What is the relevance of the concept of ‘marking to market’ to a private mortgage loan? I don’t understand that point. Are you pointing toward fixed rate loans?
Also, I think most mortgages are recourse loans. That is, if you default and all of the grace periods have been exhausted and the mortgage holder engages in a commercially reasonable sale of the secured property, any short-fall is on the borrower, and their other assets are then up for grabs unless protected in a trust or some other such structure. During the recession, the people who walked away from their houses in which they were severely upside down often had to declare bankruptcy. It wasn’t just a freebie get-out-jail free card. There are a few states that allow non-recourse loans, but I don’t think that’s the norm.
Mortgage lenders cannot take anything other than the house, unless it is a home equity loan.
It is not mark to market in the sense that unlike a margin loan on an equity portfolio, you don’t need to post daily margin as the value of the home moves around.
This differs by state (and sometime the type of loan, a refi or HELOC can be treated less favorably than the original purchase loan):
“Whether a loan is a nonrecourse loan generally depends on the laws of the state where the loan originates. There are 12 states that, by law, only allow nonrecourse loans. These are known as “nonrecourse states,” and they include Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah and Washington.”
Houses - yes. Condos - no. The condo we own in a very popular area of the city has not appreciated at all in 5 years. However, we gifted 5 years worth of rent to the tenants, and unlike their prior landlords, we have not asked them to move. Our house, OTOH, appreciated handsomely in the same timeframe, but we don’t care. Not selling, not moving.
Based on year-over-year numbers from September 2022, Queen Anne / Magnolia were up (+13.7%), Capitol Hill / First Hill (+23.1%) and NW Seattle (+15.6%). Downtown has taken a hit (-15.2%), due in large measure, I suspect, to the Covid-related closures of food and other services, which have not yet made a big comeback (effectively eliminating one of the main reasons for living downtown - walking to food and services). And those increases occurred in a rising interest rate environment. Of course, the announced tech layoffs may have something to say about this going forward.
If you don’t mind my asking, in what part of Seattle is your condo? I can’t think of anything in the city that has not become more expensive in the last six years. Even Dick’s has increased their prices.
probably not a big deal, but FYI I didn’t intend, and don’t even remember, including an emoticon on your reply post to twoin18, and I can’t remove it. just fyi.
I don’t think it’s resentment, but it sure is easy when you have help to buy a house. And higher house prices does make it hard for those who don’t have parental help.
That said, if you have the money to help your kids with a house, great! Nothing wrong with that. If you don’t have the money or don’t want to help or maybe your kids don’t need the help, that’s fine too!
I also know people who had help from their parents to buy a home and it came with a lot of conditions…they liked getting the help with the house, but hated some of the conditions it came with or as @blossom said, their parents helped with the downpayment, but then needed help with expenses later on. You don’t always know the background behind help with down payments on homes.
That said, to each their own. The only time I’d say it isn’t good to help a kid buy a house, is when you’re helping them buy a house they can’t actually afford or their terrible with money…
We bought a condo starting at our D’s sophomore year (of a five year program), but in the Longwood Medical Area in Boston. We sold a number of years later at a very attractive return – the appreciation paid for five years of school (not counting capital gains tax, I think).
Thinking about our joint estate and our life insurance, I know my DH will not need my life insurance payout when I pre-decease him (likely scenario). I now have DDs be my primary beneficiaries so that can be tax free to them. Why have it go through DH when they are the ones who can best benefit? If DH in the interim becomes terminally ill, can change his life insurance beneficiaries for the situation. DH has some term policies that will drop off - otherwise he has about the same death benefit amount as I do.
One of the best things one can do/have done is be a good financial example for kids, and teach them what they want/need to find out. Both DDs have no college debt and had a bit of stock money (DD1’s account is low, while DD2 has funds towards a home purchase).
DH and I made sacrifices to get into our first home, and six years after that were in our 3rd purchased home in 3rd city (never expected/anticipated the moves). We have been in our newly constructed for us home since 1992 (architect and designed for the lot, heavy involvement with construction). Truly don’t know how long we will be here in present location, but timing any major home improvements (more cosmetic) here around a move DD1/family will make this year, and also when DD2 is ready to purchase a home in her location. Not wanting to dive into bigger projects (home improvements I want to make for higher resale - room addition, car port addition). Thinking about timing of use of some gifting money to prepare for DD2’s home purchase, but only in the thinking process. DD2 needs to more steadily build up savings - which improves with company bonuses and pay raises. She is pulling more into savings directly from her paychecks. Cost of home prices relative to her salary ratio is still a bit too high.
Young adults (at least mine) don’t seem to be as willing to make the sacrifices as we did to get into a home. DD1/spouse are having kids early (#4 due in June). DD2 is single, so that makes it harder. And yes, the cost of homes is a bigger multiplier from when we jumped in – but even with the climb of interest rates, the current rates are lower than we had on those first 3 homes. First home (mid 1979) we assumed a 8.5% mortgage and took out a 2nd due to equity in the home (we had the 2nd paid off in a short time). That was our only home with PMI. 2nd home we were supposed to be locked into 12.5% interest but realtor didn’t do a good job and we were forced to pay 4 discount points because we truly were not ‘locked in’ on that interest rate. 3rd house we assumed 9.75% - we never refinanced because we didn’t intent to be in that house long (interest rates did drop) and we avoided loan origination fees when we purchased.
Interesting articles. I do believe lower interest rates will increase sales in various places, but it all goes to how long is someone going to wait to purchase? Interest rate decline can also go along with property price increases. When to jump in? It costs to refinance too.
I saw the below post today too (about Seattle). These broad brush “prices will rise/fall a few percent” assessments conceal that some people got carried away in the rush to buy in 2021/early 2022, and they are going to take a much bigger hit. The incentive is to stay and keep their low mortgage rates, but if more people get laid off and are forced to move then all bets are off. We’ve seen two tech layoffs on our street this month and that’s just the first round of cuts.
Our house, OTOH, appreciated handsomely in the same timeframe, but we don’t care. Not selling, not moving.
