RJ Hamster
Can Washington Really Fix Housing?
View or listen in browser December 1, 2025Can Washington Really Fix Housing?Dear Subscriber, By Nilus MattiveYou’ve probably heard about some of the latest ideas coming out of Washington to loosen up the U.S. housing market — including both 50-year mortgages and so-called “portable” mortgages.Would they actually benefit borrowers? Can they actually be implemented? And how much of an impact would they even have on the real estate market?Half a Century of PaymentsLet’s start with the idea of 50-year mortgages.Once we start talking about any financial product getting stretched beyond long-standing limits — whether it’s “century bonds” or seven-year car loans — it starts to feel ridiculous if not completely dangerous. However, a 50-year mortgage might actually be better than some products that already exist — including zero-down mortgages and adjustable-rate mortgages.After all, in the case of a zero-down mortgage, you have a lot of front-loaded risk. Should your home decline in value, you almost instantly owe more than its worth.You need only look back to the Housing Crisis to understand how quickly and severely things can unwind from there. You will almost certainly pay a higher interest rate to compensate lenders for that risk, too.With adjustable-rate mortgages, it’s a different type of risk: You simply don’t know how much your future payments might be.That might not matter if you’re only planning on staying in a home for a shorter length of time. But it can also cause havoc. Source: Insurance Newsnet.A 50-year mortgage sits somewhere between those types of products and a more conventional 30-year fixed loan.Your monthly payment might be a bit lower. Your interest rate is fixed. Assuming an adequate down payment, you start off with some equity but add to that ownership stake on a much slower schedule. And you will probably pay a lot more interest than you would with some of the other products.Would I rather stretch a mortgage to 50 years versus stretching a car loan to seven years?Yes, because at least U.S. real estate tends to appreciate over time, and the typical American owns their home at least twice as long as their car.So, a 50-year mortgage could be a decent product for the right person. Namely, someone who is reasonably sure they will want to own that home for a relatively long period of time and who is also reasonably confident prices will continue to rise over time.If we’re comparing it to that same person renting over several decades, they probably come out ahead with the 50-year mortgage.But would it be a game-changer for the U.S. real estate market or even for most people currently priced out of the market? Probably not, especially once we factor in two other things …First, lenders would almost certainly have to charge a higher interest rate to offset the added time risk associated with the loan.That could diminish even the monthly cost savings.Second, home prices — especially in very pricey markets — would probably rise as a new pool of buyers were suddenly able to “afford” higher prices.This further reduces some of the potential savings.What About “Portable Mortgages?”These would essentially let someone sell their current house and apply the existing loan to a different property.I think this is a very cool idea that will never get implemented.Source: CNN.For starters, anyone who’s ever applied for a mortgage knows that everything about it is specific to that exact moment in time — not just to the borrower’s current financial picture but also details related to the property being purchased.All of that would change with a mortgage transfer.To further complicate matters, home loans are often bundled together and sold to other third-party investors after origination.This securitization process amplifies the concern above and multiplies the number of steps it would take to make any type of loan truly portable.It’s hard to see how lawmakers could create a framework that fixes these issues.And even if they did, it would only help people that currently have attractive mortgages in place. It would do very little to change the affordability issue for everyone else.The truth is — even for the small group of people portable mortgages would help — things like existing capital gains rules would still make changing properties unattractive if not impossible for a subset of that group.This is precisely why I’ve been saying we should remove capital gains taxes of any type on primary residences — a simple change that Washington could absolutely make happen very quickly no matter what other housing proposals they consider.In the end, I believe a lot of the so-called “lock-in effect” — as well as the bulk of the affordability problem — can only be solved over time and through natural market functions.Moreover, the reality is that much of the surge in prices has been caused by Washington and the Federal Reserve in the first place through unprecedented money printing and decades of ultra-low interest rates.Those low rates have greatly reduced the purchasing power of our dollars and made real, tangible assets like real estate extremely attractive alternatives to holding cash.Best wishes,Nilus MattiveP.S. Other alternative assets offer similar attractiveness. I’ve already told my readers that a small portion of their investment portfolios should be in private markets … pre-IPO companies. And later this week, your startup specialist, Chris Graebe, will unveil a brand-new startup investment opportunity. You can catch the details on how to invest in it here.Follow us: 11780 US Highway 1,Palm Beach Gardens, FL 33408-3080, USA Would you like to edit your e-mail notification preferences or unsubscribe from our mailing list?Copyright © 2025 Weiss Ratings. All rights reserved. |
