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If you buy your first house and stay there until you die, flat or falling prices makes sense. For the rest of us, the ever-increasing values are what enables us to move up as our needs change. Our first house was $50k in 1978, for just the two of us the 2BR 1 BA was fine for 6 years. When expecting our second child we were able to sell it for $105k and move up to a larger, newer 3 BR. for $132k. Then when we decided to move to another state sold that one for $190k and paid the same amount for a 5 BR 3 BA her in Washington that's now worth $1.6 million. Retiring later this year we will be able to pay cash for a smaller house in a less expensive part of the state, no more house payment.
Flat or falling prices don't even help you if you buy your first house and live there until you die. As I've stated upthread, part of the risk-reward equation for landlords is the capital gains on the asset itself. They would require a much higher cash rent yield if residential real estate prices were flat or falling, which means fewer rental homes available and more renters, which would raise rent expense for renters, which puts homeownership further out of reach since more of their income would go to rent expense instead of saving for a down payment on a home.
If you buy your first house and stay there until you die, flat or falling prices makes sense. For the rest of us, the ever-increasing values are what enables us to move up as our needs change. Our first house was $50k in 1978, for just the two of us the 2BR 1 BA was fine for 6 years. When expecting our second child we were able to sell it for $105k and move up to a larger, newer 3 BR. for $132k. Then when we decided to move to another state sold that one for $190k and paid the same amount for a 5 BR 3 BA her in Washington that's now worth $1.6 million. Retiring later this year we will be able to pay cash for a smaller house in a less expensive part of the state, no more house payment.
Well not really.
if you need to move, guess what??
Home prices stay flat, you sell your home for the same as you paid for it. Most other homes flat as well so a wash.
Likewise if they appreciate in value other homes did you sell your home for more, next home also costs more so a wash.
Same if they fall.
Now in the case of falling values, that can not be good because most people are leveraged, but flat values are a good thing and much preferable to rising values. Falling values are needed when they get so overvalued to begin with.
That is also why the minimum 20% down payment should be mandatory and HELOCs should be outlawed. That way easy to sell your house if values are flat and still have a little equity in the case of moving costs and such. And a cushion from slight falling values due to real estate seasonal fluctuations.
That is how it ought to be and how it really was prior to the housing mania appreciation obsession since 2000
That is how it was form 1950 to 2000. Well yes in nominal dollar terms home prices skyrocketed, but inflation was extremely high in the 1970s and part of the 50s and 60s and 80s. If inflation was the low rate we had in the 90s and from 2000 to 2020, home prices from 1950 to 2000 in nominal dollar terms would not have seen much increase.
Last edited by Wolverine607; 08-11-2023 at 10:54 AM..
Flat or falling prices don't even help you if you buy your first house and live there until you die. As I've stated upthread, part of the risk-reward equation for landlords is the capital gains on the asset itself. They would require a much higher cash rent yield if residential real estate prices were flat or falling, which means fewer rental homes available and more renters, which would raise rent expense for renters, which puts homeownership further out of reach since more of their income would go to rent expense instead of saving for a down payment on a home.
Not true at all. Certainly not in the case of flat home values. And lol a landlords you are if you live there til you die. A landlord is someone who generally rents the house out they do not live there until they die. A home owner is an owner occupied thing.
Lower home prices make it more affordable for buyers who want to own their own home and pay cash or have a mortgage and get it paid off ASAP.
The current market trend is a mess and a nightmare for 1st time home buyers.
1st time home buyers would be much better off with high mortgage rates and lower home prices that way much less of a debt burden even with same/similar monthly payment.
Also benefits the frugal savers who want to pay cash for a house. With the market of the last 10 years that is impossible for many and not at all right.
Both sides win if home prices much lower high interest rates. For those who only care about the monthly payment, its the same with lower home prices and high interest rates.
For those who hope to save and pay cash or at the very least haver a smaller mortgage and work to pay it off ASAP, lower principal balance is desired.
