8 ms·

One thing I see being discussed is how high rates will reduce competition for homes (therefore lower prices). This isn't necessarily true for 2 reasons: 1) High

One thing I see being discussed is how high rates will reduce competition for homes (therefore lower prices). This isn't necessarily true for 2 reasons: 1) High rates mean higher finance rates for development/redevelopment projects, forcing new inventory to be priced higher to be viable 2) Owners with locked in rates (most homeowners) have little incentive to trade up, and more likely to trade down (increased competition for starter/smaller homes). Variable rate mortgages are a fraction of the mortgage market they used to be - this isn't 2008. The only real solutions here are to radically rethink zoning at a city level, and potentially incentivize construction of affordable homes at a federal level through new lending programs.

cameldrv 3y ago
Owners with locked-in rates have little incentive to trade to anything else. You can't take the mortgage with you, so selling and then even buying a smaller house is going to lead to a higher payment in most cases. What you will see is a lot more rental houses. When a lot of people move, they will just keep the old house and rent it out, because a huge portion of the value in the house is the mortgage itself.
- Gibbon1 3y ago
  > You can't take the mortgage with you One wonders perhaps, why is that exactly? Why can't you trade one bit of collateral for another similar bit of collateral? You owe $300k backed by a $700k house and you want to swap that for a $500k house, why should the note holder be able to call in the loan when you do that?
  - pedrosorio 3y ago
    Doesn’t the bank have the right to refuse to grant a mortgage in the first place, depending on the asset? It’s not like you tell them you’re buying a house worth x and they give you a mortgage for 0.8x, right?
    - Gibbon1 3y ago
      Banks are heavily regulated and aren't loaning out their own money.
  - ghaff 3y ago
    Because you no longer own the asset that is the collateral for the loan.

cameldrv 3y ago

Owners with locked-in rates have little incentive to trade to anything else. You can't take the mortgage with you, so selling and then even buying a smaller house is going to lead to a higher payment in most cases. What you will see is a lot more rental houses. When a lot of people move, they will just keep the old house and rent it out, because a huge portion of the value in the house is the mortgage itself.

Gibbon1 3y ago
> You can't take the mortgage with you One wonders perhaps, why is that exactly? Why can't you trade one bit of collateral for another similar bit of collateral? You owe $300k backed by a $700k house and you want to swap that for a $500k house, why should the note holder be able to call in the loan when you do that?
- pedrosorio 3y ago
  Doesn’t the bank have the right to refuse to grant a mortgage in the first place, depending on the asset? It’s not like you tell them you’re buying a house worth x and they give you a mortgage for 0.8x, right?
  - Gibbon1 3y ago
    Banks are heavily regulated and aren't loaning out their own money.
- ghaff 3y ago
  Because you no longer own the asset that is the collateral for the loan.