For most people, a mortgage is, by far, the longest duration loan they will ever take out. In 30 years a lot changes; the general price level rises thanks to inflation, your earnings increase the longer you're in the workforce, and an expanding economy increases land values, but the payment amounts remain the same.
This means that the cost of buying a home are heavily frontloaded, real payments are highest when your income is at its lowest and reach their lowest in your peak earning years. MBS owners also bear a risk of unexpected inflation, such as happened in the last 4 years, lowering the real value of the loan payments, and so they charge higher interest rates to reflect that.
It also means that borrowers bear all of the risk of decreases in property values. 15 years ago, when very large numbers of people were foreclosed on, they remained in debt even after the house had been sold, as the value of the home was less than the face value of the loan.
The flip side is that borrowers bear all of the reward from increases in property values. And the prospect of that drives people to use shady, even illegal tactics. During the 2000s housing bubble, out-of-state investors were getting Arizona license plates so that they could pretend they were buying homes as primary residences rather than investments, allowing a lower interest rate. It also means that housing shortages, such as the one occuring now, means that borrowers see their net worth go up, making them likely to vote for politicians who pass laws that restrict the supply of housing, creating great welfare losses.
All of this can be solved by tying principal and interest amounts to the value of the property. To eliminate the incentive for borrowers to neglect maintenance to lower their mortgage payments and for administrative simplicity, it would be best to use an index of regional home prices to be adjusted annually.
The frontloading of costs is greatly reduced as inflation-induced home price increases also increase payments, keeping them constant in real terms and actually increasing them as land values generally rise faster than inflation. Inflation risk to the lender is eliminated, allowing lower interest rates.
Because, by definition, borrowers would never be "underwater", the default rate is reduced by half in one study (https://dspace.mit.edu/bitstream/handle/1721.1/130490/SSRN-id3069621.pdf?sequence=2&isAllowed=y).
The obsession people have with increasing their property values would also be reduced. The rent-seeking practices of land speculation and house flipping would be curtailed. Voters in communities who support restricting the supply of new housing would be punished by higher mortgage costs.
All this critique from the "non-home owner" is fascinating...
That's our kernals...
Buyers bearing all the risk for their purchases? The horror...
Quote from: kernals12 on May 04, 2024, 11:35:39 PMIt also means that borrowers bear all of the risk of decreases in property values. [...]
The flip side is that borrowers bear all of the reward from increases in property values.
This is what is referred to in game design as "game balance".
This is a terrible idea.
The biggest risk is that the value of the home rises faster than one's income and the borrower can no longer afford the payments.
If the value of the home decreases, the bank doesn't make as much, or possibly loses money on the loan, so the bank eventually quits writing mortgages. Eventually the only people who buy houses are the ones who can afford to pay cash. This also bleeds over into new home construction, so now people start losing construction jobs.
The problem of "front loading of costs" also really isn't a problem. If a borrower takes out a loan and agrees to pay $1,000 per month for 30 years, their cost may be higher in real terms due to inflation, but the nominal cost is the same throughout the life of the loan. The only thing that changes for the borrower is how much interest can be deducted for tax purposes, assuming the borrower can itemize deductions at all.
Remember: banks make money off your debt, not your repayments.
The "obsession" with rising property values isn't going away either. If you could spend a few thousand dollars on your home and get tens of thousands of dollars in return when you sell, why wouldn't you?
Also, house flipping isn't actually a rent-seeking activity. Renovating a house adds real value to the home either in improved comfort, safety, or both. You can argue about whether or not that additional value is priced fairly, but if it isn't, the market responds by the property not selling quickly.
If you want to get rid of land speculation, implement a land value tax. Those who hold land waiting for future development would have no incentive to do so and sell to the actual end user.
I got a 6% mortgage 20 years ago. I looked into a refi when the rates bottomed out but the banks either turned me down or made me jump through more hoops than I wanted to go through, so I stuck it out. Glad I did. I paid ahead on principal early on and in a few years I will be debt free.
Bad thing is the Texas property taxes by that time will be like paying a monthly mortgage, so I will either be renting or moving out of state.
Quote from: tidecat on May 05, 2024, 12:40:18 AMThe biggest risk is that the value of the home rises faster than one's income and the borrower can no longer afford the payments.
If that happens, the bank forecloses, sells the home at its higher value, and they still make money. Today, mortgage default rates generally go up when property values decline and investors don't recover all of the loan.
Quote from: tidecat on May 05, 2024, 12:40:18 AMIf the value of the home decreases, the bank doesn't make as much, or possibly loses money on the loan, so the bank eventually quits writing mortgages. Eventually the only people who buy houses are the ones who can afford to pay cash. This also bleeds over into new home construction, so now people start losing construction jobs.
Home values are far less volatile than stock prices, but people still invest in the latter.
Quote from: tidecat on May 05, 2024, 12:40:18 AMIf you want to get rid of land speculation, implement a land value tax. Those who hold land waiting for future development would have no incentive to do so and sell to the actual end user.
People really, really hate property taxes
Quote from: tidecat on May 05, 2024, 12:40:18 AMThe problem of "front loading of costs" also really isn't a problem. If a borrower takes out a loan and agrees to pay $1,000 per month for 30 years, their cost may be higher in real terms due to inflation, but the nominal cost is the same throughout the life of the loan. The only thing that changes for the borrower is how much interest can be deducted for tax purposes, assuming the borrower can itemize deductions at all.
The whole point of credit is to smooth out differences in one's income. The present fixed payment mortgage means that payments are much higher as a percent of income at the beginning then at the end.
Quote from: Rothman on May 04, 2024, 11:40:56 PMBuyers bearing all the risk for their purchases? The horror...
Except that the purchase isn't really theirs until they pay it off after 30 years.
Is it about balloon payment?
So if I buy a house in an area that suddenly booms, my mortgage payments would increase, and the bank would make more money? How on earth is that a good idea?
