Evaluations 1, Appraisals 0

[Mark K]

Household income is not nearly keeping pace with housing prices and the overall cost of living, inflation in general. I'm not talking about the bogus gov't CPI that excludes minor things like mortgage payments and other necessities. However, the average consumer refuses to restrain their spending, i.e., live within their means, choosing instead to use credit cards to supplement their income.

The artificially low interest rates from the past 10 years have caused most of this housing run up, an economy built on a foundation of sand waiting for the next tide to come in. I think the Fed is slowly raising interest rates for the sole reason that they'll be able to drop them to stimulate the economy when the next fall comes. Problem is, they won't be able to drop them far enough. Negative rates, anyone?

I don't think the next crash will happen as quickly as the last one, Lehman Bros./Bear Stearns dying basically overnight kinda thing, but more like a slow moving train wreck and it will take much longer to recover. More like Japan's economy in the 90's, a decade or two of stagnation.

 

[Evincere]

Total US household debt soars to record above $13 trillion

• Total household debt rose to an all-time high of $13.15 trillion at year-end 2017, according to the Federal Reserve Bank of New York's Center for Microeconomic Data.
• The report said it was fifth consecutive year of annual household debt growth with increases in the mortgage, student, auto and credit card categories.

The American consumer is loading up on debt.

Total household debt rose by $193 billion to an all-time high of $13.15 trillion at year-end 2017 from the previous quarter, according to the Federal Reserve Bank of New York's Center for Microeconomic Data report released Tuesday.

Mortgage debt balances rose the most in the December quarter rising by $139 billion to $8.88 trillion from the previous quarter. Credit card debt had the second largest increase of $26 billion to a total of $834 billion.

https://www.cnbc.com/2018/02/13/total-us-household-debt-soars-to-record-above-13-trillion.html

Until a homeowner has the title to the mortgaged property in their hands they are but renters on a glorified a 30 yr lease. Don’t pay that monthly mtg payment and those bundled rights go poof.

Unless it’s a cash deal it’s the banks who are the ones laughing as the homeowner walks away from their closing with their delusions.

 

[Evincere]

duplicate deleted

 

[Joe Flacco]

I think the 30 year mortgage is a good deal vs renting.

 

[Randolph Kinney]

I think the 30 year mortgage is a good deal vs renting.

It use to be before they changed the tax law. You have to break the $24,000 standard deduction for married and you are capped at $10,000 for SALT.

 

[Joe Flacco]

It use to be before they changed the tax law. You have to break the $24,000 standard deduction for married and you are capped at $10,000 for SALT.

I think it's a good deal without any deductions at all. Deductions is a bonus.

 

[Randolph Kinney]

I think it's a good deal without any deductions at all. Deductions is a bonus.

Depends on how long you live in the home whether renting is better than buying. You have to assume an inflation rate, interest rate, etc.

 

[Joe Flacco]

Depends on how long you live in the home whether renting is better than buying. You have to assume an inflation rate, interest rate, etc.

The main thing is how long you plan to stay in the property because the interest is front loaded. But locking in your housing payment when rent and home prices historically increase is a no brainer.

 

[Terrel L. Shields]

My point is that I don't think home prices can get that far out in front of incomes.

Exactly.

Borrowed funds

True, but even then a limit is reached and do we go to multi generational loans like Japan? 100 yr mortgages? Even then the banks couldn't secure enough income, became zombie banks and were not foreclosed upon to avoid a total crash. The result is a 20 year recovery that still hasn't completely healed the Japanese economy.

Housing is not a productive investment nor expense rather a capital expenditure. Rents locked in for long term are often superior to buying. Certainly applies to pasture land to sure to the agriculturalist.

 

[Randolph Kinney]

The main thing is how long you plan to stay in the property because the interest is front loaded. But locking in your housing payment when rent and home prices historically increase is a no brainer.

You forgot the buying and selling cost, maintenance and the difference in renting versus PITI, and the money you can earn on not making a downpayment.