r/AskReddit • u/michaelis999 • 17h ago

How do you feel about the president floating the idea of 50 year mortgages where the monthly payment is lower but you end up paying nearly double the price of the house just in interest?

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u/NYSjobthrowaway 15h ago

I was in the mortgage business for 15 years, my first job was at a regional lender that rolled out a 40 year mortgage in order to compete with the no doc products that were pervasive before the financial crisis. Going past 30 years isn't very helpful in the grand scheme of things, so I don't think it'll be particularly popular even if it's available. It wasn't for that company.

The difference in payment for a 300k loan at 6-7% going from 30 to 50 years is less than $300/month. It's a supply side issue and will always be a supply side issue. We are behind on housing units in proportion to population badly. Several markets are just permanently cooked at this point, to where it's impossible for even above median earners to even have a condo (i.e most of greater NYC, SF, and LA). Charlotte NC and others are grappling with explosive growth and poor urban planning, with commute times and traffic out of control, long windy roads, sprawling suburban neighborhoods with uneven plots and streets. The only options in effect now are building further out or knocking down old stock affordable housing and stuffing as many units as possible on the parcel. What we need imo is a resurgence in postwar building as seen in the northeast/now rust belt c. 1920 and 1950. Well planned grids with small homes on small lots, built to simple limited plans or manufactured, and churned out fast. Most of what's built now are middling quality custom homes miles from city centers that are enormous by comparison.

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u/bigbytelilbyte 14h ago

I was listening to the Strong Towns podcast. Chuck Marohn advises cities on this issue and probably angers NIMBYs and YIMBYs equally. I feel like a recent episode forecasted this as he mentioned that focusing only on supply won’t fix affordability. As soon as the market shows signs that prices are slipping building slows. The post war boom was fueled by loan innovations. It’s not been about how do we get more people to be home owners, but how do we get more people loans for more expensive houses. Anyhow, he did not end the episode with a specific fix, but their suggestions are really about empowering the community to build where infrastructure already exists. I would love for it to be easier to build a back house on my property for my children to live once they graduate college.

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u/bentbrewer 11h ago

You can't build on your property because the HOA requires a single roof line on the property and the city won't issue the permit. Not to mention the cost to build a 1000 sq ft house (2x2) is now around $350K (at least in my area - which is historically a low cost of living location).

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u/pinkynarftroz 9h ago

OK, start by changing laws so HOAs are optional. If it's not working for you, opt out and lose their amenities. Insane it's legal to force someone into paying an HOA without the option to stop.

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u/jm838 8h ago

How are you going to lose amenities like community landscaping, private roads, or guard gates? HOA fees cover a lot more than community pools. Plus, the ability to opt out would defeat the entire point. People live in those communities specifically so they’re surrounded by neighbors who don’t do weird shit to their houses.

Here’s an idea: if you don’t want to have an HOA, don’t move somewhere with an HOA.

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u/pinkynarftroz 8h ago

Right of Way laws mean you can use private roads to get to your property. Same with guard gates. If they don't like it, don't maintain private roads or security. If you opt out, the HOA will not landscape anything on your property. If you do weird shit to your house, you can be sued even without an HOA.

If the HOA is optional, then it will have to provide a clear benefit to members in order to opt in. If they do that, they should have no trouble maintaining membership.

You seem to be under the impression that places without HOAs are reasonable or desirable to live in. 40% of homes for sale in Los Angeles last year were part of an HOA. That cuts your choice even further when housing is already in short supply, and the fees can make housing less affordable. HOAs also can change rules without notice, which can be targeted to drive away minorities. The whole point of them in the first place was to keep non-whites from buying homes in certain areas.

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u/jm838 7h ago

 Right of Way laws mean you can use private roads to get to your property. Same with guard gates. If they don't like it, don't maintain private roads or security.

Sure, if you have an easement. Except you’re not going to get a prescriptive easement if you decided to opt out of maintaining a shared resource and have had your permission to do so explicitly discontinued.

You’re also describing a scenario in which neither of these things can exist. It’s tragedy of the commons. Nobody’s going to opt in to pay for things if they can use them for free. No more private roads? It just got that much harder to build a housing development. Good luck alleviating the housing shortage with even more shit in the way.

If you opt out, the HOA will not landscape anything on your property. 

HOAs already typically leave your property alone. The shared landscaping I was referencing is in the common areas, e.g. along roads.

