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> You'll probably need to bail out recent homebuyers, who will be permanently underwater If you buy a house for $400k, and suddenly it is worth $300k, you don'

> You'll probably need to bail out recent homebuyers, who will be permanently underwater If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision. You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators. It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house we're supposed to give massive government support to correct the buyer's mistake?

deleted 1y ago
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JumpCrisscross 1y ago
> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision...we shouldn't be bailing out speeculators When the speculators vote, yes, you need to bail out the speculators. > It's called buyer's remorse It's called building consensus. At the end of the day, if it costs making homeowners whole to gain their buy in to solve the housing crisis, that's money well spent. I'm not saying what I'm proposing is fair or even palatable. But it's functional. If solving the housing crisis is more important than aesthetics, it's a good move.
- standardUser 1y ago
  I agree there are political considerations, but we are talking about a scenario where the only damage done is that the buyer must continue to live in the home they purchased at the price they purchased it for, and where the recipient of government benefits is a household capable of purchasing a house, presumably at the height of the market. Is a tax dollar better spent placating grumpy homeowners who already have a place to live they can afford, or by more directly building more housing and infrastructure?
  - JumpCrisscross 1y ago
    > we are talking about a scenario where the only damage done is that the buyer must continue to live in the home they purchased at the price they purchased it for In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down. > Is a tax dollar better spent placating grumpy homeowners If it gets you the reform, yes. The point is you don't get housing reform with grumpy homeowners barring a massive shift in voting patterns. Also, let's keep scope in mind. You only need to bail anyout out if you reduce home prices. If you hold them constant in nominal terms, that shouldn't generate pushback. (If you hold them constant in real terms, people can continue feeling wealthier.)
    - izacus 1y ago
      Catering to grumpy home owners somehow didn't produce a reform either.
    - dastbe 1y ago
      > In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down. At the trade-off of never being able to get a mortgage again, unless that's the bailout these homeowners get. Almost everyone will either sit tight or rent/sell at a loss. That being said, you will lose out on the public and private support of everyone who bought a house since roughly 2020. It doesn't matter if you've got a 3% rate if you're not getting your down payment out of the house. The plan that makes the most sense to me is to keep housing prices constant/barely increasing while letting 3% inflation and gradual lowering of interest rates do its thing. Eventually the houses won't seem that expensive and those who locked in at high rates and high prices have an offramp through refinancing.
      - dragonwriter 1y ago
        > At the trade-off of never being able to get a mortgage again That's not the effect of abandoning a mortgage (or using the leverage provided by that option to secure lender approval for a short sale) in a non-recourse state. (Source: been there, done that, have a new mortgage since.)
ozgrakkurt 1y ago
Yeah, pretty sure a government won’t bail me out if I invested in a stock so much that it would crush me if the stock went down. If buying a house is an investment and not for living, then it should be treated like it is.
- JumpCrisscross 1y ago
  > pretty sure a government won’t bail me out if I invested in a stock https://en.wikipedia.org/wiki/Greenspan_put https://en.wikipedia.org/wiki/Greenspan_put More pointedly, you're not in a position to block equity capital markets reforms in the way homeowners are in respect of housing reform.
  - msgodel 1y ago
    Yeah everyone involved in that should have been shot. That's part of what led to the situation we have today.
    - dmix 1y ago
      Short term thinking dominates economics these days. Managing the current downturn is most important, when people ask about longterm implications do a bunch of hand wavy stuff about it being temporary and then kick the can to the next guys who do the same thing.
      - vkou 1y ago
        > Short term thinking dominates economics these days. Especially among people criticizing the response to 2008/2020. Failing to mitigate sickness in capital markets and the economy in the short term would have inflicted far more damage in the long term.
        msgodel 1y ago
        [flagged]
unsnap_biceps 1y ago
Some loans require PMI if your outstanding balance is larger than the current value. PMI is very expensive and, unlike a TV or car, you might be forced to give up your house because it devalued too far and you can no longer afford mortgage and PMI. I'm not saying we shouldn't make housing affordable, but it's worth considering the impact for everyone.
- izacus 1y ago
  Isn't that something regulation (of mortgages) solves way better than forever banning decrease in housing costs?
  - itake 1y ago
    how would that work?
    - kelnos 1y ago
      Easy: make it illegal to require PMI in that case. Some loans will require PMI at signing (IIRC, often this will be when you put down less than 20%; you're required to carry PMI until you've paid off enough to get your principal below 80% of the purchase price), but we can certainly make clauses unenforceable that require it later under whatever conditions.
- russell_h 1y ago
  I don't think lenders have any ability to retroactively require PMI; certainly no mortgage I've ever signed permitted this.
  - bombcar 1y ago
    Correct - though the dirty secret is some percentage of the economy is run on rolling loans against house equity, and prices stagnating or dropping would slow that down.
rufus_foreman 1y ago
