Buying with monopoly money

[SD Realtor]

hahahaha

Excellent post. Yes WE THE PEOPLE do want that.

Very good point about different price levels depreciating differently in a high rate environment. Completely agree with that.

[Rich Toscano]

[quote=GH]Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion![/quote]

Sorry GH, rates DID go to 15%, in the early 1980s, and housing prices did not “fall massively.” In fact, they didn’t fall at all in nominal terms, though they did in real terms.

That is simple data and not subject to opinion. 🙂

Of course, rising from 5% immediately to 15% would make for a “shock” that did not happen in the early 1980s. But that’s not the premise of your argument… you are stating that as rates (and thus monthly payments go up), prices go down, and the historical data simply does not support this.

Go look at a chart of nominal housing prices in the early 80s to see what I mean (I’m sure I’ve put one up somewhere). And check out the “shambling toward affordability” series to see that rate levels have generally had no impact on housing price expensiveness ratios (they seemed to starting in the 2000s, but that was more due to low lending standards than low rates).

[Rich Toscano]

[quote=GH]Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion![/quote]

Sorry GH, rates DID go to 15%, in the early 1980s, and housing prices did not “fall massively.” In fact, they didn’t fall at all in nominal terms, though they did in real terms.

That is simple data and not subject to opinion. 🙂

Of course, rising from 5% immediately to 15% would make for a “shock” that did not happen in the early 1980s. But that’s not the premise of your argument… you are stating that as rates (and thus monthly payments go up), prices go down, and the historical data simply does not support this.

Go look at a chart of nominal housing prices in the early 80s to see what I mean (I’m sure I’ve put one up somewhere). And check out the “shambling toward affordability” series to see that rate levels have generally had no impact on housing price expensiveness ratios (they seemed to starting in the 2000s, but that was more due to low lending standards than low rates).

[Rich Toscano]

[quote=GH]Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion![/quote]

Sorry GH, rates DID go to 15%, in the early 1980s, and housing prices did not “fall massively.” In fact, they didn’t fall at all in nominal terms, though they did in real terms.

That is simple data and not subject to opinion. 🙂

Of course, rising from 5% immediately to 15% would make for a “shock” that did not happen in the early 1980s. But that’s not the premise of your argument… you are stating that as rates (and thus monthly payments go up), prices go down, and the historical data simply does not support this.

Go look at a chart of nominal housing prices in the early 80s to see what I mean (I’m sure I’ve put one up somewhere). And check out the “shambling toward affordability” series to see that rate levels have generally had no impact on housing price expensiveness ratios (they seemed to starting in the 2000s, but that was more due to low lending standards than low rates).

[Rich Toscano]

[quote=GH]Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion![/quote]

Sorry GH, rates DID go to 15%, in the early 1980s, and housing prices did not “fall massively.” In fact, they didn’t fall at all in nominal terms, though they did in real terms.

That is simple data and not subject to opinion. 🙂

Of course, rising from 5% immediately to 15% would make for a “shock” that did not happen in the early 1980s. But that’s not the premise of your argument… you are stating that as rates (and thus monthly payments go up), prices go down, and the historical data simply does not support this.

Go look at a chart of nominal housing prices in the early 80s to see what I mean (I’m sure I’ve put one up somewhere). And check out the “shambling toward affordability” series to see that rate levels have generally had no impact on housing price expensiveness ratios (they seemed to starting in the 2000s, but that was more due to low lending standards than low rates).

[Rich Toscano]

[quote=GH]Just keep in mind that housing prices and interest rates have no relationship

Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.

Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.

This is simple math and not subject to opinion![/quote]

Sorry GH, rates DID go to 15%, in the early 1980s, and housing prices did not “fall massively.” In fact, they didn’t fall at all in nominal terms, though they did in real terms.

That is simple data and not subject to opinion. 🙂

Of course, rising from 5% immediately to 15% would make for a “shock” that did not happen in the early 1980s. But that’s not the premise of your argument… you are stating that as rates (and thus monthly payments go up), prices go down, and the historical data simply does not support this.