In reality what would happen is that people would be forced out of their homes.
Quote from: SEWIGuy on May 05, 2024, 07:37:54 AMSo if I buy a house in an area that suddenly booms, my mortgage payments would increase, and the bank would make more money? How on earth is that a good idea?
In reality what would happen is that people would be forced out of their homes.
And if you live in an area that suddenly tanks, your mortgage payments would drop.
So, how do you view mortgage in general? Right now, it's a loan with certain financial terms - interest rate, payoff period etc. Real estate component is just backing the loan for bank's "peace of mind". Risks of property ownership are still on a borrower, abet insurance is required.
You propose to tie in real estate much deeper into the equation. Can you describe full legal framework? What are the right of the bank in this scheme?
Quote from: kernals12 on May 05, 2024, 08:05:19 AMQuote from: SEWIGuy on May 05, 2024, 07:37:54 AMSo if I buy a house in an area that suddenly booms, my mortgage payments would increase, and the bank would make more money? How on earth is that a good idea?
In reality what would happen is that people would be forced out of their homes.
And if you live in an area that suddenly tanks, your mortgage payments would drop.
So? I don't think the bank should be short-changed either.
Quote from: kalvado on May 05, 2024, 08:15:24 AMSo, how do you view mortgage in general? Right now, it's a loan with certain financial terms - interest rate, payoff period etc. Real estate component is just backing the loan for bank's "peace of mind". Risks of property ownership are still on a borrower, abet insurance is required.
You propose to tie in real estate much deeper into the equation. Can you describe full legal framework? What are the right of the bank in this scheme?
It would turn mortgages into a more equity-like product, the value of them would rise and fall with the value of the underlying asset.
If a borrower defaults, then the bank forecloses, sells the house and makes a profit or loss equal to their share of the equity.
Quote from: kernals12 on May 05, 2024, 08:27:16 AMQuote from: kalvado on May 05, 2024, 08:15:24 AMSo, how do you view mortgage in general? Right now, it's a loan with certain financial terms - interest rate, payoff period etc. Real estate component is just backing the loan for bank's "peace of mind". Risks of property ownership are still on a borrower, abet insurance is required.
You propose to tie in real estate much deeper into the equation. Can you describe full legal framework? What are the right of the bank in this scheme?
It would turn mortgages into a more equity-like product, the value of them would rise and fall with the value of the underlying asset.
If a borrower defaults, then the bank forecloses, sells the house and makes a profit or loss equal to their share of the equity.
A mortagage should not be an "equity like product." A house should be. A mortage is just a loan.
Quote from: SEWIGuy on May 05, 2024, 08:48:16 AMQuote from: kernals12 on May 05, 2024, 08:27:16 AMQuote from: kalvado on May 05, 2024, 08:15:24 AMSo, how do you view mortgage in general? Right now, it's a loan with certain financial terms - interest rate, payoff period etc. Real estate component is just backing the loan for bank's "peace of mind". Risks of property ownership are still on a borrower, abet insurance is required.
You propose to tie in real estate much deeper into the equation. Can you describe full legal framework? What are the right of the bank in this scheme?
It would turn mortgages into a more equity-like product, the value of them would rise and fall with the value of the underlying asset.
If a borrower defaults, then the bank forecloses, sells the house and makes a profit or loss equal to their share of the equity.
A mortagage should not be an "equity like product." A house should be. A mortage is just a loan.
Any financial advisor will tell you that you need to have a diverse portfolio. Having hundreds of thousands of dollars tied up in a single asset is not a diverse portfolio.
Quote from: kernals12 on May 05, 2024, 08:52:09 AMQuote from: SEWIGuy on May 05, 2024, 08:48:16 AMQuote from: kernals12 on May 05, 2024, 08:27:16 AMQuote from: kalvado on May 05, 2024, 08:15:24 AMSo, how do you view mortgage in general? Right now, it's a loan with certain financial terms - interest rate, payoff period etc. Real estate component is just backing the loan for bank's "peace of mind". Risks of property ownership are still on a borrower, abet insurance is required.
You propose to tie in real estate much deeper into the equation. Can you describe full legal framework? What are the right of the bank in this scheme?
It would turn mortgages into a more equity-like product, the value of them would rise and fall with the value of the underlying asset.
If a borrower defaults, then the bank forecloses, sells the house and makes a profit or loss equal to their share of the equity.
A mortagage should not be an "equity like product." A house should be. A mortage is just a loan.
Any financial advisor will tell you that you need to have a diverse portfolio. Having hundreds of thousands of dollars tied up in a single asset is not a diverse portfolio.
But you are suggesting that it would be better to create more uncertainty around that asset because you don't know what it will ultimately cost you. You are suggesting that people should commit to paying for an asset for as much as 30 years without any knowledge of the true cost of that asset when you make that commitment. No financial advisor would think that is a good idea.
And you are also overlooking the fact that part of why you take out a mortgage is because you are paying for a place to live.
This is just a really bad and impractical idea.
The short period of little nonsense on the forum we had was quite pleasant. I feel naive in my previous belief (however accidentally adopted) that a return to crap like this was not inevitable at some point.
Quote from: SEWIGuy on May 05, 2024, 09:00:31 AMQuote from: kernals12 on May 05, 2024, 08:52:09 AMQuote from: SEWIGuy on May 05, 2024, 08:48:16 AMQuote from: kernals12 on May 05, 2024, 08:27:16 AMQuote from: kalvado on May 05, 2024, 08:15:24 AMSo, how do you view mortgage in general? Right now, it's a loan with certain financial terms - interest rate, payoff period etc. Real estate component is just backing the loan for bank's "peace of mind". Risks of property ownership are still on a borrower, abet insurance is required.
You propose to tie in real estate much deeper into the equation. Can you describe full legal framework? What are the right of the bank in this scheme?