Whether a house is worth $400k or $300k is, sometimes, a choice the government makes. It isn't always, but sometimes it is. Through regulations, through monetary policy, through other policies. Now if the government decides that you, you personally, standardUser, are going to lose $100k, I don't think the government should bail you out. It's called "moral hazard". You lost $100k. Deal with it. If the government decides that I, me personally, am going to lost $100k, I would say that I am old and I vote in every single election, and despite my failing memory, I will remember that lost $100k until the day I die and no politician who voted for that will ever get my vote again. I will remember who did that to me.
- kelnos 1y ago
  > It isn't always, but sometimes it is. I think it always is, frankly. The price of pretty much every single house in the US[0] is a function of decades of government housing policy. And I don't think it's particularly fair to say, "oopsie, our housing policy since before you were born was kinda bad, we're going to fix it right now, but it's going to put you underwater on your mortgage... sorry, but you'll have to just deal with it". [0] Sure, maybe this isn't the case for an off-the-grid cabin out in the woods, far from any town, but that describes a teeny tiny portion of the housing stock.
dyauspitr 1y ago
House owners are just going to vote for harsher impediments to building.
Alive-in-2025 1y ago
You never know what your house or apartment or condo is worth, even to you. Maybe you can afford $400k barely, but you'll be hugely squeezed. Or maybe you'd get a bigger place if prices had dropped for your family size. You hope conditions won't change. You can look at the current market trends to try to value it. But things will change in the next few years probably. You can guess, but you'll never "know with pretty good accuracy". The economy can go down, interest rates can change, major employers can come and go, there can be an earthquake or cancerous ground discovered there.
- beeflet 1y ago
  Take out an insurance policy then, not my problem
- _carbyau_ 1y ago
  This is the rat race. You are competing with all the other humans around you in the same playspace of reality. A mortgage is a loan that gives you money you don't have (yet). If you are spending money you don't have, do it wisely or suffer the consequences. I think no special treatment. Everyone else in the same space has the same rules/uncertainty as every argument you offered.
  - cocaclub 1y ago
    These are my feelings too, but in the interests of compassion, I would suggest a return of some proportion of equity to (human, non-LLC, non-corporate, primary resident) buyers in cash, up to bank failure. Hopefully they can then buy another house at the presumably much lower prevailing market rate. Someone has to lose, let it be in order of "he who should have known what he was doing in making this catastrophe possible."
    - _carbyau_ 1y ago
      I mean, there are a few things here. Like if the bank want the house sold on the loan because the house value goes down even though the person with the loan is willing to continue servicing it - then that seems like an own goal for the bank. There are a variety of circumstances that can be dreamt up for either side of the equation. And I have no compassion for lenders either. As you say, maybe the mortgage/loan should be seen as a partnership of some degree between the parties so that the lender is less likely to take advantage. But ultimately "he who should have known" is the person asking for money to buy XYZ thing. A person should be responsible for their actions.
14 1y ago
While at the end of the day I don’t think people should be bailed out, I don’t agree that everyone who over paid is a speculator. Many people are just wanting to own their own home. The market has been crazy for the last 5 years. Many people are just buying to own not to flip it for a huge profit. So when a new home owner buys something and suddenly the value drops $100k and the bank wants the money I do feel slightly sorry for them. For the person who ownes multiple houses and buys simply to rent and flip a profit well I have very little sympathy for them. They are the true speculators.
- _carbyau_ 1y ago
  > So when a new home owner buys something and suddenly the value drops $100k and the bank wants the money I do feel slightly sorry for them. I feel a little sorry for them but they are not missing the money total of "the whole house". They can sell the house, have a shitty $100k debt, a tale of woe, and hopefully a better idea of how to go about spending money they didn't have. I feel there are too many people who "borrow as much as they can for the best house they can get" rather than being sensible about their money and using a mortgage as a hedge against paying rent and future rent raises. Some of them make it, some of them don't.
  - dastbe 1y ago
    we’re talking about wiping out most of the stored wealth of roughly a quarter of all homeowners here. and they cannot take that home with them when a new job opportunity comes up or worse get fired/sick. this sounds more like a suicide pact than a plan.
    - _carbyau_ 1y ago
      Is it great? No! It's certainly not an outcome I would wish for anyone. I'm not a monster. But there's two things here: 1. allowing people freedom to make their own choices. 2. the dangers of borrowing large sums of money Adding those two together in a free(for some notion of free) market means there will be losers. In this case, the outcome sucks but it isn't like they lost their life in a car crash. If you start guaranteeing outcomes... that way madness lies.
akudha 1y ago
How is it fair to compare buying a house to buying a TV? One costs 500$ and the other costs 500k plus ongoing costs like repairs and taxes. Not saying you’re wrong, just that the comparison isn’t apt
- deathanatos 1y ago