Go look at a chart of nominal housing prices in the early 80s to see what I mean (I’m sure I’ve put one up somewhere). And check out the “shambling toward affordability” series to see that rate levels have generally had no impact on housing price expensiveness ratios (they seemed to starting in the 2000s, but that was more due to low lending standards than low rates).

[Rich Toscano]

[quote=pri_dk][quote=SD Realtor]So necessary commodities like food, resources and other tangible goods will go up in cost.[/quote]

Why?

What will prompt my local Ralphs to raise prices?

Is the store manager going to read about QE2 and start remarking items on the shelves?

And what will stop the manager at Albertsons from lowering his prices? Because of high unemployment his cost of labor is lower. So he decides to get an edge on Ralphs…

Can someone explain exactly how current policy leads to massive inflation without simply using the premise that “printing money leads to inflation?”[/quote]

Prices at your local Ralphs have in fact been rising. They have at Albertson’s too (at least according to the CPI).

But to answer the question: Off the top of my head, QE can lead to somewhat higher inflation in the following ways:

1. Increasing asset prices, which is a stated goal of QE and seems to have worked for now, increases people’s propensity to spend via the wealth effect

2. To the extent that broad money supply does increase, that leads to an increase in aggregate demand in excess of what it otherwise would have been. (if times are tough, the demand will be more apparent in the “necessities” such as food, since we are using that as an example).

3. As a result of foreign currency pegs, QE here leads to looser monetary policy and thus higher demand in foreign countries. This leads to increased competition for commodities and many other items that could feed into our own domestic prices, regardless of our unemployment rate.

4. If #3 gets bad enough, foreign countries could let their currencies rise, which would lead to an increase in prices of items we import.

5. Commodity prices in specific could increase due to #1 (more money flowing into risk assets) or #3 (higher demand in foreign countries). They could also rise as foreign countries try to redeploy their excess dollar reserves. Commodity price increases do feed into inflation over time.

Notice that none of the above require either US employment or labor costs to be high or rising.

You asked how QE could cause “massive” inflation. I’m not really sure what that means. But inflation can be self-feeding in that if it gets past a certain point, inflation fears cause people to spend money faster, or to redeploy their paper cash into hard assets, which makes inflation even worse.

An abrupt rise in inflation is also possible, and could be caused for instance by a sudden drop in confidence in US debt or dollars. This would lead to all of the above list happening to a larger degree, and would also result in the supply of dollars growing as dollars come out from under mattresses throughout the world to seek safer stores of value and drive dollar-denominated prices up. We’ve seen that sudden losses of confidence in financial assets are possible, and we’ve even seen this happen with sovereign debt and currencies recently. Given the precarious debt situation faced by the US it’s entirely possible that could happen here. This is not necessarily an inflation being “caused by” QE, but it’s possible that continued debt monetization could be one of the items that causes global markets to lose confidence in US currency and bonds.

Speaking outside the QE2-as-direct-causation question, I think the premise who suspect high future inflation is that it is really the only politically expedient way to get our debt back to manageable levels. (The sub-premise being that it is only manageable now because it’s so unbelievably easy to roll over in this environment, and that ease is a result of markets mispricing the US ability/intent to pay back debt in real terms).

[Rich Toscano]

[quote=pri_dk][quote=SD Realtor]So necessary commodities like food, resources and other tangible goods will go up in cost.[/quote]

Why?

What will prompt my local Ralphs to raise prices?

Is the store manager going to read about QE2 and start remarking items on the shelves?

And what will stop the manager at Albertsons from lowering his prices? Because of high unemployment his cost of labor is lower. So he decides to get an edge on Ralphs…

Can someone explain exactly how current policy leads to massive inflation without simply using the premise that “printing money leads to inflation?”[/quote]

Prices at your local Ralphs have in fact been rising. They have at Albertson’s too (at least according to the CPI).

But to answer the question: Off the top of my head, QE can lead to somewhat higher inflation in the following ways:

1. Increasing asset prices, which is a stated goal of QE and seems to have worked for now, increases people’s propensity to spend via the wealth effect

2. To the extent that broad money supply does increase, that leads to an increase in aggregate demand in excess of what it otherwise would have been. (if times are tough, the demand will be more apparent in the “necessities” such as food, since we are using that as an example).

