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by julienb_sea
2414 days ago
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Mortgages are, typically, a functional debt market which is good for all parties involved. Well qualified buyers generally lack the capital needed to purchase a home outright. However, a bank can come in and provide long term financing at reasonable rates. The buyer is pleased, because despite the interest payments, over time the buyer is building equity in a fairly stable or appreciating asset. This is a great example of "worthwhile" debt, and the private market for mortgages is thriving. Of course, when guardrails are thrown out and mortgages are handed out haphazardly, things can get a bit messy, as we know. |
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The reality is if you get a typical 30-year mortgage, your house costs you 3x the list price you thought you were buying it for.
>In 1940, the median home value in the U.S. was just $2,938. In 1980, it was $47,200, and by 2000, it had risen to $119,600. Even adjusted for inflation, the median home price in 1940 would only have been $30,600 in 2000 dollars, according to data from the U.S. Census.
https://www.cnbc.com/2017/06/23/how-much-housing-prices-have...
Why 1940? Because Fannie Mae was created in 1938 after a housing crisis in the 1930's. https://en.wikipedia.org/wiki/Fannie_Mae
The majority of a person's labor throughout their life is now given to banks. It doesn't take 30% of your productivity for 30 years to build a house. It doesn't take 10 years for a person to build a house. You can build a 1,000 sqft house in a year with $50,000 worth of materials (even less) and a piece of land.
Where has the rest of the typical $200/sqft home cost gone? To the banks! That's $150,000 cash, and $450,000 total outlay of capital, if you buy that cash with a mortgage.
I propose, the loans themselves are the reason we now dedicate a decade of our life to our shelter. I do not believe this is a good thing. I do not believe this is worthwhile.
You will save money and have a better, more free life -- debt free life, if you save up enough money to buy land, plus $50,000 of materials and build your house yourself.
Loans enable every single level of the housing industry vertical to extract more money from you. Architects costs more. Utility services cost more. Building codes get more onerous. Builders charge more. Insurance companies charge more (since the houses cost more). Taxable values go up, costing you more. All of these increased costs are enabled and exacerbated by mortgage "innovation."
Everyone wants this except the first time buyer, but the first time buyer takes all the risk with a new purchase.
It is completely unbalanced. The younger generation is suffering the most and I think it's unfair and detrimental to the future of society.