You assume prices will always go up. What happens in a few years when interest rates go back up to 5% and people can't afford to buy these inflated houses? That actual fixed principal cost you owe is all of a sudden a much bigger deal.These are very minor differences in the long run. Overpaying for your mortgage is a bad idea these days as a matter of principle because anyone with a mortgage rate even approaching the rate of return you can get on almost any investment. Fees for buyers are much lower than for the seller and that's mostly because of broker fees and transfer taxes. Even if you did, as Jhhnn mentioned it's a 'variable' cost in the idea that you'll get rid of your mortgage payment in 25 years instead of 30 but for the first 25 years your payment is identical and 25 years of even low inflation your mortgage burden has decreased by 2/3rds. If inflation is higher than that you could be talking 75%+.
Again though, this all comes back to the idea that inflation is good for normal people. We should all want more of it.
I was talking about total capital expense, not remaining balance. Poor word choice on my part.
The point being if my total mortgage over 30 years was 300k principal and 200k interest, but is now 400k principal and 100k interest, I have to pay off that 400k no matter what, the interest maybe not if I over pay or sell my house before the end of the loan.
Even if that's true the number of people who live in Midtown is small as it's not a residential area so I'm not convinced it means much to the city's market. Of course it always depends on how you define Midtown, but it's mostly a business district.
I just bet if you look at the percentage of unoccupied units as a percentage of the city's units it is vanishingly small. (it's probably a lot higher right now but if you looked at it in 2019 for example)
You assume prices will always go up. What happens in a few years when interest rates go back up to 5% and people can't afford to buy these inflated houses? That actual fixed principal cost you owe is all of a sudden a much bigger deal.
I personally remember having to take a shit ton of cash to closing when I sold my house in 2009, so it's not like this doesn't happen.
You assume prices will always go up. What happens in a few years when interest rates go back up to 5% and people can't afford to buy these inflated houses? That actual fixed principal cost you owe is all of a sudden a much bigger deal.
I personally remember having to take a shit ton of cash to closing when I sold my house in 2009, so it's not like this doesn't happen.
Property taxes on unoccupied dwellings should be massive.I don't know how it is where you are but in Toronto there has been lots of foreign money (investors and some people actually living there) coming in buying up houses and multiple condo units. It was crazy back in 2017, new buyer rules were introduced to curb that and it maybe helped a little bit, but prices are still higher than in 2017.
Wages absolutely did not keep pace with the price of housing in Toronto in the last ~10 yrs or so.
Younger people are having to move way outside the city to actually afford a house.
According to Zillow it's worth about what I paid for it in 2007. Outside Cincinnati.Home prices always go up in the long term. As long as there's still a habitable house on the property and the local economy hasn't collapsed, then always. That house you sold in 2009 has appreciated dramatically since then. And is likely worth more now that whatever it was worth at the height of the 2000s housing boom.
So how is it always a good thing for your purchase price to go up, if the asset can lose value? You are taking on more risk the higher the initial cost.I'm not assuming anything - every buyer should be aware of the fact that any asset they purchase could decline in value. If they aren't prepared for that they shouldn't do it. It's not like anyone is forced to buy a house.
Not the best of markets, otherwise it would have appreciated more.According to Zillow it's worth about what I paid for it in 2007. Outside Cincinnati.
I am skeptical, but I don't have any good data on this so I can't say for sure. My suspicion is that because the number of units we are talking about is so small as compared to the rest of the city it has a pretty limited effect on what normal people would buy, and by 'normal' people in Manhattan I mean up to and including those worth several million.Midtown can fluctuate in size depending on how it's defined, but prices in luxury buildings trickle down to other areas depending upon distance and character. Luxury buildings in midtown exploding in price isn't going to affect prices in the Far Rockaways, but I wager they can affect prices in significant areas of Manhattan both North and South of Midtown.
According to Zillow it's worth about what I paid for it in 2007. Outside Cincinnati.
Steady inflation is good because it incentivizes commerce. When it comes to housing, you pay say, $1,000 a month for your mortgage in 2021 dollars. Assuming 2% inflation and wages keeping up with it (which they generally do) that means your mortgage is $980 the following year. The year after that it's $960 (or like, $961), and so on, and so forth. So, assuming you bought a house for the purpose of actually living in it and not as a speculative investment why does it even matter what it's worth? It gets cheaper for you to live in every year you're there.So how is it always a good thing for your purchase price to go up, if the asset can lose value? You are taking on more risk the higher the initial cost.
For 2 reasons: 1) in long run, the asset is unlikely to lose value (and is more likely to appreciate faster than inflation), 2) if it's your primary residence, then you have to live somewhere, and rents keep going up too.So how is it always a good thing for your purchase price to go up, if the asset can lose value? You are taking on more risk the higher the initial cost.
Yes. An underappreciated outcome of our terrible housing policy is that Americans now view their houses as speculative investments instead of places to live.For 2 reasons: 1) in long run, the asset is unlikely to lose value (and is more likely to appreciate faster than inflation), 2) if it's your primary residence, then you have to live somewhere, and rents keep going up too.
Which is the part that people should focus on. The reason to buy a house to live in is not to make money from the appreciation. In fact, it's exactly the opposite. The reason to buy a house to live in is to protect yourself from market appreciation by locking in your housing cost for the long term. Which is exactly what a 30 year fixed rate mortgage does.
Not sure how good those Zestimates algorithms have gotten but they were really terrible a few years ago.
There's the key word, "steady." I agree with you there. The housing market this year isn't steady and I don't believe it will be a net long term benefit to buyers.Steady inflation is good because it incentivizes commerce. When it comes to housing, you pay say, $1,000 a month for your mortgage in 2021 dollars. Assuming 2% inflation and wages keeping up with it (which they generally do) that means your mortgage is $980 the following year. The year after that it's $960 (or like, $961), and so on, and so forth. So, assuming you bought a house for the purpose of actually living in it and not as a speculative investment why does it even matter what it's worth? It gets cheaper for you to live in every year you're there.
The thing is they usually DO go up in value, and this injects cash into the economy. Say you bought it for $100k and now the next buyer will pay $150k because they can make the same monthly payment. Now you have $50k (well, less after closing costs but whatever) to spend on whatever you want. This is the primary vehicle through which the federal reserve stimulates the economy with interest rate cuts.
There's the key word, "steady." I agree with you there. The housing market this year isn't steady and I don't believe it will be a net long term benefit to buyers.
Agreed. Those foreign investors usually find someone to "squat" in the home though lol.Property taxes on unoccupied dwellings should be massive.