It makes no sense for someone in California who is -35% on equity
to pay into a mortgage that is never going to see the surface in
our lifetimes, unless you really expect the inflation rates to explode.
[/quote]
Fifteen years. Not a lifetime.
Let’s use a simple example.
Someone buys a home for $1M.
Let’s say it goes down 50%, not just 35%.
So it is now worth $500K.
If inflation is just 5%, it will take that house fifteen years to reach $1M.
I can hear some ppl now:
“houses won’t rise in value for a few years”
“today’s dollars vs future dollars”
None of that holds much water. So tack on a few years to the 15 if you feel prices will be flat for awhile…maybe twenty years until it hits $1M. And I’ve used a worst-case scenario of 50% fall in value, and realistic inflation rate of 5%.
