Making you able to upgrade while taking on less debt, than if both houses rose 10%.
Then we have property taxes, which tends to be a yearly expense based on what nearby homes are trading for.
which you may not be able to keep paying if the economic downturn cost you your job.
That’s a completely different factor, which isn’t directly linked to housing costs. Housing can crash, if done properly without the economy being in a bad shape. Supply, demand and force owners to live in the house. Boom, price crash.
The people who gains something from house prices increases, are people that own multiple houses and people looking to downgrade.
People wanting to die in their current home, doesn’t lose anything.
People looking to swap to a pricier home, doesn’t lose anything.
People looking to enter the market, doesn’t lose anything.
People looking to swap to a pricier home, doesn’t lose anything.
Here’s a wrinkle: they probably gain. Say there’s a crash and prices across the board drop 50%.
You’re in a $600k house that’s now worth only $300k. But you had your eye on a $900k house, that required an additional $300k for you to move into. It’s now worth $450k, so you only need to come up with $150k to move up. So, if you have access to the necessary money, buying a more expensive house post-crash will cost you less.
It’s a simplistic scenario, I leave out transaction costs, varying availability of credit pre- and post-crash. and the fact that price drops are seldom uniform for all houses, even in a smallish local market. But those considerations don’t make that much difference to the main concept.
You’re thinking of wealthy people who don’t have a mortgage and “only have $150k more” to come up with. And as I explained above, it’s not just the wealthy looking to move up to a pricier home; growing your house as the family grows is just standard practice for an American family over the last 70y.
It is a very common case for couples to put everything they own together to make a 20% downpayment (if they’re lucky).
So for a $600k house, that’s $120k downpayment and a $480k mortgage. We’re saying the house loses half its value, so it’s now worth $300k and their equity is now worth $60k. But they still have a $480k mortgage to deal with. If they sell the house for $300k and put all of that toward the mortgage, they still have to come up with $180k just to get the bank of their backs and have nothing to show for it! They could continue paying the mortgage, but it is worth far more than the house is. They’re now at the point where it would be cheaper to walk away from the house, let the bank foreclose it, and then rebuy it (or a similar one) at $300k instead of $480k. But they won’t have any money to do that with, and their credit will be demolished by the foreclosure, so they won’t be getting another mortage any time soon. So that’s not even a real option.
Not only is moving to a larger house to support a growing family no longer an option, they’ll be lucky to still be in a house at all.
People wanting to die in their current home, doesn’t lose anything.
They do if they put their life’s savings into the house with the intention of leaving it to their kids. Yeah, it sucks when an investment goes south, and yeah, that’s just how it goes sometimes, but they DID lose something.
People looking to swap to a pricier home, doesn’t lose anything
Again, families often need to move to larger (i.e. pricier) homes. This isn’t reserved for the wealthy class.
People looking to enter the market, doesn’t lose anything.
I don’t know if you’ve been watching where people have been putting their money when they can’t afford a house, lately. Have you noticed how everything is being speculated on? Tried to buy any pokemon cards lately? Seen the meme stocks? Crypto? Labubu? Young people haven’t been putting their money in housing, so yeah, they won’t get hit directly when the housing market collapses. But what do you think happens to all those secondary “investments” when housing suddenly becomes more affordable?
A lot of young people think they’re making investments right now, but as soon as housing falls, they’re going to be left holding a bunch of worthless cardboard over night.
We have a big complex house of cards built on the assumption that housing prices always go up. But they’ve really only gone up proportional to what the boomer generation has been able to afford. Now that boomers are dying out, demand for expensive housing is cratering, and the house of cards is going to collapse and have many secondary and tertiary effects. There will be very few people who “don’t lose anything.”
Yeah, it sucks when an investment goes south, and yeah, that’s just how it goes sometimes, but they DID lose something.
Sounds like the inheritors lost something.
Again, families often need to move to larger (i.e. pricier) homes. This isn’t reserved for the wealthy class.
Which becomes easier to afford if housing is cheaper.
A lot of young people think they’re making investments right now, but as soon as housing falls, they’re going to be left holding a bunch of worthless cardboard over night.
The end game buyers of such collectibles, won’t be impacted enough from a housing crash to stop them from collecting.
Also far from everyone is speculating on collectibles, it’s a high risk high reward gamble to do so. Which unopened Lego boxes has proven. With the added sprinkle on top you need to be able to hold the items for decades
That’s fine if you’re fine with it, as long as you understand what’s about to happen. What I don’t get is your “fuck them, got mine” attitude about it. It doesn’t help to welcome the worst for everyone around you. What helps is empathy.