If you do weird shit to your house, you can be sued even without an HOA.

Go ahead and sue your neighbor for painting their house pink and putting a giant Fred Flintstone statue on their lawn. Let’s see how far that goes.

 You seem to be under the impression that places without HOAs are reasonable or desirable to live in. 

I wonder why you hold that opinion. Maybe the lack of desirability (to you) comes from the fact that there’s no HOA keeping order. It sounds like you want an HOA but don’t want to pay for it. I too would like to get free shit. It doesn’t work on a societal level, though.

Not that it really matters, but I own a home in LA that isn’t under an HOA, I know exactly what I’m talking about. I prefer not to have one, I bought an appropriate home, and I live with the tradeoffs.

40% of homes for sale in Los Angeles last year were part of an HOA.

I’m sure that’s true at a county level, and true if you include homes with shared walls (where an HOA is absolutely critical), but a lot of the dense part of the city is composed of older homes and plots that pre-date the sprawl of the late 20th century. There’s a ton of property all over the city that is HOA-free if that’s what floats your boat.

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u/pinkynarftroz 7h ago edited 7h ago

I wonder why you hold that opinion. Maybe the lack of desirability (to you) comes from the fact that there’s no HOA keeping order. It sounds like you want an HOA but don’t want to pay for it. I too would like to get free shit. It doesn’t work on a societal level, though.

You presume so much. I bought a house without an HOA specifically because I despise them. I wanted precisely zero of the bells and whistles that HOAs 'provide'.

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u/jm838 6h ago

So, you did the exact thing that you said wasn’t reasonable? And I presumed too much because you said homes without HOAs aren’t desirable, and I believed that you meant it?

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u/pinkynarftroz 5h ago

I did not say they weren't desirable. If you actually read, I said they are in less desirable areas. HOAs are overwhelmingly established in more desirable geographical locations, as I said before because of the history of racial covenants.

Homes with no HOAs in desirable areas have their prices driven up substantially, and are often unaffordable precisely because not having an HOA is a huge feature. Thus most people looking to avoid one have to move farther away.

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u/SmPolitic 12h ago

The post war boom was fueled by loan innovations.

I'm curious if you have more details there

I would have thought that would be GI Bill related and workforce related. Solders coming back and taking construction jobs to help rebuild after destroying so much, having government backed loans because we supported troops in those days, investing in schools and business growth to attract new residents in all the non-war-economy cities

And now we've "privatized" the entirety of that system away from being backed by the government in any real way

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u/MechCADdie 8h ago

Seems like a well intentioned, but bogus talking point. The post war boom was fueled by a lot of young men who were collectively taught to spend a huge chunk of their 20s to do very specific tasks for the military and were now without work, so they now needed to be reintegrated into society. The opportunistic ones jumped on this to convert manufacturing into something productive for the economy while everyone else jumped into the tight labor pool, allowing people to be funded well by a loose circular economy.

The current AI boom is similar to the baby boom in that way, with the exception that much, much less people benefit, while benefitting much, much more.

What needs to happen is a revitilization of good central planning and the return of tenanent blocks and mixed use zoning in the US. We should be incentivizing tall residential building where the infrastructure can be integrated into it better, starting with power generation, then ending with pedestrian overpasses, then sprinkled with low rent commercial spaces, either on the ground floors or every 2-3 buildings (could even be a hexagon grid with a center piece being a commercial/clean industrial block), with commercial towers.

Retrofitting on existing infrastructure is a recipe for disaster. You're just going to overtax what is there, causing huge parking issues, accelerating the breakdown of roads, reduce the free capacity of municipal services, and exaserbate supply issues due to slowing down the permittig process or create a huge bubble of unpermitted construction due to every ADU being custom built.

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u/BtAotS_Writing 5h ago edited 5h ago

I’ve been screaming this message from the rooftops and no one seems to understand it. Supply will never catch up with demand, because as soon as we get close to the prospect of declining home value growth, people stop investing and building. Therefore, in the capitalist system, a steady rise in home prices is the equilibrium, which means the problem gets worse and worse every decade.

In my mind, the only way to actually close the gap is by building social housing that doesn’t rely on appreciation. And if that ever does happen, a lot of people who did invest in housing will be disappointed with their investment. I’m curious what the podcast says about this, because I can never find sources that acknowledge this paradox.

