Pay over Time

[KevinC]

Originally Posted by ASAP

Yesterday, on one of the FB groups, there was some guy that posted he traded in a Civic Type R that he had negative equity on it for a new M4... he would then owe 107k on a car worth 91k...

Nonsense like this has been going on for a long time, but I thought it was largely over? Apparently not.

Back when I was young ('70s/'80s), if you walked into a dealership with a trade, first thing they did was determine how much equity you had in it, and also establish whether or not you'd be putting any cash down in addition to the trade. If you were upside-down in the trade (like this goofball in the example above) and didn't have a fat wad of cash to make up for it and then some, you were quickly escorted out of the dealership - absolutely no way to finance a negative equity deal back then. As it should be.

[ASAP]

Originally Posted by KevinC

Nonsense like this has been going on for a long time, but I thought it was largely over? Apparently not.

Back when I was young ('70s/'80s), if you walked into a dealership with a trade, first thing they did was determine how much equity you had in it, and also establish whether or not you'd be putting any cash down in addition to the trade. If you were upside-down in the trade (like this goofball in the example above) and didn't have a fat wad of cash to make up for it and then some, you were quickly escorted out of the dealership - absolutely no way to finance a negative equity deal back then. As it should be.

Yes - that's exactly how it should be...

...but we live in an unsustainable economy of revenue growth at all times which translates to, let's get this sucker into a car, make solid margin on him and then let the bank deal with the repo...

... then we the taxpayer will socialize this loss once it happens at a large enough scale... sad state of times.

[///d]

Originally Posted by ASAP

Yesterday, on one of the FB groups, there was some guy that posted he traded in a Civic Type R that he had negative equity on it for a new M4... he would then owe 107k on a car worth 91k...

Posts like this are why I am confident in the fact this next economic crash is going to be solid...

Meanwhile, when someone wants to understand these things in order to make better and smarter decisions only a few try to actually explain it while the rest just ridicule.

There was a time I didn't understand anything with finances and I made a lot of dumb decisions because no one explained it to me. I learned by being sick of being broke, but for so many being people broke is normal and they don't know how to get out if it, or that it's even possible.

Originally Posted by ASAP

People's heads would really explode if they knew what a 7% interest rate on a 30 year loan for a house really means ... do you think they know that they pay more than double for the house at that point?

Unfortunately that 7% rate is most folks only option right now. Sure, they can keep throwing money away at a rental or a payment they can't afford in hopes that interest rates come down, but how long will that take? And will they ever come back down to a reasonable rate, or is this going to become the new normal?

I just did a small 2cnd equity mortgage at 6.2% for 15 years. It fucking sucks, but it's my best option right now. But, I will be selling in the next few years and as long as the market doesn't tank by then I'll sell for far more than I owe and should be able to walk away with around half (or more) my sale price in my pocket.

I think many of us here are comfortable, and while we know shit sucks out there right now, I feel like most are too far removed from what is actually happening for a lot of folks. Most folks today can't think about long term, because they can only budget for today. Most first time home buyers can't afford the down payment required in todays market so they get sucked into high rates with shitty fine print programs.

[David70]

Originally Posted by ///d

Unfortunately that 7% rate is most folks only option right now. Sure, they can keep throwing money away at a rental or a payment they can't afford in hopes that interest rates come down, but how long will that take? And will they ever come back down to a reasonable rate, or is this going to become the new normal?

I just did a small 2cnd equity mortgage at 6.2% for 15 years. It fucking sucks, but it's my best option right now. But, I will be selling in the next few years and as long as the market doesn't tank by then I'll sell for far more than I owe and should be able to walk away with around half (or more) my sale price in my pocket.

I think many of us here are comfortable, and while we know shit sucks out there right now, I feel like most are too far removed from what is actually happening for a lot of folks. Most folks today can't think about long term, because they can only budget for today. Most first time home buyers can't afford the down payment required in todays market so they get sucked into high rates with shitty fine print programs.

