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Generational Luck in the Housing Market

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Re: Generational Luck in the Housing Market

#91

Post by Workaccount2 »

JumpCrisscross wrote: post #90
Workaccount2 wrote: post #59

Earlier quoted context omitted.

A fixed 30 yr mortgage is insane. Insanely good if you have a home and a low rate (or refi into one) Insanely bad if you don't have a home. It's not a natural construct, it's an artificial loan that only exists because the fed is the counter party. In an natural economy, mortgages would all be variable rate, or fixed rate but much higher than what is available today. This would also mean that the housing rush of 2021…

> it's an artificial loan that only exists because the fed is the counter party The Fed doesn't originate mortgages. (And it's increasingly getting out of even holding them.)

No, it buys them from the banks and the banks know this going into the loans.

Re: Generational Luck in the Housing Market

#92

Post by thaumasiotes »

layer8 wrote: post #58
thaumasiotes wrote: post #56

Earlier quoted context omitted.

Why? Not everybody has a house. A house going for the median price is going to be purchased by someone well above the median income.

> Not everybody has a house. I’m pretty sure that’s correlated to income. > A house going for the median price is going to be purchased by someone well above the median income. Which proves the point?

What are you trying to achieve by looking at the median house price?

Re: Generational Luck in the Housing Market

#93

Post by enlyth »

SoftTalker wrote: post #71
enlyth wrote: post #28

Earlier quoted context omitted.

Among other things, I think interest only mortgages are a completely degenerate financial product that shouldn't exist, the only purpose is so someone can leverage themselves to the tits on housing

Disagree. A mortgage is responsible debt, if you plan to live in the house for 30 years why not pay for it over that timeframe? And the house itself will usually appreciate if you take reasonably good care of it. Zero-down, no-income-no-credit-check mortgages, OK yeah those were a problem. Credit cards are the degenerate financial product that shouldn't exist, if anything is.

I'm in the negative for my opinion but I'll still bite.

People don't live in houses on interest only mortgages, they use them as leveraged investment vehicles to speculate, rent out, and then roll them into even more leverage as time goes on.

I have nothing against classic mortgages where you pay the principle off, I have one myself, but I will maintain my opinion that interest only mortgages shouldn't exist despite the unpopularity.

Re: Generational Luck in the Housing Market

#94

Post by ProfessorLayton »

triceratops wrote: post #44
bryanlarsen wrote: post #11

Earlier quoted context omitted.

Why blame the Fed? The low interest rates that made it easy to buy homes (driving up the price) also should have made it cheap to build homes which would have driven down the price. It was local regulations that prevented building homes.

> It was local regulations that prevented building homes. Wealthy old homeowners tend to control those.

Only because the younger renters aren't as involved in local politics as the older homeowners. SF, for example, is mostly renters and they could easily overturn NIMBY homeowners to make housing cheap and plentiful. Alas, they don't turn out and push politicians the way homeowners do, so here we are.

Re: Generational Luck in the Housing Market

#95

Post by SoftTalker »

enlyth wrote: post #93
SoftTalker wrote: post #71

Earlier quoted context omitted.

Disagree. A mortgage is responsible debt, if you plan to live in the house for 30 years why not pay for it over that timeframe? And the house itself will usually appreciate if you take reasonably good care of it. Zero-down, no-income-no-credit-check mortgages, OK yeah those were a problem. Credit cards are the degenerate financial product that shouldn't exist, if anything is.

I'm in the negative for my opinion but I'll still bite. People don't live in houses on interest only mortgages, they use them as leveraged investment vehicles to speculate, rent out, and then roll them into even more leverage as time goes on. I have nothing against classic mortgages where you pay the principle off, I have one myself, but I will maintain my opinion that interest only mortgages shouldn't exist despite…

OK should have read your original comment more closely. I missed "interest only" on the first read.

But even on a traditional mortgage, in the early years the vast majority of the payment is interest. How much lower is the monthly payment on an interest-only loan? Are they easier to qualify for? Are the rates the same, or higher than, a traditional mortgage?

I'm not sure I'd want to ban types of financing for types of properties, that seems heavy-handed.

Re: Generational Luck in the Housing Market

#96

Post by enlyth »

SoftTalker wrote: post #95
enlyth wrote: post #93

Earlier quoted context omitted.

I'm in the negative for my opinion but I'll still bite. People don't live in houses on interest only mortgages, they use them as leveraged investment vehicles to speculate, rent out, and then roll them into even more leverage as time goes on. I have nothing against classic mortgages where you pay the principle off, I have one myself, but I will maintain my opinion that interest only mortgages shouldn't exist despite…

OK should have read your original comment more closely. I missed "interest only" on the first read. But even on a traditional mortgage, in the early years the vast majority of the payment is interest. How much lower is the monthly payment on an interest-only loan? Are they easier to qualify for? Are the rates the same, or higher than, a traditional mortgage? I'm not sure I'd want to ban types of financing for types o…

This depends on where you live, in some countries I believe they don't even exist, but I can speak for the UK where interest only mortgages are meant for landlords, you basically get a mortgage with a minimum of 25% deposit, none of the principle is paid off at any point, you rent out the property and collect the difference between your interest payment and the premium the tenant is paying.