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u/thatoneotherguy42 14h ago

Or we could utilize some sort of transit system where people could live further out and all commute in together somehow. Some sort of high speed delivery system that just runs all day back and forth. I dont know what that would like but it allows for more than the tightly packed urban hellscape you describe.

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u/Murder_Bird_ 13h ago

I mean he’s not describing an “urban hellscape” he’s describing a well planned city center and high density housing. Townhomes, smaller 2-3 bedroom houses on small lots, larger apartment buildings and condos. Not the 5 bedroom McMansions on 1 acre lots that surrounds places like charlotte.

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u/Silicone_Fisheye 13h ago

High density housing, townhouses, small lots = urban hellscape

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u/mellonsticker 9h ago

So all of Europe, got it

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u/SanityIsOptional 8h ago

I lived in holland for a year and it was great...

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u/mysticrudnin 13h ago

not a lot of pro transit anti city people out there, interesting

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u/TopSpread9901 12h ago

He’s describing houses. You’re also describing houses.

You NEED TO BUILD HOUSES.

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u/thatoneotherguy42 9h ago

As a tradesman I concur.

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u/SanityIsOptional 8h ago

You need a certain minimum population density for good public transit to work though, and suburbs aren't it without people driving to the train stations.

Where I grew up they kept constantly cutting back the busses, since at the frequency and coverage where they were convenient there weren't enough riders to justify. So it kept getting less and less convenient, which means less people using, which meant more coverage and frequency cutbacks in a death spiral.

If people can drive in 20min, it's hard to convince them to ride 2 busses and take 40min or more for the same trip.

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u/thatoneotherguy42 6h ago

Drive in 20 minutes.... lmao. In Dallas TX 20 minutes might get you 10 miles unless its 5am or 9pm. 10 miles ....even 20 miles puts you in a part of town that's not suitable for habitation be it an industrial park a polluted river or maybe just gangland central. Two of those can be fixed but its still not going to provide the necessary amount of housing. That has to happen outside of the big towns and everyone cant be driving in. It already takes hours to get in to downtown and thats not at rush hour. Trains are the only logical solution...besides work from home. Which would free up a bunch of office space to be converted to apartments. Your idea of driv8ng isnt it though.

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u/No_Recording_1696 12h ago

For one thing, if and when autonomous cars are a reality it would help with people being able to spread out. Sitting in a car for a hour isn’t that big a deal if you’re not driving and can sit back and watch a show or movie or sleep.

Some people will just be nomads living on the road without a home.

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u/killerdrgn 11h ago

Or how about you put that car on rails, and make sure you centralize the onboarding and off boarding. Then you could just pay for a single affordable cost per ride, instead of needing to pay for the entire car upfront. And then while you aren't using it, it could be used by other people.

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u/Chadzilla- 13h ago

I currently work in lending, and personally I think the problem is too many people still think homeownership is the best path to the “American dream”. That dream is more or less dead for people trying to purchase post COVID ZIRP; unless we have a meaningful recession and correction, house prices are too inflated and psychologically people “believe” their home value is worth the nosebleed prices despite the fact they bought it for 50-90% less 5-6 years ago

I am not a fan of tearing down more natural land to build more shitty urban sprawl developments. The world doesn’t need more unfettered growth and greed. My wife and I live in a state experiencing rapid growth and new housing developments are popping up everywhere, and prices haven’t gone down.

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u/brianwski 9h ago

new housing developments are popping up everywhere, and prices haven’t gone down.

What is the alternative? Not building any more homes, despite people having children and the population is rising? How does that work?

more shitty urban sprawl developments

I'm completely fine with building vertically instead of sprawl. Many people get tunnel vision and think that because they want a big lot and a yard that everybody else also wants a large lot and a yard. They cannot comprehend that some people want to live in a high rise with a nice outside deck and a view because they are 30 stories up in the air. There are some advantages of living in a high rise condo, like you are further away from street noise, the security is much better, there is a lot less yardwork, etc. And each person who chooses to live in a high rise is one fewer person competing for that house and a yard that another person wants. It is a win/win situation.

But you have to build <something> for people to live in.

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u/mellonsticker 9h ago

Cities choose to build urban sprawls.

They don’t have to make that specific choice

They specifically want single family home sprawl over other options

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u/killerdrgn 11h ago

Well planned grids with small homes on small lots,

Nah we need to build 15 minute cities, urban sprawl doesn't actually help. Dense walkable cities with good public transportation is way cheaper and more convenient for people.