For those who only care about monthly payment, it does not matter either way for them, but the above scenarios do matter for the ones who want to pay off mortgage ASAP or save and pay cash ( harsh a stretch for most even if home prices were much lower or even at 2010-2012 levels)
Now for those who use HELOCs, no sympathy for them and they are part of the problem and HELOCs should be banned forever.
And yes borrowing against stocks portfolio should not be allowed either. That's exactly what got us into the 2008 mess and not a thing was learned from it except lets patch it up to keep the inflated ponzi scheme going and going until it blow sup even worse down the line.
That should have happened since 2008 back to the traditional rules of the 1980s and before. Instead they just patched them to kick the can down the road while allowing HELOCs and little money down loans and only slight better income verification than pre 2008. And oh yeah lets keep supply arterially short to keep prices inflated as another patch. Home builders are going to start building lots again and when a crash comes its going to be glorious and maybe will teach the lessons that homes are a place to raise a family and live, not a flippin ATM machine. That crash is a ways off though if it ever happens unfortunately given the lack of building for over a decade now.
Um yes they did. The economy in early to mid 90s was very strong and employment was good. Home prices are pretty stable and flat and so was new construction costs. I think good employment means people were doing well.
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Japan is relevant here. The only plausible scenario in which you will have falling asset prices is protracted Japan-like deflation.
There is a difference between falling asset prices and flat prices. Flat is a good thing. Falling can be bad. Though Japan had the other of all bubbles in stocks and homes and it burst so bad as things were so badly overvalued. Prices returned to their norm and stayed that way and good for them. In fact one of my brother's friends in 3rd grade their family moved back to Japan for a job. So they could not have been doing all that bad in the 90s.
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Good for you. For the vast majority of American households, their primary residence is a large part of their net worth and sure as hell does a lot for them.
It provides a place for them to live. Unless they own 2nd and third homes and can sell them to book profits, what kind of net worth do they really have unless they want to sell their home and go live in a cracker box apartment to book the savings form home price appreciation.
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In other words, you wanted to own your own appreciating asset instead of paying for someone else's appreciating asset. So you want only your house to appreciate and no one else's. Got it.
Uh no no no you have it very wrong in my thinking with that one!!
I wanted to own my home as a place to live that I can call my own castle and my pride of ownership passion while having no rent nor mortgage. It was my desire since a young age and I had the though I would save for a house and that same house down the road would cost the same as I had been saving back in 2003 to 2004.
I rushed because I had just enough cash in the bank to afford the outright purchase price (even though not quite as much of an extra cushion as wanted) and did not want to be priced out as I saw what was going on with the market and there were bidding wars just as the market was coming off the floor and prices were starting to rise and fast and already somewhat had in early 2013. So I had to rush or risk not being able to afford to pay cash for my own place to live which was essential for me. Luckily I barely had enough money in my bank account to make it work as my savings added up and I got my home before being priced out just in the nick of time
Heck no do I not want my home to appreciate only and no one else's.I prefer my home and everyone else's stay flat in value. But if homes are all rising and mine did not and I had to move bad. My home rises, but the next homes rises as well, so a wash if I had to move. Same if they were flat and mine is flat.
if prices were flat in 2013 like they were expected to be for longer, I could have waited and saved more and had more cash cushion. But thanks to people' like you thinking and easy monetary policy I had to rush as I refused to ever have a mortgage. but it worked out anyways thank god as I recouped my cushion savings over a few years and had no major expenses with thin savings 10 years ago luckily.
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Who the hell are you to define for all 100 million+ households what a home should mean for them?
What the heck is the purpose of a house originally intended for. In the 50s and 60s and even 70s and 80s, not was viewed as a place to own and live, not a flippin ATM machine.
