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.
With the interest rates what they are, it makes sense to wait on buying a home, even if you can technically “afford” it. My mortgage would be 60% higher if I bought today vs. 2 years ago when interest rates were a lot lower.
Except even then you can plan to refinance. There’s tradeoffs- it’s a pain and you have to pay additional costs, but if the rate is that much of a problem it’s usually worth it. Plus the additional history of a few years of mortgage will likely help your credit score.
And there’s even more context. You’re talking about buying today- my parents had immaculate credit and a huge down payment when they bought their house in the 80’s. Their interest rate was 15%. The US has had artificially low rates for decades, to the point where people are considering 6% and 7% to be “high”.
Rates will certainly impact who can or cannot afford to buy a home of course, but the only ones who are deferring purchasing at all for that reason are people viewing their home as a financial instrume that needs return on investment. If you need a home for shelter, a slightly higher rate is still a way better financial decision in the long-run than renting most of the time.