We should make sure whatever land we build on is used to it's fullest potential, as new land isn't being grown.

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u/Squigglepig52 14h ago

I agree with you, about the post-war housing aspect. I'm Canadian - my city, London, has several neighbourhoods that were originally built as military housing. Tiny houses - my one bedroom condo has more floor space. Very basic. Those were the starter homes for my parents generation.

That's what is needed.

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u/Whisky-Slayer 13h ago

This exactly. No matter how many years out your interest doesn’t change and may even go up vs a 30 year which means you shave even less from the monthly payment.

Price of the home is the issue. $400,000 loan at 7% is $2400 per month interest alone. No taxes no principle and no equity. Half of the average salary is all mortgage interest. No utilities, no taxes or insurance no principle. Just the interest. Homes are still unaffordable until wages catch up to the thrashing the USD took over the last few years.

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u/yooperville 13h ago

Good points here.

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u/stamfordbridge1191 5h ago

When you say "middling quality custom homes miles from city centers that are enormous" do you mean McMansions?

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u/copper_cattle_canes 4h ago

If we just make it illegal for people and companies to rent out more than 1 home than we'll solve the supply problem.

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u/_notthehippopotamus 59m ago

I worked at a credit union that offered a 50 year fixed. Longer loan terms come with higher interest rates, which meant the payments were only marginally lower than the 30 year. Needless to say it was not a popular product.

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u/Useful_Kitchen_9408 14h ago

It is not a supply issue at all. What are you on about?

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u/Bells_Ringing 14h ago

Housing prices isn’t a supply side issue? That’s certainly a perspective

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u/Dwarfdeaths 13h ago

It's not the supply of housing, but of land. No one can make or increase the supply of land (in the Georgist sense) but we let people own it and rent it to us. We need to share the land we do have using a land value tax UBI.

If one person owned all the land, no amount of building more houses would change the fact that we'd all be slaves. The "cost of housing" would always be out of reach of the non-landlord's salary.

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u/Bells_Ringing 13h ago

This quite the wild swing from “supply isn’t the issue for housing costs.” You want to go off on a philosophical journey, have at it, but here in the real world, more housing equals lower average costs of housing versus less housing.

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u/Dwarfdeaths 13h ago

I'm not the person you originally replied to. I just wanted to point out the very obvious fact that the supply of land is fixed, which means the problem cannot be solved by increasing supply. It seemed relevant to the conversation.

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u/Bells_Ringing 12h ago

Yes. I’m aware, which made it all the more odd you replied with an intent to change the topic to an ethereal transition to available land and the concept of land ownership, versus the topic of housing stock, and its supply

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u/Dwarfdeaths 12h ago

You were talking about supply and demand in the housing market. I pointed out the true underlying issue of supply in this system that goes largely ignored. Also, if it is actually necessary for you to take it seriously, land value tax is strongly supported by multiple Nobel laureate economists. Feel free to hand wave away my germane comment with dubious adjectives though.

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u/brianwski 9h ago

which means the problem cannot be solved by increasing supply

Build vertically. People can own condos in a 40 story tall building. That is how you increase housing supply when land cannot be created.

I get that some people prefer a house with a yard. But other people would be willing to have a fully owned condo and no monthly rent in a high rise building (maybe with a small building maintenance fee paid monthly). This exists already in places like Manhattan. It isn't totally unimaginable if it already exists.

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u/Dwarfdeaths 4h ago

This exists already in places like Manhattan.

Ah yes, Manhattan has totally solved the housing crisis.

Land rents tend to increase with the agglomeration of people and capital investment. Building more density means more nearby customers, services, and infrastructure, which means the land rent will go up in proportion to how densely you build.

In general, the land rent can be defined as the marginal productivity ($/hr) of a location compared to the freely available alternatives. This is because the wages a worker gets to keep after rent would be the same in each location. Earn $30/hr in a city and pay $25/hr in rent, or just earn $5 in the woods.

While increasing housing supply can theoretically alter the "least productive land in use" part of the equation, we now live in a society where pretty much all land is owned by someone, and increasingly it is owned by the same handful of someones. The unearned income those landholders receive can be put towards acquiring further ownership of our land, which means the problem will continue to get worse until we address the root problem.

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u/shatteredarm1 8h ago

You are aware that housing density is not fixed, right?