4 ms·

Makes sense? One advantage of a mortgage is that you lock up your housing costs and are immune to inflation. So anyone who bought before the big inflation ended

Makes sense? One advantage of a mortgage is that you lock up your housing costs and are immune to inflation. So anyone who bought before the big inflation ended up getting lucky.

marssaxman 2y ago
Would that it were so simple! My wife and I may have a fixed mortgage, but our other expenses have all grown, consuming most of what was once our disposable income. Buying before the big inflation means we cannot rebalance our budget by moving: going from a 3% mortgage to 6% would be like setting all of our equity on fire. We're better off than if we hadn't bought the place, but it sure doesn't feel like we have been immune to inflation.
- FooBarBizBazz 2y ago
  > we cannot rebalance our budget by moving Neither can a renter, really. Say you're in a 1BR. Even moving down to a tiny studio won't help much, because the tiny studio still costs significantly more now than your 1BR did five years ago. There's no cheaper option to move down to. Well, there is one: Say your 1BR used to be $1.6k five years ago and is now $2.4k. The only way to get back to $1.6k is to rent a $3.2k 2BR and split the cost with a roommate. That's actually doable. That works for a single person. But if you were a family renting a 2BR, then your options would be more limited. The analogous thing would be to find a 4BR house and split it with another family, but that's a pretty difficult social arrangement. The other option is to get a new job in a cheaper place. Often the pay is a little lower, but not in proportion to the reduction in home prices, so you come out ahead, at least as far as your monthly budget is concerned. That neglects price appreciation though. In a regime of rising inequality, real estate is "winner take all", and the unaffordable places will, paradoxically, continue to see the most appreciation. You'll miss out on those capital gains. Better to buy whatever rich people are going to want.
- whateveracct 2y ago
  Are you just referring to the additional upkeep expenses of home ownership?
  - marssaxman 2y ago
    No, I mean that everything is more expensive now.
    - whateveracct 2y ago
      Hm funnily enough, my house has helped me combat that too. I'm in the suburbs + not in Seattle anymore so everything is cheaper. And the restaurants here are on par with Seattle tbh. Bigger kitchen + ability to grill means I cook way more. And I'm closer to a supermarket than I was in Seattle. I never had anything walkable in the city but now it's walkable or a 90s drive. It did take years of practice to learn how to cook with confidence. But I frequently now buy a whole (free range, locally grown) chicken on sale for 99c/lb. And generally just use what's on sale. More storage space means I can stock up when staples are on sale. Both shelf stable food and stuff like paper products. That's free money. Add those up and I've saved a lot of money.
      - marssaxman 2y ago
        I can see why you are happy with the life you've found. Congratulations - it sounds like you've made a great change! There are actually similar reasons motivating us to stay in our central Seattle townhouse, despite feeling "house-poor". Having three grocery stores within ten minutes' walk makes it easy to cook fresh meals at home, which I do most of the time these days; we've dropped the delivery habit. We don't have to drive often anymore - I walk to work, and my wife has an e-bike - so a single older car meets our needs, keeping transportation costs in check. Inflation may have squeezed the slack out of our budget, but we still have a better life here than the one we could make with the money we might save by leaving.
        whateveracct 2y ago
        Yeah, I do feel you about the "stuck"-ness of it all. Just as a sanity check I looked into what moving out of this house would look like. And like you said, due to interest rates, it's not pretty. So I've just leaned into it and invested in the house. New water heater/furnace. Remodeling & finishing things. Landscaping. I figure I should be ready for the long haul. And you can definitely do worse than living in central Seattle in a townhouse :) it's a wonderful city.

Makes sense? One advantage of a mortgage is that you lock up your housing costs and are immune to inflation. So anyone who bought before the big inflation ended up getting lucky.

marssaxman 2y ago

Would that it were so simple! My wife and I may have a fixed mortgage, but our other expenses have all grown, consuming most of what was once our disposable income. Buying before the big inflation means we cannot rebalance our budget by moving: going from a 3% mortgage to 6% would be like setting all of our equity on fire. We're better off than if we hadn't bought the place, but it sure doesn't feel like we have been immune to inflation.

FooBarBizBazz 2y ago
> we cannot rebalance our budget by moving Neither can a renter, really. Say you're in a 1BR. Even moving down to a tiny studio won't help much, because the tiny studio still costs significantly more now than your 1BR did five years ago. There's no cheaper option to move down to. Well, there is one: Say your 1BR used to be $1.6k five years ago and is now $2.4k. The only way to get back to $1.6k is to rent a $3.2k 2BR and split the cost with a roommate. That's actually doable. That works for a single person. But if you were a family renting a 2BR, then your options would be more limited. The analogous thing would be to find a 4BR house and split it with another family, but that's a pretty difficult social arrangement. The other option is to get a new job in a cheaper place. Often the pay is a little lower, but not in proportion to the reduction in home prices, so you come out ahead, at least as far as your monthly budget is concerned. That neglects price appreciation though. In a regime of rising inequality, real estate is "winner take all", and the unaffordable places will, paradoxically, continue to see the most appreciation. You'll miss out on those capital gains. Better to buy whatever rich people are going to want.
whateveracct 2y ago
Are you just referring to the additional upkeep expenses of home ownership?
- marssaxman 2y ago
  No, I mean that everything is more expensive now.
  - whateveracct 2y ago
    Hm funnily enough, my house has helped me combat that too. I'm in the suburbs + not in Seattle anymore so everything is cheaper. And the restaurants here are on par with Seattle tbh. Bigger kitchen + ability to grill means I cook way more. And I'm closer to a supermarket than I was in Seattle. I never had anything walkable in the city but now it's walkable or a 90s drive. It did take years of practice to learn how to cook with confidence. But I frequently now buy a whole (free range, locally grown) chicken on sale for 99c/lb. And generally just use what's on sale. More storage space means I can stock up when staples are on sale. Both shelf stable food and stuff like paper products. That's free money. Add those up and I've saved a lot of money.
    - marssaxman 2y ago
      I can see why you are happy with the life you've found. Congratulations - it sounds like you've made a great change! There are actually similar reasons motivating us to stay in our central Seattle townhouse, despite feeling "house-poor". Having three grocery stores within ten minutes' walk makes it easy to cook fresh meals at home, which I do most of the time these days; we've dropped the delivery habit. We don't have to drive often anymore - I walk to work, and my wife has an e-bike - so a single older car meets our needs, keeping transportation costs in check. Inflation may have squeezed the slack out of our budget, but we still have a better life here than the one we could make with the money we might save by leaving.
      - whateveracct 2y ago
        Yeah, I do feel you about the "stuck"-ness of it all. Just as a sanity check I looked into what moving out of this house would look like. And like you said, due to interest rates, it's not pretty. So I've just leaned into it and invested in the house. New water heater/furnace. Remodeling & finishing things. Landscaping. I figure I should be ready for the long haul. And you can definitely do worse than living in central Seattle in a townhouse :) it's a wonderful city.