I don't think your case is all that common. The vast majority of people don't have that much money such that they could earn say $1500+/month with rates at 5%. Offsetting you are a whole lot of people who only have a few thousand dollars available in case of emergency and many more who don't even have that.
(that said, I'm really enjoying making 5.5% on tbills.)
https://www.calculator.net/interest-calculator.html?cstartin...
Inflation rates go up and down (i-bonds were not attractive until recently) and so do interest rates. The current 5% rate may not last for long.
> American households, on average, have $41,600 in savings, according to data last collected by the Federal Reserve in 2019.
And that’s before the free money era and the explosion of wealth from rising interest rates. Of course it’s also true that inflation could be taking a bite out of household wealth.
https://time.com/personal-finance/article/average-american-s....
People may not have enough saved for retirement, but that’s a separate issue.
The surveys of people not having cash on hand to handle a 1000 emergency or whatnot? That really has to do with your phase of life and economic conditions, and interestingly has been a relatively stable number even as inflation has increased.
It’s also really important to understand that they are based on unverified phone surveys about how people feel they are doing. Consider that they are asking people whether they could cover a one time expense, a month of expenses or three months of expenses. But they don’t ask whether people have access to money. The survey reports that “More than 2 in 3 Americans *would be worried* about having enough emergency savings to cover a month’s worth of living expenses,” so something to bear in mind.
https://www.bankrate.com/banking/savings/emergency-savings-r...
Average vs Median strikes again.
Median household has 4k. 70% don't break 10k.
It's the high end that weighs on that average pretty hard.
The data in the last link really is worth checking out. I don’t disagree with you, but the numbers I’ve seen numbers are off quite a bit from what you’re quoting.
Source?
Age Group Mean Net Worth Median Net Worth
Less than 35 $76,300 $13,900
35-44 $436,200 $91,300
45-54 $833,200 $168,600
55-64 $1,175,900 $212,500
65-74 $1,217,700 $266,400
75 or more $977,600 $254,800
https://www.firstrepublic.com/insights-education/average-ame...
If you’re happy in your current situation, that’s great too!
I don't think individual mortgage holders, as a class, got government bailouts during the GFC. The closest thing I can think of is the Troubled Asset Relief Program which, to my understanding, largely benefited the banks themselves (by allowing them to offload toxic assets). Am I missing something?
Crypto did it too, probably on a larger scale than any money market fund - I know many people who bought a house on the proceeds from bitcoins they bought a decade ago.
But if increased demand happens in a market where: (a) new sellers can enter easily and (b) there's low startup cost to competing it will be more of a "rising tide lifts all boats" than a "compete to inflate the prices of the fixed quantity of goods" situation. (Housing is the latter - location, location, location, and construction would lag even in a zero-regulation world. And the difference between now and 2008 is that even if some of that is kinda "funny money" like crypto, there's still real money and real income involved, and less of a "a ton of people are going to have to sell in a hurry" pressure vs the wildly over-leveraged essentially-fraudulent buyers with crazy variable rate terms and such.)
If rent prices go up faster than house prices, then you might as well buy at any price. Of course this assumes you can afford it.
(This is why the USG generally pursues a policy of low interest rates and mild inflation: it incentivizes consumer purchasing and investment to have an environment in which dollars in the bank very slowly their purchasing power over time.)
I highly doubt this estimate is true, outside of very specific locales. Always ignore Zillow/Redfin estimates, and just look at comparable sales in the recent past.
Which is why they lost a ton of money in their home buying/selling division and shut it down.
So, if you were to buy a house you'd spend more for the next 5-10 years but because your payments are fixed, whereas rents will increase each year, there will be a crossover point where your mortgage+tax payments will eventually be quite low. So people who buy a house may pump more cash into the economy in the future. Plus theoretically, whoever sold you the house will be spending any extra cash they get from it (if they buy/rent in a lower cost of living area, or if the house was sold as part of estate that goes to a younger generation).
But yes, in the short term you might be pumping the economy with more cash than you would if you bought a house, depending on your ongoing savings rate vs. spending rate.
I was in the market to buy a house during like... 2019-2021. What "was supposed to be" say... a $450k 3/2 house became $540k during "the COVID pandemic housing gold rush" when rates were 3.25% with everybody bored, willing to have a bidding war (low supply, high demand... how all of these families were able to afford what felt like $200k inflated prices, I guess because of the "funny money" equity inflation in their house and they just rolled it over?)
(Unrelated but Zillow says at 7.5% interest rates that house is now $750k+, weird... makes no sense... counter-intuitive, except for how tight the supply/demand situation must be)
Long story short... I never made that move. I kept renting. Probably "below my means". Then I put a bunch of money into a money market fund that yields 5%.
So... the Fed is raising rates to 5% to try and slow inflation. But now I'm earning 5% on a bunch of money to the point that it basically offsets my rent.
So now I have more money to spend/am less financially "tight"...
doesn't that contribute to inflation? me having an "oversupply" of money will increase my demand for... travel, frivolous purchases (which was the original problem when business owners got more than what they needed influx wise with PPP loans, or consumers getting "covid relief" and then spending it on things that trickled up to business owners, etc.)