Buying with monopoly money

[SD Realtor]

Pretty funny CAR. Yes in a post several weeks ago I was whining about how much more my grocery bills were this year compared to last year.

[Coronita]

You folks are making me regret refinance from a 30 year to 15 year loan, because I thought I would be able to pay off the home early. At this point, perhaps, I should just done another 30 year and made minimum payments of $2k/month, since it’s going to be worthless anyway…Sheesh…

[Coronita]

You folks are making me regret refinance from a 30 year to 15 year loan, because I thought I would be able to pay off the home early. At this point, perhaps, I should just done another 30 year and made minimum payments of $2k/month, since it’s going to be worthless anyway…Sheesh…

[Coronita]

You folks are making me regret refinance from a 30 year to 15 year loan, because I thought I would be able to pay off the home early. At this point, perhaps, I should just done another 30 year and made minimum payments of $2k/month, since it’s going to be worthless anyway…Sheesh…

[Coronita]

You folks are making me regret refinance from a 30 year to 15 year loan, because I thought I would be able to pay off the home early. At this point, perhaps, I should just done another 30 year and made minimum payments of $2k/month, since it’s going to be worthless anyway…Sheesh…

[Coronita]

You folks are making me regret refinance from a 30 year to 15 year loan, because I thought I would be able to pay off the home early. At this point, perhaps, I should just done another 30 year and made minimum payments of $2k/month, since it’s going to be worthless anyway…Sheesh…

[CA renter]

[quote=bubble_contagion]Just keep in mind that housing prices and interest rates have no relationship. I have read this from several sources including Calculated Risk and Rich. The following quote is from the latest Nov 10 data rodeo:

“I firmly disagree with the idea that there is a one-to-one relationship between rates and prices, such that if rates increase a certain percent, prices should be expected to decline by that percent or anywhere near it. The historical data clearly demonstrates that there is no such correlation. However, there is no question that sustained higher rates will reduce demand, all other thing being equal, just as super-low rates have in recent times boosted housing activity above what it otherwise would have been.”

From CR:

“I’ve tried to explain this several times in several different ways. Price is what you pay for something. Interest rates are related to how the item is financed. Some people pay cash for a house. Would they pay more because interest rates are low? Nope.

Imagine just one buyer gets a special interest rate. Would that lucky buyer be willing to pay more than all other buyers for the same property? Nope.

It is true that low rates make buying more attractive as compared to renting. And that can increase the demand for buying – and more demand might mean slightly higher prices. But if rates are low, a rational buyer will expect mortgages rates to rise when they sell the property, and under the theory that mortgage rates impact price, the price will then fall in the future. That makes the property less attractive, and the buyer in the low interest rate environment will not want to overpay for the house.

So the buyer needs to consider both current interest rates and future interest rates, and by the time they are done doing all the calculations, you get the graph that Leonhardt shows. And that is exactly what I’d expect – there is little relationship between house prices and mortgage rates. That doesn’t surprise me at all.”

http://www.calculatedriskblog.com/2010/09/mortgage-rates-and-home-prices.html

I am suspect that there is truly no relationship but the data seems to be clear on this.[/quote]

Interest rates are just one input WRT the housing market. The other inputs are jobs, demographic trends, currency issues (which may or may not be correlated with rates in the short-term), tax policies, changes in mortgage availability/downpayment requirements, etc.

IMHO, the earlier period of higher rates correlated with the peak buying years of Baby Boomers (the largest, and wealthiest cohort to buy RE in the U.S.), rising inflation which affected wages as well as asset prices, and immigration/population growth trends (see pg. 4 in the following link) with more of our growth now coming from poorer, lower-skilled immigrants and workers vs. past immigration/population growth trends.

