psychothumbsDeflation Never Happens, Except Right Now
people put off buying homes and other big purchases because they know it will be cheaper later
What absolute drivel. This myth was obviously formulated by some wealthy economist who had only ever worries about purchasing vacation homes.
People put off buying homes UNTIL THEY CAN AFFORD IT. How many people does the author think are currently in the streets or renting for years just so they can save a bit on their mortgage? Completely garbage.
I mean - I could afford a home now, it’s just stupid expensive and I’d be leveraged up to my eyeballs. You do usually need to have the deposit in on-hand cash (though if you’re sneaky and an utter idiot you could probably find some way to borrow for the down payment).
I understand where you’re coming from but it’s accurate language to use because a lot of people technically could afford to buy homes right now they just know it’s dumb and realize the market is about to collapse and they’d end up underwater on like an 8% mortgage.
I could make mortgage payments standing on my head considering what I pay in rent. It’s the down payment that’s the killer for me.
Aside, it is absolutely fucking insane that rents usually far exceed mortgages. The rent does need to account for the lack of liability for depreciation property damage (like, if your apartment floods you’re not on the hook to replace your floor boards) but in a lot of markets it’s become entirely detached from reality.
With persistent deflation, that down payment would have to be 100% of the price of the house.
As for right now, you don’t need a 20% down payment for a house. That just avoids mortgage insurance. You can get rid of that once the remaining mortgage is at ~80% of the current value of the house. We got rid of ours in 3 years with a 10% down payment but that was in a booming market in the fastest growing large city in the country. It may not even make financial sense to buy in your area. If it is going to be an extra $1000+/month to buy vs renting, stick to renting and make sure you are filling up your Roth IRA and if you have more, throw it into a savings account which actually bears interest now.
And of course if you are doing something as lavish as eating avocado toast or getting coffee from a coffee shop…keep doing that of it makes you happy. It is not going to really amount to shit.