Jon Tyler

I didn’t say you were safe renting either. I’m commenting on the general tone of the original post which is that high inflation means paying off your mortgage becomes a breeze. If you want to solely focus on mortgage principal and interest becoming cheaper in real terms during hyper inflation, ignore all other housing cost increases, and also assume your earnings grow at the same rate of inflation for the duration of the loan (earnings growth lags price increases and skews towards high earners, which also could get flipped on its head with developments in AI - a whole other discussion). Sure, go ahead. But that’s not as compelling as the message the original post attempts to present.

@itsanotherjon @yourjohnag @leevalueroach If you're in an environment of very high inflation and your wages are stagnant you are likely to lose any housing, rented or owned. This could also happen through illness, but it has nothing to do with the point about a mortgage being a call option.

A 30-year fixed mortgage is basically a long-dated call option on inflation. You borrow dollars today, lock the rate, and repay in nominal terms. If inflation explodes, your debt evaporates in real terms while your house price soars. You’re long the house, short the dollar.

@zzakzzak111 @leevalueroach Fair. I took the original post as a commentary on buying a primary residence.

@itsanotherjon @leevalueroach if your “income” is largely property investment you make out like a bandit in inflationary environments

@yongfook There is no difference. They’re the same.

X is seemingly full of business experts who don’t know the difference between MRR and ARR.

@JamesMcBarron @leevalueroach Precisely

@itsanotherjon @leevalueroach The loan is the least of your problems because the rate is fixed. Insurance, taxes, repairs, etc. could eat you alive if your income doesn’t grow with the rate of inflation.

@JonGMechE @leevalueroach Yea for sure. Definitely depends on the situation.

Financial. Lifestyle is difficult because it is so subjective. Even financially, it’s subject to lifestyle. Some people massively increase their income by regularly moving for job advancement. For them, renting is far cheaper. I’ve been in the same city for decades, buying is the better option for me.

@JonGMechE @leevalueroach By better do you mean from a purely financial standpoint? Or financial + lifestyle benefit?

@itsanotherjon @leevalueroach True, but renting is quickly catching up. As home prices increase and people become more likely to rent because of it, rent goes up faster. Generally speaking buying is better, even if that isn’t true at this particular point in time.

@Radbot13 @yjacket1 @leevalueroach Yea you can just sell it. Assuming no market crash and / or illiquidity

@yjacket1 @itsanotherjon @leevalueroach You dont just lose the house after 20 yrs of paying because you lost your job, wtf

@jobarpo @yourjohnag @leevalueroach Productivity has been decoupled from wage growth since like the 70s. Inflation can drive wage growth but it doesn’t inherently drive wage growth.

@itsanotherjon @yourjohnag @leevalueroach Earnings eventually increase by inflation + productivity

@JonGMechE @leevalueroach The alternative is renting yes. Depends on where you live, but with current home prices the math on renting versus buying is not as clear cut as it once was.

@itsanotherjon @leevalueroach What is the alternative? Renting? What do you think happens when you rent and there is inflation?

@jobarpo @yourjohnag @leevalueroach Inflation destroys both. You think 5% inflation in a year where you got a 2% raise (or worse, no raise at all) doesn’t destroy your earnings?

@itsanotherjon @yourjohnag @leevalueroach This assumption is absurd. Inflation destroys cash, not earnings.

Today I learned that people think CPI == inflation

@yourjohnag @leevalueroach 🇺🇸💵

@itsanotherjon @leevalueroach If you ever thought, what did we get for winning the war all those years ago? The 30 year fix rate mortgage is the answer...1948

We are talking about a mortgage but you can’t decide to *just* pay the mortgage. You have to pay everything or you lose the house. So to only look at the mortgage payment and ignore everything else oversimplifies the picture and, in my opinion, makes the original assertion pointless which is what I’m arguing.

@itsanotherjon @leevalueroach "the other expenses associated with owning the home will have gone up significantly." But we're talking only about mortgage, other expenses have other solutions. And yes if you become disabled and cannot pay your mortgage or you lose your job, that's a whole other set of risks

@HomeLoanBill @leevalueroach Ask grok to explain. I’m out of ideas.

@itsanotherjon @leevalueroach Yes, it did (unless the landlord is operating at a net loss). Again, pretty straight forward.

@yourjohnag @leevalueroach *if your earnings growth matches the rate of inflation* let’s say you experience zero earnings growth in that time. It will still take you 2 weeks to make 1000. Moreover, all of the other expenses associated with owning the home will have gone up significantly.

@itsanotherjon @leevalueroach For example, if it takes you two weeks to get the cash to pay 1000 now for your mortgage on a fixed rate, and inflation keeps going up, in 20 years you will be paying the same $1000, it'll only take about a day or two to make the same thousand dollars

So the landlords who lowered rent as a result of market conditions did not have increased costs YoY like everyone else? It’s highly relevant. If they had increased costs (they almost certainly did) but lowered rents, the costs did not flow through to rents. Again, quite straightforward.

@itsanotherjon @leevalueroach Because we’re talking about expenses flowing through to rent, not profit/loss.

@HomeLoanBill @leevalueroach How is it irrelevant?

@itsanotherjon @leevalueroach That question is irrelevant to the point.

@HomeLoanBill @leevalueroach Dude what? Please answer this. In areas where rents have decreased, you think that the landlords costs also decreased YoY?

@itsanotherjon @leevalueroach “The presence of decreasing rents in some markets disproves your assertion that all cost increases flow through to rents.” It’s baffling to me how many people say this with a straight face. Unless the landlord is losing money, 100% of cost increases flow through rent.

Landlords operate in markets driven by a multitude of supply / demand side factors that literally disallow them from passing on 100% of cost increases (on average, yes you can find markets where this doesn’t apply). The presence of decreasing rents in some markets disproves your assertion that all cost increases flow through to rents.

@itsanotherjon @leevalueroach You’re not making the point you think you are.

@HomeLoanBill @leevalueroach 👇

@itsanotherjon @leevalueroach Every time one of my investor clients buys a new investment property, we see his tax returns for the last two years. Guess what *never* happens? YoY profit loss due to an increase of taxes/insurance costs.