Why the 30-Year Mortgage Could Be Coming to an End

[JQPublic1]

NEW YORK (TheStreet) -- The 30-year mortgage is a U.S. consumer institution, affording families a path to full homeownership at reasonable monthly payments (although banks and lenders make out like bandits on the high interest payments.)

But Approved Mortgage, in Orange City, Fla., says big changes are coming in the form of two congressional reform bills that could put the 30-year mortgage out to pasture for good.
Whether that outcome is good for homeowners is debatable, as a company statement calls the two bills a " growing concern " for potential homebuyers.

Why the 30-Year Mortgage Could Be Coming to an End - TheStreet

 

[TheGreatGatsby]

Paying for 30 years on a house is kinda ridiculous when you think about it. But, I'm sure the banks want 40.

 

[JQPublic1]

Paying for 30 years on a house is kinda ridiculous when you think about it. But, I'm sure the banks want 40.

Why do you think the 30 year mortgage is ridiculous? Many working class Americans could never have afforded to buy a home without it! Hopefull, the Veteran's home loan guarantee will remain intact.

 

[TheGreatGatsby]

Paying for 30 years on a house is kinda ridiculous when you think about it. But, I'm sure the banks want 40.

Why do you think the 30 year mortgage is ridiculous? Many working class Americans could never have afforded to buy a home without it! Hopefull, the Veteran's home loan guarantee will remain intact.

Think about the relative ease it takes to build a home nowadays. Paying for it for 30 years?

 

[william the wie]

10 year interest only mortgages were the norm until the 1923-6 housing bubble and owner occupancy rates ran better than 40%, often 50%. That is not a great deal different than what is happening now so what is the problem?

 

[JQPublic1]

Paying for 30 years on a house is kinda ridiculous when you think about it. But, I'm sure the banks want 40.

Why do you think the 30 year mortgage is ridiculous? Many working class Americans could never have afforded to buy a home without it! Hopefull, the Veteran's home loan guarantee will remain intact.

Think about the relative ease it takes to build a home nowadays. Paying for it for 30 years?

Well, brick and mortar homes would likely be out of reach for first time home buyers. Young couples may have fewer options since many will already be burdened by the high cost of college education as well. Manufactured housing /land packages may be the wave of the future for those who waive military service and lose Vet bennies!

 

[JQPublic1]

10 year interest only mortgages were the norm until the 1923-6 housing bubble and owner occupancy rates ran better than 40%, often 50%. That is not a great deal different than what is happening now so what is the problem?

I don't follow you here William. Could you elaborate?

 

[Moonglow]

On a 30 years fixed mortgage you pay 3x the borrowed amount.

 

[william the wie]

10 year interest only mortgages were the norm until the 1923-6 housing bubble and owner occupancy rates ran better than 40%, often 50%. That is not a great deal different than what is happening now so what is the problem?

I don't follow you here William. Could you elaborate?

Sure, the 30 year mortgage was designed to stimulate employment in a more labor intensive construction market and thereby generate enough extra revenues so that the costs of 1920s era home appliances installed in the house would be affordable.

However labor costs as a percentage of construction and home appliance costs have been declining ever more rapidly since the late 1950s. (The Jonas Fisher paper about embedded capital in capital equipment reducing the real cost of capital vs. labor costs is available on the web but I am posting while on break.) Basically the reason for the 30 year mortgage, increasing employment in construction and home appliance manufacture, has been declining for more than half a century. Since the extra revenues and employment from a 30 year mortgage no longer offset its added costs vs. a 10-20 year mortgage it is becoming a drag on the economy. Therefore it is dying.

 

[JQPublic1]

On a 30 years fixed mortgage you pay 3x the borrowed amount.