It would turn mortgages into a more equity-like product, the value of them would rise and fall with the value of the underlying asset.
If a borrower defaults, then the bank forecloses, sells the house and makes a profit or loss equal to their share of the equity.
A mortagage should not be an "equity like product." A house should be. A mortage is just a loan.
Any financial advisor will tell you that you need to have a diverse portfolio. Having hundreds of thousands of dollars tied up in a single asset is not a diverse portfolio.
But you are suggesting that it would be better to create more uncertainty around that asset because you don't know what it will ultimately cost you. You are suggesting that people should commit to paying for an asset for as much as 30 years without any knowledge of the true cost of that asset when you make that commitment. No financial advisor would think that is a good idea.
And you are also overlooking the fact that part of why you take out a mortgage is because you are paying for a place to live.
This is just a really bad and impractical idea.
I linked to a study showing that this kind of mortgage would *halve* the number of foreclosures.
And reduce by 75% the amount of people willing to build a house since they wouldn't have any idea how much it would cost in five years.
Quote from: kernals12 on May 05, 2024, 09:33:11 AMQuote from: SEWIGuy on May 05, 2024, 09:00:31 AMQuote from: kernals12 on May 05, 2024, 08:52:09 AMQuote from: SEWIGuy on May 05, 2024, 08:48:16 AMQuote from: kernals12 on May 05, 2024, 08:27:16 AMQuote from: kalvado on May 05, 2024, 08:15:24 AMSo, how do you view mortgage in general? Right now, it's a loan with certain financial terms - interest rate, payoff period etc. Real estate component is just backing the loan for bank's "peace of mind". Risks of property ownership are still on a borrower, abet insurance is required.
You propose to tie in real estate much deeper into the equation. Can you describe full legal framework? What are the right of the bank in this scheme?
It would turn mortgages into a more equity-like product, the value of them would rise and fall with the value of the underlying asset.
If a borrower defaults, then the bank forecloses, sells the house and makes a profit or loss equal to their share of the equity.
A mortagage should not be an "equity like product." A house should be. A mortage is just a loan.
Any financial advisor will tell you that you need to have a diverse portfolio. Having hundreds of thousands of dollars tied up in a single asset is not a diverse portfolio.
But you are suggesting that it would be better to create more uncertainty around that asset because you don't know what it will ultimately cost you. You are suggesting that people should commit to paying for an asset for as much as 30 years without any knowledge of the true cost of that asset when you make that commitment. No financial advisor would think that is a good idea.
And you are also overlooking the fact that part of why you take out a mortgage is because you are paying for a place to live.
This is just a really bad and impractical idea.
I linked to a study showing that this kind of mortgage would *halve* the number of foreclosures.
Right. Because it would reduce the number of people who would apply or would qualify for a mortgage.
Furthermore I think reducing foreclosures, which aren't much of a problem, shouldn't be the ultimate goal of our mortgage policy.
Quote from: kernals12 on May 05, 2024, 08:52:09 AMQuote from: SEWIGuy on May 05, 2024, 08:48:16 AMQuote from: kernals12 on May 05, 2024, 08:27:16 AMQuote from: kalvado on May 05, 2024, 08:15:24 AMSo, how do you view mortgage in general? Right now, it's a loan with certain financial terms - interest rate, payoff period etc. Real estate component is just backing the loan for bank's "peace of mind". Risks of property ownership are still on a borrower, abet insurance is required.
You propose to tie in real estate much deeper into the equation. Can you describe full legal framework? What are the right of the bank in this scheme?
It would turn mortgages into a more equity-like product, the value of them would rise and fall with the value of the underlying asset.
If a borrower defaults, then the bank forecloses, sells the house and makes a profit or loss equal to their share of the equity.
A mortagage should not be an "equity like product." A house should be. A mortage is just a loan.
Any financial advisor will tell you that you need to have a diverse portfolio. Having hundreds of thousands of dollars tied up in a single asset is not a diverse portfolio.
To diverse the portfolio, someone can buy more housing in areas of increasing crime and decay. The more boarded up housing, squatters and drug dens, the better.
That's what my brother did in Indianapolis. I kept calling him a slim lord for years after he sold. Can't deny the fact that he made some money off of, even though it was a questionable act.
Quote from: Max Rockatansky on May 05, 2024, 10:51:37 AMThat's what my brother did in Indianapolis. I kept calling him a slim lord for years after he sold. Can't deny the fact that he made some money off of, even though it was a questionable act.
If they have some insight into the future and can see an area that may gentrify, they can make some money. But in the meantime, they just hope their asset isn't destroyed.
Quote from: kernals12 on May 05, 2024, 11:07:55 AMQuote from: JayhawkCO on May 05, 2024, 09:41:56 AMAnd reduce by 75% the amount of people willing to build a house since they wouldn't have any idea how much it would cost in five years.
The only thing that's certain in life is death and taxes. By taking away much of the potential profits from speculation, this type of mortgage should dampen changes in home prices.
Why is that a good thing? I'm not exactly a capitalism absolutist, but appreciation in and if itself is not something to avoid.
Quote from: JayhawkCO on May 05, 2024, 11:13:41 AMQuote from: kernals12 on May 05, 2024, 11:07:55 AMQuote from: JayhawkCO on May 05, 2024, 09:41:56 AMAnd reduce by 75% the amount of people willing to build a house since they wouldn't have any idea how much it would cost in five years.
The only thing that's certain in life is death and taxes. By taking away much of the potential profits from speculation, this type of mortgage should dampen changes in home prices.
Why is that a good thing? I'm not exactly a capitalism absolutist, but appreciation in and if itself is not something to avoid.
It is something to avoid if you're a first time homebuyer who doesn't have an existing house to sell at an inflated price to finance the purchase of another one.