Agree, have no idea if or when rates will come down. how much rent you would spend waiting for it to happen, or what the same house will cost by then. Really aren't that bad now when looking t long term history -

[ASAP]

Originally Posted by David70

Agree, have no idea if or when rates will come down. how much rent you would spend waiting for it to happen, or what the same house will cost by then. Really aren't that bad now when looking t long term history -

Attachment 3231826

the fallacy w historical rates is that prices are also at an all time high combined w the highest % of income spent on housing EVER... so there is that, if we go to a 10% rate... this becomes a cash only real estate market

[David70]

Originally Posted by ASAP

the fallacy w historical rates is that prices are also at an all time high combined w the highest % of income spent on housing EVER... so there is that, if we go to a 10% rate... this becomes a cash only real estate market

Super high rates will cause prices to drop. Supply and demand. If you want/need to sell your house and nobody can afford it you will drop your price. It will never become a cash only market as almost no one can afford to do this and part of the ones that can don't want to.

Your theory is rates go to 10% and prices aren't affected?

I also don't think housing prices are at an all time high now (as an average across the country, maybe in your area it is different).

[G35POPPEDMYCHERRY]

i just don't understand why someone would defer payment, unless they could beat the interest rate by investing

[Tyga11]

I forgot I was posting where everyone has 0 debt and is a multi millionaire. Should have expected this....

[infinitekidM2C]

angry people in this thread lol

[infinitekidM2C]

Originally Posted by M2siast

MOST people finance their cars because they don’t have the money to buy them outright.



Right; it seems to me that once cmyx6go broke down the numbers and revealed the interest costs, which you mentioned you didn’t factor in, topic was kinda closed. No need for the bashing that ensued in my opinion.

M2 owners are a bit nicer innit?

[G35POPPEDMYCHERRY]

Originally Posted by M2siast

MOST people finance their cars because they don’t have the money to buy them outright.



Right; it seems to me that once cmyx6go broke down the numbers and revealed the interest costs, which you mentioned you didn’t factor in, topic was kinda closed. No need for the bashing that ensued in my opinion.

all for financing....but people buy new cars, and cars they can't afford way to often. hence why questions like this happen. if they default then the liquates the dollar. happening in mass event, economy collapse

[ASAP]

Originally Posted by David70

Super high rates will cause prices to drop. Supply and demand. If you want/need to sell your house and nobody can afford it you will drop your price. It will never become a cash only market as almost no one can afford to do this and part of the ones that can don't want to.

Your theory is rates go to 10% and prices aren't affected?

I also don't think housing prices are at an all time high now (as an average across the country, maybe in your area it is different).

Attachment 3231840

High rates with a +5% increase vs 1.5 years ago has not significantly affected pricing at all... at least not in FL where I am. In fact, it hasn't really affected pricing at all. This may be true for certain overvalued coastal cities but not generally... and yes at 10%, very few people can afford to finance... only those with buckets of cash can purchase at these prices.

[David70]

Originally Posted by ASAP

People's heads would really explode if they knew what a 7% interest rate on a 30 year loan for a house really means ... do you think they know that they pay more than double for the house at that point?

edit - the reason why this works out in the USA... is people look strictly at cash flow... as long as I have positive cash flow I am in a good position... meaning 5 million on debt is irrelevant if I am sitting on 5.5M of assets... now that works, until it doesn't when people lose their jobs and can't make payments... in other countries this doesn't work because a) interest rates are far higher and b) the amount of leverage we allow here WOULD never fly there

Not sure what number you are starting with but when the interest rate goes from 3.5% to 7% on a 30 year they don't pay more than double for the house.

[ASAP]

Originally Posted by David70

Not sure what number you are starting with but when the interest rate goes from 3.5% to 7% on a 30 year they don't pay more than double for the house.

not an absolute variance... however at 7% you are paying double what the selling price of the house is in interest

[David70]

Originally Posted by ASAP

not an absolute variance... however at 7% you are paying double what the selling price of the house is in interest

That's not what was said in the post I replied to said. I also don't see the relevance in whether you are paying 80% of the home value or 100% over the 30 years.

[David70]

Originally Posted by ASAP

High rates with a +5% increase vs 1.5 years ago has not significantly affected pricing at all... at least not in FL where I am. In fact, it hasn't really affected pricing at all. This may be true for certain overvalued coastal cities but not generally... and yes at 10%, very few people can afford to finance... only those with buckets of cash can purchase at these prices.

