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Will a 50-Year Mortgage Make Homes More Affordable?

13 points by bookofjoe 1y ago

bookofjoe 1y ago
no paywall: https://www.wsj.com/personal-finance/mortgages/will-a-50-year-mortgage-make-homes-more-affordable-heres-how-it-would-work-9f9a1b2e https://www.wsj.com/personal-finance/mortgages/will-a-50-yea...
gnabgib 1y ago
Related (2022): The existence of the 50-year mortgage shows lenders are desperate (26 points, 33 comments) https://news.ycombinator.com/item?id=32525364 https://news.ycombinator.com/item?id=32525364 50-Year Mortgages That Children Can Inherit (21 points, 36 comments) https://news.ycombinator.com/item?id=31967700 https://news.ycombinator.com/item?id=31967700 UK Gover[n]ment keen on 50-year mortgages (27 points, 60 comments) https://news.ycombinator.com/item?id=31958362 https://news.ycombinator.com/item?id=31958362
lawlessone 1y ago
Will it increase the supply of homes?
- toomuchtodo 1y ago
  It facilitates offloading overpriced assets to younger bag holders with insufficient buying power due to stagnant wages and lack of economic potential. So, unfortunately not. (increasing supply would take targeted capital cost reduction, monopoly busting around new home builders and their land acquisition partners, and rapidly increasing the trades labor supply by hundreds of thousands of workers in the near term without immigration; none of this is likely to happen within the next three years)
  - itopaloglu83 1y ago
    So, practically speaking we need a modern form of a medieval land reform.
    - smallmancontrov 1y ago
      Yeah, we've had the same land ownership system for 188 cycles but maybe the outcome in the 189th will be different!
    - toomuchtodo 1y ago
      I’m unsure if that solves this. China has built enough housing for everyone who will ever live in China, because they overbuilt during their housing frenzy [1] and they’ve reached the decline of the population curve where more people are dying every year versus those being born. Japan has more housing than people because their population has also reached the population curve decline [2], and will continue to decline forever (creating surplus housing supply). We need enough housing to cover peak population in each country [3], but also a system to lock out investment from front running humans for the ownership. Otherwise, Capital will consume housing while also trying to destroy jobs with offshoring, AI, and automation. To those who say, “just build more,” well, let me know when you’re going to show up to pour a foundation and start framing, because the evidence is robust in the US we’re having a heck of a time building more supply. You have to build more (which includes supply chains for affordable materials and a constant supply of tradespeople), and what you do build, ensure that supply gets into the hands of folks who need affordable housing (instead of housing anyone under 40 cannot afford, or entire built to order subdivisions by investors that are going to be rented out). The political will is lacking, because strong policy intervention will be required. If immigration in flows to the US have mostly stopped due to this administration’s policies, ~2M+ people a year 55+ die every year, and ~3M people turn 18 every year, assuming a continuing declining total fertility rate (currently 1.6 and continuing to fall) and smaller family formation (couples and families with only 1-2 children, if any, versus families >4), what is the target build rate and the delta to get there? You can either build more, destroy demand, or some combination of both. I’ve seen various reports that the housing shortage is anywhere between 2M-8M units, but I think Fannie Mae’s estimate of ~4M is likely the most accurate [4]. I’m a big fan of the Vienna public housing model [5], but again, political appetite is lacking to implement. [1] https://www.wsj.com/world/china/china-housing-glut-population-economy-09cffa6a https://www.wsj.com/world/china/china-housing-glut-populatio... | https://archive.today/OqYat https://archive.today/OqYat [2] https://finance.yahoo.com/news/look-japans-reverse-housing-crisis-170016339.html https://finance.yahoo.com/news/look-japans-reverse-housing-c... [3] https://www.sas.upenn.edu/~jesusfv/Slides_London.pdf https://www.sas.upenn.edu/~jesusfv/Slides_London.pdf [4] https://news.ycombinator.com/item?id=38252549 https://news.ycombinator.com/item?id=38252549 [5] https://www.newstatesman.com/spotlight/economic-growth/regional-development/housing/2023/02/vienna-model-social-housing https://www.newstatesman.com/spotlight/economic-growth/regio...
  - seg_lol 1y ago
    > It facilitates offloading overpriced assets to younger bag holders with insufficient buying power due to stagnant wages and lack of economic potential. As someone who holds excess capital this makes me so hard. 15 year car loans?
FireBeyond 1y ago