http://www.williamperezphd.com/articles/fix-passel-2003.pdf

What we’ve witnessed in the 1982-2010 period is an environment of falling rates:

http://www.freddiemac.com/pmms/pmms30.htm

http://braydencapitalhomeloans.com/HistoryofMortgageRatesPR.pdf

Also, we’ve seen rising (total and mortgage) DTI ratios, and falling homeowner’s equity ratio in that period:

http://seekingalpha.com/article/176462-debt-to-income-ratios-and-the-u-s-savings-rate

http://www.getsmartaboutbanks.com/2010/08/dr-housing-bubble-gives-the-straight-scoop-on-why-the-falling-housing-prices-will-help-the-economy/

The unemployment rate was much lower then than it is now:

http://www.ritholtz.com/blog/wp-content/uploads/2010/02/2-5-10-UnEmployment-peaks.gif

Down payment requirements were lowered over the 1982-present period:

http://www.gkbaum.com/housing/topicalReports/history_of_downpayment_assistance.pdf

Mortgage securitization took off, which lowered rates and standards — causing the “EZ credit” boom:

http://www.econbrowser.com/archives/2008/01/mortgage_securi.html

In other words, while I totally appreciate the threat of inflation/currrency debasement, and think this is their goal, I question their ability to succeed over the long run — espeically for as long as we engage in “free trade” with Third World nations — because our labor market has absolutely no pricing power, and debt levels are still extremely high.

We’ve pretty much maxed out our ability to leverage and borrow more, IMHO. I firmly believe that asset pricing is most greatly affected by the credit market. If the credit market/leverage is growing, asset prices will rise. If the credit market/leverage is shrinking, asset prices will fall. There are other inputs, but credit is the primary driver of asset prices, IMHO.

Yes, you might be paying your mortgage off with “cheaper” money, but it will likely benefit hard asset holders and foreign currency holders who can exchange their stronger currency for “cheap” housing in the U.S. more than it will benefit regular folk who have to work for a living.

[CA renter]

[quote=bubble_contagion]Just keep in mind that housing prices and interest rates have no relationship. I have read this from several sources including Calculated Risk and Rich. The following quote is from the latest Nov 10 data rodeo:

“I firmly disagree with the idea that there is a one-to-one relationship between rates and prices, such that if rates increase a certain percent, prices should be expected to decline by that percent or anywhere near it. The historical data clearly demonstrates that there is no such correlation. However, there is no question that sustained higher rates will reduce demand, all other thing being equal, just as super-low rates have in recent times boosted housing activity above what it otherwise would have been.”

From CR:

“I’ve tried to explain this several times in several different ways. Price is what you pay for something. Interest rates are related to how the item is financed. Some people pay cash for a house. Would they pay more because interest rates are low? Nope.

Imagine just one buyer gets a special interest rate. Would that lucky buyer be willing to pay more than all other buyers for the same property? Nope.

It is true that low rates make buying more attractive as compared to renting. And that can increase the demand for buying – and more demand might mean slightly higher prices. But if rates are low, a rational buyer will expect mortgages rates to rise when they sell the property, and under the theory that mortgage rates impact price, the price will then fall in the future. That makes the property less attractive, and the buyer in the low interest rate environment will not want to overpay for the house.

So the buyer needs to consider both current interest rates and future interest rates, and by the time they are done doing all the calculations, you get the graph that Leonhardt shows. And that is exactly what I’d expect – there is little relationship between house prices and mortgage rates. That doesn’t surprise me at all.”

http://www.calculatedriskblog.com/2010/09/mortgage-rates-and-home-prices.html

I am suspect that there is truly no relationship but the data seems to be clear on this.[/quote]

Interest rates are just one input WRT the housing market. The other inputs are jobs, demographic trends, currency issues (which may or may not be correlated with rates in the short-term), tax policies, changes in mortgage availability/downpayment requirements, etc.

