Mortgage Payments should be Indexed to the Value of the Home

[michravera]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

That's actually not true, in California and other "Title Theory" states.

What does Title Theory mean?

Look it up! Basically, under Title Theory, if a borrower defaults, there are no deficiency judgements. The lender can have the house or have the money. They can't have both.

[Max Rockatansky]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

Almost as though it is intended to incentivize home ownership or something.

[kernals12]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

Almost as though it is intended to incentivize home ownership or something.

There is no rational reason for it.

[kernals12]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

That's actually not true, in California and other "Title Theory" states.

What does Title Theory mean?

Look it up! Basically, under Title Theory, if a borrower defaults, there are no deficiency judgements. The lender can have the house or have the money. They can't have both.

And so that makes the problem even worse

[Max Rockatansky]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

Almost as though it is intended to incentivize home ownership or something.

There is no rational reason for it.

Sure there is.  It encourages home ownership even if to a nominal degree.  If someone owns a home, then they start paying property taxes also.  I'd think you of all people would be all for the proliferation of single family suburban housing.

[kernals12]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

Almost as though it is intended to incentivize home ownership or something.

There is no rational reason for it.

Sure there is.  It encourages home ownership even if to a nominal degree.  If someone owns a home, then they start paying property taxes also.  I'd think you of all people would be all for the proliferation of single family suburban housing.

Landlords also pay property taxes. And the mortgage interest deduction gives the biggest benefit in dense, transit-rich urban areas where housing is at its most expensive.

[Max Rockatansky]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

Almost as though it is intended to incentivize home ownership or something.

There is no rational reason for it.

Sure there is.  It encourages home ownership even if to a nominal degree.  If someone owns a home, then they start paying property taxes also.  I'd think you of all people would be all for the proliferation of single family suburban housing.

Landlords also pay property taxes. And the mortgage interest deduction gives the biggest benefit in dense, transit-rich urban areas where housing is at its most expensive.

Funny, you don't outright deny the contradiction to your usual tact regarding urban sprawl. Let us not forget you were just "applauding" the proposed car/single family home centric Flannery project in Solano County.

[kernals12]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

Almost as though it is intended to incentivize home ownership or something.

There is no rational reason for it.

Sure there is.  It encourages home ownership even if to a nominal degree.  If someone owns a home, then they start paying property taxes also.  I'd think you of all people would be all for the proliferation of single family suburban housing.

Landlords also pay property taxes. And the mortgage interest deduction gives the biggest benefit in dense, transit-rich urban areas where housing is at its most expensive.

Funny, you don't outright deny the contradiction to your usual tact regarding urban sprawl. Let us not forget you were just "applauding" the proposed car/single family home centric Flannery project in Solano County.

I didn't think I needed to issue one. Anyways, the current system of housing finance encourages existing suburbanites to support NIMBY policies to inflate their own property values, thereby relegating younger people to overcrowded cities

[Max Rockatansky]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

Almost as though it is intended to incentivize home ownership or something.

There is no rational reason for it.

Sure there is.  It encourages home ownership even if to a nominal degree.  If someone owns a home, then they start paying property taxes also.  I'd think you of all people would be all for the proliferation of single family suburban housing.

Landlords also pay property taxes. And the mortgage interest deduction gives the biggest benefit in dense, transit-rich urban areas where housing is at its most expensive.

Funny, you don't outright deny the contradiction to your usual tact regarding urban sprawl. Let us not forget you were just "applauding" the proposed car/single family home centric Flannery project in Solano County.

I didn't think I needed to issue one. Anyways, the current system of housing finance encourages existing suburbanites to support NIMBY policies to inflate their own property values, thereby relegating younger people to overcrowded cities

So really this thread is about having your  cake and eating it too. 

[Rothman]

I like cake.

[kernals12]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

Almost as though it is intended to incentivize home ownership or something.

There is no rational reason for it.