  Because if you're buying a house for a house, then it (mostly, generally¹) doesn't matter that the housing market has moved downwards and you'll be underwater until you pay down a bit on the house. You still have a house! So long as you can afford the mortgage — something you should have already planned for given you bought the house — you can still afford it. You might have remorse at having paid +$100k right before the market moved, but that's what the parent is saying: that's buyer's remorse, that is speculating on the price, when instead, you should be saying "am I willing (and financially able) to trade $400k for a home to live in?" (¹I don't want to get too much into the sidetrack that is "but if you're underwater you could lose your home" — yes… that's possible. The example here is a 20% fall in prices — which would be astounding to those of us wanting a home, the thing of dreams — but you put 20% in the down payment, so a single mortgage payment & you're no longer underwater. In reality, the price drop (in rent, but let's work with what we got) was 3.7%. (Don't get me wrong, I'd take that too, as a renter.))
  - naasking 1y ago
    I think you're neglecting to account for a big risk. If the house retains or increases in value, the bank can just take the house to recoup what you owe them of you can no longer pay the mortgage due to ill health, accidents, etc. What do you think happens if the houses value drops a lot and you can no longer pay what you owe? You don't just lose the house, you're in a much, much deeper hole. How property values go substantially changes the risk calculus of owning a home with a mortgage.
    - kelnos 1y ago
      > You don't just lose the house, you're in a much, much deeper hole. Oof, I was about to question if this is correct or not, but it turns out that this is indeed true in most US states: if you default on your mortgage, and the bank can't resell your house for at least as much principal as you have left to pay, you still owe the difference, and they can get a court to garnish your wages, put a lien on any future home you may buy, get your accounts frozen. Didn't realize this was a thing... I live in a non-recourse state (California) where the bank only gets the property on default and can't pursue you further.
petesergeant 1y ago
> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision. You should have been certain that the house was worth $400k to you at the time of purchase. I think it's pretty normal for rational purchasers to consider the resale value of something that they purchase, and hand-waving that away doesn't make for a very serious argument.
- _carbyau_ 1y ago
  I think it's pretty normal for resale to be less than purchase price. Considering it is important! Making any guarantees as to the future worth of these items is craziness.
  - kelnos 1y ago
    In the case of housing, it is generally very not normal for resale to be less than purchase price. Sure, there are exceptions to that: market downturns happen, and sometimes regional issues (like the one big employer leaving town) can cause that. But in general, no, it's normal for the resale value of a home to be higher than when you purchased it. That's dumb. But that's the reality we live in.
    - _carbyau_ 1y ago
      You are correct! These are indeed the general trends and there are those exceptions. Some win, some lose and there are general trends in play. This is the market. So I maintain that guaranteeing outcomes is craziness. Should something as vital as housing be a market commodity? That's a whole different conversation.
- dgfitz 1y ago
  Very rarely does the value of a purchase increase over time. Literally the only examples I can come up with are things that are very old and rare, or a house. Viewing a home as some kind of investment vehicle is everything wrong with the housing market today. It’s so wrong it makes my head spin.
bee_rider 1y ago
But, the convention in the US is that people see their houses as a form of savings. Realistically, we should account for that. Also, if continuing the building ends up requiring some policy change (supported by changing laws and regulations)… it seems reasonable to protect normal people, doing normal things, from massive financial chaos that is explicitly caused by the government changing policies on them. At least for people actually using the houses as intended, that is, living in them.
- graeme 1y ago
  >But, the convention in the US is that people see their houses as a form of savings. Realistically, we should account for that. Why? If it makes society as a whole much poorer. The convention is fairly recent and the cause of enormous problems.
  - bee_rider 1y ago
    Because policies they cause huge financial harm to normal people become unpopular, and don’t spread as a result. And also because it is bad for society if we modify the rules in ways that makes it harder to plan ahead.
    - graeme 1y ago
      Realistically basically no one is aware of the details of zoning policy or the mechanics. Are there pitchforks in Denver or Austin? Are angry homeowners overthrowing governments and blocking homebuilding? People seem to complain that housing costs too much. The straightforward bet is that lower prices would be popular. For example, re Texas, 9 out of 10 say housing prices are too high: https://www.texastribune.org/2024/08/08/texas-housing-affordability-poll/ https://www.texastribune.org/2024/08/08/texas-housing-afford...
      - kelnos 1y ago
        > Are angry homeowners overthrowing governments and blocking homebuilding? No, they're already in the government, have been for decades, and they're the ones responsible for anti-development policy. > For example, re Texas, 9 out of 10 say housing prices are too high Cute punchy polls like that make for nice sound bits, but don't tell the whole story. I'm sure if you followed that up with, "If the government were to enact new housing development property that would reduce the value of your home by 20% over the next 10 years, would you support it?", I guarantee you that 9 out of 10 (homeowners) would absolutely not.
threatofrain 1y ago
If we go to a place where homes cost $400k then we're all buying at $400k, regardless of whether people understand speculation or markets. Once you allow enough people with deep pockets to do speculation or price arbitrage... then we're all paying it. It's not that we shouldn't desire cheaper homes, but we should realize that people who paid $400k are largely not speculators. They bought what the market was willing to offer.
- deleted 1y ago
  [deleted]
franga2000 1y ago
And it's not like the actual value has decreased. You still own the same house. It's the same size, location, build quality... That's the value of the house to you. If you're not currently buying a house, the price of a house should be irrelevant to you.
- immibis 1y ago