3. As a result of foreign currency pegs, QE here leads to looser monetary policy and thus higher demand in foreign countries. This leads to increased competition for commodities and many other items that could feed into our own domestic prices, regardless of our unemployment rate.

4. If #3 gets bad enough, foreign countries could let their currencies rise, which would lead to an increase in prices of items we import.

5. Commodity prices in specific could increase due to #1 (more money flowing into risk assets) or #3 (higher demand in foreign countries). They could also rise as foreign countries try to redeploy their excess dollar reserves. Commodity price increases do feed into inflation over time.

Notice that none of the above require either US employment or labor costs to be high or rising.

You asked how QE could cause “massive” inflation. I’m not really sure what that means. But inflation can be self-feeding in that if it gets past a certain point, inflation fears cause people to spend money faster, or to redeploy their paper cash into hard assets, which makes inflation even worse.

An abrupt rise in inflation is also possible, and could be caused for instance by a sudden drop in confidence in US debt or dollars. This would lead to all of the above list happening to a larger degree, and would also result in the supply of dollars growing as dollars come out from under mattresses throughout the world to seek safer stores of value and drive dollar-denominated prices up. We’ve seen that sudden losses of confidence in financial assets are possible, and we’ve even seen this happen with sovereign debt and currencies recently. Given the precarious debt situation faced by the US it’s entirely possible that could happen here. This is not necessarily an inflation being “caused by” QE, but it’s possible that continued debt monetization could be one of the items that causes global markets to lose confidence in US currency and bonds.

Speaking outside the QE2-as-direct-causation question, I think the premise who suspect high future inflation is that it is really the only politically expedient way to get our debt back to manageable levels. (The sub-premise being that it is only manageable now because it’s so unbelievably easy to roll over in this environment, and that ease is a result of markets mispricing the US ability/intent to pay back debt in real terms).

[Rich Toscano]

[quote=pri_dk][quote=SD Realtor]So necessary commodities like food, resources and other tangible goods will go up in cost.[/quote]

Why?

What will prompt my local Ralphs to raise prices?

Is the store manager going to read about QE2 and start remarking items on the shelves?

And what will stop the manager at Albertsons from lowering his prices? Because of high unemployment his cost of labor is lower. So he decides to get an edge on Ralphs…

Can someone explain exactly how current policy leads to massive inflation without simply using the premise that “printing money leads to inflation?”[/quote]

Prices at your local Ralphs have in fact been rising. They have at Albertson’s too (at least according to the CPI).

But to answer the question: Off the top of my head, QE can lead to somewhat higher inflation in the following ways:

1. Increasing asset prices, which is a stated goal of QE and seems to have worked for now, increases people’s propensity to spend via the wealth effect

2. To the extent that broad money supply does increase, that leads to an increase in aggregate demand in excess of what it otherwise would have been. (if times are tough, the demand will be more apparent in the “necessities” such as food, since we are using that as an example).

3. As a result of foreign currency pegs, QE here leads to looser monetary policy and thus higher demand in foreign countries. This leads to increased competition for commodities and many other items that could feed into our own domestic prices, regardless of our unemployment rate.

4. If #3 gets bad enough, foreign countries could let their currencies rise, which would lead to an increase in prices of items we import.

5. Commodity prices in specific could increase due to #1 (more money flowing into risk assets) or #3 (higher demand in foreign countries). They could also rise as foreign countries try to redeploy their excess dollar reserves. Commodity price increases do feed into inflation over time.

Notice that none of the above require either US employment or labor costs to be high or rising.

You asked how QE could cause “massive” inflation. I’m not really sure what that means. But inflation can be self-feeding in that if it gets past a certain point, inflation fears cause people to spend money faster, or to redeploy their paper cash into hard assets, which makes inflation even worse.