Quote from: kernals12 on May 05, 2024, 11:21:42 AMQuote from: JayhawkCO on May 05, 2024, 11:13:41 AMQuote from: kernals12 on May 05, 2024, 11:07:55 AMQuote from: JayhawkCO on May 05, 2024, 09:41:56 AMAnd reduce by 75% the amount of people willing to build a house since they wouldn't have any idea how much it would cost in five years.
The only thing that's certain in life is death and taxes. By taking away much of the potential profits from speculation, this type of mortgage should dampen changes in home prices.
Why is that a good thing? I'm not exactly a capitalism absolutist, but appreciation in and if itself is not something to avoid.
It is something to avoid if you're a first time homebuyer who doesn't have an existing house to sell at an inflated price to finance the purchase of another one.
While I understand that home ownership is a large contributor to the wealth gap, there are plenty of places in the country where you can move and be able to afford a house if that's what you want to do.
And there's nothing "inflated" about the price. Prices change based on market conditions. Sometimes the prices of homes go down, too. My house is down about $40k from its peak value in 2021.
I find it annoying enough under the existing system when the mortgage payment goes up because of real estate tax, which in turn raises the escrow payment. Over the years I've figured out how to come close to estimating what the new escrow amount is likely to be and then making a lump payment in advance to minimize the increase in the monthly amount, but it's almost impossible to avoid some sort of increase except in a year when the real estate assessment decreases—which has happened exactly once and the monthly payment dropped by $21 that year. (I kept on paying the same amount anyway—reduce the outstanding principal.)
My house's assessed value has gone up by about $460,000 since I bought it, although most houses around here sell for more than the assessment such that the current assessment is likely a bit low. Why should the mortgage company be entitled to anything more than the interest I contracted to pay them when I took out the loan? If the payment had shot up just because of a hot real estate market, I'd have lost the house in 2009 when I was out of work for a while and living off money I had saved up at my previous job.
Quote from: kernals12 on May 04, 2024, 11:35:39 PM... In 30 years a lot changes; the general price level rises thanks to inflation, your earnings increase the longer you're in the workforce, ....
The boldfaced is an unwarranted assumption.
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.
Quote from: 1995hoo on May 05, 2024, 11:31:14 AMIf the payment had shot up just because of a hot real estate market, I'd have lost the house in 2009 when I was out of work for a while and living off money I had saved up at my previous job.
Your being laid off was likely connected to the recession that happened that year due to the collapse of the housing market. In this counterfactual world, your mortgage payments would've gone down, giving you more money to spend just when you needed it most. Economists would call this a "countercyclical effect" as it dampens the impact of economic swings.
Quote from: JayhawkCO on May 05, 2024, 11:13:41 AMQuote from: kernals12 on May 05, 2024, 11:07:55 AMQuote from: JayhawkCO on May 05, 2024, 09:41:56 AMAnd reduce by 75% the amount of people willing to build a house since they wouldn't have any idea how much it would cost in five years.
The only thing that's certain in life is death and taxes. By taking away much of the potential profits from speculation, this type of mortgage should dampen changes in home prices.
Why is that a good thing? I'm not exactly a capitalism absolutist, but appreciation in and if itself is not something to avoid.
... and it wouldn't achieve the stated goal. The super-rich, who
can afford to speculate and pay cash, would simply buy low and sell high to someone who would be willing to accept an indexed mortgage scheme. The only way to keep people from speculating is to ban private ownership (in which case the commune is speculating). If that happens, no one is building (or even maintaining) houses, except under the threat of the whip. -- Next Idea?!
Quote from: jeffandnicole on May 05, 2024, 11:06:57 AMQuote from: Max Rockatansky on May 05, 2024, 10:51:37 AMThat's what my brother did in Indianapolis. I kept calling him a slim lord for years after he sold. Can't deny the fact that he made some money off of, even though it was a questionable act.
If they have some insight into the future and can see an area that may gentrify, they can make some money. But in the meantime, they just hope their asset isn't destroyed.
In his case the angle was renovation (involving eviction) which led to gentrification. It actually worked too given it was a downtown area. He asked if I was interested in investing in it but wasn't my bag.
Quote from: JayhawkCO on May 05, 2024, 11:28:22 AMQuote from: kernals12 on May 05, 2024, 11:21:42 AMQuote from: JayhawkCO on May 05, 2024, 11:13:41 AMQuote from: kernals12 on May 05, 2024, 11:07:55 AMQuote from: JayhawkCO on May 05, 2024, 09:41:56 AMAnd reduce by 75% the amount of people willing to build a house since they wouldn't have any idea how much it would cost in five years.
The only thing that's certain in life is death and taxes. By taking away much of the potential profits from speculation, this type of mortgage should dampen changes in home prices.
Why is that a good thing? I'm not exactly a capitalism absolutist, but appreciation in and if itself is not something to avoid.
It is something to avoid if you're a first time homebuyer who doesn't have an existing house to sell at an inflated price to finance the purchase of another one.
While I understand that home ownership is a large contributor to the wealth gap, there are plenty of places in the country where you can move and be able to afford a house if that's what you want to do.
And there's nothing "inflated" about the price. Prices change based on market conditions. Sometimes the prices of homes go down, too. My house is down about $40k from its peak value in 2021.
The house I owned during the pre-bubble era had a county assessed value of $575,000 in 2007. Just last year it reached the approximate same numeric value. It would need to be valued at approximately $866,000 to pace the value it had in 2007 with inflation factored.
Kernals did you go to BU by chance? It just sounds like something you would learn in their econ dept.
Quote from: SectorZ on May 05, 2024, 12:45:18 PMKernals did you go to BU by chance? It just sounds like something you would learn in their econ dept.
Umm, procyclical and countercyclical policies are a very fundamental element of orthodox economic study.
Suppose you got a new 30 year mortgage with a $2000 payment (principal and interest only for this illustration - taxes and insurance are extra).
Somewhere around $1800 of that payment would go toward interest.
