hd95489 4y ago

There is no rental trap. The problem is runaway inflation that destroys savings and taxes investment gains. The only reason housing is such a good deal is that the first 500k is tax free.

AstralStorm 4y ago
The rental trap is a very real thing for people who are below middle class. (Which is thinning out.) They are extremely unlikely to be able to save for even a downpayment on a property in two lifetimes combined. It gets worse when you cannot inherit, which is a situation all too common these days.
briantakita 4y ago
> There is no rental trap Your decree does not invalidate the lived experiences of the people who want to own a home but can't afford the > $80k down payment, so they are stuck paying rent. The problem is credit inflates housing prices. Some parties, such as speculators, have plenty of credit, so they can buy multiple houses & inflate the markets using credit. Those who cannot obtain credit or are not willing to play the game are stuck trying to save up > $80k for the down payment on top of their regular living expenses that are under rapid inflation. The middle class used to be able to buy a home or large acreage outright without credit.