IMHO, the earlier period of higher rates correlated with the peak buying years of Baby Boomers (the largest, and wealthiest cohort to buy RE in the U.S.), rising inflation which affected wages as well as asset prices, and immigration/population growth trends (see pg. 4 in the following link) with more of our growth now coming from poorer, lower-skilled immigrants and workers vs. past immigration/population growth trends.

http://www.williamperezphd.com/articles/fix-passel-2003.pdf

What we’ve witnessed in the 1982-2010 period is an environment of falling rates:

http://www.freddiemac.com/pmms/pmms30.htm

http://braydencapitalhomeloans.com/HistoryofMortgageRatesPR.pdf

Also, we’ve seen rising (total and mortgage) DTI ratios, and falling homeowner’s equity ratio in that period:

http://seekingalpha.com/article/176462-debt-to-income-ratios-and-the-u-s-savings-rate

http://www.getsmartaboutbanks.com/2010/08/dr-housing-bubble-gives-the-straight-scoop-on-why-the-falling-housing-prices-will-help-the-economy/

The unemployment rate was much lower then than it is now:

http://www.ritholtz.com/blog/wp-content/uploads/2010/02/2-5-10-UnEmployment-peaks.gif

Down payment requirements were lowered over the 1982-present period:

http://www.gkbaum.com/housing/topicalReports/history_of_downpayment_assistance.pdf

Mortgage securitization took off, which lowered rates and standards — causing the “EZ credit” boom:

http://www.econbrowser.com/archives/2008/01/mortgage_securi.html

In other words, while I totally appreciate the threat of inflation/currrency debasement, and think this is their goal, I question their ability to succeed over the long run — espeically for as long as we engage in “free trade” with Third World nations — because our labor market has absolutely no pricing power, and debt levels are still extremely high.

We’ve pretty much maxed out our ability to leverage and borrow more, IMHO. I firmly believe that asset pricing is most greatly affected by the credit market. If the credit market/leverage is growing, asset prices will rise. If the credit market/leverage is shrinking, asset prices will fall. There are other inputs, but credit is the primary driver of asset prices, IMHO.

Yes, you might be paying your mortgage off with “cheaper” money, but it will likely benefit hard asset holders and foreign currency holders who can exchange their stronger currency for “cheap” housing in the U.S. more than it will benefit regular folk who have to work for a living.

[CA renter]

[quote=bubble_contagion]Just keep in mind that housing prices and interest rates have no relationship. I have read this from several sources including Calculated Risk and Rich. The following quote is from the latest Nov 10 data rodeo:

“I firmly disagree with the idea that there is a one-to-one relationship between rates and prices, such that if rates increase a certain percent, prices should be expected to decline by that percent or anywhere near it. The historical data clearly demonstrates that there is no such correlation. However, there is no question that sustained higher rates will reduce demand, all other thing being equal, just as super-low rates have in recent times boosted housing activity above what it otherwise would have been.”

From CR:

“I’ve tried to explain this several times in several different ways. Price is what you pay for something. Interest rates are related to how the item is financed. Some people pay cash for a house. Would they pay more because interest rates are low? Nope.

Imagine just one buyer gets a special interest rate. Would that lucky buyer be willing to pay more than all other buyers for the same property? Nope.

It is true that low rates make buying more attractive as compared to renting. And that can increase the demand for buying – and more demand might mean slightly higher prices. But if rates are low, a rational buyer will expect mortgages rates to rise when they sell the property, and under the theory that mortgage rates impact price, the price will then fall in the future. That makes the property less attractive, and the buyer in the low interest rate environment will not want to overpay for the house.

So the buyer needs to consider both current interest rates and future interest rates, and by the time they are done doing all the calculations, you get the graph that Leonhardt shows. And that is exactly what I’d expect – there is little relationship between house prices and mortgage rates. That doesn’t surprise me at all.”

http://www.calculatedriskblog.com/2010/09/mortgage-rates-and-home-prices.html

I am suspect that there is truly no relationship but the data seems to be clear on this.[/quote]

Interest rates are just one input WRT the housing market. The other inputs are jobs, demographic trends, currency issues (which may or may not be correlated with rates in the short-term), tax policies, changes in mortgage availability/downpayment requirements, etc.