  But the price you were strong armed into paying is more than the value of that stuff, and you only begrudgingly accepted the price that included a large speculative component, because you saw that the government has been guaranteeing that the speculative component only goes up.
kelnos 1y ago
I agree in principle that we shouldn't be bailing people out for the consequences of making purchases with their eyes open, but if something like this happened, a lot of people would be mad. And I get it. The problem in this eventuality is mobility: if you buy a house for $400k, live there for, say, 5 years and the resale value of your house is at $300k, that's going to be a big problem if you have (or just want) to move. If you sell at $300k, you'll have about $50k left over (after repaying the bank) for a down payment on your new house, which means you can only afford a $250k house, which may well not meet your needs. If someone is planning to live in that house long enough such that when they do want to sell it, they can move to a new place that meets their needs, at a price they can still afford, sure, great. We shouldn't be bailing those people out. > You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators. That's absurd. Aside from people who buy too much house ('00s, anyone?) and regret it later, people pay the price they have to pay for the amount of space and location they believe they need. Most people -- very understandably -- don't know the dynamics of the housing market to the point that they'd be able to predict that their resale value might go down by 25% at some point in the future, because, historically, that's just not what home prices do. (And don't parrot the "past performance is no guarantee of the future" crap... yes, true, so what. Most people unfortunately can't plan their lives around that.) These people aren't speculators... speculators are buying to flip, or to hold and resell, as investment properties. These are just regular folks who need a place to live and have -- regardless of prudence or correctness -- bought into the idea that owning their home is the next life stage, a proof of success and well-being. Calling people like that speculators shows a severe lack of understanding and empathy. > It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house... A car or a TV costs nowhere near as much as a house. Losing a car or a TV is not going to make someone homeless. Housing is a basic need, and housing security is essential in a healthy society. (Granted, in many places in the US, losing your car can lead to financial ruin as well, sadly, considering how crucial a car can be to many people for basic things like getting to work.)
- tpxl 1y ago
  > Losing a car or a TV is not going to make someone homeless. Your house losing 100k$ in value isn't going to make you homeless either (quite the opposite actually). If you buy a house and it depreciates, so what? Not to mention if everyone's house depreciates, your new house is cheaper to buy. You lose _nothing_, except imaginary dollar values. > Calling people like that speculators shows a severe lack of understanding and empathy. I don't know what you call preventing young people from buying, or even renting, at affordable prices so 'people like that' don't have a possibility of losing some money, but you sure as fuck don't call it empathy either.
brenainn 1y ago
As someone that's bought their first house in the last few years, it's hard not to take offense. A car or a TV are much smaller investments relative to a house. Over a decade of savings is tied up in my home. If the ass drops out of the market, myself, and others like me, who have broken into the market without assistance at the peak of housing prices will be virtually permanently financially set back. And to call buying a house around this time a mistake is crazy. I would be as much a speculator if I continued to rent and pay someone else's mortgage, hoping that prices dropped so I could get a good deal. It's a home and this attitude of treating homes as investments or mere purchases is why we're in this mess in the first place.
immibis 1y ago
But the buyer probably didn't think it was actually worth $400k intrinsically. They were bullied into paying $400k because (1) they need a house no matter what and (2) at least the government guarantees that there will be a bigger sucker down the line who will pay $500k. It's the government's fault that this bigger-fool game even exists, because the buck always stops there. They might want to consider compensating people for the misery they caused.
rolandog 1y ago
> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision. You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators. Isn't that missing the forest for the trees? There's an all-out class war between the haves and the have-nots. If it controls supply like a cartel, and if it pursues rent-seeking like a cartel, then maybe the real estate moguls and speculators that treat everything like an investment instrument should be held accountable and liable.
ctrlp 1y ago
If the government passed subsidy laws or building requirements that caused your loss, then you might expect compensation. Did you disagree with bailing out small businesses shuttered during COVID and their furloughed employees? Same principle.
- cko 1y ago
  Small businesses being bailed out was presumably because of liquidity issues. Being underwater does not cause a liquidity issue.
42772827 1y ago
>It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house we're supposed to give massive government support to correct the buyer's mistake? The difference is order of magnitude as proportion of net worth and the necessity of the purchase.
specialist 1y ago
We (government) does debt forgiveness all the time. For very practical reasons. Can't some of the cheddar be redirected from the 0.1% to the rest of us? A $400k home is probably a starter home. Owners are probably a young couple (millennials). They probably want to have kids. Forgiving 100k of their debt means they (and their kids) will have a fair chance at success. Earning more money. Saving more. Paying more taxes (over their life times).
naijaboiler 1y ago
Well those people vote. Home ownership rate is 65%. Home owners I believe are more likely to vote than renters. So yeah your proposition is not feasible

