Posted on 05/10/2022 3:34:39 AM PDT by Kaslin
but for arguments sake, add 50% to the numbers or assume 600k and double them.
Housing prices will remain 'sticky' for a while, which will prompt a move to 40 and 50 year mortgages (which we may already be seeing).
People that refinance to get extra money out are not very bright. What is the advantage of going deeper in debt in today s’ world? I know people who do that to pay off credit card debt and then run the cards right back up. Ding Ding Ding.
Oligarchs? What oligarchs?
You are projecting Russia on America in a drivelous manner
Sorry, Steve Moore is what I called a “Cocktail Party” economist. He spins great stories, but there are no models or data. Just Steve being Steve.
I have seen him speak several times and he can’t answer questions.
Sorry, Steve Moore is what I called a “Cocktail Party” economist. He spins great stories, but there are no models or data. Just Steve being Steve.
I have seen him speak several times and he can’t answer questions.
LOL @ “If & When”....., in 2008 we had a massive amount of borrowers with no real investments in their homes as the are given 0-5% down payments..., they simply walked away from the banks with little pain or loss. Today, majority have alot of equity in their properties and they were putting 20 - 30% down in some cases to even qualify, its much less likely the market crashes like 2008. A healthy pull back should be expected and if it does dont miss the boat.
During an inflationary cycle, wholly owned tangible goods rise in price, thus holding their value overall.
Cash is eaten away at the rate of inflation.
Borrowed money still costs money, depending upon interest rate, of course.
Be debt free, and own tangible goods of lasting value. It takes discipline, but pays very well.
Models end up largely being what you want them to show you, and work until they don't.
You fail to realize that many of these mortgages are not fixed rates.
Regulators do not permit banks to keep foreclosed houses on the books and require that they be sold. As that happens, prices tend to fall and to stay depressed until the backlog of foreclosed homes is sold off and supply and demand come back into balance.
“ During an inflationary cycle, wholly owned tangible goods rise in price…”
Yes, but our wholly owned house costs more in taxes and maintenance every year, due to inflation. We’re OK so far, but housing assessments for taxes have gone up almost 70% in our neighborhood in the last decade. That increased value is not accessible to us, except through a loan or sale.
Right, but in this case you’ve got very high inflation at the same time. Also, various private equity and investment bank vehicles can play with both their expanding direct residential portfolios and MBS, so the properties could be scooped up in record time. (As well, millions pouring in through our wide-open border are putting increasing pressure on housing prices, increasingly played out through rental markets.)
Understood, I’m in the same boat, but at least it’s capital preservation, rather than inflationary loss.
Hard to deal with the tax increases, but if you don’t have mortgage interest, that should help defray the loss a bit.
The US was drowning in an oversupply of housing on 2008 - now we are 5 million units short. Expect prices to level off and even decline some - especially at the lower end - but there is no 2008-like bubble this time in housing or any real asset. The bubbles are in paper, and paper-holders are standing on the beach trying to get a better look at the Cat 5 hurricane coming ashore.
Also, suppose I somehow managed to get a special mortgage deal where I only had to put 5% down. So I'm carrying a mortgage of $285,000 on a home that appraised for $300,000 as its current (at the time) market value.
If we have a "housing collapse" along the lines of 2007-2009 and my home loses 30% of its value, then the home I purchased last year for $300,000 is only worth $210,000. If we include the principal I have paid on my $285,000 mortgage over the last two years, let's suppose I have an outstanding balance of $280,000 on the mortgage. This means I am "underwater" by $70,000 on the mortgage.
But this ignores the underlying inflation of the currency I'm using to pay the mortgage.
An annual inflation rate of 10% means the value of dollar-denominated assets will rise -- on average -- 21% over two years. So the home that should have sold for $240,000 two years ago would now be worth more than $290,000 even without any premium for the overheated market that drove me to pay $300,000 for it.
The point here is that it's highly unlikely that the market value of the home would ever decline to $210,000 at all in a high-inflation environment -- for the same reason the value of the home my parents purchased in the early 1970s for $40,000 never declined to that level even during multiple "housing market collapses" over the last 45 years.
Assumption; 1,011.85 payment, borrowed amount:
You're assuming that the person who was able to afford the $1,011.85 payment two years ago is still earning the same income today. That's simply not the case at all. In fact, A professional in my neck of the woods who bought a home 5-8 years ago has a mortgage payment that could be covered by someone working at a warehouse up the road today.
Nice post - thanks.
If your debt is being carried at a fixed interest rate that is very low, then a lot of folks would be foolish NOT to go deeper into debt.
I relocated and purchased a home last year. I'm paying a 30-year mortgage at a fixed rate just over 3%. If inflation is running at 8% or more (probably much more), then the bank is getting its ass handed to it every time I make the minimum mortgage payment. In fact, I have two business loans in addition to the mortgage that are being carried at low rates that are fixed for the next three years. I could pay them off tomorrow if I wanted to, but I refuse to do it because it's ludicrous to pay them off when the interest rates are lower than the rate of inflation.
I'd like to meet the homeowner who bought a home during a period of historically low interest rates and was dumb enough to finance it with an adjustable rate mortgage.
After the collapse in the late 2000s, a lot of banks in my area got around these regulations by extending the foreclosure process indefinitely so they didn't actually foreclose on many properties at all. Some of them remained in limbo without any change in ownership for years. That's why you started to see terms being used like "pre-foreclosure" and "mortgage loan modification" around that time. I never heard of those things before 2008.
Expect prices to level off and even decline some - especially at the lower end ...
These two sentences do not make sense together. If we are short 5 million housing units, then housing costs should continue to ESCALATE.
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