It's kinda a Goldilocks trap. Good jobs numbers are good for the economy, but keep the Fed holding up rates. Weaker jobs numbers are the opposite.
I don't know. At 6.7% (which I think is roughly the 30 year rate right now), banks will make $396,900 in interest. They have to pay to administer the loan, make sure it's insured and taxes paid. If the interest rate drops, their debt gets paid off with no prepayment penalty. And if interest rates go up, it's much more likely the homeowner will keep the loan and they will have an underperforming asset. That just doesn't seem like a homerun for the bank?
I am confident that almost everyone who was given the chance to reap all the financial benefits from owning a mortgage lending bank, would sign up on the spot.
The funny thing is that nearly everyone took these positions: 1) this sucks and I hate it or 2) this sucks but we deserve to take our medicine and bust the bubble. A reset will be good for us.
For me, I've never had a huge problem with the rate itself. It's the front loading of interest payments that should be criminal
ETA: I am not a good investor, so this may make your point, but I would not sign up for owning a mortgage lending bank. I purposefully don't invest in any banks outside of being invested in them through S&P 500 funds. Just doesn't seem like a great business. Seems like the banks that grow fast usually do so by taking on extra risk or overpaying for acquisitions and I just don't like them in general as an investment class. That said, over the past 10 years, the S&P has outperformed the Dow Jones US Bank index by more than 3.5% on an annualized basis, which is obviously huge. But over the past 5 years, it's almost exactly the opposite, with the Bank index outperforming by a little more than 3% annually. https://www.spglobal.com/spdji/en/indices/equity/dow-jones-us-banks-index/#overview
I'm not making the argument that they should increase rates, just that they don't seem absurdly high to me. If you let me pay for a $300,000 asset over thirty years, and the rate is low enough that the vast majority of the time, just putting the amount loaned into a simple index fund would perform well enough that it would make sense to take out the mortgage even if you could pay cash, it doesn't seem like the interest rate is excessive.
Sure, I see why you are saying it isnt excessive.
What do you mean? Like pay the principal and accumulate interest on that but the interest itself isn’t subject to more interest?
What's the better way? Effective interest rate calcs are just math really.
I'm talking about this...
Well, the only other option for the banks for that to work would be to completely eliminate or heavily penalize the option to pay down the loan early, and lock you into the payments over the long haul. And say your home value increases a lot and you sell for a windfall, you’d have to pay the entire remaining scheduled principal + interest, not just the principal.
I don’t disagree with any of that, but in places that allow building it’s better. The artificially low interest rates have created a problem, but it’s going to be temporary one way or the other, even if it’s pretty ****** for people not in a house before the post Covid spike. But the chokehold we have on supply and extra costs we impose have created a long term problem that we still aren’t addressing and don’t appear to have a path to address.
If it makes you feel any better, most of the broader indices are up; nothing like NVDA, but any buy in late March/April looks brilliant.
They make most of their money by packaging and selling the loans, which is extremely lucrative, limits risk, and frees up their capital for reinvestment.
I feel you here. I own a rental property that appreciated dramatically in 2021-2022 and I wasn't in a position to sell. By the time I was, rates had gone crazy. I've been wanting to offload it since then, but now will get hammered by capital gains. And yes, I've been depreciating it out. Still frustrating that I could've sold it in 2023 if rates had just increased moderately; now I'm looking at a 1031 but my rate on that property is 3%. Golden handcuffs indeed.
Yep, getting money back to then use for further investment is key to the process.
I mean one side would love to cut a ton of debt. Just give us the word!!
I don't have any democrats representing me. Besides, Republicans are just as bad with money than Democrats. While I'm not sure Democrats actually understand economic principles which is bad itself, the GOP may deserve more criticism bc they allegedly know better. Their existence is to ***** about debt when they can't do anything about it. When they are given the reigns after the *****-fest works, they just add to it - as we've learned this very day.
As a lender, I would prefer better collateral than real estate. I want liquidity, fungibility, faster recovery time, lower LTV, and less risk.
getbuilding.com
a rare mistake from the Founding Fathers, imo
I’d settle with 20 years total between house and senate. 16 years max in one.
They would help. I also think we are far overdue for adding more representatives. They represent far far more people than the founding fathers ever intended. Too many people + short unlimited terms means they just spend all their time fundraising and not what they are supposed to do - listen to their constituents and legislate.
It's past time for him to hang it up. I have Kustoff now. He's inaccessible and is a rubber stamp. I'm not sure why offices like his even exist with the budget he has. It's not to listen to constituents that's for sure. Although it was pretty easy to get Capitol and White House tour tickets the one time I tried so that's cool...
What timeframe are you looking at? $IBIT has outperformed $NVDA over the last year.