Sure there is.  It encourages home ownership even if to a nominal degree.  If someone owns a home, then they start paying property taxes also.  I'd think you of all people would be all for the proliferation of single family suburban housing.

Landlords also pay property taxes. And the mortgage interest deduction gives the biggest benefit in dense, transit-rich urban areas where housing is at its most expensive.

Funny, you don't outright deny the contradiction to your usual tact regarding urban sprawl. Let us not forget you were just "applauding" the proposed car/single family home centric Flannery project in Solano County.

I didn't think I needed to issue one. Anyways, the current system of housing finance encourages existing suburbanites to support NIMBY policies to inflate their own property values, thereby relegating younger people to overcrowded cities

So really this thread is about having your  cake and eating it too. 

Exactly, that's what innovation does.

[Max Rockatansky]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

Almost as though it is intended to incentivize home ownership or something.

There is no rational reason for it.

Sure there is.  It encourages home ownership even if to a nominal degree.  If someone owns a home, then they start paying property taxes also.  I'd think you of all people would be all for the proliferation of single family suburban housing.

Landlords also pay property taxes. And the mortgage interest deduction gives the biggest benefit in dense, transit-rich urban areas where housing is at its most expensive.

Funny, you don't outright deny the contradiction to your usual tact regarding urban sprawl. Let us not forget you were just "applauding" the proposed car/single family home centric Flannery project in Solano County.

I didn't think I needed to issue one. Anyways, the current system of housing finance encourages existing suburbanites to support NIMBY policies to inflate their own property values, thereby relegating younger people to overcrowded cities

So really this thread is about having your  cake and eating it too. 

Exactly, that's what innovation does.

Get back to us when you've actually innovated something.  You haven't even made the drive to Phoenix yet Mr. Hughes.

Also, hopefully a goat somewhere is pleased with the quote pyramid.

[1995hoo]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

I would think you would favor that. One aspect of the current income tax system, as it was amended during the previous administration, is a cap on the amount of state and local taxes you can deduct on your federal return. For many of us, that causes us to take the standard deduction, rather than itemizing and deducting mortgage interest and real estate taxes, because the standard deduction exceeds the amount we can get by itemizing. The current system is set to expire next year, though in general we can probably be certain it won't just expire with everything going back to the way it was before because that never seems to happen.

If the current system were to remain in place, though, I've wondered to what extent it might cause a societal shift away from home ownership, at least in larger urban areas. The loss, for many people, of the tax benefit from home ownership could well prompt more people to rent, and I've wondered to what extent that might lead to increasing numbers of people renting apartments or condos—which, in turn, in many urban and suburban areas are often concentrated either near subway lines or along major bus routes. Hence why, given your expressed antipathy towards mass transit, I figure you'd favor tax advantages for home ownership to the extent it could increase reliance on cars.

[JayhawkCO]

I like cake.

I like eating, too.

[kalvado]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

I would think you would favor that. One aspect of the current income tax system, as it was amended during the previous administration, is a cap on the amount of state and local taxes you can deduct on your federal return. For many of us, that causes us to take the standard deduction, rather than itemizing and deducting mortgage interest and real estate taxes, because the standard deduction exceeds the amount we can get by itemizing. The current system is set to expire next year, though in general we can probably be certain it won't just expire with everything going back to the way it was before because that never seems to happen.

If the current system were to remain in place, though, I've wondered to what extent it might cause a societal shift away from home ownership, at least in larger urban areas. The loss, for many people, of the tax benefit from home ownership could well prompt more people to rent, and I've wondered to what extent that might lead to increasing numbers of people renting apartments or condos—which, in turn, in many urban and suburban areas are often concentrated either near subway lines or along major bus routes. Hence why, given your expressed antipathy towards mass transit, I figure you'd favor tax advantages for home ownership to the extent it could increase reliance on cars.

