this post was submitted on 12 Jul 2023
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Look on the bright side. If enough people default on their loans, I might be able to buy a house one day.
That won't go on your favour. That will go VERY badly.
Why not? Genuine question. If a bunch of people go under and their houses hit the market, supply increases, homes get cheaper.
At the same time banks get more cautious about who they lend to. If you're rich and a cash buyer is great as you can snap up a few houses at discount to add to your portfolio. Normal people, not so great.
All those people have to live somewhere. Or there will be a massive increase in homelessness.
With a flood of houses on the market, they will snapped up by... people with a good cash flow... like... corporations. Who will then turn around and rent them out to you and me and all those people forced out of their homes.. at whatever rental rate they desire... while raking in the cash.
I assume you can't afford a house now and couldn't afford a house when rates were as low as 1%. Even if a house is foreclosed on and dramatically drops in price, do you think you will actually be able to pony up and pay a downpayment and manage a mortgage rate at say.. 8 percent? I seriously doubt it. A $1.8 million home (at today's valuation) isn't going to pop onto the market at $150,000 in 2 years when the renewal hits.
The reality is that the banks will do whatever they can to keep people in their houses. I checked my bank today to estimate what my mortgage renewal will look like when it comes up and they are offering mortgage terms up to 59 years. I can afford my renewal even at the new rate because I bought a bit over at 1/3rd of what they approved me for... I knew rates would go up, and I knew what I could afford at more typical rates. I'd rather pay the lower rates of course... but...
Maybe more homeowners should care about the rental situation, if home ownership is such a risk to lose.
By this, I mean people should stop lobbying against new housing being built. People should start caring when renters begin to get screwed over in new ways. The number of renters is going to keep going up unless we hit a solid population hiatus. "Wait and see" just doesn't work with this.
Too many people have the mindset of "f you, I got mine", without looking beyond their own nose. Many of those people don't realize how close they are to being in a renter position themselves. Demotions, firings, unexpected disabilities, illnesses, fires, deaths, etc. don't just wait around until you can afford them. Those things don't care if you've had a bad year, or if you're the breadwinner of your household.
You or I could suddenly wake up one day and have a stroke. Everyone seems to ignore that as if it's something that only happens to other people.
Many (most?) people who lobby against particular developments are not against building homes, but are pro-new housing. Paving over food-producing greenbelt areas for McMansions or building 50 story condo resort towers to sit mostly empty will not fix the housing crisis. Nimbys who fight a 4 story affordable apartment building in their neighborhood -yeah, I agree 100% with you.
If my family of four can live cramped inside a one bedroom apartment for years, then overleveraged folks can downsize from the large houses they bought during the pandemic. And, if nothing else, it will feel a little like justice.
That's not the discussion here though. It was about how the sharp rise in interest rates will flood the market with foreclosed homes... somehow making it magically affordable for people who couldn't afford a house at the low interest rates.
And now your family of four in your cramped apartment will be competing with a LOT more people for that same number of cramped spaces... supply/demand... it's going to hurt EVERYONE not just the overleveraged. Meanwhile corporate housing companies will be playing Scrooge McDuck.
I don't know who is downvoting you because you are completely right.
At the same time, I am delighted at the idea of a bunch of speculators being stressed out and losing a ton of the money they obtained while making housing unaffordable for everybody else.
Housing can be affordable or it can be a good investment. It can't be both, and it is time it starts being the former.
There's a contingent of jaded people who just want to see slightly better-off middle-class people punished for taking any risk in buying their house, rather than actually seeing the housing market become more affordable for everyone. There's always someone celebrating the upcoming foreclosures.
Depends. Maybe OP meant outright.
Or with a large downpayment. People that bought within or below their means might be well within the position to upgrade using their savings. After all, high interest rates are good for those savings.