Posted by Wayne-NC on July 12, 2002 at 09:25:33:
You may know more of Charles than I do because that is the only thing he said that I could remember but, I remember it well. Notice the change? He said, “stocks WILL grow.” But anyway, on to the meat of the answer. I think I understand this mud. If wage inflation goes to say 7% and housing increases by 14% it is more expensive, right? Now as I see it most people judge an expense by it’s monthly payment. If mortgage interest to my buyer goes up and my price stays the same his payment goes up ofcourse. If he cannot qualify now due to this higher payment, I am now looking for a new buyer or I lower my price which becomes a comp to my neighbor for 6 months. Let’s say my buyer is Mr. and Mrs. America over a years time per se. Talking in inflation adjusted dollars, the $1,000 mortgage payment now pays more in interest and less in principle which is all they can be approved for. Wouldn’t this begin to depress the home values? I know that the interest is the tax deductable portion so the net effect is a lower cost possibly, but my thinking was more shallow than your answer. The purchase of a home is paid with borrowed money and that payment is made with our purchasing power from wages. It is the numbers inside the mortgage that adjust accordingly to price and interest which is determined by inflation which has my attention at this point. As I said, most consumers are only focused on that monthly payment because that is what the lenders dictate unfortunatly and I see why. You see it all the time in car ads, appliance purchases, electronics, etc. Sorry, but I like this mud and it helps me make more dollars in the RE investing business and I am having fun which is what it’s all about. I’m having more fun than I should legally be allowed to have. Who said that? (I printed your response as it was one avenue I haven’t thought about. Thanks.)