I truly hope you are not negatively impacted by what comes next. Cheers.
There’s nothing “fuck them, got mine” attitude about this, the only one losing to a housing market crash are the well offs; It’s a net benefit for the vast masses of society
But that larger home lost even more equity.
Making you able to upgrade while taking on less debt, than if both houses rose 10%.
Then we have property taxes, which tends to be a yearly expense based on what nearby homes are trading for.
That’s a completely different factor, which isn’t directly linked to housing costs. Housing can crash, if done properly without the economy being in a bad shape. Supply, demand and force owners to live in the house. Boom, price crash.
The people who gains something from house prices increases, are people that own multiple houses and people looking to downgrade.
People wanting to die in their current home, doesn’t lose anything.
People looking to swap to a pricier home, doesn’t lose anything.
People looking to enter the market, doesn’t lose anything.
Here’s a wrinkle: they probably gain. Say there’s a crash and prices across the board drop 50%.
You’re in a $600k house that’s now worth only $300k. But you had your eye on a $900k house, that required an additional $300k for you to move into. It’s now worth $450k, so you only need to come up with $150k to move up. So, if you have access to the necessary money, buying a more expensive house post-crash will cost you less.
It’s a simplistic scenario, I leave out transaction costs, varying availability of credit pre- and post-crash. and the fact that price drops are seldom uniform for all houses, even in a smallish local market. But those considerations don’t make that much difference to the main concept.
You’re thinking of wealthy people who don’t have a mortgage and “only have $150k more” to come up with. And as I explained above, it’s not just the wealthy looking to move up to a pricier home; growing your house as the family grows is just standard practice for an American family over the last 70y.
It is a very common case for couples to put everything they own together to make a 20% downpayment (if they’re lucky).
So for a $600k house, that’s $120k downpayment and a $480k mortgage. We’re saying the house loses half its value, so it’s now worth $300k and their equity is now worth $60k. But they still have a $480k mortgage to deal with. If they sell the house for $300k and put all of that toward the mortgage, they still have to come up with $180k just to get the bank of their backs and have nothing to show for it! They could continue paying the mortgage, but it is worth far more than the house is. They’re now at the point where it would be cheaper to walk away from the house, let the bank foreclose it, and then rebuy it (or a similar one) at $300k instead of $480k. But they won’t have any money to do that with, and their credit will be demolished by the foreclosure, so they won’t be getting another mortage any time soon. So that’s not even a real option.
Not only is moving to a larger house to support a growing family no longer an option, they’ll be lucky to still be in a house at all.
They do if they put their life’s savings into the house with the intention of leaving it to their kids. Yeah, it sucks when an investment goes south, and yeah, that’s just how it goes sometimes, but they DID lose something.
Again, families often need to move to larger (i.e. pricier) homes. This isn’t reserved for the wealthy class.
I don’t know if you’ve been watching where people have been putting their money when they can’t afford a house, lately. Have you noticed how everything is being speculated on? Tried to buy any pokemon cards lately? Seen the meme stocks? Crypto? Labubu? Young people haven’t been putting their money in housing, so yeah, they won’t get hit directly when the housing market collapses. But what do you think happens to all those secondary “investments” when housing suddenly becomes more affordable?
A lot of young people think they’re making investments right now, but as soon as housing falls, they’re going to be left holding a bunch of worthless cardboard over night.
We have a big complex house of cards built on the assumption that housing prices always go up. But they’ve really only gone up proportional to what the boomer generation has been able to afford. Now that boomers are dying out, demand for expensive housing is cratering, and the house of cards is going to collapse and have many secondary and tertiary effects. There will be very few people who “don’t lose anything.”
Sounds like the inheritors lost something.
Which becomes easier to afford if housing is cheaper.
The end game buyers of such collectibles, won’t be impacted enough from a housing crash to stop them from collecting.
Also far from everyone is speculating on collectibles, it’s a high risk high reward gamble to do so. Which unopened Lego boxes has proven. With the added sprinkle on top you need to be able to hold the items for decades
That’s fine if you’re fine with it, as long as you understand what’s about to happen. What I don’t get is your “fuck them, got mine” attitude about it. It doesn’t help to welcome the worst for everyone around you. What helps is empathy.
I truly hope you are not negatively impacted by what comes next. Cheers.
There’s nothing “fuck them, got mine” attitude about this, the only one losing to a housing market crash are the well offs; It’s a net benefit for the vast masses of society