this post was submitted on 23 Nov 2023
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I've been in my house for 2 years. Based on housesigma.com my valuation is already up $150k. I could care less if it tanks. Something is severely fucky when they have no idea if/what work I've done and my valuation is up that much after 2 years.
If you have a mortgage, you should care, you should probably care if you don't.
Lets imagine that a $656,6253 house were to go back to it's 2010 price, about $339,030.
If you have a mortgage you now have about 600k in debt on an asset worth 340k.
It's unfortunate you can't just transfer a mortgage to a new home.
If you could, then it wouldn't matter if the market tanked.
Yes you would still have your $600k mortgage, but if you sold that $300k house and moved to a different $300k house or a $250k or $350k one (since the market tanking would bring the value of all houses down), then you aren't in any worse of a situation than before.
The way it is now though, I believe, is you would have to sell the house, be in debt, and not be able to get a new mortgage for another house.
Selling and purchasing aren't the only time you'd feel it. Any time interest rates go up you'd also feel it (now you get to pay more on large amount). With very large principals you'd be paying it for longer. Anytime the mortgage goes up for renewal no bank would want to touch you, or maybe they'd love you, just with really unfavorable terms (idk much about banks).
Having a large mortgage when the asset tanks can be thought of having a big debt where the collateral for that debt is suddenly with way less.
But hurting when interest rates go up would happen wether your house is now $300k or $600k.
If you bought your house for $600k you should hopefully be prepared to pay that $600k over time, whether or not interest rates go up.
Yes the collateral is an issue, but if it tanks it's not like the bank is getting their money back any faster by kicking people out and foreclosing. That would only be an issue if they can't make the payments anymore.
Unfortunate reality is sometimes rates jump, predicting 10 years out what your income will be, and how interest rates change is sort of impossible. IMO a lot of this uncertainty on the part of the buyer is mitigated by history, while the banks only have to take that risk in 5 year chunks (idk if there are longer renewal periods).
short googling seems like people tend to declare bankruptcy first in canada. It all around seems like a terrible situation -- and not one we'd want to encourage, hence: we probably shouldn't actively lower existing housing prices to pandemic or 2010 prices.
Well perhaps we should be trying to reform our banking and mortgage sector regulations so that lowering housing prices would be possible without destroying people's livelihoods.
Because house prices need to come down. And if we don't make it safe for it to happen it will eventually whether it's convenient or not.
I think I favour building lots of (hopefully well made) public housing, and taxes on non primary dwellings. I'm not in any way an expert though.
I don't really understand why the statements in your second paragraph are true.