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- The Borrow Smart Chronicles - Inflation and Housing Update
"Destitutus ventis, remos adhibere."
Latin for: “IF there is no wind, row.”
There is an old saying: ‘you have not come this far, to come this far’… what does that mean to you - when you hear it? Your future is undecided, so who decides? Is the decision made for you and if so is it because you need to pay more attention to the habits you exercise today? What will your current habits lead to if you simply keep doing what you are doing? If you are getting the results you want now, then keep doing what you are doing. If you are not, take stock of the wind.
Do you have wind at your back? If so set the sails and focus on the rudder. If there is no wind at your back, then row! In the rowing you steer as you row by applying a little more pressure to one side or the other until you find yourself aligned with the flow, the current that moves you to your next destination - there is always a current, always wind about to blow, but you must be prepared.
a BORROW SMART CONCEPT
Inflation Paper Update V3
Trevor Hammond asked me to update a short paper I’d written about Inflation and Housing. Its complicated as they say… but I find it an interesting discussion. TLDR: Inflation pushes your house price up, we often rebrand inflation as appreciation. Inflation also makes your debt cheaper, as you pay the debt back with future dollars that cost you less in real terms.
I took a shot at explaining that here, and trying to illustrate it in the attached spreadsheet. One thing I added this time was an effort to look at the real net cost expressed as an interest rate. We often are so focused on interest rates as borrowers, that it seemed like an interesting experiment.
In my example, a 7% mortgage ends up being closer to 3% in real cost over 30 years if the house appreciates at 4% annually, compared to a renter paying rent that increases at 3% annually ends up paying for the same house as if they purchased it, but paid a 10% effective interest rate over 30 years.
In other words, it cost money to live indoors and your going to pay a mortgage one way or the other, so what if you compare owning and renting as a cost expressed as an interest rate over time.
Sharing here to see if you find the exploration interesting as well.
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Want to play around with this calculator? Download
LIABILITIES and DEBT
What’s Happening.
rates are a big driver of activity 'duh’
great outline from John Wake at realestatedecoded.com
expectations for a rate fall are rising
as mortgage limits try to keep up with house prices
and consumer continue to handle their debt reasonably well
“There has never been a statue erected to the memory of someone who let well enough alone.”
REAL ESTATE
What’s Happening?
big drop in news sentiment this past week
but housing affordability is improving
active listings are dropping
and inventory is rising per Aziz Sunderji
“You are under no obligation to be the same person you were 5 minutes ago."
ASSETS and INCOME
What’s Happening?
markets continue on a tear with some pullback this week
this is the time of the year where things get more volatile
July is the Janus of months - strong first half and weak second half seasonally
but companies are making more money and earnings are strong as is cash flow
the wild card for longer term housing prices
and whether or not inflation persists
as over half of consumers still say they can’t handle a payment shock of $1,200
but it still pays to live in America!
wealth distribution is wild
very few control most of the wealth overall - UBS Report
If you would convince a man that he does wrong, do right. But do not care to convince him. Men will believe what they see. Let them see.”
ON BEING HUMAN
What’s Worth Sharing?
this is just sad, as I remember so vividly time spent with friends playing kickball and racing banana seat bikes - I do hope these kids aren’t missing out on something key to their development
something I don’t miss!
DOPAMEMES
And Other Happy Moments…
My son and his friends just put out their first single - go listen and give them a shout (share with friends).
Artificial Intelligence
And the Future of Work…
From: Prompt of the Day
Please rewrite the following text in a concise and professional manner without using technical language. Maintain the original tone but make the content more succinct while preserving the message. Please answer in a structured way to enhance readability.
TEXT: [PUT YOUR CONTENT HERE]
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