Now suppose you have a reduced payment in the early years of the mortgage, paying more in later years. So you pay $1700 per month.
You would be going $100 in the hole each month! Your payments wouldn't even cover the interest, so your principle would be going up. What bank would gamble on that, knowing that not until some time in the future would you end up paying enough to cover the cost of the original loan? And that assumes that both your house value and your income continue to rise. Clearly not the case for everyone.
Quote from: GaryV on May 05, 2024, 01:31:28 PMSuppose you got a new 30 year mortgage with a $2000 payment (principal and interest only for this illustration - taxes and insurance are extra).
Somewhere around $1800 of that payment would go toward interest.
Now suppose you have a reduced payment in the early years of the mortgage, paying more in later years. So you pay $1700 per month.
You would be going $100 in the hole each month! Your payments wouldn't even cover the interest, so your principle would be going up. What bank would gamble on that, knowing that not until some time in the future would you end up paying enough to cover the cost of the original loan? And that assumes that both your house value and your income continue to rise. Clearly not the case for everyone.
I assume the idea is that things are close to rent-to-own where asking for, say, 5% of building cost annually is reasonable.
Probably scaling principal amount to market conditions is assumed as a basis.
Quote from: GaryV on May 05, 2024, 01:31:28 PMSuppose you got a new 30 year mortgage with a $2000 payment (principal and interest only for this illustration - taxes and insurance are extra).
Somewhere around $1800 of that payment would go toward interest.
Now suppose you have a reduced payment in the early years of the mortgage, paying more in later years. So you pay $1700 per month.
You would be going $100 in the hole each month! Your payments wouldn't even cover the interest, so your principle would be going up. What bank would gamble on that, knowing that not until some time in the future would you end up paying enough to cover the cost of the original loan? And that assumes that both your house value and your income continue to rise. Clearly not the case for everyone.
It is the case for almost everyone, and that's what matters to lenders.
And financial institutions regularly "gamble" in far riskier ways than this.
Quote from: kernals12 on May 05, 2024, 01:01:07 PMQuote from: SectorZ on May 05, 2024, 12:45:18 PMKernals did you go to BU by chance? It just sounds like something you would learn in their econ dept.
Umm, procyclical and countercyclical policies are a very fundamental element of orthodox economic study.
If you can't dazzle them with genius, then baffle them with bullshit.
This notion of indexing mortgage payments based on assessed value is nuts. It sounds as bad or maybe even worse than signing up for an Adjustable Rate Mortgage (ARM). Anyone would have to be eating stupid pills by the fist full if they wanted to finance a home with a ARM and actually live in the home for any long term amount of time (as opposed to renovating and flipping the thing).
The nice thing about a traditional 30 year fixed rate mortgage is the payments get easier to make through the years due to dollar inflation and one's own earnings increases. Hopefully those gains aren't offset by onerous hikes in property taxes.
For all the schemes going on to game the residential real estate market, a bunch of this crap can go on for only so much longer. The US is in a very absurd housing price bubble. Some market experts are trying to insist this is the new normal, but it is mathematically NOT sustainable. 70% of our economy is driven by consumer spending. When you have low income and middle income people spending 50%, 60% or 70% of their incomes on mortgage payments or rent it leaves very little money left over to buy stuff. Some warning signs are already present with certain dollar store chains failing and companies like McDonald's reporting serious downturns in customer traffic. That economic rot happening at the bottom always has a nasty way of working itself upward.
With the US residential real estate market currently being used as an investors playground it's possible for this bad math situation in home mortgage/rent prices to continue for years to come. But it's just going to delay consequences that will be far worse and inflict economic pain that will last for many years. These investors and policy makers have created conditions ripe for the United States to have an utter collapse of fertility rates and just crater our nation's future demographics. In the US only 25% of adults aged 30 and younger have 1 or more children. That number was 60% back in the 1990's. The decline can get a lot worse. Tens of millions of young adults are being priced out of parenthood. America's divorce rate is falling, but that's only because fewer people are getting married.
What do falling birth rates and demographic decline have to do with this topic? Every person who buys a home has the thought in his head that he'll be able to sell it and sell it for a profit sometime in the distant future. What are these home owners and investors going to do when they don't have any buyers?
I don't live in a high income city, but all the new homes getting built here on the far East and West sides of Lawton are big homes for people with six figure incomes. Nearly all the buyers are middle-age and retired-age people. 20 years from now those same homes might be sitting empty. What would a single unmarried person with no kids need with a 3000 square foot McMansion that comes with 3000 square foot utility bills and 3000 square foot property taxes? We have a massive shortage of small houses for single people or couples without kids. And it's hard to build those kinds of houses anywhere thanks to zoning politics. That's yet another thing that's eventually going to kill a generation worth of home ownership and make our emerging baby bust all that much worse.
Quote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: Bobby5280 on May 05, 2024, 02:40:37 PMThis notion of indexing mortgage payments based on assessed value is nuts. It sounds as bad or maybe even worse than signing up for an Adjustable Rate Mortgage (ARM). Anyone would have to be eating stupid pills by the fist full if they wanted to finance a home with a ARM and actually live in the home for any long term amount of time (as opposed to renovating and flipping the thing).
The nice thing about a traditional 30 year fixed rate mortgage is the payments get easier to make through the years due to dollar inflation and one's own earnings increases. Hopefully those gains aren't offset by onerous hikes in property taxes.
For all the schemes going on to game the residential real estate market, a bunch of this crap can go on for only so much longer. The US is in a very absurd housing price bubble. Some market experts are trying to insist this is the new normal, but it is mathematically NOT sustainable. 70% of our economy is driven by consumer spending. When you have low income and middle income people spending 50%, 60% or 70% of their incomes on mortgage payments or rent it leaves very little money left over to buy stuff. Some warning signs are already present with certain dollar store chains failing and companies like McDonald's reporting serious downturns in customer traffic. That economic rot happening at the bottom always has a nasty way of working itself upward.