Barely, month to month. At current rates a $2700 mortgage might go to about $2400... ... in exchange for over a million dollars more paid over the life of the loan. I don't think that's making any meaningful difference to anyone other than lenders.
- bfkwlfkjf 1y ago
  If you increase mortgages to 50 years and keep the number of houses too low, houses prices will go up until the monthly payments return to the level of borderline unaffordability. Another way to think about it. Longer mortgages means more available buyers (for a given price level). More buyers means prices up.
  - warlog 1y ago
    This will mean extending loans to those that current lenders are not making loans too. So rates will have to increase in order cover increased defaults (the borrowers aren't different). Increasing interest rates will drop prices. Or maybe it's the reverse.
  - FireBeyond 1y ago
    Also true. Just like every time (not that it's happened recently, at least at the federal level, more common at the state) minimum wage has risen, you can basically track an increase in rental prices to ever so seamlessly absorb every cent of it within a matter of months... None of this is being done for the actual struggling people in the community.
- seanmcdirmid 1y ago
  It might work if inflation is high and you make extra payments at the beginning of the loan. So you have 50 years to pay it off doesn’t mean you have to make minimum payments, you could get the principle down at the beginning and then get your repayments redone later in the loan to have something manageable. Inflation and appreciation would eat away at the loans value, you would be paying off a loan from 30 years ago with today’s money, your property taxes would likely be more than your house payment by then. However, USA’s fixed interest rates, and your ability to refinance to a lower rate, aren’t really sustainable in a 59 year loan (they aren’t sustainable for 30 year loans). A lot of people are going to be locked into the same house for generations because they got a good rate 30-40 years ago. Also, it doesn’t really increase supply, we are going to quickly degrade into a European housing market of interest only loans and renting as a normal way of life.
bfkwlfkjf 1y ago
Buckle up, houses prices going up.
Saris 1y ago
I'd think no, the prices will just increase until monthly payments are the same.
- FireBeyond 1y ago
  That's exactly what happens when states increase minimum wage levels - rental prices increase until in a matter of months they've absorbed every cent (or more) of the increase.
GenerWork 1y ago
You could make an argument that for the investment savvy, this is a great move. Say a 30Y payment is $1000/mo. A 50Y payment may be $800/mo. Put the difference ($200/mo) into something like SPY, and in 5 to 10 years, you'll have a small chunk of change that you could tap into. I doubt many people, if any, will do this though.
- fred_is_fred 1y ago
  SPY only ever goes up so this is a great plan!
  - wiredpancake 1y ago
    [dead]
- soared 1y ago
  If rates are 6%, it takes wayyyy longer than 5-10 years to earn more than that on average. Always goes up is not the usual.
- anigbrowl 1y ago
  I've heard a few people making this argument, but unless it allows you to pay off your mortgage 20 years early it's still a net loss.
- UncleMeat 1y ago
  The deltas in monthly payments aren't typically that large.
- FireBeyond 1y ago
  That's a generous payment estimate. The actual numbers at the current 6.5% are that a $2700 30Y will be a $2450 50Y. It's not a 20% decrease in mortgage payments. It's more like 9%. And uhhh, there's the small matter of "what you're putting in SPY" being rather offset by the $1M+ extra in payments and interest over the life of the loan. The only people this benefit, truly, are lenders.
- recursivecaveat 1y ago
itopaloglu83 1y ago
TLDR: No. The supply will stay the same, the demand and therefore the prices will increase. Only the property owners and lenders will make money.
fred_is_fred 1y ago
If immigration remains low, then won't the demographic shift in the US population eventually free up more housing stock. In other words, Boomers die off. Gen X is fairly small, more empty homes? Is something like this happening in Japan or SK?
- gtaylor 1y ago
  Homes are lucrative investment vehicles. I’d expect many of these to get gobbled up people and companies looking to make a buck.
anigbrowl 1y ago
Will Betteridge's law of headlines ever be defeated? BTW if you're commenting you should vote the story up so other people can see it.
bix6 1y ago
This does nothing for the down payment which is the bigger hurdle compared to monthlies?
- JojoFatsani 1y ago
  You don’t have to put down 20% as a first time homebuyer
  - deleted 1y ago
    [deleted]
  - bix6 1y ago
    O yes everybody loves PMI
chriselles 1y ago
Terrible idea. But if it mimics the rise of the same idea in Japan, it could indicate peak real estate as coincided relatively closely with the introduction of the 50 year mortgage in Japana, Different circumstances, different “song”. But perhaps a similar tune.

