Buying with monopoly money

[ocrenter]

I firmly agree with OP in regard to the coming inflation and the feeling that essentially that is the ultimate game plan to get us out of the debt crisis.

This scenario will still work for homeowners even if home prices remain stagnate for the foreseeable future. Since homeowners will be using dollars that are significantly less to pay down debt that was worth significantly more.

If instead home prices increase at rate of inflation, that would be an added bonus.

While jumping on bandwagons is typically not the smartest move, being a permabear can be just as bad as for one’s financial health as being a permabull.

[ocrenter]

aimloan’s jr jumbo is now at 4.875%. The refi just a few months ago is already looking better.

[ocrenter]

aimloan’s jr jumbo is now at 4.875%. The refi just a few months ago is already looking better.

[ocrenter]

aimloan’s jr jumbo is now at 4.875%. The refi just a few months ago is already looking better.

[ocrenter]

aimloan’s jr jumbo is now at 4.875%. The refi just a few months ago is already looking better.

[ocrenter]

aimloan’s jr jumbo is now at 4.875%. The refi just a few months ago is already looking better.

[SD Realtor]

Pretty much agree with you ocr. I don’t see home prices rising due to the rate hikes that will come. Rather I see them depreciating, it is just how severe that I am unsure of. Inflation without job growth to me will be the worst of both worlds. So necessary commodities like food, resources and other tangible goods will go up in cost. Similarly other investment vehicles like bonds and such will be giving healthy returns as the money supply tightens. Also, as with any situation there will be alot of people with money and they will take advantage of the cheaper rela estate without having to incur large financing issues. To me depreciation will occur but I am not sure how much. It will be a great time to buy real estate but not if you have to finance much of it.

So that theary by the OP to buy now with someone elses money seems to make sense regardless of whether the home appreciates or depreciates. Buy the asset now with money that is borrowed and becoming worthless verses waiting until your own money is much more worthless but the asset has declined in value. I think the premise makes sense but everyone has a different situation depending on their holdings.

[SD Realtor]

Pretty much agree with you ocr. I don’t see home prices rising due to the rate hikes that will come. Rather I see them depreciating, it is just how severe that I am unsure of. Inflation without job growth to me will be the worst of both worlds. So necessary commodities like food, resources and other tangible goods will go up in cost. Similarly other investment vehicles like bonds and such will be giving healthy returns as the money supply tightens. Also, as with any situation there will be alot of people with money and they will take advantage of the cheaper rela estate without having to incur large financing issues. To me depreciation will occur but I am not sure how much. It will be a great time to buy real estate but not if you have to finance much of it.

So that theary by the OP to buy now with someone elses money seems to make sense regardless of whether the home appreciates or depreciates. Buy the asset now with money that is borrowed and becoming worthless verses waiting until your own money is much more worthless but the asset has declined in value. I think the premise makes sense but everyone has a different situation depending on their holdings.

[SD Realtor]

Pretty much agree with you ocr. I don’t see home prices rising due to the rate hikes that will come. Rather I see them depreciating, it is just how severe that I am unsure of. Inflation without job growth to me will be the worst of both worlds. So necessary commodities like food, resources and other tangible goods will go up in cost. Similarly other investment vehicles like bonds and such will be giving healthy returns as the money supply tightens. Also, as with any situation there will be alot of people with money and they will take advantage of the cheaper rela estate without having to incur large financing issues. To me depreciation will occur but I am not sure how much. It will be a great time to buy real estate but not if you have to finance much of it.

So that theary by the OP to buy now with someone elses money seems to make sense regardless of whether the home appreciates or depreciates. Buy the asset now with money that is borrowed and becoming worthless verses waiting until your own money is much more worthless but the asset has declined in value. I think the premise makes sense but everyone has a different situation depending on their holdings.

[SD Realtor]

Pretty much agree with you ocr. I don’t see home prices rising due to the rate hikes that will come. Rather I see them depreciating, it is just how severe that I am unsure of. Inflation without job growth to me will be the worst of both worlds. So necessary commodities like food, resources and other tangible goods will go up in cost. Similarly other investment vehicles like bonds and such will be giving healthy returns as the money supply tightens. Also, as with any situation there will be alot of people with money and they will take advantage of the cheaper rela estate without having to incur large financing issues. To me depreciation will occur but I am not sure how much. It will be a great time to buy real estate but not if you have to finance much of it.

So that theary by the OP to buy now with someone elses money seems to make sense regardless of whether the home appreciates or depreciates. Buy the asset now with money that is borrowed and becoming worthless verses waiting until your own money is much more worthless but the asset has declined in value. I think the premise makes sense but everyone has a different situation depending on their holdings.

[SD Realtor]

Pretty much agree with you ocr. I don’t see home prices rising due to the rate hikes that will come. Rather I see them depreciating, it is just how severe that I am unsure of. Inflation without job growth to me will be the worst of both worlds. So necessary commodities like food, resources and other tangible goods will go up in cost. Similarly other investment vehicles like bonds and such will be giving healthy returns as the money supply tightens. Also, as with any situation there will be alot of people with money and they will take advantage of the cheaper rela estate without having to incur large financing issues. To me depreciation will occur but I am not sure how much. It will be a great time to buy real estate but not if you have to finance much of it.

So that theary by the OP to buy now with someone elses money seems to make sense regardless of whether the home appreciates or depreciates. Buy the asset now with money that is borrowed and becoming worthless verses waiting until your own money is much more worthless but the asset has declined in value. I think the premise makes sense but everyone has a different situation depending on their holdings.

[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.

[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.

[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.

[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.

[Author]

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