You could make an argument that for the investment savvy, this is a great move. Say a 30Y payment is $1000/mo. A 50Y payment may be $800/mo. Put the difference ($200/mo) into something like SPY, and in 5 to 10 years, you'll have a small chunk of change that you could tap into.
It facilitates offloading overpriced assets to younger bag holders with insufficient buying power due to stagnant wages and lack of economic potential.
So, unfortunately not.
(increasing supply would take targeted capital cost reduction, monopoly busting around new home builders and their land acquisition partners, and rapidly increasing the trades labor supply by hundreds of thousands of workers in the near term without immigration; none of this is likely to happen within the next three years)
If you increase mortgages to 50 years and keep the number of houses too low, houses prices will go up until the monthly payments return to the level of borderline unaffordability.
Another way to think about it. Longer mortgages means more available buyers (for a given price level). More buyers means prices up.
This will mean extending loans to those that current lenders are not making loans too. So rates will have to increase in order cover increased defaults (the borrowers aren't different). Increasing interest rates will drop prices.
Also true. Just like every time (not that it's happened recently, at least at the federal level, more common at the state) minimum wage has risen, you can basically track an increase in rental prices to ever so seamlessly absorb every cent of it within a matter of months...
None of this is being done for the actual struggling people in the community.
It might work if inflation is high and you make extra payments at the beginning of the loan. So you have 50 years to pay it off doesn’t mean you have to make minimum payments, you could get the principle down at the beginning and then get your repayments redone later in the loan to have something manageable. Inflation and appreciation would eat away at the loans value, you would be paying off a loan from 30 years ago with today’s money, your property taxes would likely be more than your house payment by then.
However, USA’s fixed interest rates, and your ability to refinance to a lower rate, aren’t really sustainable in a 59 year loan (they aren’t sustainable for 30 year loans). A lot of people are going to be locked into the same house for generations because they got a good rate 30-40 years ago. Also, it doesn’t really increase supply, we are going to quickly degrade into a European housing market of interest only loans and renting as a normal way of life.
If immigration remains low, then won't the demographic shift in the US population eventually free up more housing stock. In other words, Boomers die off. Gen X is fairly small, more empty homes? Is something like this happening in Japan or SK?
I'd think no, the prices will just increase until monthly payments are the same.
You could make an argument that for the investment savvy, this is a great move. Say a 30Y payment is $1000/mo. A 50Y payment may be $800/mo. Put the difference ($200/mo) into something like SPY, and in 5 to 10 years, you'll have a small chunk of change that you could tap into.
I doubt many people, if any, will do this though.
I've heard a few people making this argument, but unless it allows you to pay off your mortgage 20 years early it's still a net loss.
The deltas in monthly payments aren't typically that large.
If rates are 6%, it takes wayyyy longer than 5-10 years to earn more than that on average.
Always goes up is not the usual.
SPY only ever goes up so this is a great plan!
[dead]
Related (2022): The existence of the 50-year mortgage shows lenders are desperate (26 points, 33 comments) https://news.ycombinator.com/item?id=31958362
Buckle up, houses prices going up.
This does nothing for the down payment which is the bigger hurdle compared to monthlies?
You don’t have to put down 20% as a first time homebuyer
Will it increase the supply of homes?
It facilitates offloading overpriced assets to younger bag holders with insufficient buying power due to stagnant wages and lack of economic potential.
So, unfortunately not.
(increasing supply would take targeted capital cost reduction, monopoly busting around new home builders and their land acquisition partners, and rapidly increasing the trades labor supply by hundreds of thousands of workers in the near term without immigration; none of this is likely to happen within the next three years)
So, practically speaking we need a modern form of a medieval land reform.
4 replies →
Will Betteridge's law of headlines ever be defeated?
BTW if you're commenting you should vote the story up so other people can see it.
Barely, month to month. At current rates a $2700 mortgage might go to about $2400...
... in exchange for over a million dollars more paid over the life of the loan.
I don't think that's making any meaningful difference to anyone other than lenders.
If you increase mortgages to 50 years and keep the number of houses too low, houses prices will go up until the monthly payments return to the level of borderline unaffordability.
Another way to think about it. Longer mortgages means more available buyers (for a given price level). More buyers means prices up.
This will mean extending loans to those that current lenders are not making loans too. So rates will have to increase in order cover increased defaults (the borrowers aren't different). Increasing interest rates will drop prices.
Or maybe it's the reverse.
Also true. Just like every time (not that it's happened recently, at least at the federal level, more common at the state) minimum wage has risen, you can basically track an increase in rental prices to ever so seamlessly absorb every cent of it within a matter of months...
None of this is being done for the actual struggling people in the community.
It might work if inflation is high and you make extra payments at the beginning of the loan. So you have 50 years to pay it off doesn’t mean you have to make minimum payments, you could get the principle down at the beginning and then get your repayments redone later in the loan to have something manageable. Inflation and appreciation would eat away at the loans value, you would be paying off a loan from 30 years ago with today’s money, your property taxes would likely be more than your house payment by then.
However, USA’s fixed interest rates, and your ability to refinance to a lower rate, aren’t really sustainable in a 59 year loan (they aren’t sustainable for 30 year loans). A lot of people are going to be locked into the same house for generations because they got a good rate 30-40 years ago. Also, it doesn’t really increase supply, we are going to quickly degrade into a European housing market of interest only loans and renting as a normal way of life.
no paywall: https://www.wsj.com/personal-finance/mortgages/will-a-50-yea...
If immigration remains low, then won't the demographic shift in the US population eventually free up more housing stock. In other words, Boomers die off. Gen X is fairly small, more empty homes? Is something like this happening in Japan or SK?
Homes are lucrative investment vehicles. I’d expect many of these to get gobbled up people and companies looking to make a buck.
TLDR: No.
The supply will stay the same, the demand and therefore the prices will increase.
Only the property owners and lenders will make money.