With the US residential real estate market currently being used as an investors playground it's possible for this bad math situation in home mortgage/rent prices to continue for years to come. But it's just going to delay consequences that will be far worse and inflict economic pain that will last for many years. These investors and policy makers have created conditions ripe for the United States to have an utter collapse of fertility rates and just crater our nation's future demographics. In the US only 25% of adults aged 30 and younger have 1 or more children. That number was 60% back in the 1990's. The decline can get a lot worse. Tens of millions of young adults are being priced out of parenthood. America's divorce rate is falling, but that's only because fewer people are getting married.
What do falling birth rates and demographic decline have to do with this topic? Every person who buys a home has the thought in his head that he'll be able to sell it and sell it for a profit sometime in the distant future. What are these home owners and investors going to do when they don't have any buyers?
I don't live in a high income city, but all the new homes getting built here on the far East and West sides of Lawton are big homes for people with six figure incomes. Nearly all the buyers are middle-age and retired-age people. 20 years from now those same homes might be sitting empty. What would a single unmarried person with no kids need with a 3000 square foot McMansion that comes with 3000 square foot utility bills and 3000 square foot property taxes? We have a massive shortage of small houses for single people or couples without kids. And it's hard to build those kinds of houses anywhere thanks to zoning politics. That's yet another thing that's eventually going to kill a generation worth of home ownership and make our emerging baby bust all that much worse.
Birthrate declines will be more than made up by net immigration.
Quote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: GaryV on May 05, 2024, 01:31:28 PMSuppose you got a new 30 year mortgage with a $2000 payment (principal and interest only for this illustration - taxes and insurance are extra).
Somewhere around $1800 of that payment would go toward interest.
Now suppose you have a reduced payment in the early years of the mortgage, paying more in later years. So you pay $1700 per month.
You would be going $100 in the hole each month! Your payments wouldn't even cover the interest, so your principle would be going up. What bank would gamble on that, knowing that not until some time in the future would you end up paying enough to cover the cost of the original loan? And that assumes that both your house value and your income continue to rise. Clearly not the case for everyone.
This is a fairly good, simple website to calculate the amortization schedule, which allows you to look at just principal & interest if you knock down the other rates, taxes & fees to 0. https://www.amortization-calc.com/mortgage-calculator/
Quote from: michravera on May 05, 2024, 05:10:12 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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?
Quote from: SEWIGuyBirthrate declines will be more than made up by net immigration.
This nation might not be able to take the immigration factor for granted much longer.
For the past 50 years all of America's net increases in population have been made possible by immigration. In the early 1970's the total fertility rate of American-born women of all races fell to an average near 2.1 children per female, which is equal to the replacement level. TFR hovered near that level until the mid 2000's and has been steadily dropping since. Immigrants who come to America now are also having fewer children.
Currently there is a lot of anti-immigrant hysteria present in our country. The possibility of mass deportations following the November election could dramatically reduce all types of immigration. The free and open nature of our society helps attract a great deal of high skilled legal immigrants. If America's government turns into a dictatorship of some type that sort of immigration will be greatly reduced. Finally, if America's economy tanks itself that will also reduce immigration. A bunch of this nation's wealth is tied up in the housing market. If future generations are suddenly much smaller that will lead to a far smaller pool of future home buyers.
Quote from: Bobby5280 on May 05, 2024, 06:29:24 PMQuote from: SEWIGuyBirthrate declines will be more than made up by net immigration.
This nation might not be able to take the immigration factor for granted much longer.
For the past 50 years all of America's net increases in population have been made possible by immigration. In the early 1970's the total fertility rate of American-born women of all races fell to an average near 2.1 children per female, which is equal to the replacement level. TFR hovered near that level until the mid 2000's and has been steadily dropping since. Immigrants who come to America now are also having fewer children.
Currently there is a lot of anti-immigrant hysteria present in our country. The possibility of mass deportations following the November election could dramatically reduce all types of immigration. The free and open nature of our society helps attract a great deal of high skilled legal immigrants. If America's government turns into a dictatorship of some type that sort of immigration will be greatly reduced. Finally, if America's economy tanks itself that will also reduce immigration. A bunch of this nation's wealth is tied up in the housing market. If future generations are suddenly much smaller that will lead to a far smaller pool of future home buyers.
There will not be "mass deportations" no matter who wins in November. And there will still be plenty who want to come here.
How the fuck did dictatorships get into the conversation?
Quote from: SEWIGuy on May 05, 2024, 07:11:13 PMQuote from: Bobby5280 on May 05, 2024, 06:29:24 PMQuote from: SEWIGuyBirthrate declines will be more than made up by net immigration.
This nation might not be able to take the immigration factor for granted much longer.
For the past 50 years all of America's net increases in population have been made possible by immigration. In the early 1970's the total fertility rate of American-born women of all races fell to an average near 2.1 children per female, which is equal to the replacement level. TFR hovered near that level until the mid 2000's and has been steadily dropping since. Immigrants who come to America now are also having fewer children.
Currently there is a lot of anti-immigrant hysteria present in our country. The possibility of mass deportations following the November election could dramatically reduce all types of immigration. The free and open nature of our society helps attract a great deal of high skilled legal immigrants. If America's government turns into a dictatorship of some type that sort of immigration will be greatly reduced. Finally, if America's economy tanks itself that will also reduce immigration. A bunch of this nation's wealth is tied up in the housing market. If future generations are suddenly much smaller that will lead to a far smaller pool of future home buyers.
There will not be "mass deportations" no matter who wins in November. And there will still be plenty who want to come here.
Economy is certainly a big factor for immigration. When/if significant problems would occur, an outflow instead of inflow is pretty much expected.
Quote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Huh. Are you catching on yet?