13 points by bookofjoe 1y ago

no paywall: https://www.wsj.com/personal-finance/mortgages/will-a-50-year-mortgage-make-homes-more-affordable-heres-how-it-would-work-9f9a1b2e https://www.wsj.com/personal-finance/mortgages/will-a-50-yea...

gnabgib 1y ago

Related (2022): The existence of the 50-year mortgage shows lenders are desperate (26 points, 33 comments) https://news.ycombinator.com/item?id=32525364 https://news.ycombinator.com/item?id=32525364 50-Year Mortgages That Children Can Inherit (21 points, 36 comments) https://news.ycombinator.com/item?id=31967700 https://news.ycombinator.com/item?id=31967700 UK Gover[n]ment keen on 50-year mortgages (27 points, 60 comments) https://news.ycombinator.com/item?id=31958362 https://news.ycombinator.com/item?id=31958362

lawlessone 1y ago

Will it increase the supply of homes?

toomuchtodo 1y ago
It facilitates offloading overpriced assets to younger bag holders with insufficient buying power due to stagnant wages and lack of economic potential. So, unfortunately not. (increasing supply would take targeted capital cost reduction, monopoly busting around new home builders and their land acquisition partners, and rapidly increasing the trades labor supply by hundreds of thousands of workers in the near term without immigration; none of this is likely to happen within the next three years)
- itopaloglu83 1y ago
  So, practically speaking we need a modern form of a medieval land reform.
  - smallmancontrov 1y ago
    Yeah, we've had the same land ownership system for 188 cycles but maybe the outcome in the 189th will be different!
  - toomuchtodo 1y ago
    I’m unsure if that solves this. China has built enough housing for everyone who will ever live in China, because they overbuilt during their housing frenzy [1] and they’ve reached the decline of the population curve where more people are dying every year versus those being born. Japan has more housing than people because their population has also reached the population curve decline [2], and will continue to decline forever (creating surplus housing supply). We need enough housing to cover peak population in each country [3], but also a system to lock out investment from front running humans for the ownership. Otherwise, Capital will consume housing while also trying to destroy jobs with offshoring, AI, and automation. To those who say, “just build more,” well, let me know when you’re going to show up to pour a foundation and start framing, because the evidence is robust in the US we’re having a heck of a time building more supply. You have to build more (which includes supply chains for affordable materials and a constant supply of tradespeople), and what you do build, ensure that supply gets into the hands of folks who need affordable housing (instead of housing anyone under 40 cannot afford, or entire built to order subdivisions by investors that are going to be rented out). The political will is lacking, because strong policy intervention will be required. If immigration in flows to the US have mostly stopped due to this administration’s policies, ~2M+ people a year 55+ die every year, and ~3M people turn 18 every year, assuming a continuing declining total fertility rate (currently 1.6 and continuing to fall) and smaller family formation (couples and families with only 1-2 children, if any, versus families >4), what is the target build rate and the delta to get there? You can either build more, destroy demand, or some combination of both. I’ve seen various reports that the housing shortage is anywhere between 2M-8M units, but I think Fannie Mae’s estimate of ~4M is likely the most accurate [4]. I’m a big fan of the Vienna public housing model [5], but again, political appetite is lacking to implement. [1] https://www.wsj.com/world/china/china-housing-glut-population-economy-09cffa6a https://www.wsj.com/world/china/china-housing-glut-populatio... | https://archive.today/OqYat https://archive.today/OqYat [2] https://finance.yahoo.com/news/look-japans-reverse-housing-crisis-170016339.html https://finance.yahoo.com/news/look-japans-reverse-housing-c... [3] https://www.sas.upenn.edu/~jesusfv/Slides_London.pdf https://www.sas.upenn.edu/~jesusfv/Slides_London.pdf [4] https://news.ycombinator.com/item?id=38252549 https://news.ycombinator.com/item?id=38252549 [5] https://www.newstatesman.com/spotlight/economic-growth/regional-development/housing/2023/02/vienna-model-social-housing https://www.newstatesman.com/spotlight/economic-growth/regio...
- seg_lol 1y ago
  > It facilitates offloading overpriced assets to younger bag holders with insufficient buying power due to stagnant wages and lack of economic potential. As someone who holds excess capital this makes me so hard. 15 year car loans?

