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Comment by mercy_dude | Hacker News Reader

Sounds like a sensible strategy and there is not a day I regret for not getting in the housing market sooner like two years ago when things were still affordable (it looked quite expensive even back then but compared to now it looks Like a great deal).

Question is what happens during the inevitable impending credit default crisis as you outline. Would the housing market just floor to zero? Or your hypothesis is they would let the inflation go run away? Either way (default or inflating debt away strategy) I am not sure how the housing market will adjust just because I am not sure what the outcome of downfall would be to all the middle class families who stretched to max and bought SFH post 2015.

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You ride it to the top and then take the government bailout.

A friend told me about a friend in Las Vegas who bought a big house prior to 2008, then HELOC’d it to the max to buy new vehicles, boats, etc. Took advantage of every opportunity to leverage himself to the hilt.

Housing went tits up, so he stopped paying the mortgage for two years, then mailed the keys back and walked away keeping the cars and boats.

Sure he had to declare bankruptcy, but after a couple years was able to repair his credit and buy another home. (The seven year mark remained but hey there were willing lenders).

Bastard made out like a bandit despite going bankrupt.

Aren't they supposed to repo those big purchases?

During a typical bankruptcy yeah, but 2008 wasn’t typical.

Banks were losing paperwork, mortgages had passed through multiple hands, they couldn’t deal with the foreclosure volume. Hell, banks were going under. It was a complete mess. That’s why if you stopped paying your mortgage it was often 1-2 years before anyone even came knocking.

In many cases, if you simply sent the keys back and were in a non-recourse state, nothing more happened. The bank added the home to the foreclosure backlog and deemed the debt “uncollectable”.

If they balked, you go through a bankruptcy process, but who had time for that? Plus the government had programs to help relieve underwater homeowners.

There was a bit of a financial “reset” in a sense. Many people were allowed to wipe the slate clean and start over.

And that man's name? - 400 FICo

Why do you think that there is going to be a credit default crisis.

The governments around the world are experts in printing money and kicking the can down the road. In the US, medicare is going to not be able to repay its bills in less than 4 years. They will combat all of that just by printing more money and letting inflation run at 6-7%.

That doesn't make any sense. Higher inflation won't keep the Medicare program solvent. The usual approach has been to cut the fees paid to healthcare providers. That's why Medicare beneficiaries in many areas have trouble finding doctors willing to take them on as new patients.

This time is different.

There's increases in wages right now as well and employees are demanding higher salaries.

They don't care about asset price inflation, they care deeply about wage-price spirals.

A government that takes on debt in its own currency like the US isn’t going to default except perhaps as a political stunt. The likely outcome is that they let inflation eat away at the debt until the ratio of debt to GDP is back to a more normal level. This benefits anyone with debt including those with a fixed rate mortgage.

Where people could get into trouble is if they take out a variable rate mortgage because rates will probably rise as inflation heats up. The other risk is I f the economy hits a bump and you can’t get or keep a job that pays the mortgage payment. These can be mostly mitigated by not trying to over extend yourself financially.

This keeps China in check as the debt they hold becomes worth less value. Because other western countries are doing something similiar the US dollar will stay strong.

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