OT: 50 year mortgages?

[JimmyinSD]

And so the solution is to... add more?

Sarcasm....  but i don't see a solution,   everyone seems ok with debt as long as the spending is funding their teams priorities,  so why shouldn't we expect the solutions to be just to increase debt top to bottom?

It's like Fuck it!

[medaille]

Within a fractional reserve banking system, you have to create debt at an ever faster rate in order to create the amount of money needed by society to service the existing debt and to keep the economy liquid. As we become consumed by debt, we need to make debt easier to get … from within a fractional reserve banking system.

There’s only three options:
1. Keep our banking system as is. Keep taking out more and more debt at an ever faster rate.
2. Reset the system, but keep it the same. Debt Jubilee. Trillion dollar coin. Everybody goes bankrupt. This would zero out the debt and we would restart the process like it was the 60’s.
3. Get out of the fractional reserve system.

A 50 year loan is the only thing that makes sense if you assume that we’re not changing the system in a fundamental way. It is dumb, but you can’t ignore the fundamental problem that our economy is based off paying off our credit cards with new credit cards. Things need to be changed at a fundamental level.

[purplefaithful]

I dont think this is a hill anyone has to die on...

I'm of personal belief choices are good, just that this isnt a good choice.

Medaille is right, this is a significant problem at the very Macro level.

[Waterboy]

I dont think this is a hill anyone has to die on...

I'm of personal belief choices are good, just that this isnt a good choice.

Medaille is right, this is a significant problem at the very Macro level.

Agreed, it does fit the needs of a minority of borrowers and is hardly the "stupidest thing" ever.  During periods of very low interest rates, this could be a huge boon for money savvy borrowers and first-time homeowners.  You would want proper loan oversight to make sure banks don't go "stupid" again and avoid policies forcing banks to provide loans to people that clearly can't afford them, but this isn't meant to replace the 15 yr, 30 yr, and balloon mortgages at all.  But there are those that want to make sure they pontificate how stupid it is in general so that they can make broader statements about other matters.  We all know that.

[badgervike]

I do understand, what you are not getting is the concept of debt and tangible assets.  I think you live in a world where a home equity line of credit, HELOC, is a tool to achieve wealth, without understanding or appreciating the dynamics of a Monte Carlo distribution over time.  My values are different than yours, when it comes to my families security, my home has not been in that calculus, that is not money I bring to the table.  The only time a pre-sale value is used is a HELOC, or a second mortgage as was the original term, and that usually does not work out well for the borrowers bottom line.  It has been rebranded from a desperation move to a leveraged asset for attaining wealth.

I have had some luck and effort payoff over the years, but it don't make me stupid.  When I see someone say "20 Year AVERAGE across the country" as a reason to buy in, I think 1.) Mean, Mode or Median 2.)  How dumb does he think I am 3.) Hard no on that.  

Badger Ive heard you claim to be everything from a Geophysicist, CEO producing medical products in China, Scientist of some sort who doesn't believe in peer review, all the while volunteering to help the homeless and downtrodden..... you always give me great... 

Al the Bus driver

Unlike our parents, we don't typically own a house for a lifetime these days.  The average length of home ownership is around 13 years.  Bessent is saying that the 50 year mortgage will have payments that on average are $336 less than a 30 year mortgage.  Unlike the article that Sticky posted which posited what the interest rates would be and than hate on it, I think I'll wait to see what the details are before I decide.  Like I said, it's not for everyone nor are things like variable or balloon mortgages.  Since the vast majority of mortgage payments is interest in those average 13 years of home ownership, some will opt for the lower payments while they build home equity IF it indeed turns out to be $300+ per month less.  The devil will be in the details.  If you look at your history, the 30 year mortgage was very controversial when enacted in the 30s as life expectancies were only 60 years...much like the discussion we're having now with life expectancies to be around 85 years in 2060  It actually took a decade to be officially enacted by Congress mainly due to some of the same concerns we're talking about now.  The 30 year mortgage is now the mainstay in home financing.  