An abrupt rise in inflation is also possible, and could be caused for instance by a sudden drop in confidence in US debt or dollars. This would lead to all of the above list happening to a larger degree, and would also result in the supply of dollars growing as dollars come out from under mattresses throughout the world to seek safer stores of value and drive dollar-denominated prices up. We’ve seen that sudden losses of confidence in financial assets are possible, and we’ve even seen this happen with sovereign debt and currencies recently. Given the precarious debt situation faced by the US it’s entirely possible that could happen here. This is not necessarily an inflation being “caused by” QE, but it’s possible that continued debt monetization could be one of the items that causes global markets to lose confidence in US currency and bonds.

Speaking outside the QE2-as-direct-causation question, I think the premise who suspect high future inflation is that it is really the only politically expedient way to get our debt back to manageable levels. (The sub-premise being that it is only manageable now because it’s so unbelievably easy to roll over in this environment, and that ease is a result of markets mispricing the US ability/intent to pay back debt in real terms).

[Rich Toscano]

[quote=pri_dk][quote=SD Realtor]So necessary commodities like food, resources and other tangible goods will go up in cost.[/quote]

Why?

What will prompt my local Ralphs to raise prices?

Is the store manager going to read about QE2 and start remarking items on the shelves?

And what will stop the manager at Albertsons from lowering his prices? Because of high unemployment his cost of labor is lower. So he decides to get an edge on Ralphs…

Can someone explain exactly how current policy leads to massive inflation without simply using the premise that “printing money leads to inflation?”[/quote]

Prices at your local Ralphs have in fact been rising. They have at Albertson’s too (at least according to the CPI).

But to answer the question: Off the top of my head, QE can lead to somewhat higher inflation in the following ways:

1. Increasing asset prices, which is a stated goal of QE and seems to have worked for now, increases people’s propensity to spend via the wealth effect

2. To the extent that broad money supply does increase, that leads to an increase in aggregate demand in excess of what it otherwise would have been. (if times are tough, the demand will be more apparent in the “necessities” such as food, since we are using that as an example).

3. As a result of foreign currency pegs, QE here leads to looser monetary policy and thus higher demand in foreign countries. This leads to increased competition for commodities and many other items that could feed into our own domestic prices, regardless of our unemployment rate.

4. If #3 gets bad enough, foreign countries could let their currencies rise, which would lead to an increase in prices of items we import.

5. Commodity prices in specific could increase due to #1 (more money flowing into risk assets) or #3 (higher demand in foreign countries). They could also rise as foreign countries try to redeploy their excess dollar reserves. Commodity price increases do feed into inflation over time.

Notice that none of the above require either US employment or labor costs to be high or rising.

You asked how QE could cause “massive” inflation. I’m not really sure what that means. But inflation can be self-feeding in that if it gets past a certain point, inflation fears cause people to spend money faster, or to redeploy their paper cash into hard assets, which makes inflation even worse.

An abrupt rise in inflation is also possible, and could be caused for instance by a sudden drop in confidence in US debt or dollars. This would lead to all of the above list happening to a larger degree, and would also result in the supply of dollars growing as dollars come out from under mattresses throughout the world to seek safer stores of value and drive dollar-denominated prices up. We’ve seen that sudden losses of confidence in financial assets are possible, and we’ve even seen this happen with sovereign debt and currencies recently. Given the precarious debt situation faced by the US it’s entirely possible that could happen here. This is not necessarily an inflation being “caused by” QE, but it’s possible that continued debt monetization could be one of the items that causes global markets to lose confidence in US currency and bonds.

Speaking outside the QE2-as-direct-causation question, I think the premise who suspect high future inflation is that it is really the only politically expedient way to get our debt back to manageable levels. (The sub-premise being that it is only manageable now because it’s so unbelievably easy to roll over in this environment, and that ease is a result of markets mispricing the US ability/intent to pay back debt in real terms).

[Rich Toscano]

[quote=pri_dk][quote=SD Realtor]So necessary commodities like food, resources and other tangible goods will go up in cost.[/quote]

Why?

What will prompt my local Ralphs to raise prices?

Is the store manager going to read about QE2 and start remarking items on the shelves?