IMHO, the earlier period of higher rates correlated with the peak buying years of Baby Boomers (the largest, and wealthiest cohort to buy RE in the U.S.), rising inflation which affected wages as well as asset prices, and immigration/population growth trends (see pg. 4 in the following link) with more of our growth now coming from poorer, lower-skilled immigrants and workers vs. past immigration/population growth trends.

http://www.williamperezphd.com/articles/fix-passel-2003.pdf

What we’ve witnessed in the 1982-2010 period is an environment of falling rates:

http://www.freddiemac.com/pmms/pmms30.htm

http://braydencapitalhomeloans.com/HistoryofMortgageRatesPR.pdf

Also, we’ve seen rising (total and mortgage) DTI ratios, and falling homeowner’s equity ratio in that period:

http://seekingalpha.com/article/176462-debt-to-income-ratios-and-the-u-s-savings-rate

http://www.getsmartaboutbanks.com/2010/08/dr-housing-bubble-gives-the-straight-scoop-on-why-the-falling-housing-prices-will-help-the-economy/

The unemployment rate was much lower then than it is now:

http://www.ritholtz.com/blog/wp-content/uploads/2010/02/2-5-10-UnEmployment-peaks.gif

Down payment requirements were lowered over the 1982-present period:

http://www.gkbaum.com/housing/topicalReports/history_of_downpayment_assistance.pdf

Mortgage securitization took off, which lowered rates and standards — causing the “EZ credit” boom:

http://www.econbrowser.com/archives/2008/01/mortgage_securi.html

In other words, while I totally appreciate the threat of inflation/currrency debasement, and think this is their goal, I question their ability to succeed over the long run — espeically for as long as we engage in “free trade” with Third World nations — because our labor market has absolutely no pricing power, and debt levels are still extremely high.

We’ve pretty much maxed out our ability to leverage and borrow more, IMHO. I firmly believe that asset pricing is most greatly affected by the credit market. If the credit market/leverage is growing, asset prices will rise. If the credit market/leverage is shrinking, asset prices will fall. There are other inputs, but credit is the primary driver of asset prices, IMHO.

Yes, you might be paying your mortgage off with “cheaper” money, but it will likely benefit hard asset holders and foreign currency holders who can exchange their stronger currency for “cheap” housing in the U.S. more than it will benefit regular folk who have to work for a living.

[CA renter]

[quote=bubble_contagion]Just keep in mind that housing prices and interest rates have no relationship. I have read this from several sources including Calculated Risk and Rich. The following quote is from the latest Nov 10 data rodeo:

“I firmly disagree with the idea that there is a one-to-one relationship between rates and prices, such that if rates increase a certain percent, prices should be expected to decline by that percent or anywhere near it. The historical data clearly demonstrates that there is no such correlation. However, there is no question that sustained higher rates will reduce demand, all other thing being equal, just as super-low rates have in recent times boosted housing activity above what it otherwise would have been.”

From CR:

“I’ve tried to explain this several times in several different ways. Price is what you pay for something. Interest rates are related to how the item is financed. Some people pay cash for a house. Would they pay more because interest rates are low? Nope.

Imagine just one buyer gets a special interest rate. Would that lucky buyer be willing to pay more than all other buyers for the same property? Nope.

It is true that low rates make buying more attractive as compared to renting. And that can increase the demand for buying – and more demand might mean slightly higher prices. But if rates are low, a rational buyer will expect mortgages rates to rise when they sell the property, and under the theory that mortgage rates impact price, the price will then fall in the future. That makes the property less attractive, and the buyer in the low interest rate environment will not want to overpay for the house.

So the buyer needs to consider both current interest rates and future interest rates, and by the time they are done doing all the calculations, you get the graph that Leonhardt shows. And that is exactly what I’d expect – there is little relationship between house prices and mortgage rates. That doesn’t surprise me at all.”

http://www.calculatedriskblog.com/2010/09/mortgage-rates-and-home-prices.html

I am suspect that there is truly no relationship but the data seems to be clear on this.[/quote]

Interest rates are just one input WRT the housing market. The other inputs are jobs, demographic trends, currency issues (which may or may not be correlated with rates in the short-term), tax policies, changes in mortgage availability/downpayment requirements, etc.