Last time I heard about it, there is a shortage of housing in most areas. Also, as far as I understand, every rental  property has an owner... 
So K12 actually advocates converting private home ownership into corporate ownership? Pretty liberal approach.. 

[SectorZ]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

I would think you would favor that. One aspect of the current income tax system, as it was amended during the previous administration, is a cap on the amount of state and local taxes you can deduct on your federal return. For many of us, that causes us to take the standard deduction, rather than itemizing and deducting mortgage interest and real estate taxes, because the standard deduction exceeds the amount we can get by itemizing. The current system is set to expire next year, though in general we can probably be certain it won't just expire with everything going back to the way it was before because that never seems to happen.

If the current system were to remain in place, though, I've wondered to what extent it might cause a societal shift away from home ownership, at least in larger urban areas. The loss, for many people, of the tax benefit from home ownership could well prompt more people to rent, and I've wondered to what extent that might lead to increasing numbers of people renting apartments or condos—which, in turn, in many urban and suburban areas are often concentrated either near subway lines or along major bus routes. Hence why, given your expressed antipathy towards mass transit, I figure you'd favor tax advantages for home ownership to the extent it could increase reliance on cars.

https://www.washingtonpost.com/realestate/increasing-housing-prices-expected-to-slow-down-as-gop-tax-bill-begins-to-reshape-a-major-part-of-the-economy-analysts-say/2017/12/28/be3bc19a-e670-11e7-a65d-1ac0fd7f097e_story.html

It's weird that there were a lot of sky is falling predictions about less people buying homes depressing sales prices due to the SALT deduction cap. Meanwhile in a state affected by it, my home value has gone up at least 70% since that point 7 years ago.

[kernals12]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

I would think you would favor that. One aspect of the current income tax system, as it was amended during the previous administration, is a cap on the amount of state and local taxes you can deduct on your federal return. For many of us, that causes us to take the standard deduction, rather than itemizing and deducting mortgage interest and real estate taxes, because the standard deduction exceeds the amount we can get by itemizing. The current system is set to expire next year, though in general we can probably be certain it won't just expire with everything going back to the way it was before because that never seems to happen.

If the current system were to remain in place, though, I've wondered to what extent it might cause a societal shift away from home ownership, at least in larger urban areas. The loss, for many people, of the tax benefit from home ownership could well prompt more people to rent, and I've wondered to what extent that might lead to increasing numbers of people renting apartments or condos—which, in turn, in many urban and suburban areas are often concentrated either near subway lines or along major bus routes. Hence why, given your expressed antipathy towards mass transit, I figure you'd favor tax advantages for home ownership to the extent it could increase reliance on cars.

You are assuming that rented homes are always multi-family and multi-family homes are always rented. That's not true, there are single family homes for rent and multi-family homes you can buy.

And for reasons I have explained throughout this thread, those tax advantages almost certainly favor the type of dense, transit rich cities I dislike

[SEWIGuy]

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

[kernals12]

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

[1995hoo]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

I would think you would favor that. One aspect of the current income tax system, as it was amended during the previous administration, is a cap on the amount of state and local taxes you can deduct on your federal return. For many of us, that causes us to take the standard deduction, rather than itemizing and deducting mortgage interest and real estate taxes, because the standard deduction exceeds the amount we can get by itemizing. The current system is set to expire next year, though in general we can probably be certain it won't just expire with everything going back to the way it was before because that never seems to happen.

If the current system were to remain in place, though, I've wondered to what extent it might cause a societal shift away from home ownership, at least in larger urban areas. The loss, for many people, of the tax benefit from home ownership could well prompt more people to rent, and I've wondered to what extent that might lead to increasing numbers of people renting apartments or condos—which, in turn, in many urban and suburban areas are often concentrated either near subway lines or along major bus routes. Hence why, given your expressed antipathy towards mass transit, I figure you'd favor tax advantages for home ownership to the extent it could increase reliance on cars.