Quote from: SEWIGuy on May 05, 2024, 05:58:10 PMQuote from: michravera on May 05, 2024, 05:10:12 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: Max Rockatansky on May 05, 2024, 07:54:03 PMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: michravera on May 05, 2024, 07:51:47 PMQuote from: SEWIGuy on May 05, 2024, 05:58:10 PMQuote from: michravera on May 05, 2024, 05:10:12 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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
Quote from: kernals12 on May 05, 2024, 08:27:38 PMQuote from: Max Rockatansky on May 05, 2024, 07:54:03 PMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: Max Rockatansky on May 05, 2024, 08:34:12 PMQuote from: kernals12 on May 05, 2024, 08:27:38 PMQuote from: Max Rockatansky on May 05, 2024, 07:54:03 PMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: kernals12 on May 05, 2024, 08:38:32 PMQuote from: Max Rockatansky on May 05, 2024, 08:34:12 PMQuote from: kernals12 on May 05, 2024, 08:27:38 PMQuote from: Max Rockatansky on May 05, 2024, 07:54:03 PMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: Max Rockatansky on May 05, 2024, 08:47:34 PMQuote from: kernals12 on May 05, 2024, 08:38:32 PMQuote from: Max Rockatansky on May 05, 2024, 08:34:12 PMQuote from: kernals12 on May 05, 2024, 08:27:38 PMQuote from: Max Rockatansky on May 05, 2024, 07:54:03 PMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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
Quote from: kernals12 on May 05, 2024, 09:39:20 PMQuote from: Max Rockatansky on May 05, 2024, 08:47:34 PMQuote from: kernals12 on May 05, 2024, 08:38:32 PMQuote from: Max Rockatansky on May 05, 2024, 08:34:12 PMQuote from: kernals12 on May 05, 2024, 08:27:38 PMQuote from: Max Rockatansky on May 05, 2024, 07:54:03 PMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
I like cake.
Quote from: Max Rockatansky on May 05, 2024, 09:44:33 PMQuote from: kernals12 on May 05, 2024, 09:39:20 PMQuote from: Max Rockatansky on May 05, 2024, 08:47:34 PMQuote from: kernals12 on May 05, 2024, 08:38:32 PMQuote from: Max Rockatansky on May 05, 2024, 08:34:12 PMQuote from: kernals12 on May 05, 2024, 08:27:38 PMQuote from: Max Rockatansky on May 05, 2024, 07:54:03 PMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: kernals12 on May 05, 2024, 10:31:12 PMQuote from: Max Rockatansky on May 05, 2024, 09:44:33 PMQuote from: kernals12 on May 05, 2024, 09:39:20 PMQuote from: Max Rockatansky on May 05, 2024, 08:47:34 PMQuote from: kernals12 on May 05, 2024, 08:38:32 PMQuote from: Max Rockatansky on May 05, 2024, 08:34:12 PMQuote from: kernals12 on May 05, 2024, 08:27:38 PMQuote from: Max Rockatansky on May 05, 2024, 07:54:03 PMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: 1995hoo on May 06, 2024, 10:33:20 AMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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..
Quote from: 1995hoo on May 06, 2024, 10:33:20 AMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: 1995hoo on May 06, 2024, 10:33:20 AMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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
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.
Quote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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.
Quote from: kernals12 on May 06, 2024, 11:13:55 AMQuote from: 1995hoo on May 06, 2024, 10:33:20 AMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: 1995hoo on May 06, 2024, 11:17:24 AMQuote from: kernals12 on May 06, 2024, 11:13:55 AMQuote from: 1995hoo on May 06, 2024, 10:33:20 AMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Quote from: kernals12 on May 06, 2024, 11:17:16 AMQuote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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.
can you explain that in Super Mario 64 terms
Quote from: kalvado on May 06, 2024, 11:33:15 AMQuote from: kernals12 on May 06, 2024, 11:17:16 AMQuote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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.
Quote from: kalvado on May 06, 2024, 11:33:15 AMQuote from: kernals12 on May 06, 2024, 11:17:16 AMQuote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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)
Quote from: kernals12 on May 06, 2024, 11:44:29 AMQuote from: kalvado on May 06, 2024, 11:33:15 AMQuote from: kernals12 on May 06, 2024, 11:17:16 AMQuote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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.
Quote from: kalvado on May 06, 2024, 11:33:15 AMQuote from: kernals12 on May 06, 2024, 11:17:16 AMQuote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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.
Quote from: kalvado on May 06, 2024, 11:47:41 AMQuote from: kernals12 on May 06, 2024, 11:44:29 AMQuote from: kalvado on May 06, 2024, 11:33:15 AMQuote from: kernals12 on May 06, 2024, 11:17:16 AMQuote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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.
Quote from: kalvado on May 06, 2024, 11:33:15 AMQuote from: kernals12 on May 06, 2024, 11:17:16 AMQuote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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.
Not on the first $250,000 in gain ($500,000 if married) primary residence owned for more than one year.
Quote from: SEWIGuy on May 06, 2024, 12:08:54 PMQuote from: kalvado on May 06, 2024, 11:47:41 AMQuote from: kernals12 on May 06, 2024, 11:44:29 AMQuote from: kalvado on May 06, 2024, 11:33:15 AMQuote from: kernals12 on May 06, 2024, 11:17:16 AMQuote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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.
Quote from: kalvado on May 06, 2024, 11:33:15 AMQuote from: kernals12 on May 06, 2024, 11:17:16 AMQuote from: SEWIGuy on May 06, 2024, 11:14:17 AMWell 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.
Not on the first $250,000 in gain ($500,000 if married) primary residence owned for more than one year.
And even without an exemption, there's still the benefit of deferral.
Quote from: 1995hoo on May 06, 2024, 10:33:20 AMQuote from: kernals12 on May 05, 2024, 07:32:07 PMQuote from: SEWIGuy on May 05, 2024, 02:46:06 PMQuote from: kernals12 on May 05, 2024, 11:33:00 AMThe 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.