There is a difference between falling asset prices and flat prices. Flat is a good thing. Falling can be bad. Though Japan had the other of all bubbles in stocks and homes and it burst so bad as things were so badly overvalued. Prices returned to their norm and stayed that way and good for them. In fact one of my brother's friends in 3rd grade their family moved back to Japan for a job. So they could not have been doing all that bad in the 90s.
There's no such thing as an asset market with flat prices. Prices either rise or fall. Flat asset prices means a collapsed market. The only way prices stay flat is if there are no sales transactions.
What makes you think a bank will lend you money for 30 years against an asset they can't value?
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Originally Posted by Wolverine607
It provides a place for them to live. Unless they own 2nd and third homes and can sell them to book profits, what kind of net worth do they really have unless they want to sell their home and go live in a cracker box apartment to book the savings form home price appreciation.
It also provides them a place to park a substantial portion of their wealth. Virtually all of it tax-free or tax deferred.
And guess what? Traditionally, "wealth" meant real estate, before we had advanced financial markets. Ask the Californians who sold out and moved to North Carolina and bought 3 homes if they were made worse off by rising real estate prices.
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Originally Posted by Wolverine607
Uh no no no you have it very wrong in my thinking with that one!!
I wanted to own my home as a place to live that I can call my own castle and my pride of ownership passion while having no rent nor mortgage. It was my desire since a young age and I had the though I would save for a house and that same house down the road would cost the same as I had been saving back in 2003 to 2004.
I rushed because I had just enough cash in the bank to afford the outright purchase price (even though not quite as much of an extra cushion as wanted) and did not want to be priced out as I saw what was going on with the market and there were bidding wars just as the market was coming off the floor and prices were starting to rise and fast and already somewhat had in early 2013. So I had to rush or risk not being able to afford to pay cash for my own place to live which was essential for me. Luckily I barely had enough money in my bank account to make it work as my savings added up and I got my home before being priced out just in the nick of time
Heck no do I not want my home to appreciate only and no one else's.I prefer my home and everyone else's stay flat in value. But if homes are all rising and mine did not and I had to move bad. My home rises, but the next homes rises as well, so a wash if I had to move. Same if they were flat and mine is flat.
if prices were flat in 2013 like they were expected to be for longer, I could have waited and saved more and had more cash cushion. But thanks to people' like you thinking and easy monetary policy I had to rush as I refused to ever have a mortgage. but it worked out anyways thank god as I recouped my cushion savings over a few years and had no major expenses with thin savings 10 years ago luckily.
So you want to make it impossible for anyone who doesn't have a large cash hoard to buy a home? Got it. You appear to hate anyone who doesn't have a half a million sitting in their bank account, want them to be doomed to renting in perpetuity, and have no ability or opportunity to build wealth.
You sound psychopathic.
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Originally Posted by Wolverine607
What the heck is the purpose of a house originally intended for. In the 50s and 60s and even 70s and 80s, not was viewed as a place to own and live, not a flippin ATM machine.
Well things change. Homeowners are wealthier today than they were 30 years ago, partially thanks to asset price appreciation.
There's no such thing as an asset market with flat prices. Prices either rise or fall. Flat asset prices means a collapsed market. The only way prices stay flat is if there are no sales transactions.
What makes you think a bank will lend you money for 30 years against an asset they can't value?
It also provides them a place to park a substantial portion of their wealth. Virtually all of it tax-free or tax deferred.
And guess what? Traditionally, "wealth" meant real estate, before we had advanced financial markets. Ask the Californians who sold out and moved to North Carolina and bought 3 homes if they were made worse off by rising real estate prices.
So you want to make it impossible for anyone who doesn't have a large cash hoard to buy a home? Got it. You appear to hate anyone who doesn't have a half a million sitting in their bank account, want them to be doomed to renting in perpetuity, and have no ability or opportunity to build wealth.
You sound psychopathic.
Well things change. Homeowners are wealthier today than they were 30 years ago, partially thanks to asset price appreciation.
Why does it bother you so much? Is it because not everyone sees it your way?