And what will stop the manager at Albertsons from lowering his prices? Because of high unemployment his cost of labor is lower. So he decides to get an edge on Ralphs…

Can someone explain exactly how current policy leads to massive inflation without simply using the premise that “printing money leads to inflation?”[/quote]

Prices at your local Ralphs have in fact been rising. They have at Albertson’s too (at least according to the CPI).

But to answer the question: Off the top of my head, QE can lead to somewhat higher inflation in the following ways:

1. Increasing asset prices, which is a stated goal of QE and seems to have worked for now, increases people’s propensity to spend via the wealth effect

2. To the extent that broad money supply does increase, that leads to an increase in aggregate demand in excess of what it otherwise would have been. (if times are tough, the demand will be more apparent in the “necessities” such as food, since we are using that as an example).

3. As a result of foreign currency pegs, QE here leads to looser monetary policy and thus higher demand in foreign countries. This leads to increased competition for commodities and many other items that could feed into our own domestic prices, regardless of our unemployment rate.

4. If #3 gets bad enough, foreign countries could let their currencies rise, which would lead to an increase in prices of items we import.

5. Commodity prices in specific could increase due to #1 (more money flowing into risk assets) or #3 (higher demand in foreign countries). They could also rise as foreign countries try to redeploy their excess dollar reserves. Commodity price increases do feed into inflation over time.

Notice that none of the above require either US employment or labor costs to be high or rising.

You asked how QE could cause “massive” inflation. I’m not really sure what that means. But inflation can be self-feeding in that if it gets past a certain point, inflation fears cause people to spend money faster, or to redeploy their paper cash into hard assets, which makes inflation even worse.

An abrupt rise in inflation is also possible, and could be caused for instance by a sudden drop in confidence in US debt or dollars. This would lead to all of the above list happening to a larger degree, and would also result in the supply of dollars growing as dollars come out from under mattresses throughout the world to seek safer stores of value and drive dollar-denominated prices up. We’ve seen that sudden losses of confidence in financial assets are possible, and we’ve even seen this happen with sovereign debt and currencies recently. Given the precarious debt situation faced by the US it’s entirely possible that could happen here. This is not necessarily an inflation being “caused by” QE, but it’s possible that continued debt monetization could be one of the items that causes global markets to lose confidence in US currency and bonds.

Speaking outside the QE2-as-direct-causation question, I think the premise who suspect high future inflation is that it is really the only politically expedient way to get our debt back to manageable levels. (The sub-premise being that it is only manageable now because it’s so unbelievably easy to roll over in this environment, and that ease is a result of markets mispricing the US ability/intent to pay back debt in real terms).

[Rich Toscano]

As to the OP, in my opinion the thinking is pretty sound and I more or less feel exactly the same way.

I am jealous of my friends who have all locked in sub 4.5% 30 year loans. I think their monthly payments will be laughably small in 10 years. Housing prices may go up or down in the years ahead, but unless you are buying in an area that is still heavily on the overpriced side (or maybe even if you do!), I think it will not outweigh the simple benefit of locking in a low nominal payment. (And in aggregate, payments are as low as they’ve ever been).

The hitch is that this only works if you stay in the place (or at least keep it, whether you live there or not) indefinitely. I myself am not ready to commit to buying my indefinite house. There are various reasons for this, but the main two are: 1) a desire for liquidity due to owning my own business, 2) I happen to like living in the areas that are still pretty spendy compared to rents (ie, payments wouldn’t be locked in as low as they might in other areas). As a bonus item the house we are renting is the greatest house ever, which really reduces motivation to buy. If not for these me-specific facts, though, I would probably have already bought, and serially refi’d all the way down to sub 4.5%.

Note that only one of those reasons is related to the market, and note that even that item only applies to certain pockets of town. So, it comes down to personal situation such as how certain you are that you can commit to stay in the place long term, what area you want to live in, etc… but in some situations, I think it absolutely makes sense to buy for exactly the reasons outlined by the OP (and I have told many a client exactly that).