Again Al, I'm not advocating for this or against this at this point and as I said earlier there are a lot of other things that would also help make housing more affordable.  I am really against subsidizing home ownership.  Look at what has happened to healthcare costs since we made it "affordable".  I'd rather focus on causal issues:

Reduce interest rates.   Interest rates affect not only home purchases/payments but even more so construction financing for developers/builders.  Whatever the carrying costs are for the builder get built (pun intended) to the home price.

Shorten approval times, reduce red tape.  Again, builders are hesitant to purchase and carry land for extended periods of time waiting for layers of government to approve.  One of my best friends is a large developer here in Madison.  He's constantly talking about projects that are bogged down for years.  Guess what happens to those carrying costs...it's passed on to the homeowners or tenants for commercial properties.

Reduce building costs.  Wood prices are starting to come down but are still elevated from the Covid days which killed a lot of trees when we had nothing to do while shut in except remodel our houses.  Petroleum products are another big contributor both for materials and transportation.  Again, coming down but still elevated.

This one will be controversial.  If you're already struggling for housing inventory...maybe opening the front door and let 12 million plus people in with many subsidized to be here wasn't the best idea.  Other Countries are suffering similarly.  

Just my two cents.

In terms of the other items Al, I'll take them in order.

My risk adversity is way lower than yours probably from owning a business for so long.  You can hate on us all you want but many of us have literally mortgaged our futures to get to where we are.  Most of my employees have been with me forever and we've all profited from the fruit of our labors.  And yes, me more than others.  I took the risks and worked the longest hours.  Again, if you don't like risk, don't take it on.  The reality is there are a lot more risky opportunities these days with things like Crypto.

I've answered this question before but my Undergraduate degree (a long damn time ago) was in Biomedical Engineering.  I was President of a company here in Madison that was part of a Fortune 50.  I didn't feel like dealing with the Harvard MBA egos (and Institutional investors) anymore and moved to my own company along with many key employees.  Spent the first year mostly in Court while I fought (and won) numerous lawsuits with my former employer.

We design sophisticated analysis systems for a wide range of research applications in many different market segments including pharamaceutical research, transportation research (cars, trains, trucks, autonomous vehicles, offroad), military/aerospace research, power systems research).  Virtually all my employees are scientists or engineers.  That's why I know a lot about many different disciplines.  We're basically geeks selling to other geeks.  The vast majority of our products are developed and made in the US.  China has traditionally been our largest export market although that started to cool a few years ago with the "buy China" directives from the government to prop up their struggling economy.  We've been one of those companies that have gone against the grain to have a trade surplus with China.

I'm not sure what you're talking about on Peer reviews.  I believe all science needs to be rigorously investigated, defended and adapted with new data.  I'm guessing you're talking about Climate change which is a political movement not a scientific movement.  The primary body of "investigation" is a political organization.  The global organization aggressively stifles opposing viewpoints.  Anybody that ever uses the term "settled science" isn't a scientist because no science is ever settled...it's just what we know today.  

The volunteering.  Not sure how that's controversial.  Everybody should do it if they can find time.  You get so much out of it.  I stopped doing the shelter work in 2020.  My girlfriend was already complaining that I didn't have free time...and the work became political and less about caring for people in their time of need.  We were required to assist everybody that came into the shelter to fill out absentee ballots...which was hardly top of mind need when you're dealing with homelessness, drug and mental issues, health issues, etc.  Many of the workers who would "assist" with the absentee ballots would also offer their input with things like "this shelter wouldn't even be here if it wasn't for the Democrats", etc.  The funny thing is that many of the largest private donors...are Republicans...which is tough to find in this town.  I just decided that I didn't want to do it anymore and didn't have the time or desire to play the game.  I just wanted to help people.  I still stay in touch with many that I've helped throughout the years.  The shelter calls me still and asks me to come back...but at this point in my life, I'm more working on my exit strategy and than possibly spending time here or abroad working on similar projects.  I still do Red Cross disaster relief which in the Midwest is primarily tornadoes and floods with an occasional trip to a foreign nation affected by hurricane, war or earthquakes.  I didn't have time this year to go down to Jamaica to assist with their recovery.  I also help out soliciting donations and getting the message out for the food banks.  Been busy with that the last few weeks as you can imagine.