They are normally inaccessible to people who don't already own their own property, even more so by the nature of the higher than usual deposit required, so it's an investment vehicle for already well off people to leverage more money into property and extract money from tenants

It puts upwards pressure on housing prices because you don't just get the family that wants to own a home or the occasional landlord who wants to own and rent out a second holiday house, it's a purely synthetic financial product that lets you take a house out of the market and arbitrage on the difference between your interest payments and the tenant's rent

It is not uncommon for people like this to own tens or hundreds of properties in their portfolio this way, and these are the people crying first and loudest when interest rates go up because their rental yields can no longer cover the interest only payments on the houses they "own". Whatever happened to being on the hook for bad investment decisions? They think they should get special treatment because they're providing a so called service to the tenants

Re: Generational Luck in the Housing Market

#97

Post by pcthrowaway »

Workaccount2 wrote: post #59
landedgentry wrote: post #10

Calling it luck makes it sound like there are uncontrollable forces at work. However, these consequences are entirely downstream of artificial, man-made policies.

A fixed 30 yr mortgage is insane. Insanely good if you have a home and a low rate (or refi into one) Insanely bad if you don't have a home. It's not a natural construct, it's an artificial loan that only exists because the fed is the counter party. In an natural economy, mortgages would all be variable rate, or fixed rate but much higher than what is available today. This would also mean that the housing rush of 2021…

> In an natural economy, mortgages would all be variable rate, or fixed rate but much higher than what is available today.

> This would also mean that the housing rush of 2021 would have been crushed by rate increases in 2022/23. In fact there probably wouldn't have been much of a rush at all.

Interestingly, you described almost exactly how mortgages work in Canada: you pay more for a fixed rate, and even then, you can only get a fixed rate for a term of up to 10 years. And the average term is more like 5 years. People's mortgages have been going up now that interest rates are up. This was not impossible to predict.

And that certainly didn't stop the housing rush of the last 15 years.

Re: Generational Luck in the Housing Market

#98

Post by bryanlarsen »

pcthrowaway wrote: post #97
Workaccount2 wrote: post #59

Earlier quoted context omitted.

A fixed 30 yr mortgage is insane. Insanely good if you have a home and a low rate (or refi into one) Insanely bad if you don't have a home. It's not a natural construct, it's an artificial loan that only exists because the fed is the counter party. In an natural economy, mortgages would all be variable rate, or fixed rate but much higher than what is available today. This would also mean that the housing rush of 2021…

> In an natural economy, mortgages would all be variable rate, or fixed rate but much higher than what is available today. > This would also mean that the housing rush of 2021 would have been crushed by rate increases in 2022/23. In fact there probably wouldn't have been much of a rush at all. Interestingly, you described almost exactly how mortgages work in Canada: you pay more for a fixed rate, and even then, you c…

Canadian house prices are up 40% in the last 15 years. That's less than inflation.

Yes, they are super expensive, but they were even more super expensive 15 years ago. Canada didn't get the 2008 crash that the US did.

Re: Generational Luck in the Housing Market

#99

Post by JumpCrisscross »

Workaccount2 wrote: post #91
JumpCrisscross wrote: post #90

Earlier quoted context omitted.

> it's an artificial loan that only exists because the fed is the counter party The Fed doesn't originate mortgages. (And it's increasingly getting out of even holding them.)

No, it buys them from the banks and the banks know this going into the loans.

> it buys them from the banks and the banks know this going into the loans

This isn't how the mortgage market works. Qualifying mortgages are guaranteed by Fannie and Freddie. The Fed's participation in the mortgage market has been for liquidity, not credit, purposes.

Kill Fannie & Freddie and the 30-year mortgage goes away. Ban the Fed from buying mortgage securities and rates go up a bit.

Re: Generational Luck in the Housing Market

#100

Post by office_drone »

bryanlarsen wrote: post #98
pcthrowaway wrote: post #97

Earlier quoted context omitted.

> In an natural economy, mortgages would all be variable rate, or fixed rate but much higher than what is available today. > This would also mean that the housing rush of 2021 would have been crushed by rate increases in 2022/23. In fact there probably wouldn't have been much of a rush at all. Interestingly, you described almost exactly how mortgages work in Canada: you pay more for a fixed rate, and even then, you c…

Canadian house prices are up 40% in the last 15 years. That's less than inflation. Yes, they are super expensive, but they were even more super expensive 15 years ago. Canada didn't get the 2008 crash that the US did.

That can't be right. GTA and Vancouver home prices are 3 times what they were in 2009.
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