Friday, August 10, 2012
Karl Smith makes the case the young folks who recently bought homes will end up in a terrific financial position after the economy recovers:
Something which I don’t see talked about anywhere but I am pretty sure will be a significant story over the next decade or so is the massive wealth transfer now occurring in the United States towards the young middle class and the young upper middle class in particular. [...] The young middle class is incurring long term debts at extremely low interest rates, this includes education and housing debts. [...] Not, only are we talking about being mortgage free at 52, but mortgage payment as a fraction of income should decline to a basically nominal cost around age 40.
One thing I wish Smith had explored is the long-terms effects of these super cheap mortgages on labor mobility. If interest rates ever normalize, it's easy to forsee a lot of people staying in jobs and locations they don't really like in order to hang on to their 3.1% mortgages.