You are assuming that rented homes are always multi-family and multi-family homes are always rented. That's not true, there are single family homes for rent and multi-family homes you can buy.

And for reasons I have explained throughout this thread, those tax advantages almost certainly favor the type of dense, transit rich cities I dislike

I'm not assuming that at all. Notice how I worded my comment: "I've wondered to what extent that might lead to increasing numbers of people renting apartments or condos ...." In other words, while there are all sorts of rental properties on the market, I've wondered to what extent people who decide to rent might decide to rent that particular sort of property instead of buying something larger.

[kernals12]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

I would think you would favor that. One aspect of the current income tax system, as it was amended during the previous administration, is a cap on the amount of state and local taxes you can deduct on your federal return. For many of us, that causes us to take the standard deduction, rather than itemizing and deducting mortgage interest and real estate taxes, because the standard deduction exceeds the amount we can get by itemizing. The current system is set to expire next year, though in general we can probably be certain it won't just expire with everything going back to the way it was before because that never seems to happen.

If the current system were to remain in place, though, I've wondered to what extent it might cause a societal shift away from home ownership, at least in larger urban areas. The loss, for many people, of the tax benefit from home ownership could well prompt more people to rent, and I've wondered to what extent that might lead to increasing numbers of people renting apartments or condos—which, in turn, in many urban and suburban areas are often concentrated either near subway lines or along major bus routes. Hence why, given your expressed antipathy towards mass transit, I figure you'd favor tax advantages for home ownership to the extent it could increase reliance on cars.

You are assuming that rented homes are always multi-family and multi-family homes are always rented. That's not true, there are single family homes for rent and multi-family homes you can buy.

And for reasons I have explained throughout this thread, those tax advantages almost certainly favor the type of dense, transit rich cities I dislike

I'm not assuming that at all. Notice how I worded my comment: "I've wondered to what extent that might lead to increasing numbers of people renting apartments or condos ...." In other words, while there are all sorts of rental properties on the market, I've wondered to what extent people who decide to rent might decide to rent that particular sort of property instead of buying something larger.

Alternatively, it could coax people to buy a home that's the same size, but closer to amenities.

[kalvado]

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

You assume that rent is mostly profit. It's not.
Rent should cover any taxes on real estate, maintenance (which is often more expensive than renters realize), insurances, interest and depreciation on the value of the property - someone paid a lump sum to have that built. Once all that is taken into account, rent may cover risks associated with ownership. 

[LilianaUwU]

can you explain that in Super Mario 64 terms

[kernals12]

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

You assume that rent is mostly profit. It's not.
Rent should cover any taxes on real estate, maintenance (which is often more expensive than renters realize), insurances, interest and depreciation on the value of the property - someone paid a lump sum to have that built. Once all that is taken into account, rent may cover risks associated with ownership. 

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

You assume that rent is mostly profit. It's not.
Rent should cover any taxes on real estate, maintenance (which is often more expensive than renters realize), insurances, interest and depreciation on the value of the property - someone paid a lump sum to have that built. Once all that is taken into account, rent may cover risks associated with ownership. 

We tax the risk premium on all other capital assets (i.e. interest on corporate bonds, dividends from equities)

[kalvado]

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

You assume that rent is mostly profit. It's not.
Rent should cover any taxes on real estate, maintenance (which is often more expensive than renters realize), insurances, interest and depreciation on the value of the property - someone paid a lump sum to have that built. Once all that is taken into account, rent may cover risks associated with ownership. 

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

You assume that rent is mostly profit. It's not.
Rent should cover any taxes on real estate, maintenance (which is often more expensive than renters realize), insurances, interest and depreciation on the value of the property - someone paid a lump sum to have that built. Once all that is taken into account, rent may cover risks associated with ownership. 

We tax the risk premium on all other capital assets (i.e. interest on corporate bonds, dividends from equities)

there is a tax on real estate sale profit, AFAIK. Exactly that.