IMHO, the earlier period of higher rates correlated with the peak buying years of Baby Boomers (the largest, and wealthiest cohort to buy RE in the U.S.), rising inflation which affected wages as well as asset prices, and immigration/population growth trends (see pg. 4 in the following link) with more of our growth now coming from poorer, lower-skilled immigrants and workers vs. past immigration/population growth trends.

http://www.williamperezphd.com/articles/fix-passel-2003.pdf

What we’ve witnessed in the 1982-2010 period is an environment of falling rates:

http://www.freddiemac.com/pmms/pmms30.htm

http://braydencapitalhomeloans.com/HistoryofMortgageRatesPR.pdf

Also, we’ve seen rising (total and mortgage) DTI ratios, and falling homeowner’s equity ratio in that period:

http://seekingalpha.com/article/176462-debt-to-income-ratios-and-the-u-s-savings-rate

http://www.getsmartaboutbanks.com/2010/08/dr-housing-bubble-gives-the-straight-scoop-on-why-the-falling-housing-prices-will-help-the-economy/

The unemployment rate was much lower then than it is now:

http://www.ritholtz.com/blog/wp-content/uploads/2010/02/2-5-10-UnEmployment-peaks.gif

Down payment requirements were lowered over the 1982-present period:

http://www.gkbaum.com/housing/topicalReports/history_of_downpayment_assistance.pdf

Mortgage securitization took off, which lowered rates and standards — causing the “EZ credit” boom:

http://www.econbrowser.com/archives/2008/01/mortgage_securi.html

In other words, while I totally appreciate the threat of inflation/currrency debasement, and think this is their goal, I question their ability to succeed over the long run — espeically for as long as we engage in “free trade” with Third World nations — because our labor market has absolutely no pricing power, and debt levels are still extremely high.

We’ve pretty much maxed out our ability to leverage and borrow more, IMHO. I firmly believe that asset pricing is most greatly affected by the credit market. If the credit market/leverage is growing, asset prices will rise. If the credit market/leverage is shrinking, asset prices will fall. There are other inputs, but credit is the primary driver of asset prices, IMHO.

Yes, you might be paying your mortgage off with “cheaper” money, but it will likely benefit hard asset holders and foreign currency holders who can exchange their stronger currency for “cheap” housing in the U.S. more than it will benefit regular folk who have to work for a living.

[CA renter]

[quote=bubble_contagion]Just keep in mind that housing prices and interest rates have no relationship. I have read this from several sources including Calculated Risk and Rich. The following quote is from the latest Nov 10 data rodeo:

“I firmly disagree with the idea that there is a one-to-one relationship between rates and prices, such that if rates increase a certain percent, prices should be expected to decline by that percent or anywhere near it. The historical data clearly demonstrates that there is no such correlation. However, there is no question that sustained higher rates will reduce demand, all other thing being equal, just as super-low rates have in recent times boosted housing activity above what it otherwise would have been.”

From CR:

“I’ve tried to explain this several times in several different ways. Price is what you pay for something. Interest rates are related to how the item is financed. Some people pay cash for a house. Would they pay more because interest rates are low? Nope.

Imagine just one buyer gets a special interest rate. Would that lucky buyer be willing to pay more than all other buyers for the same property? Nope.

It is true that low rates make buying more attractive as compared to renting. And that can increase the demand for buying – and more demand might mean slightly higher prices. But if rates are low, a rational buyer will expect mortgages rates to rise when they sell the property, and under the theory that mortgage rates impact price, the price will then fall in the future. That makes the property less attractive, and the buyer in the low interest rate environment will not want to overpay for the house.

So the buyer needs to consider both current interest rates and future interest rates, and by the time they are done doing all the calculations, you get the graph that Leonhardt shows. And that is exactly what I’d expect – there is little relationship between house prices and mortgage rates. That doesn’t surprise me at all.”

http://www.calculatedriskblog.com/2010/09/mortgage-rates-and-home-prices.html

I am suspect that there is truly no relationship but the data seems to be clear on this.[/quote]

Interest rates are just one input WRT the housing market. The other inputs are jobs, demographic trends, currency issues (which may or may not be correlated with rates in the short-term), tax policies, changes in mortgage availability/downpayment requirements, etc.

