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

I wonder how long it will take the market to adjust up once a run on these ridiculous loans start hitting.

If one is going to do it, do it early.

This has me thinking about buying a house to two more.

Let the 50 year people create quick equity.

Then be stuck when it corrects.

Very risky move for all but the smartest first time buyers.

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Buying a home right now might be a trap

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Unless one is fairly certain they'll be in a location long-term, buying now is very risky.

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Thankfully people never lose their jobs and all Americans have a robust emergency fund right?

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If I lose my job, the duration of the mortgage is irrelevant. In fact a 15 year would be the hardest to pay back since it would have the biggest monthly payment followed by the 30 year and finally the 50 year would be the easiest to make the monthly payment

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50 year mortgages are going to create inflation like we’ve never seen.

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Perhaps you could run those numbers, and make obvious to the rest of us what seems so apparent to you.
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Let's help get you started.
60% of US homeowners hold mortgages.
40% own their homes outright.
Of the loans held, 90% are 30yr.
Of those 30yr loans, a large % turn over at ~7yrs.

Finally, in the current market, for every 14 sellers there are just 10 buyers.
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Make your case.

I think I remember Jersey Tiger preaching the same gospel about home ownership.

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This is panic talk and this definitely wont happen at all

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How do you justify current prices given other inflation adjusted variables such as wages, consumer debt, COL and pretty much whatever else you want to look at?

The only thing propping it up are the REITs buying and holding properties.

People cant afford to purchase and cant afford to sell if they had pre-covid mortgage notes due to a doubling of their rates if they do.

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You picked one item on a list and found fault with that - as opposed to loking at all the costs / benefits.

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I picked it because I didn't have time to go through the whole thing (only now getting the time to do that much writing/researching) and it was to point out that the 50yr is very likely to create more of the very thing it's being touted as addressing (thus being germane to the overall topic).

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but just writing it off bc some of you Baws were able to pay off your 15 yr morgages early - is not a solution.

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We bought in 2014, we may not see rates go low enough to make refi'ing to a 15yr affordable before we pay it off.

To set the stage for my counter stance, I'm going to sum it up from some of my other posts first before getting to your points.

The average age of a first-time home buyer is 38.
The lower the loan time period, the higher the note.
The crossover point for a 50yr mortgage would be 40 years.
The average retirement age in the US is 62.
The average for income drop upon retirement is 31%.

40%-50% of 30yrs get paid off. 80%-85% of 15yrs get paid off. Extrapolating that to a 50yr mortgage would likely be something like 15% of 50yrs ever being paid off (and I think that would be on the high side).

For a 50yr loan, you're only accruing around 5% equity after 10 years. For comparison, with a 30yr mortgage you have ~22% equity in 10 years.

The average annual difference between the 30yr mortgage rate and the 15yr mortgage rate over the last 30 years is .58%. We'll go ahead and assume it would be similar from the 30yr to a 50yr (since we really have nothing else to go on), meaning that the current rate for a 50yr would likely be 6.89% (current average 30yr is ~6.31% and 15yr is ~5.7%).

A 50yr mortgage at 6.89% for a $200k home would be a total price of $711,939.14. That's $511,939.14 in interest for a home the initial buyers will likely never realize full ownership (meaning that, at best, these are generational loans). For comparison, a 30yr mortgage on a $200k home at 6.31% would be $446,129.85 with total interest being $246,129.85.

With all of that said, a 50yr mortgage doesn't feed supply, it creates only more demand with the hope being the demand increase causes supply to increase. Supply is what needs to be addressed and there are avenues for that, depending on locality (reforming zoning and/or land use rules, streamlining permitting processes, updating building codes for flexibility, grants and/or low-interest loans for encouraging adaptive reuse of buildings, etc.).

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1- It’s a far more workable solution than rent control

2-it’s a hedge against increasing rent, which is the biggest problem facing young people

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It's a placebo. The calls for rent control come from the prices of rents going up so much. Rents are going up due to increasing demand due to housing price increases rising so much. Instituting a 50yr mortgage will create more demand for housing (and thus then for rentals).

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3-it’s an appreciating asset so the equity in it will naturally also increase even if they’re making minimum payments

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From our $200k home example, after 10 years they would have ~$6k equity in the home (not including appreciation). If we look at the CAGR (nominal, compound annual growth rate) for the last 30 years (4.64%) and add that in, the accrued equity comes out to ~$15k (or ~7.5% of the home's original price, or ~2% of the total mortgage price). At the risk of repeating myself, that amount of equity for that long a period is a placebo.

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4-nothing prevents anyone from paying early

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Agreed, but unless it's a few decades early, paying a little extra each month is going to have no noticeable effect for a very long time.

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5-increases stability in communities

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Possibly, but if so it won't be the positive you think it will be. Going back to our $200k home example, if a family buys such a home they aren't going to be able to sell it without being underwater on their next purchase for a couple of decades due to the low equity accrual rate. That means they either don't move because they can't afford it (which can also mean a lack of upward mobility) or they just declare bankruptcy and go back to renting. At this point the price will depend on what the bank will take for it.

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6-it creates a heritable asset

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Agreed. And the mortgage will also be heritable. Hopefully a descendant is doing well enough to finally pay it off.

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7-I’d much rather see someone finance a house for fifty years than rent a house till they’re fifty.

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I don't disagree, but I think this doesn't fix that issue but allows for the illusion that it does.

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8-it’s feasible if there were age limits, and down payment requirements for qualifying

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Agreed, but then it's not working for those outside the age limits and/or down payment requirements, which I believe would be a majority of those who are having the most problems affording homes now.

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10-nothing prevents anyone from purchasing 15/20/30 yr mortgages

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Agreed and I'm not so much saying it shouldn't be tried as I am saying it's not going to fix affordability, but rather exacerbate it.