re: Trump promoting a 50 year mortgage. Dave Ramsey will lose his mind. Terrible idea - imo

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Due to government policy...

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Which policies do you see as culprits for this phantom disproportionate price inflation you imagine occurred?

Was predicting this for awhile.

The only way to prevent a real estate price correction is:
1) Massive income increases (impossible in the short term)
2) elimination of property taxes (impossible in most states due to revenue issues)
3) Major reductions in interest rates (impossible due to inflation and the FED)
4) Other forms of government intervention

If we're ok with 84 month truck notes most people won't care about a 50 year mortgage if it allows them to afford their house note and the market loves it (realtors/wall street/blackrock) because it is going to explode real estate prices as we've seen in europe to otherwise unsustainable levels.

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And what should be the appropriate interest rate on a mortgage in your opinion?

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You're asking a question of me that is determined by the totality of the market.

We know that interest rates were too low during Covid, as we can look back and judge. The inflation is a good indicator, as well as the correction on housing prices with the increased interest rate. And since the timeframe applicable to that comment was specifically Covid, my point stands.

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And what should be the appropriate interest rate on a mortgage in your opinion?

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5% is the correct number

Where it was before covid.

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If we're ok with 84 month truck notes most people won't care about a 50 year mortgage if it allows them to afford their house note and the market loves it (realtors/wall street/blackrock) because it is going to explode real estate prices as we've seen in europe to otherwise unsustainable levels.

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These are really not close to the same if you're trying to conflate the 2 together. Vehicles can and do easily last 7 years with lots of people keeping vehicles for close to or exceeding loan terms in many cases. Practically nobody stays in a house for 50 years. The median length (which is pretty high right now since interest rates went way up) for homeowners staying in 1 place is around 11-12 years. If its a first house (again only talking ownership, not renting) it's more like 5 years.

If you put down like 5% on your first house which a ton of people do and get a 50 year mortgage you better prey that house went up a large amount in value in 5 years if you plan to move again otherwise you basically wont have anything to show for it moving out of there after paying all costs to move/realtors. You might actually lose money.

Example:
50 year mortgage at 7% on $400k with 5% down
Mortgaging $380k
After 5 years your principal is down to only $375k on a $400k house
After 10 years your principal is down to only $368k on that $400k house

You are destroying yourself in interest payments up front on a 50 year and banking on home values going way way up. Which we've lived in a real estate bubble basically after 2020 and is not normal at all with values skyrocketing like that. There's plenty of times in the past few decades prior to that housing appreciating at a pretty slow pace.

50 year mortgages are beyond stupid and make no sense and would only further drive up some housing prices artificially making them more "affordable"

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5% is the correct number

Where it was before covid.

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Depending on the RE price floor in this scenario, yeah something between 5-10% would probably be the sweet range.

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Which policies do you see as culprits for this phantom disproportionate price inflation you imagine occurred?

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I hope this was sarcasm, because the reasons are as obvious as the two feet at the base of your legs.

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Run the numbers on your house, even if you bought well before the boom and what it could sell for today, the actual "return on investment" is way way less than you would expect once you include things like property tax, insurance, interest on loan, maintenance, remodeling, transaction costs of buying then selling it you did over that time as well. Houses are not the "investment" people think they are if you just live in it.

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I've seen people do this math (pre-Covid, but still) and yeah, I agree.

That's why I said the cultural issues are toxic and only based in bad government policy.

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That refi culture is a sign of unhealthiness in the market, propped up by bad government policy and culture. Same with other "investment" behavior related to RE like HELOCs and flipping (by so many amateurs).

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I stand by this. You can see this with NC's strawman-based posts to me about housing values, as if I was giving investment advice. My whole argument is that this idea that housing is an investment and a tool for investment mobility and a HELOC credit card are signs of bad economic culture. We saw this in the runup to the 2008 crash. This ONLY works if housing always goes up. The problem is that it doesn't, and when people get left holding the bag, the government steps in when it's large enough to correct the market.

The real "too big to fail" is our RE market in the US.

Randomly (?) this Rory Sutherland Youtube short just popped up for me

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Why do you act like anyone stays in 1 home loan for any longer than 7-10yrs?

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I already told you. I see that as a sign of an unhealthy economic culture that's primarily based on unsustainable appreciation and debt culture.