[Waterboy]

While we're discussing mortgages....

https://www.newsmatwitter.com/us/fannie-...d/1234255/

[purplefaithful]

Agreed, it does fit the needs of a minority of borrowers and is hardly the "stupidest thing" ever.  During periods of very low interest rates, this could be a huge boon for money savvy borrowers and first-time homeowners.  You would want proper loan oversight to make sure banks don't go "stupid" again and avoid policies forcing banks to provide loans to people that clearly can't afford them, but this isn't meant to replace the 15 yr, 30 yr, and balloon mortgages at all.  But there are those that want to make sure they pontificate how stupid it is in general so that they can make broader statements about other matters.  We all know that.

I'm not as savvy on all of this as others here...My concern for those biting is the assumption of equity build in the 50 year vs more traditional loans. 

That build could be quite negligible and even comparable to renting depending on term...But here I go down another rabbit hole.

[badgervike]

I'm not as savvy on all of this as others here...My concern for those biting is the assumption of equity build in the 50 year vs more traditional loans. 

That build could be quite negligible and even comparable to renting depending on term...But here I go down another rabbit hole.

Again, since we don't have details, I don't have an opinion.  If Bessent is correct and the payment savings is $330 per month on the 50 year note, that's $4000 less a year that you're paying on that note.  And since that 30 year and 50 year note pay down virtually no principal in the first 10 years, that's significant more money left in your pocket ($40k) if you refinance at that 10 year mark from a 50 year to a 30, 20 or 15 year note.  If the payment differential is marginal, there's really no reason for a 50 year note.

[medaille]

Again, since we don't have details, I don't have an opinion.  If Bessent is correct and the payment savings is $330 per month on the 50 year note, that's $4000 less a year that you're paying on that note.  And since that 30 year and 50 year note pay down virtually no principal in the first 10 years, that's significant more money left in your pocket ($40k) if you refinance at that 10 year mark from a 50 year to a 30, 20 or 15 year note.  If the payment differential is marginal, there's really no reason for a 50 year note.

Prices rise to match how much money you have to spend.  In this case, prices will rise to how much debt you can afford.  You can’t assume the price of the house is the same in a 30 year mortgage world as a 50 year mortgage world.  Enough people will be desperate enough to get a home, that they will pay as much as they can afford.  Their monthly payment will be the same.  The price of the home will be higher, and the price of all homes will be higher for everyone, and very shortly the same people that couldn’t afford a 30 mortgage won’t be able to afford the 50 year mortgage.

You made the argument above, that you’re not a fan of subsidizing things because it causes prices to go up.  The exact same thing happens when you allow people to take on more debt.  Reduced interest rates, which you advocated for, do the same thing.  They cause housing prices to go up, because they allow people to buy a more expensive house for the same monthly payment.

[badgervike]

Prices rise to match how much money you have to spend.  In this case, prices will rise to how much debt you can afford.  You can’t assume the price of the house is the same in a 30 year mortgage world as a 50 year mortgage world.  Enough people will be desperate enough to get a home, that they will pay as much as they can afford.  Their monthly payment will be the same.  The price of the home will be higher, and the price of all homes will be higher for everyone, and very shortly the same people that couldn’t afford a 30 mortgage won’t be able to afford the 50 year mortgage.

You made the argument above, that you’re not a fan of subsidizing things because it causes prices to go up.  The exact same thing happens when you allow people to take on more debt.  Reduced interest rates, which you advocated for, do the same thing.  They cause housing prices to go up, because they allow people to buy a more expensive house for the same monthly payment.

I also advocated for different ways of creating more inventory and reducing costs.  Like I said, until we get the details, no reason to have a strong opinion especially without talking about a comprehensive strategy.  

And yes...subsidies cause prices to rise...  Once again...see the Affordable Care act. Take a crappy healthcare system where we dramatically overpay....and turn it into a "hold my beer" contest