Your post is why I specifically said

I also don't think housing prices are at an all time high now (as an average across the country, maybe in your area it is different).

The never ending "not what is happening where I live" is pointless.

[ASAP]

Originally Posted by David70

That's not what was said in the post I replied to said. I also don't see the relevance in whether you are paying 80% of the home value or 100% over the 30 years.

Originally Posted by David70

Your post is why I specifically said

You mean, you don't care about total cost to own? That's wild to me...

The never ending "not what is happening where I live" is pointless.

That is how real estate works... it is 100% location dependent and will depend on a wide variety of factors.... average has no meaning in real estate.. just like average / median income doesn't either unless it's looked at by area due to cost of living.

You must be one of those folks that believes the current unemployment rate as well not realizing a vast majority of that is based on gig jobs, people working two jobs and low income jobs... whearas the white collar sector has been absolutely battered with folks in marketing, software engineering and tons of other positions looking for work for months.

[David70]

Originally Posted by ASAP

That is how real estate works... it is 100% location dependent and will depend on a wide variety of factors.... average has no meaning in real estate.. just like average / median income doesn't either unless it's looked at by area due to cost of living.

You must be one of those folks that believes the current unemployment rate as well not realizing a vast majority of that is based on gig jobs, people working two jobs and low income jobs... whearas the white collar sector has been absolutely battered with folks in marketing, software engineering and tons of other positions looking for work for months.

Thanks but not interested in a discussion of the housing market in your neighborhood.

On average housing prices are no longer at their peak, interest rates are up, if interest rates continue to go up it will likely cause housing prices to go down.

"You must be one of the those folks that believes..." - also pass on this rabbit hole. Thanks again.

[G35POPPEDMYCHERRY]

god i love how people argue on fourms

[Donatello.]

Originally Posted by zx10guy

I agree with you when you look at the full amortization table to see what the total payments are at loan term. But it's more complicated with home purchases. The assumption is the home is going to gain in equity and didn't over pay. You can claim some or all of the interest on your tax filing.

Just glad I'm sitting at 2.874% fixed on a 30 year loan and my vacation home at 3.25% fixed for 30 years. I don't see how people are still bidding up properties with the interest rate environment we're in now. Every home in my primary home's development has been sold when listed and all of them have gone for over asking with the recent homes having gone to settlement in the past month. There are three under contract now with no new listings still outstanding.

You are not in the same boat if you own TWO homes.

Also, should no one buy a home again? Different times.

With that said, I know the current rates & market are stupid artificially inflated. Clearly not sustainable. The bubble will burst. When? We don't know.

These people paying over asking for average homes and not doing inspections etc = idiots

[Donatello.]

Originally Posted by David70

Thanks but not interested in a discussion of the housing market in your neighborhood.

On average housing prices are no longer at their peak, interest rates are up, if interest rates continue to go up it will likely cause housing prices to go down.

"You must be one of the those folks that believes..." - also pass on this rabbit hole. Thanks again.

These retard high interest rates only help the rich & big companies. They hurt the average American.

[tgrundke]

Originally Posted by Donatello.

These retard high interest rates only help the rich & big companies. They hurt the average American.

Mortgage rates averaged 7.5% between roughly 1970 and 2008.
They were over 16% in 1981.

Rates have been in a cyclical decline since 1982, and we're headed into a period of elevated interest rates for longer. Much longer. I'd expect that 5% - 8% will become the norm for the foreseeable future.

Auto loan rates averaged around 9% throughout the '90s, and up until the financial bust in 2008 they were between 6.75 - 7.5%

My point being: 0% (ZIRP) was an anomaly and mistake that created a lot of downstream ramifications.

Higher ("normal") interest rates help the average person because it forces price discovery that makes things like houses and cars more affordable. It significantly reduces big speculative bubbles and it makes everyone more cautious in how they use money. Higher rates incentivize low risk saving. Low rates incentivize spending.

Low interest rates mask problems until they hit a crisis.