IMHO, the earlier period of higher rates correlated with the peak buying years of Baby Boomers (the largest, and wealthiest cohort to buy RE in the U.S.), rising inflation which affected wages as well as asset prices, and immigration/population growth trends (see pg. 4 in the following link) with more of our growth now coming from poorer, lower-skilled immigrants and workers vs. past immigration/population growth trends.

http://www.williamperezphd.com/articles/fix-passel-2003.pdf

What we’ve witnessed in the 1982-2010 period is an environment of falling rates:

http://www.freddiemac.com/pmms/pmms30.htm

http://braydencapitalhomeloans.com/HistoryofMortgageRatesPR.pdf

Also, we’ve seen rising (total and mortgage) DTI ratios, and falling homeowner’s equity ratio in that period:

http://seekingalpha.com/article/176462-debt-to-income-ratios-and-the-u-s-savings-rate

http://www.getsmartaboutbanks.com/2010/08/dr-housing-bubble-gives-the-straight-scoop-on-why-the-falling-housing-prices-will-help-the-economy/

The unemployment rate was much lower then than it is now:

http://www.ritholtz.com/blog/wp-content/uploads/2010/02/2-5-10-UnEmployment-peaks.gif

Down payment requirements were lowered over the 1982-present period:

http://www.gkbaum.com/housing/topicalReports/history_of_downpayment_assistance.pdf

Mortgage securitization took off, which lowered rates and standards — causing the “EZ credit” boom:

http://www.econbrowser.com/archives/2008/01/mortgage_securi.html

In other words, while I totally appreciate the threat of inflation/currrency debasement, and think this is their goal, I question their ability to succeed over the long run — espeically for as long as we engage in “free trade” with Third World nations — because our labor market has absolutely no pricing power, and debt levels are still extremely high.

We’ve pretty much maxed out our ability to leverage and borrow more, IMHO. I firmly believe that asset pricing is most greatly affected by the credit market. If the credit market/leverage is growing, asset prices will rise. If the credit market/leverage is shrinking, asset prices will fall. There are other inputs, but credit is the primary driver of asset prices, IMHO.

Yes, you might be paying your mortgage off with “cheaper” money, but it will likely benefit hard asset holders and foreign currency holders who can exchange their stronger currency for “cheap” housing in the U.S. more than it will benefit regular folk who have to work for a living.

[temeculaguy]

[quote=Effective Demand]Buy a house for the right reasons. its right for you and your family and you can afford it. Dont buy expecting to get rich off the house or expecting the house will protect ,you from the ills of the world.[/quote]

If you combine what ED said above and the collective discussion about potential inflation, you’ll be O.K.

If you buy a house that you cannot afford because you think inflation will alter the situation, you are nothing more than a 2006 bubble buyer with a toxic loan. They were buying a house they couldn’t afford because they thought it’s value would rise indefinately. But if you can afford what you are planning on buying, if it works with or without inflation, you will probably end up in great position 15 years from now when your house payment is the size of your car payment.

Prepare for inflation but don’t count on it! It is the system’s “easy button” but it has consequences that they would prefer to avoid. I think the odds are in favor of it but I wouldn’t make it my entire financial plan, just a component of it.

If we do enter a period of high inflation, lets say 6% a year for 5+ years, wages tend to follow but they also tend to lag. Most people’s wages do not adjust on a monthly basis, it balances out over a decade or so but it usually is a game of catch up.

In the early 1970’s you could buy a house with a 30 yr mortgage and by the mid 1980’s your mortgage was similar to a car payment. But it took 15 years and I’m cherry picking a period of time from the past, who knows what the future will bring.

If hyperinflation actually shows up, then those who own will make out like bandits, but it’s never happened in this country, so i wouldn’t bank on it.

[temeculaguy]

[quote=Effective Demand]Buy a house for the right reasons. its right for you and your family and you can afford it. Dont buy expecting to get rich off the house or expecting the house will protect ,you from the ills of the world.[/quote]

If you combine what ED said above and the collective discussion about potential inflation, you’ll be O.K.

