The Fed has finally acknowledged the obvious:
Federal Reserve officials left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.
They ought to be cutting rates right now, but I suppose we should be grateful for small favors.
On another note, this also pushes back on the deficit hawks who have been panicked about increases in interest payments on the national debt. They've been trying to make the nonsensical case that interest rates will stay high forever and send interest costs into the stratosphere, but the Fed put the kibosh on that today. As common sense dictates, they suggested there will be rate cuts next year and in 2025, with rates returning to around 2% after that.
Good news but who would buy a house now that doesn't absolutely have to.
Someone who can get a lower price now and expects to refinance?
And wealthy enough to make use of interest rate exemption.
I was just paid $7,268 this month while working from my laptop. And if you find that admirable, With twin toddlers, my divorced acquaintance earned almost $1,892 in her first month of marriage. Making so much money feels great, especially when other bs10 people have to work for far less.
What I do is this...............> > > https://careersrevenue123.blogspot.com/
Housing prices haven't really fallen in large past because there's little inventory
Nobody absolutely has to buy a house. A house is a liability, not an investment. Besides, they're all overpriced at this point, just like cars. At least with cars people need to get around and ever since Covid used cars haven't been a bargain. Even worse with cars, shareholders are demanding companies build their most expensive and high profit vehicles and not the more economical ones that the market is asking for.
A house is a lifestyle decision, not an investment strategy. If you want an investment, get a Vanguard account and tuck your money into index funds.
A house is a net asset. You can't just write it off as a complete liability - it is both, and the way things are structured for homeownership here it is (almost) always a net asset rather than a net liability.
I also hate to say it, but you're wrong about it being an investment decision/strategy. Should it be that way? No, we should have other avenues for wealth building, but the way that life actually functions in modern North America is that you MUST own a house as your investment strategy unless you have access to other forms of wealth. And even if you can choose to own a house, given the market dynamics involved it's still a (good) investment strategy.
Unless/until the supply of housing ceases to be artificially constricted, this will ALWAYS be the case.
Housing price appreciation nowadays outpaces Vanguard accounts (not by much, but it does).
Not in all markets, it doesn't. Plus you're not factoring in the property tax, maintenance, and cost of borrowing hundreds of thousands of dollars. For example, if you buy a $450k house on a 30 year loan you are paying over $300k in interest on the loan. That means that you are paying over $650k for that $450k house. Plus property taxes and maintenance.
Once you've paid off that house, yes you're living without a house payment as long as you weren't dumb and used your equity to trade up and now you're 55 with a 20 year mortgage still on your back and how do you split a house between three kids?
With new housing being artificially constricted in nearly every metropolitan area, the cost of housing in those can't keep going up forever. Unless employers start to truly embrace remote work to reset where housing is needed, you end up with California where nobody can afford to buy near a job center unless they have a six figure income.
Buying a house is largely an alternative to paying rent on an apartment. In an apartment you pay indirectly for many of the same expenses you have in your own house. Rents are also expensive now. They aren't making any more land.
Real property is a hedge against inflation. If you expect inflation to be a lot higher than it is currently and you can still get a mortgage at a reasonable rate (current rate is only slightly above the long-term average) a house may be a good investment. If the Fed raises interest rates it makes losers out of both stocks and bonds.
A house is a liability, not an investment.
A house shouldn't be an investment. But in our decidedly non-Georgite system, land tends to increase in value. So yes, for most Americans, a place to live in fact become an investment.
I own a house because I got tired of dealing with psycho landlords. I'll never rent again.
Exactly. A house is a lifestyle choice. I've owned two and am about to build a third and final "retirement" house on the profits from the sale of the second. But if you run the numbers, someone can get to exactly the same place by conscious investment in index funds over 30 years.
Use Bankrate's mortage calculator:
$450k house at 5% interest, 20% down, 30 year loan = total cost of $695k.
Property tax let's estimate at 1.08% for $4850 per year = $145,800 over 30 years.
Lastly, let's assume a $2500 annual budget for maintenance = $75,000
Total cost of $915,800 to a 30 year payoff on your $450k house.
The question you have to ask is will my house be worth $915k in 30 years? In some markets, that answer is yes.
Let's contrast that with investing. You take your $85k 20% and instead of buying a house you put it into an index fund paying a conservative average of 6%. Instead of paying for maintenance and interest on a loan, you decide to rent and put an additional $6k annually into that fund.
After 30 years you have $962k.
Now, you are ready to retire.
You and your spouse both qualify for $2k a month in social security (I'm scaling that down because odds are strong future budgets will push SS down). Your total SS income for the household is $4k per month. If you've paid off your house, you can live on that as long as you don't go wild (assuming property taxes don't eat you alive, which is NOT a guarantee).
If you are renting, that doesn't cover your needs, but you have $962k in investments to draw from (again reasonably) and while you are drawing your investment account down the balance is still out there earning.
So, you've ended up in largely the same place. Your decision really hinges on whether you are a "house" person or not. Not everyone wants to/will maintain a house. It's work. It's expensive. But it has other benefits.
My point is, that you can build the same wealth renting a house as you can from buying one. There is no "one" path, but there is an army of realtors and finance industry folks that want to convince you to buy because their revenue projections depend on you doing so. They've been very good at brainwashing large numbers of people that the only path to wealth is through buying a home and they profit massively from it.
Good news but who would buy a house now that doesn't absolutely have to.
Depends in part by what you mean by "absolutely" — I think in the real world the vast majority of folks aren't ever in the position of "absolutely" needing to buy—in most cases renting is an alternative.
Anway, I think the answer is: people who think they can get a good deal now that prices have moderated (and in a few cases even declined) in some areas. Needless to say, it wouldn't violate the laws of physics to buy a house now, and refinance two years from now when long term rates are more attractive.
And the Dow Jones at a record high today
My pet theory is that the bear market was driving a lot of the negative economic sentiment. A new high in stocks should mean better news for Biden.
And here it is. Biden leads in four new polls:
https://www.nationalmemo.com/biden-polls-2666395339
More of this to come in '24, I suspect.
Hope that this continues - & that the Republicans realize that there may be some opposition to their tactics, & not double down on them.
But perceived state of the economy aside, I'm hoping that Democrats will be able to push through Ukraine aid (or that Bidrn will use Russian funds), the situation in Gaza & the West Bank will be vastly improved, & more people acknowledge thr absurdity of the impeachment inquiry aftrr months of wasted money & time by THREE committee
Yes, my wish list is long..& overly optimistic.
I think there has been a quiet consensus that sub 2% prime goal was just too low for several reasons including negative expectations on raises, maneuverability, inflation correlation, and not to mention bond market impact. I’m guessing the “new” target will be between 2-3% with 2.5 and it’s 25 basis points swing being the sweet spot. That number would be subject to less pressure from all sides and still allow for some inflation swings. Basically stated, it’s just a more stable number.
Isn't this a bit of counting of an unhatched chicken, that the Fed will lower rates three times next year?
There's only one bond vigilante and his name is Jerome Hayden Powell.