Comment by 01100011 | Hacker News Reader

Comment by 01100011 | Hacker News Reader

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No one knows. The fed could give up trying to contain inflation and buying now could be a good move. Reversion to the mean is more likely though, and if that happens it would make now and the near future an absolutely terrible time to buy.

Owning a home is a complex decision. No one can tell you without knowing more about your desired market, your career and life trajectory, your financial situation and your life goals.

One thing you should not do though is to let FOMO drive your decision making process. Old folks like me remember 2006 and how strong FOMO was at the time. It seemed like most folks were going to be permanently priced out of the market.

Right now looks nothing like 2006-08. There aren't a lot of ARM loans at risk and the risk from mortgage backed derivatives is much less. That said, we face an equally serious, if not more so(!!!) set of risks that could see the US GDP decline for a while. Generally, market corrections overshoot, and given the miscalculations of the Fed over the last few years I see no reason this time will be different.

I am personally looking to buy a home and start a family but I am waiting despite being able to finally afford (barely) a house in my desired market. I think the market I'm looking at will correct at least 10% in the next 6 months. I may still delay the purchase even then just because of poor financial conditions overall. I may be wrong. I think probabilities are in line with my view, however.

> No one knows. The fed could give up trying to contain inflation

One thing that we know absolutely will not happen is that the Fed will give up trying to fight inflation.

The Fed has a duel mandate to stabilize prices and keep unemployment low, but really more important than either of those is that it’s predictable and does what it says it will do. Expectations play a really large role in monetary policy. Pretty much the whole reason they waited so long to start raising rates was because they said they weren’t going to raise rates for a long time.

I keep seeing people make the assumption that the inflation that the world is currently experiencing is something that supply side monetary policy can stop.

I'm skeptical of that assumption.

Correct me if I'm wrong, but doesn't the fed control the demand side by (indirectly?) controlling the money supply? If I understand correctly, the fed is currently trying to reduce demand to match the limited supply by pulling money out of the economy.

In my view, the money supply has very little to do with inflation for modern fiat currencies - especially USD. Dollars are not backed by tangible goods which can be valued, like gold. They are backed by "confidence", which can be roughly seen as something like the proportion of trade conducted using them. In this view, inflation would be caused by slowing economic activity, loss of USD trade dominance, and geopolitical shifts toward multipolarity. Nobody knows or cares about the number of dollars in the world, but we all see new economic currents flowing in Asia and the "global south".

It's also kind of a sham, "reducing demand" basically means reducing the amount of cash people have to spend, since it currently exceeds the amount of goods we can supply. The nominal prices of things might go down but the average American won't be able to afford any more, since the whole point was to reduce demand.

Even worse, higher rates tend to strengthen currency value, which makes imports cheaper but hurts domestic exports. It's already very hard to devalue the USD due to its status as a reserve currency and this exacerbates that problem. We run the risk of triggering a manufacturing recession, which will helpfully "reduce demand" with layoffs but not make anyone better off.

> duel mandate

I wish.

> Reversion to the mean is more likely though, and if that happens it would make now and the near future an absolutely terrible time to buy.

Why? Couldn't you refinance in this situation?

In this situation, interest rates will be higher so you wouldn’t want to refinance. You also will have negative equity in the home, due to values falling, so may have trouble writing the loan.

The total amount of loan will differ though. Why pay 1mil when you could pay 900k instead in 6 months?

Or you could miss that window. If you barely qualify now why risk it over 10% which will mean nothing when you own the home.

Because, even as a tech worker at a major tech company, I do not feel confident in my job security. I want to maintain a true 6 month safety net. Last year, over half my income came from equity compensation. If equities continue to slide, and I think that is very likely, that compensation will drop dramatically, potentially to zero for a while if I feel that holding the stock will be a better long-term move.

I'm not thinking of the next year or two. I'm thinking longer term and want to secure my financial future and not gamble it away.

The last few months was evident that hi-tech stocks got boosted heavily by pandemic-money-printing machine.

I wouldn't bet my mortgage on hi-tech stock. My mortgage limit must be from my regular paycheck using the commonly accepted debt:income ratio. I excluded stock out of the calculation.

Stock is a mean to pay more on annual prepayment.

How much is your cash roughly? Can you survive on only that if you bought the house?

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