Cornflakes
Active member
I wonder what happens when music stops.
I think about how seats are getting swapped in the ever escalating housing market.
Who are the winners and who are the losers?
This thread is to have some discussion and sharing thoughts.
Generalied hypothetical scene:
A is a renter.
A buys a home from B and pays 5% over LP to beat competittion.
B now has cash and finally moved up to a bigger, better home that he buys from C.
B pays 5% over LP.
And so on it goes till certain point.
At some point, D, an empty nester or a retiree or a savvy RE expert ends the chain. Sells her home to C, takes the cash and becomes a renter for time being.
You still have the same mix - 3 owners, 1 renter. But now, lenders have lent more money, collecting more interest, counties get more taxes, all the parties involved in three transactions get paid (escrow, title, appraiser, realtor, notary, loan officer....) and D has a pile of cash that she converted from equity to bank balance.
A, B, and C paid for all that.
Fast fwd 5 years and the prices for those three homes are even higher than today, A, B, and C are the winners. D is not complete loser if she did something with that cash and got some returns. She might do better or worse than if she had held the real estate.
If the home prices are lower in five years than today, clearly ABCD are on a scale from biggest loser to biggest winner. A being the former and D being the latter.
I think about how seats are getting swapped in the ever escalating housing market.
Who are the winners and who are the losers?
This thread is to have some discussion and sharing thoughts.
Generalied hypothetical scene:
A is a renter.
A buys a home from B and pays 5% over LP to beat competittion.
B now has cash and finally moved up to a bigger, better home that he buys from C.
B pays 5% over LP.
And so on it goes till certain point.
At some point, D, an empty nester or a retiree or a savvy RE expert ends the chain. Sells her home to C, takes the cash and becomes a renter for time being.
You still have the same mix - 3 owners, 1 renter. But now, lenders have lent more money, collecting more interest, counties get more taxes, all the parties involved in three transactions get paid (escrow, title, appraiser, realtor, notary, loan officer....) and D has a pile of cash that she converted from equity to bank balance.
A, B, and C paid for all that.
Fast fwd 5 years and the prices for those three homes are even higher than today, A, B, and C are the winners. D is not complete loser if she did something with that cash and got some returns. She might do better or worse than if she had held the real estate.
If the home prices are lower in five years than today, clearly ABCD are on a scale from biggest loser to biggest winner. A being the former and D being the latter.