deleted 1y ago

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JumpCrisscross 1y ago

> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision...we shouldn't be bailing out speeculators When the speculators vote, yes, you need to bail out the speculators. > It's called buyer's remorse It's called building consensus. At the end of the day, if it costs making homeowners whole to gain their buy in to solve the housing crisis, that's money well spent. I'm not saying what I'm proposing is fair or even palatable. But it's functional. If solving the housing crisis is more important than aesthetics, it's a good move.

standardUser 1y ago
I agree there are political considerations, but we are talking about a scenario where the only damage done is that the buyer must continue to live in the home they purchased at the price they purchased it for, and where the recipient of government benefits is a household capable of purchasing a house, presumably at the height of the market. Is a tax dollar better spent placating grumpy homeowners who already have a place to live they can afford, or by more directly building more housing and infrastructure?
- JumpCrisscross 1y ago
  > we are talking about a scenario where the only damage done is that the buyer must continue to live in the home they purchased at the price they purchased it for In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down. > Is a tax dollar better spent placating grumpy homeowners If it gets you the reform, yes. The point is you don't get housing reform with grumpy homeowners barring a massive shift in voting patterns. Also, let's keep scope in mind. You only need to bail anyout out if you reduce home prices. If you hold them constant in nominal terms, that shouldn't generate pushback. (If you hold them constant in real terms, people can continue feeling wealthier.)
  - izacus 1y ago
    Catering to grumpy home owners somehow didn't produce a reform either.
  - dastbe 1y ago
    > In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down. At the trade-off of never being able to get a mortgage again, unless that's the bailout these homeowners get. Almost everyone will either sit tight or rent/sell at a loss. That being said, you will lose out on the public and private support of everyone who bought a house since roughly 2020. It doesn't matter if you've got a 3% rate if you're not getting your down payment out of the house. The plan that makes the most sense to me is to keep housing prices constant/barely increasing while letting 3% inflation and gradual lowering of interest rates do its thing. Eventually the houses won't seem that expensive and those who locked in at high rates and high prices have an offramp through refinancing.
    - dragonwriter 1y ago
      > At the trade-off of never being able to get a mortgage again That's not the effect of abandoning a mortgage (or using the leverage provided by that option to secure lender approval for a short sale) in a non-recourse state. (Source: been there, done that, have a new mortgage since.)

ozgrakkurt 1y ago

Yeah, pretty sure a government won’t bail me out if I invested in a stock so much that it would crush me if the stock went down. If buying a house is an investment and not for living, then it should be treated like it is.

JumpCrisscross 1y ago
> pretty sure a government won’t bail me out if I invested in a stock https://en.wikipedia.org/wiki/Greenspan_put https://en.wikipedia.org/wiki/Greenspan_put More pointedly, you're not in a position to block equity capital markets reforms in the way homeowners are in respect of housing reform.
- msgodel 1y ago
  Yeah everyone involved in that should have been shot. That's part of what led to the situation we have today.
  - dmix 1y ago
    Short term thinking dominates economics these days. Managing the current downturn is most important, when people ask about longterm implications do a bunch of hand wavy stuff about it being temporary and then kick the can to the next guys who do the same thing.
    - vkou 1y ago
      > Short term thinking dominates economics these days. Especially among people criticizing the response to 2008/2020. Failing to mitigate sickness in capital markets and the economy in the short term would have inflicted far more damage in the long term.
      - msgodel 1y ago
        [flagged]

unsnap_biceps 1y ago

Some loans require PMI if your outstanding balance is larger than the current value. PMI is very expensive and, unlike a TV or car, you might be forced to give up your house because it devalued too far and you can no longer afford mortgage and PMI. I'm not saying we shouldn't make housing affordable, but it's worth considering the impact for everyone.

izacus 1y ago
Isn't that something regulation (of mortgages) solves way better than forever banning decrease in housing costs?
- itake 1y ago
  how would that work?
  - kelnos 1y ago
    Easy: make it illegal to require PMI in that case. Some loans will require PMI at signing (IIRC, often this will be when you put down less than 20%; you're required to carry PMI until you've paid off enough to get your principal below 80% of the purchase price), but we can certainly make clauses unenforceable that require it later under whatever conditions.
russell_h 1y ago
I don't think lenders have any ability to retroactively require PMI; certainly no mortgage I've ever signed permitted this.
- bombcar 1y ago
  Correct - though the dirty secret is some percentage of the economy is run on rolling loans against house equity, and prices stagnating or dropping would slow that down.

