Buying with monopoly money

[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).

[AK]

“Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.

[AK]

“Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.

[AK]

“Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.

[AK]

“Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.

[AK]

“Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.

[Rich Toscano]

[quote=AK]”Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.[/quote]

Actually I believe that it’s only required for nominal incomes to keep up. As long as your fixed payment is falling against your nominal income, you win, even if your real income is falling. (Nominal income, or nominal rents, or nominal rate of investment return… depends what you want to measure your mortgage against, but the point is it’s the nominal number that matters).

[Rich Toscano]

[quote=AK]”Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.[/quote]

Actually I believe that it’s only required for nominal incomes to keep up. As long as your fixed payment is falling against your nominal income, you win, even if your real income is falling. (Nominal income, or nominal rents, or nominal rate of investment return… depends what you want to measure your mortgage against, but the point is it’s the nominal number that matters).

[Rich Toscano]

[quote=AK]”Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.[/quote]

Actually I believe that it’s only required for nominal incomes to keep up. As long as your fixed payment is falling against your nominal income, you win, even if your real income is falling. (Nominal income, or nominal rents, or nominal rate of investment return… depends what you want to measure your mortgage against, but the point is it’s the nominal number that matters).

[Rich Toscano]

[quote=AK]”Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.[/quote]

Actually I believe that it’s only required for nominal incomes to keep up. As long as your fixed payment is falling against your nominal income, you win, even if your real income is falling. (Nominal income, or nominal rents, or nominal rate of investment return… depends what you want to measure your mortgage against, but the point is it’s the nominal number that matters).

[Rich Toscano]

[quote=AK]”Buying with monopoly money” worked for an earlier generation. It’s comforting to know that I have some protection against inflation. Of course this relies on the assumption that real incomes will keep up, or at least won’t fall too far behind.[/quote]

Actually I believe that it’s only required for nominal incomes to keep up. As long as your fixed payment is falling against your nominal income, you win, even if your real income is falling. (Nominal income, or nominal rents, or nominal rate of investment return… depends what you want to measure your mortgage against, but the point is it’s the nominal number that matters).

[Effective Demand]

Regarding interest rates and housing prices.

The issue is WHY rates are high or low. Rates are high because of high inflation or high growth, Rates are low because of low inflation (or deflation) or low growth. If you put high rates in a low growth scenario, it would no doubt effect housing prices, just as low rates in a high growth scenario would.

[Effective Demand]

Regarding interest rates and housing prices.

The issue is WHY rates are high or low. Rates are high because of high inflation or high growth, Rates are low because of low inflation (or deflation) or low growth. If you put high rates in a low growth scenario, it would no doubt effect housing prices, just as low rates in a high growth scenario would.

[Effective Demand]

Regarding interest rates and housing prices.

The issue is WHY rates are high or low. Rates are high because of high inflation or high growth, Rates are low because of low inflation (or deflation) or low growth. If you put high rates in a low growth scenario, it would no doubt effect housing prices, just as low rates in a high growth scenario would.

[Effective Demand]

Regarding interest rates and housing prices.

The issue is WHY rates are high or low. Rates are high because of high inflation or high growth, Rates are low because of low inflation (or deflation) or low growth. If you put high rates in a low growth scenario, it would no doubt effect housing prices, just as low rates in a high growth scenario would.

[Author]

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