FireBeyond 1y ago

Barely, month to month. At current rates a $2700 mortgage might go to about $2400... ... in exchange for over a million dollars more paid over the life of the loan. I don't think that's making any meaningful difference to anyone other than lenders.

bfkwlfkjf 1y ago
If you increase mortgages to 50 years and keep the number of houses too low, houses prices will go up until the monthly payments return to the level of borderline unaffordability. Another way to think about it. Longer mortgages means more available buyers (for a given price level). More buyers means prices up.
- warlog 1y ago
  This will mean extending loans to those that current lenders are not making loans too. So rates will have to increase in order cover increased defaults (the borrowers aren't different). Increasing interest rates will drop prices. Or maybe it's the reverse.
- FireBeyond 1y ago
  Also true. Just like every time (not that it's happened recently, at least at the federal level, more common at the state) minimum wage has risen, you can basically track an increase in rental prices to ever so seamlessly absorb every cent of it within a matter of months... None of this is being done for the actual struggling people in the community.
seanmcdirmid 1y ago
It might work if inflation is high and you make extra payments at the beginning of the loan. So you have 50 years to pay it off doesn’t mean you have to make minimum payments, you could get the principle down at the beginning and then get your repayments redone later in the loan to have something manageable. Inflation and appreciation would eat away at the loans value, you would be paying off a loan from 30 years ago with today’s money, your property taxes would likely be more than your house payment by then. However, USA’s fixed interest rates, and your ability to refinance to a lower rate, aren’t really sustainable in a 59 year loan (they aren’t sustainable for 30 year loans). A lot of people are going to be locked into the same house for generations because they got a good rate 30-40 years ago. Also, it doesn’t really increase supply, we are going to quickly degrade into a European housing market of interest only loans and renting as a normal way of life.

bfkwlfkjf 1y ago

Buckle up, houses prices going up.

Saris 1y ago

I'd think no, the prices will just increase until monthly payments are the same.

FireBeyond 1y ago
That's exactly what happens when states increase minimum wage levels - rental prices increase until in a matter of months they've absorbed every cent (or more) of the increase.

GenerWork 1y ago

You could make an argument that for the investment savvy, this is a great move. Say a 30Y payment is $1000/mo. A 50Y payment may be $800/mo. Put the difference ($200/mo) into something like SPY, and in 5 to 10 years, you'll have a small chunk of change that you could tap into. I doubt many people, if any, will do this though.

fred_is_fred 1y ago
SPY only ever goes up so this is a great plan!
- wiredpancake 1y ago
  [dead]
soared 1y ago
If rates are 6%, it takes wayyyy longer than 5-10 years to earn more than that on average. Always goes up is not the usual.
anigbrowl 1y ago
I've heard a few people making this argument, but unless it allows you to pay off your mortgage 20 years early it's still a net loss.
UncleMeat 1y ago
The deltas in monthly payments aren't typically that large.
FireBeyond 1y ago
That's a generous payment estimate. The actual numbers at the current 6.5% are that a $2700 30Y will be a $2450 50Y. It's not a 20% decrease in mortgage payments. It's more like 9%. And uhhh, there's the small matter of "what you're putting in SPY" being rather offset by the $1M+ extra in payments and interest over the life of the loan. The only people this benefit, truly, are lenders.
recursivecaveat 1y ago

itopaloglu83 1y ago

TLDR: No. The supply will stay the same, the demand and therefore the prices will increase. Only the property owners and lenders will make money.

fred_is_fred 1y ago

If immigration remains low, then won't the demographic shift in the US population eventually free up more housing stock. In other words, Boomers die off. Gen X is fairly small, more empty homes? Is something like this happening in Japan or SK?

gtaylor 1y ago
Homes are lucrative investment vehicles. I’d expect many of these to get gobbled up people and companies looking to make a buck.

anigbrowl 1y ago

Will Betteridge's law of headlines ever be defeated? BTW if you're commenting you should vote the story up so other people can see it.

bix6 1y ago

This does nothing for the down payment which is the bigger hurdle compared to monthlies?

JojoFatsani 1y ago
You don’t have to put down 20% as a first time homebuyer
- deleted 1y ago
  [deleted]
- bix6 1y ago
  O yes everybody loves PMI

chriselles 1y ago

Terrible idea. But if it mimics the rise of the same idea in Japan, it could indicate peak real estate as coincided relatively closely with the introduction of the 50 year mortgage in Japana, Different circumstances, different “song”. But perhaps a similar tune.