rufus_foreman 1y ago

Whether a house is worth $400k or $300k is, sometimes, a choice the government makes. It isn't always, but sometimes it is. Through regulations, through monetary policy, through other policies. Now if the government decides that you, you personally, standardUser, are going to lose $100k, I don't think the government should bail you out. It's called "moral hazard". You lost $100k. Deal with it. If the government decides that I, me personally, am going to lost $100k, I would say that I am old and I vote in every single election, and despite my failing memory, I will remember that lost $100k until the day I die and no politician who voted for that will ever get my vote again. I will remember who did that to me.

kelnos 1y ago
> It isn't always, but sometimes it is. I think it always is, frankly. The price of pretty much every single house in the US[0] is a function of decades of government housing policy. And I don't think it's particularly fair to say, "oopsie, our housing policy since before you were born was kinda bad, we're going to fix it right now, but it's going to put you underwater on your mortgage... sorry, but you'll have to just deal with it". [0] Sure, maybe this isn't the case for an off-the-grid cabin out in the woods, far from any town, but that describes a teeny tiny portion of the housing stock.

dyauspitr 1y ago

House owners are just going to vote for harsher impediments to building.

Alive-in-2025 1y ago

You never know what your house or apartment or condo is worth, even to you. Maybe you can afford $400k barely, but you'll be hugely squeezed. Or maybe you'd get a bigger place if prices had dropped for your family size. You hope conditions won't change. You can look at the current market trends to try to value it. But things will change in the next few years probably. You can guess, but you'll never "know with pretty good accuracy". The economy can go down, interest rates can change, major employers can come and go, there can be an earthquake or cancerous ground discovered there.

beeflet 1y ago
Take out an insurance policy then, not my problem
_carbyau_ 1y ago
This is the rat race. You are competing with all the other humans around you in the same playspace of reality. A mortgage is a loan that gives you money you don't have (yet). If you are spending money you don't have, do it wisely or suffer the consequences. I think no special treatment. Everyone else in the same space has the same rules/uncertainty as every argument you offered.
- cocaclub 1y ago
  These are my feelings too, but in the interests of compassion, I would suggest a return of some proportion of equity to (human, non-LLC, non-corporate, primary resident) buyers in cash, up to bank failure. Hopefully they can then buy another house at the presumably much lower prevailing market rate. Someone has to lose, let it be in order of "he who should have known what he was doing in making this catastrophe possible."
  - _carbyau_ 1y ago
    I mean, there are a few things here. Like if the bank want the house sold on the loan because the house value goes down even though the person with the loan is willing to continue servicing it - then that seems like an own goal for the bank. There are a variety of circumstances that can be dreamt up for either side of the equation. And I have no compassion for lenders either. As you say, maybe the mortgage/loan should be seen as a partnership of some degree between the parties so that the lender is less likely to take advantage. But ultimately "he who should have known" is the person asking for money to buy XYZ thing. A person should be responsible for their actions.

14 1y ago

While at the end of the day I don’t think people should be bailed out, I don’t agree that everyone who over paid is a speculator. Many people are just wanting to own their own home. The market has been crazy for the last 5 years. Many people are just buying to own not to flip it for a huge profit. So when a new home owner buys something and suddenly the value drops $100k and the bank wants the money I do feel slightly sorry for them. For the person who ownes multiple houses and buys simply to rent and flip a profit well I have very little sympathy for them. They are the true speculators.

_carbyau_ 1y ago
> So when a new home owner buys something and suddenly the value drops $100k and the bank wants the money I do feel slightly sorry for them. I feel a little sorry for them but they are not missing the money total of "the whole house". They can sell the house, have a shitty $100k debt, a tale of woe, and hopefully a better idea of how to go about spending money they didn't have. I feel there are too many people who "borrow as much as they can for the best house they can get" rather than being sensible about their money and using a mortgage as a hedge against paying rent and future rent raises. Some of them make it, some of them don't.
- dastbe 1y ago
  we’re talking about wiping out most of the stored wealth of roughly a quarter of all homeowners here. and they cannot take that home with them when a new job opportunity comes up or worse get fired/sick. this sounds more like a suicide pact than a plan.
  - _carbyau_ 1y ago
    Is it great? No! It's certainly not an outcome I would wish for anyone. I'm not a monster. But there's two things here: 1. allowing people freedom to make their own choices. 2. the dangers of borrowing large sums of money Adding those two together in a free(for some notion of free) market means there will be losers. In this case, the outcome sucks but it isn't like they lost their life in a car crash. If you start guaranteeing outcomes... that way madness lies.