[Rich Toscano]

As to the OP, in my opinion the thinking is pretty sound and I more or less feel exactly the same way.

I am jealous of my friends who have all locked in sub 4.5% 30 year loans. I think their monthly payments will be laughably small in 10 years. Housing prices may go up or down in the years ahead, but unless you are buying in an area that is still heavily on the overpriced side (or maybe even if you do!), I think it will not outweigh the simple benefit of locking in a low nominal payment. (And in aggregate, payments are as low as they’ve ever been).

The hitch is that this only works if you stay in the place (or at least keep it, whether you live there or not) indefinitely. I myself am not ready to commit to buying my indefinite house. There are various reasons for this, but the main two are: 1) a desire for liquidity due to owning my own business, 2) I happen to like living in the areas that are still pretty spendy compared to rents (ie, payments wouldn’t be locked in as low as they might in other areas). As a bonus item the house we are renting is the greatest house ever, which really reduces motivation to buy. If not for these me-specific facts, though, I would probably have already bought, and serially refi’d all the way down to sub 4.5%.

Note that only one of those reasons is related to the market, and note that even that item only applies to certain pockets of town. So, it comes down to personal situation such as how certain you are that you can commit to stay in the place long term, what area you want to live in, etc… but in some situations, I think it absolutely makes sense to buy for exactly the reasons outlined by the OP (and I have told many a client exactly that).

[Rich Toscano]

As to the OP, in my opinion the thinking is pretty sound and I more or less feel exactly the same way.

I am jealous of my friends who have all locked in sub 4.5% 30 year loans. I think their monthly payments will be laughably small in 10 years. Housing prices may go up or down in the years ahead, but unless you are buying in an area that is still heavily on the overpriced side (or maybe even if you do!), I think it will not outweigh the simple benefit of locking in a low nominal payment. (And in aggregate, payments are as low as they’ve ever been).

The hitch is that this only works if you stay in the place (or at least keep it, whether you live there or not) indefinitely. I myself am not ready to commit to buying my indefinite house. There are various reasons for this, but the main two are: 1) a desire for liquidity due to owning my own business, 2) I happen to like living in the areas that are still pretty spendy compared to rents (ie, payments wouldn’t be locked in as low as they might in other areas). As a bonus item the house we are renting is the greatest house ever, which really reduces motivation to buy. If not for these me-specific facts, though, I would probably have already bought, and serially refi’d all the way down to sub 4.5%.

Note that only one of those reasons is related to the market, and note that even that item only applies to certain pockets of town. So, it comes down to personal situation such as how certain you are that you can commit to stay in the place long term, what area you want to live in, etc… but in some situations, I think it absolutely makes sense to buy for exactly the reasons outlined by the OP (and I have told many a client exactly that).

[Rich Toscano]

As to the OP, in my opinion the thinking is pretty sound and I more or less feel exactly the same way.

I am jealous of my friends who have all locked in sub 4.5% 30 year loans. I think their monthly payments will be laughably small in 10 years. Housing prices may go up or down in the years ahead, but unless you are buying in an area that is still heavily on the overpriced side (or maybe even if you do!), I think it will not outweigh the simple benefit of locking in a low nominal payment. (And in aggregate, payments are as low as they’ve ever been).

The hitch is that this only works if you stay in the place (or at least keep it, whether you live there or not) indefinitely. I myself am not ready to commit to buying my indefinite house. There are various reasons for this, but the main two are: 1) a desire for liquidity due to owning my own business, 2) I happen to like living in the areas that are still pretty spendy compared to rents (ie, payments wouldn’t be locked in as low as they might in other areas). As a bonus item the house we are renting is the greatest house ever, which really reduces motivation to buy. If not for these me-specific facts, though, I would probably have already bought, and serially refi’d all the way down to sub 4.5%.

Note that only one of those reasons is related to the market, and note that even that item only applies to certain pockets of town. So, it comes down to personal situation such as how certain you are that you can commit to stay in the place long term, what area you want to live in, etc… but in some situations, I think it absolutely makes sense to buy for exactly the reasons outlined by the OP (and I have told many a client exactly that).

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