Yep, depending on the interest rates... But what other options do working class families have when their budgets are already strapped by skyrocketing healthcare costs, car payments, high college tuition and cable TV? Are we about to experience an end to "the American Dream" of home ownership as the middle class shrinks and job prospects dwindle? Besides, the 30 year mortgage seems so fundamental in keeping a housing glut from occuring...and, that is bound to happen when people cannot afford to buy homes!

Then again, a housing glut will make the prices of homes cheap for those with a bankroll!

 

[JQPublic1]

10 year interest only mortgages were the norm until the 1923-6 housing bubble and owner occupancy rates ran better than 40%, often 50%. That is not a great deal different than what is happening now so what is the problem?

I don't follow you here William. Could you elaborate?

Sure, the 30 year mortgage was designed to stimulate employment in a more labor intensive construction market and thereby generate enough extra revenues so that the costs of 1920s era home appliances installed in the house would be affordable.

However labor costs as a percentage of construction and home appliance costs have been declining ever more rapidly since the late 1950s. (The Jonas Fisher paper about embedded capital in capital equipment reducing the real cost of capital vs. labor costs is available on the web but I am posting while on break.) Basically the reason for the 30 year mortgage, increasing employment in construction and home appliance manufacture, has been declining for more than half a century. Since the extra revenues and employment from a 30 year mortgage no longer offset its added costs vs. a 10-20 year mortgage it is becoming a drag on the economy. Therefore it is dying.

I don't think the FEDS will let the 30 year mortgage die. In fact, it has been federal programs like FANNIE MAE and FREDDIE MAC that has kept them going all along.
Your premise turns on the notion that the 30 year Mortgage was a product beneficial to the construction/ banking industries only; but, there are other opinions that tie them to social constructs beneficial to the middle class!
Check out this link:
How the 30-year mortgage came to be | Marketplace.org

 

[william the wie]

I don't follow you here William. Could you elaborate?

Sure, the 30 year mortgage was designed to stimulate employment in a more labor intensive construction market and thereby generate enough extra revenues so that the costs of 1920s era home appliances installed in the house would be affordable.

However labor costs as a percentage of construction and home appliance costs have been declining ever more rapidly since the late 1950s. (The Jonas Fisher paper about embedded capital in capital equipment reducing the real cost of capital vs. labor costs is available on the web but I am posting while on break.) Basically the reason for the 30 year mortgage, increasing employment in construction and home appliance manufacture, has been declining for more than half a century. Since the extra revenues and employment from a 30 year mortgage no longer offset its added costs vs. a 10-20 year mortgage it is becoming a drag on the economy. Therefore it is dying.

I don't think the FEDS will let the 30 year mortgage die. In fact, it has been federal programs like FANNIE MAE and FREDDIE MAC that has kept them going all along.
Your premise turns on the notion that the 30 year Mortgage was a product beneficial to the construction/ banking industries only; but, there are other opinions that tie them to social constructs beneficial to the middle class!
Check out this link:
How the 30-year mortgage came to be | Marketplace.org

That's why I brought up appliances as well but consumer durables in general have also been dropping in real terms as well over the past half century and mostly due to reduced labor input.

 

[SteadyMercury]

Think about the relative ease it takes to build a home nowadays. Paying for it for 30 years?

Relative to what? Tell me I need to build a house up to code or go homeless I'd be looking for a nice bridge to put my cardboard box under.

 

[JQPublic1]

Think about the relative ease it takes to build a home nowadays. Paying for it for 30 years?

Relative to what? Tell me I need to build a house up to code or go homeless I'd be looking for a nice bridge to put my cardboard box under.

Don't bet on living under a the bridge... You may not find any space there with so many fellow Americans in the same predicament! And, if the GOP fat cats get wind of it, they are likely to start charging rent for people living under the bridge!

 

[william the wie]

Think about the relative ease it takes to build a home nowadays. Paying for it for 30 years?

Relative to what? Tell me I need to build a house up to code or go homeless I'd be looking for a nice bridge to put my cardboard box under.

In China, Local cadre have been known to count that as an affordable housing initiative.