akudha 1y ago

How is it fair to compare buying a house to buying a TV? One costs 500$ and the other costs 500k plus ongoing costs like repairs and taxes. Not saying you’re wrong, just that the comparison isn’t apt

deathanatos 1y ago
Because if you're buying a house for a house, then it (mostly, generally¹) doesn't matter that the housing market has moved downwards and you'll be underwater until you pay down a bit on the house. You still have a house! So long as you can afford the mortgage — something you should have already planned for given you bought the house — you can still afford it. You might have remorse at having paid +$100k right before the market moved, but that's what the parent is saying: that's buyer's remorse, that is speculating on the price, when instead, you should be saying "am I willing (and financially able) to trade $400k for a home to live in?" (¹I don't want to get too much into the sidetrack that is "but if you're underwater you could lose your home" — yes… that's possible. The example here is a 20% fall in prices — which would be astounding to those of us wanting a home, the thing of dreams — but you put 20% in the down payment, so a single mortgage payment & you're no longer underwater. In reality, the price drop (in rent, but let's work with what we got) was 3.7%. (Don't get me wrong, I'd take that too, as a renter.))
- naasking 1y ago
  I think you're neglecting to account for a big risk. If the house retains or increases in value, the bank can just take the house to recoup what you owe them of you can no longer pay the mortgage due to ill health, accidents, etc. What do you think happens if the houses value drops a lot and you can no longer pay what you owe? You don't just lose the house, you're in a much, much deeper hole. How property values go substantially changes the risk calculus of owning a home with a mortgage.
  - kelnos 1y ago
    > You don't just lose the house, you're in a much, much deeper hole. Oof, I was about to question if this is correct or not, but it turns out that this is indeed true in most US states: if you default on your mortgage, and the bank can't resell your house for at least as much principal as you have left to pay, you still owe the difference, and they can get a court to garnish your wages, put a lien on any future home you may buy, get your accounts frozen. Didn't realize this was a thing... I live in a non-recourse state (California) where the bank only gets the property on default and can't pursue you further.

petesergeant 1y ago

> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision. You should have been certain that the house was worth $400k to you at the time of purchase. I think it's pretty normal for rational purchasers to consider the resale value of something that they purchase, and hand-waving that away doesn't make for a very serious argument.

_carbyau_ 1y ago
I think it's pretty normal for resale to be less than purchase price. Considering it is important! Making any guarantees as to the future worth of these items is craziness.
- kelnos 1y ago
  In the case of housing, it is generally very not normal for resale to be less than purchase price. Sure, there are exceptions to that: market downturns happen, and sometimes regional issues (like the one big employer leaving town) can cause that. But in general, no, it's normal for the resale value of a home to be higher than when you purchased it. That's dumb. But that's the reality we live in.
  - _carbyau_ 1y ago
    You are correct! These are indeed the general trends and there are those exceptions. Some win, some lose and there are general trends in play. This is the market. So I maintain that guaranteeing outcomes is craziness. Should something as vital as housing be a market commodity? That's a whole different conversation.
dgfitz 1y ago
Very rarely does the value of a purchase increase over time. Literally the only examples I can come up with are things that are very old and rare, or a house. Viewing a home as some kind of investment vehicle is everything wrong with the housing market today. It’s so wrong it makes my head spin.

bee_rider 1y ago

But, the convention in the US is that people see their houses as a form of savings. Realistically, we should account for that. Also, if continuing the building ends up requiring some policy change (supported by changing laws and regulations)… it seems reasonable to protect normal people, doing normal things, from massive financial chaos that is explicitly caused by the government changing policies on them. At least for people actually using the houses as intended, that is, living in them.

graeme 1y ago
>But, the convention in the US is that people see their houses as a form of savings. Realistically, we should account for that. Why? If it makes society as a whole much poorer. The convention is fairly recent and the cause of enormous problems.
- bee_rider 1y ago
  Because policies they cause huge financial harm to normal people become unpopular, and don’t spread as a result. And also because it is bad for society if we modify the rules in ways that makes it harder to plan ahead.
  - graeme 1y ago
    Realistically basically no one is aware of the details of zoning policy or the mechanics. Are there pitchforks in Denver or Austin? Are angry homeowners overthrowing governments and blocking homebuilding? People seem to complain that housing costs too much. The straightforward bet is that lower prices would be popular. For example, re Texas, 9 out of 10 say housing prices are too high: https://www.texastribune.org/2024/08/08/texas-housing-affordability-poll/ https://www.texastribune.org/2024/08/08/texas-housing-afford...
    - kelnos 1y ago
      > Are angry homeowners overthrowing governments and blocking homebuilding? No, they're already in the government, have been for decades, and they're the ones responsible for anti-development policy. > For example, re Texas, 9 out of 10 say housing prices are too high Cute punchy polls like that make for nice sound bits, but don't tell the whole story. I'm sure if you followed that up with, "If the government were to enact new housing development property that would reduce the value of your home by 20% over the next 10 years, would you support it?", I guarantee you that 9 out of 10 (homeowners) would absolutely not.

threatofrain 1y ago

If we go to a place where homes cost $400k then we're all buying at $400k, regardless of whether people understand speculation or markets. Once you allow enough people with deep pockets to do speculation or price arbitrage... then we're all paying it. It's not that we shouldn't desire cheaper homes, but we should realize that people who paid $400k are largely not speculators. They bought what the market was willing to offer.