So you want to make it impossible for anyone who doesn't have a large cash hoard to buy a home? Got it. You appear to hate anyone who doesn't have a half a million sitting in their bank account, want them to be doomed to renting in perpetuity, and have no ability or opportunity to build wealth.
You sound psychopathic.
I only had $170K in the bank. Hardly needed anywhere near $500K to buy a house for cash.
And I am not saying someone should only be able to pay cash outright for a house. But no buying a house without at least 20% down period.
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Well things change. Homeowners are wealthier today than they were 30 years ago, partially thanks to asset price appreciation.
And not for the better. In fact for the far worse of society and its a shame!!
My home has gone up lots in value but so have almost every other home. I do not consider myself any wealthier than I was when I bought it except for the fact my savings account has lots more money from saved up money from work as I have no mortgage yeah.
I look at it as relief I was able to buy my house before prices got so out of control and do not have to worry about it as I would have been priced out forever to be able to buy a home for cash if I had waited much longer but no longer have to worry about it for myself. But I pity those who want to save for a small starter house to pay cash as they have no chance and are going to be enlsaved by massive jumbo $200K or higher mortgage sizes which is a shame.
A shame $100K to $200K and in between starter modest homes in nice neighborhoods in good areas are long gone and not for the betterment of society or our future kids.
Its absolutely a shame people view their homes as a flippin ATM machine and its what got us into 2008 and apparently you and so many others think that is ok to the detriment of responsible savers who do not want to have to take on a jumbo mortgage or who the extra mile to pay cash have 0 chance to do so now because of your statement things change and not for the better!!
Last edited by Wolverine607; 08-11-2023 at 02:36 PM..
That's exactly what you're saying. What makes you think a bank is going to lend you money for 30 years on a depreciating and/or stagnating asset?
Uhm banks lend people money to buy cars/SUVs/trucks/vans and they do not gain in value nor are they actually even flat in value, you know what they actually depreciate in value yet banks lend to people all the time to buy those things!! They also lend for college educations which have no appreciation in value and in fact depreciate in value as well as there is not even an asset except a paper degree that is worth nothing to anyone you can sell it to and yet banks lend for that.
Flat home values banks would be willing to lend lots. and did over the years.
In fact banks did in 2009-2012 when the expectation was homes were going to be flat in value for a long time even though sadly they as well as most economic experts were wrong.
Uhm banks lend people money to buy cars/SUVs/trucks/vans and they do not gain in value nor are they actually even flat in value, you know what they actually depreciate in value yet banks lend to people all the time to buy those things!! They also lend for college educations which have no appreciation in value and in fact depreciate in value as well as there is not even an asset except a paper degree that is worth nothing to anyone you can sell it to and yet banks lend for that.
Tell me, what bank will lend you up to 95% LTV for 30 years at a fixed rate that is not much more than the Fed Funds rate on a car? Without recourse?
If the car sells for less than the remaining balance on the loan, the bank can come after you for the difference. In about 12 states, mortgages are nonrecourse, which means the bank's sole remedy is taking back the house if you don't pay.
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Originally Posted by Wolverine607
Flat home values banks would be willing to lend lots. and did over the years.
In fact banks did in 2009-2012 when the expectation was homes were going to be flat in value for a long time even though sadly they as well as most economic experts were wrong.
There was no expectation of any kind that home prices were going to decline or be flat for 30 years.
You just want to lock everyone who doesn't have a large cash hoard out of the housing market altogether. You want everyone else who's not already a homeowner to be denied the opportunities that you had to build wealth by owning your own home. If you see housing as a consumer good, fine. The rest of the world sees it as an asset, and there's nothing positive about stagnating or declining asset prices. Imagine the S&P 500 Index was between 4400 and 4600 for the next 10 years. You want that?
Yeah, I didn't think so either.
Last edited by albert648; 08-11-2023 at 03:05 PM..
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