Deducting the mortgage interest on one's HOUSE from income taxes simply means that you are paying that interest with pre tax rather than post tax money, still a bad deal. The best ting for you is to make the interest cost as low as possible regardless. "I've got this massive tax deduction every year!!" ("but you still have an even more massive debt expense that you are servicing").
Mike
Well, in the grand scheme of things, someone invested into home being built; and that someone wants to collect the interest either as rental income or as a reduced cost of personal residence.
If someone else has no capital to invest... it's called capitalism after all.
there are only different combinations of who owns it - resident, bank, landlord. Government ownership is another option, though, but may be too big can of worms to talk about.
Quote from: JayhawkCO on May 06, 2024, 10:57:37 AMQuote from: Rothman on May 05, 2024, 09:56:57 PMI like cake.
I like eating, too.
What else would one do with cake?
So...you can have your cake and eat it, too...
Quote from: kernals12 on May 04, 2024, 11:35:39 PMFor most people, a mortgage is, by far, the longest duration loan they will ever take out. In 30 years a lot changes; the general price level rises thanks to inflation, your earnings increase the longer you're in the workforce, and an expanding economy increases land values, but the payment amounts remain the same.
That assumes that everyone takes out a 30 year mortgage. Nope, I have a 15 year mortgage that will be paid off in ten. And yes, there are ten and twenty year fixed mortgages, not to mention adjustable rate mortgages.
Also, the "payments remain the same" only works if you have a fixed interest rate and no escrow account for property taxes and homeowners insurance. So, yup, at the cost of interest, I have escrow account to ensure that property insurance and taxes are paid, thus I get a yearly statement around March with the adjusted escrow payment.
Quote from: kernals12 on May 04, 2024, 11:35:39 PMIt also means that borrowers bear all of the risk of decreases in property values. 15 years ago, when very large numbers of people were foreclosed on, they remained in debt even after the house had been sold, as the value of the home was less than the face value of the loan.
Fifteen years ago makes it 2009. In that surreal estate period before that, there were too many NINA (No Income No Asset) mortgages as well as interest-only mortgages where the borrow only paid the interest for several years in the hopes of refinancing when the home increased in value and the interest rate dropped. Instead, they were underwater. Oh, and the interest rate ranged from 5.5-7% before that housing crash.
Quote from: kernals12 on May 04, 2024, 11:35:39 PMIt also means that housing shortages, such as the one occurring now, means that borrowers see their net worth go up, making them likely to vote for politicians who pass laws that restrict the supply of housing, creating great welfare losses.
Part of the reason behind the housing shortage is that many people took advantage of the low interest rate a few years and refinanced. Those interest rates have more than doubled, so if they sell and get a new mortgage, their costs would be more. This also means that the "empty nesters" of older folks whose kids have moved out are hanging onto their bigger homes, turning the spare bedrooms into hobby rooms or storage rooms.
Quote from: kernals12 on May 04, 2024, 11:35:39 PMAll of this can be solved by tying principal and interest amounts to the value of the property. To eliminate the incentive for borrowers to neglect maintenance to lower their mortgage payments and for administrative simplicity, it would be best to use an index of regional home prices to be adjusted annually.
Again, define "value". Ultimately, the price of a home is determined by the purchaser and the seller. Because of the sharp increase in the appraised value of homes in the past five years, the increased in the assessed value of homes had it against limits. For Texas, that rise in appraised value is hitting against the 10% limit if you have a homestead exemption on that primary residence. If you are a renter, then homestead exemption doesn't apply and the full value of the property tax is passed along as a rent increase.
Unfortunately, some homeowners are resisting those property tax increases by letting their homes fall apart by not even performing home maintenance, then complain about gentrification (https://www.merriam-webster.com/dictionary/gentrification) when other homes in their neighborhood get sold as fixer-uppers and those new homeowners perform the necessary yet long-delayed maintenance.
Quote from: Rothman on May 06, 2024, 02:39:11 PMQuote from: JayhawkCO on May 06, 2024, 10:57:37 AMQuote from: Rothman on May 05, 2024, 09:56:57 PMI like cake.
I like eating, too.
What else would one do with cake?
So...you can have your cake and eat it, too...
You can stare at it. I often find myself doing that at weddings when I'm served cake and I'd not sure if it contains tree nuts.
The phrase "have your cake and eat it too" is referring to the fact that once you eat the cake, you no longer have it.
You can have archaic too, but it's obsolete. :awesomeface:
Quote from: Scott5114 on May 06, 2024, 06:02:01 PMThe phrase "have your cake and eat it too" is referring to the fact that once you eat the cake, you no longer have it.
Paul Brians has a good explanation along the lines of what you've noted: (https://brians.wsu.edu/2016/05/19/you-cant-have-your-cake-and-eat-it-too/)
QuoteThe most popular form of this saying—"You can't have your cake and eat it too"— confuses many people because they mistakenly suppose the word "have" means "eat," as in "Have a piece of cake for dessert." A more logical version of this saying is "You can't eat your cake and have it too," meaning that if you eat your cake you won't have it any more. The point is that if you eat your cake right now you won't have it to eat later. "Have" means "possess" in this context, not "eat."
If I eat the cake, I still have it.
Quote from: Rothman on May 06, 2024, 06:39:37 PMIf I eat the cake, I still have it.
Not for long, though.
Quote from: LilianaUwU on May 06, 2024, 11:38:57 AMcan you explain that in Super Mario 64 terms
His posts should be set to this music...
Too upbeat, K12 is more Lethal Lava Land paced.
Quote from: SectorZ on May 06, 2024, 08:53:02 PMQuote from: LilianaUwU on May 06, 2024, 11:38:57 AMcan you explain that in Super Mario 64 terms
His posts should be set to this music...
I prefer this version. It's much more grand.