If you buy a house that you cannot afford because you think inflation will alter the situation, you are nothing more than a 2006 bubble buyer with a toxic loan. They were buying a house they couldn’t afford because they thought it’s value would rise indefinately. But if you can afford what you are planning on buying, if it works with or without inflation, you will probably end up in great position 15 years from now when your house payment is the size of your car payment.

Prepare for inflation but don’t count on it! It is the system’s “easy button” but it has consequences that they would prefer to avoid. I think the odds are in favor of it but I wouldn’t make it my entire financial plan, just a component of it.

If we do enter a period of high inflation, lets say 6% a year for 5+ years, wages tend to follow but they also tend to lag. Most people’s wages do not adjust on a monthly basis, it balances out over a decade or so but it usually is a game of catch up.

In the early 1970’s you could buy a house with a 30 yr mortgage and by the mid 1980’s your mortgage was similar to a car payment. But it took 15 years and I’m cherry picking a period of time from the past, who knows what the future will bring.

If hyperinflation actually shows up, then those who own will make out like bandits, but it’s never happened in this country, so i wouldn’t bank on it.

[temeculaguy]

[quote=Effective Demand]Buy a house for the right reasons. its right for you and your family and you can afford it. Dont buy expecting to get rich off the house or expecting the house will protect ,you from the ills of the world.[/quote]

If you combine what ED said above and the collective discussion about potential inflation, you’ll be O.K.

If you buy a house that you cannot afford because you think inflation will alter the situation, you are nothing more than a 2006 bubble buyer with a toxic loan. They were buying a house they couldn’t afford because they thought it’s value would rise indefinately. But if you can afford what you are planning on buying, if it works with or without inflation, you will probably end up in great position 15 years from now when your house payment is the size of your car payment.

Prepare for inflation but don’t count on it! It is the system’s “easy button” but it has consequences that they would prefer to avoid. I think the odds are in favor of it but I wouldn’t make it my entire financial plan, just a component of it.

If we do enter a period of high inflation, lets say 6% a year for 5+ years, wages tend to follow but they also tend to lag. Most people’s wages do not adjust on a monthly basis, it balances out over a decade or so but it usually is a game of catch up.

In the early 1970’s you could buy a house with a 30 yr mortgage and by the mid 1980’s your mortgage was similar to a car payment. But it took 15 years and I’m cherry picking a period of time from the past, who knows what the future will bring.

If hyperinflation actually shows up, then those who own will make out like bandits, but it’s never happened in this country, so i wouldn’t bank on it.

[temeculaguy]

[quote=Effective Demand]Buy a house for the right reasons. its right for you and your family and you can afford it. Dont buy expecting to get rich off the house or expecting the house will protect ,you from the ills of the world.[/quote]

If you combine what ED said above and the collective discussion about potential inflation, you’ll be O.K.

If you buy a house that you cannot afford because you think inflation will alter the situation, you are nothing more than a 2006 bubble buyer with a toxic loan. They were buying a house they couldn’t afford because they thought it’s value would rise indefinately. But if you can afford what you are planning on buying, if it works with or without inflation, you will probably end up in great position 15 years from now when your house payment is the size of your car payment.

Prepare for inflation but don’t count on it! It is the system’s “easy button” but it has consequences that they would prefer to avoid. I think the odds are in favor of it but I wouldn’t make it my entire financial plan, just a component of it.

If we do enter a period of high inflation, lets say 6% a year for 5+ years, wages tend to follow but they also tend to lag. Most people’s wages do not adjust on a monthly basis, it balances out over a decade or so but it usually is a game of catch up.

In the early 1970’s you could buy a house with a 30 yr mortgage and by the mid 1980’s your mortgage was similar to a car payment. But it took 15 years and I’m cherry picking a period of time from the past, who knows what the future will bring.

If hyperinflation actually shows up, then those who own will make out like bandits, but it’s never happened in this country, so i wouldn’t bank on it.

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