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i know this is a silly question, but if there were no 'credit' cards and no lending agencies and the only way to buy a house was to write a check for the full amount, wouldn't houses be MUCH cheaper in the supply and demand mode?
so, who gets rich? the lending companies. people with mortgages are essentially paying many thousands more for the house for the 'privilege' of doing business with a lending institution when if there was no lending institution to begin with, houses would be a fraction of what they cost now.
OR, do you think the houses would be exactly the same prices?
Sadly, housing lending s getting as absurd as the last cycle as banks and government entities try to sucker those who can't buy houses to buy them with 3% down or less yet again and claim they are doing them a favor again, lol. In the meantime, to stimulate demand banks are supporting a gamete of real estate trusts (REIT) that are getting people to buy up property synthetically so they can play games and create another class of losers since they can't get them to buy the bonds they got them to take massive losses on last downturn.
Invent another vehicle and get passengers on, then roll them off the edge of a cliff again. Really? Owning those REIT's today is riskier than owning the high yield bonds folks. Wake up.
No. I had houses overseas. Until about 15 years ago it was impossible for the average person to get a loan. Then the world bank and others came in making money available for borrowing to buy a home.
The average house was 20-30k before the loans were made. That was because people had to save to buy one or build little by little.
Today the average hose is 150k. Big huge jump in prices after loans were offered.
you toss around random numbers but don't mention how much they people make there...
I can do the same, houses cost $100-150k where I am in the US... it's 2-3 times the average salary.
Mortgages are "cheap" if compared to outright buying it
Mortgage interest isn't even that bad, it's cheaper than the "rent" that people would be paying if I they had to rent + save for a "cash" house.
If anything, people should consider mortgage interest as paying "rent" to the bank while they live in a house they don't own yet. Better yet, this "rent" decreases over time, and not increase
Location: Was Midvalley Oregon; Now Eastside Seattle area
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Quote:
Originally Posted by Perma Bear
Places like the Bay Area and NYC wouldn't change but the rest of the country would crash to 1/2 or 1/3 the amount.
We bought with cash, Seattle, fall 2015. Seller did not come down in price. He had 2 price cuts by then. He still made gross 15% with 1 year of holding plus rents.
We paid cash from inheritance. Bank didn't like our credit scores and offered +4.5% even with a 25% down. Bank didn't like our cash flow, living off of SS, small PLUS loan, own, untapped IRA and annuities, small draws from shortterm cash accounts.
Back in the early 20th century, home loans were made largely by insurance companies and required 50% down. Adjusted for inflation, homes were surprisingly similar to today's values, at least on a per-square-foot basis.
In fact, if you simply look at the case-shiller index for the last century, you won't even see any blips when mortgage policy changed. With the exception of the bubble of the 2000's.
With no mortgages, home values would likely be....about the same.
you won't even see any blips when mortgage policy changed
Well, that's because they had mortgage financing and it's mostly a myth to say it's all that different from today - the players just changed. Just think about it practically for a minute - why was the bank always taking the family farm in old country songs if they paid for them outright? The answer is they didn't- they had mortgages just like we do, though they weren't 30 year- but they don't really have 30 year mortgages in Canada either today.
It'd probably be more like Europe where there are far more renters than owners.
It's hard to speculate because all-cash purchases have been so rare for pretty much all of American history. One of the factors for the American revolution was that Britain was trying to reign in real estate speculation by regulation. The earliest financial panics the U.S. ever experienced, ie: the Panic of 1819, were caused by real estate speculation then crash.
Real estate speculation is fundamentally American. Not gonna take that away.
If European real estate is any guide, it would make property more expensive, not less.
No. I had houses overseas. Until about 15 years ago it was impossible for the average person to get a loan. Then the world bank and others came in making money available for borrowing to buy a home.
The average house was 20-30k before the loans were made. That was because people had to save to buy one or build little by little.
Today the average hose is 150k. Big huge jump in prices after loans were offered.
There are countries like that. Basically, people get to own their homes in one of several ways. They live with their parents until they die then inherit the property. Others move from an existing home that they own to new construction so they pay cash. The third way is low income housing. 500 sq. ft apartments bought by government loans. None of these options are workable in this country.
you toss around random numbers but don't mention how much they people make there...
I can do the same, houses cost $100-150k where I am in the US... it's 2-3 times the average salary.
Mortgages are "cheap" if compared to outright buying it
Mortgage interest isn't even that bad, it's cheaper than the "rent" that people would be paying if I they had to rent + save for a "cash" house.
If anything, people should consider mortgage interest as paying "rent" to the bank while they live in a house they don't own yet. Better yet, this "rent" decreases over time, and not increase
Salaries didnt go up if that is what you mean. Average is about $600-$1000 per month.
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