Houses can be a good investment or they can be cheap.
A good investment outperforms its alternative asset classes. We chose policies that ensured they’d be a good investment. For housing to become cheap in our lifetimes, existing homeowners will need to experience an enormous capital loss.
This has been exacerbated by the long-term decline of interest rates. Sticker price and interest rate are roughly inversely correlated since the monthly payment a prospective owner can afford is roughly fixed. Over the past fifty years, boomers have been able to regularly refinance their loans into lower and lower interest rates as prices skyrocketed. This also made it easy to move since you could trade up on your home’s increased value relative to the remaining mortgage.
That pathway isn’t as available to millennials who bought at sub-4% interest rates, and it likely never will be.
A good investment outperforms its alternative asset classes. We chose policies that ensured they’d be a good investment. For housing to become cheap in our lifetimes, existing homeowners will need to experience an enormous capital loss.
This has been exacerbated by the long-term decline of interest rates. Sticker price and interest rate are roughly inversely correlated since the monthly payment a prospective owner can afford is roughly fixed. Over the past fifty years, boomers have been able to regularly refinance their loans into lower and lower interest rates as prices skyrocketed. This also made it easy to move since you could trade up on your home’s increased value relative to the remaining mortgage.
That pathway isn’t as available to millennials who bought at sub-4% interest rates, and it likely never will be.