Re:2012 vs. 1984: Young adults really do have it harder today
by malandrew on Friday May 11, 2012 @07:31PM
(#3961976)
True, but this is the reason I said that homes need to cease to function as an investment asset if you aren't living in it.
Homes should not function as an investment asset when interest rates drop. It effectively negates the benefit of more affordable loans. "The good news is that the home loan is for your first home is 5% with no money down. The bad news is that now everyone is buying homes whether or not they are going to live in it themselves, so the home you want to buy now costs you double what it did when loans were 13% and you had to 20% down". Only banks win in this scenario.
I would guess that a large share of all those homes purchased as an investment asset when rates dropped were put to use in rent-seeking activities. Add to that the vicious cycle impact rising home prices has on rental rates and you have an environment that hurts everyone that can't or shouldn't be buying a home.
Homes should not function as an investment asset when interest rates drop. It effectively negates the benefit of more affordable loans. "The good news is that the home loan is for your first home is 5% with no money down. The bad news is that now everyone is buying homes whether or not they are going to live in it themselves, so the home you want to buy now costs you double what it did when loans were 13% and you had to 20% down". Only banks win in this scenario.
I would guess that a large share of all those homes purchased as an investment asset when rates dropped were put to use in rent-seeking activities. Add to that the vicious cycle impact rising home prices has on rental rates and you have an environment that hurts everyone that can't or shouldn't be buying a home.