deleted 1y ago
[deleted]

franga2000 1y ago

And it's not like the actual value has decreased. You still own the same house. It's the same size, location, build quality... That's the value of the house to you. If you're not currently buying a house, the price of a house should be irrelevant to you.

immibis 1y ago
But the price you were strong armed into paying is more than the value of that stuff, and you only begrudgingly accepted the price that included a large speculative component, because you saw that the government has been guaranteeing that the speculative component only goes up.

kelnos 1y ago

I agree in principle that we shouldn't be bailing people out for the consequences of making purchases with their eyes open, but if something like this happened, a lot of people would be mad. And I get it. The problem in this eventuality is mobility: if you buy a house for $400k, live there for, say, 5 years and the resale value of your house is at $300k, that's going to be a big problem if you have (or just want) to move. If you sell at $300k, you'll have about $50k left over (after repaying the bank) for a down payment on your new house, which means you can only afford a $250k house, which may well not meet your needs. If someone is planning to live in that house long enough such that when they do want to sell it, they can move to a new place that meets their needs, at a price they can still afford, sure, great. We shouldn't be bailing those people out. > You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators. That's absurd. Aside from people who buy too much house ('00s, anyone?) and regret it later, people pay the price they have to pay for the amount of space and location they believe they need. Most people -- very understandably -- don't know the dynamics of the housing market to the point that they'd be able to predict that their resale value might go down by 25% at some point in the future, because, historically, that's just not what home prices do. (And don't parrot the "past performance is no guarantee of the future" crap... yes, true, so what. Most people unfortunately can't plan their lives around that.) These people aren't speculators... speculators are buying to flip, or to hold and resell, as investment properties. These are just regular folks who need a place to live and have -- regardless of prudence or correctness -- bought into the idea that owning their home is the next life stage, a proof of success and well-being. Calling people like that speculators shows a severe lack of understanding and empathy. > It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house... A car or a TV costs nowhere near as much as a house. Losing a car or a TV is not going to make someone homeless. Housing is a basic need, and housing security is essential in a healthy society. (Granted, in many places in the US, losing your car can lead to financial ruin as well, sadly, considering how crucial a car can be to many people for basic things like getting to work.)

tpxl 1y ago
> Losing a car or a TV is not going to make someone homeless. Your house losing 100k$ in value isn't going to make you homeless either (quite the opposite actually). If you buy a house and it depreciates, so what? Not to mention if everyone's house depreciates, your new house is cheaper to buy. You lose _nothing_, except imaginary dollar values. > Calling people like that speculators shows a severe lack of understanding and empathy. I don't know what you call preventing young people from buying, or even renting, at affordable prices so 'people like that' don't have a possibility of losing some money, but you sure as fuck don't call it empathy either.

brenainn 1y ago

As someone that's bought their first house in the last few years, it's hard not to take offense. A car or a TV are much smaller investments relative to a house. Over a decade of savings is tied up in my home. If the ass drops out of the market, myself, and others like me, who have broken into the market without assistance at the peak of housing prices will be virtually permanently financially set back. And to call buying a house around this time a mistake is crazy. I would be as much a speculator if I continued to rent and pay someone else's mortgage, hoping that prices dropped so I could get a good deal. It's a home and this attitude of treating homes as investments or mere purchases is why we're in this mess in the first place.

immibis 1y ago

But the buyer probably didn't think it was actually worth $400k intrinsically. They were bullied into paying $400k because (1) they need a house no matter what and (2) at least the government guarantees that there will be a bigger sucker down the line who will pay $500k. It's the government's fault that this bigger-fool game even exists, because the buck always stops there. They might want to consider compensating people for the misery they caused.

rolandog 1y ago

> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision. You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators. Isn't that missing the forest for the trees? There's an all-out class war between the haves and the have-nots. If it controls supply like a cartel, and if it pursues rent-seeking like a cartel, then maybe the real estate moguls and speculators that treat everything like an investment instrument should be held accountable and liable.

ctrlp 1y ago

If the government passed subsidy laws or building requirements that caused your loss, then you might expect compensation. Did you disagree with bailing out small businesses shuttered during COVID and their furloughed employees? Same principle.

cko 1y ago
Small businesses being bailed out was presumably because of liquidity issues. Being underwater does not cause a liquidity issue.

42772827 1y ago

>It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house we're supposed to give massive government support to correct the buyer's mistake? The difference is order of magnitude as proportion of net worth and the necessity of the purchase.

specialist 1y ago

We (government) does debt forgiveness all the time. For very practical reasons. Can't some of the cheddar be redirected from the 0.1% to the rest of us? A $400k home is probably a starter home. Owners are probably a young couple (millennials). They probably want to have kids. Forgiving 100k of their debt means they (and their kids) will have a fair chance at success. Earning more money. Saving more. Paying more taxes (over their life times).

naijaboiler 1y ago

Well those people vote. Home ownership rate is 65%. Home owners I believe are more likely to vote than renters. So yeah your proposition is not feasible