For Tens of Millions of Americans, the Good Times Are Here

I was planning on refinancing my home that I purchased at the end of 2020. It's gone from ~$500k to ~$750k since I bought it, but adding an extra 25% ($125k) to the mortgage (bringing it from currently $470k to ~$600k) would increase my monthly payments by 50%.

It's actually ~$200/m cheaper for me to take out an 8% $125k loan separate from my mortgage than it is to refinance the bulk from 2.75% to 5.2%.

That sounds like common sense, but it isn't the way things have happened in the past, at least if you are talking about nominal home prices. From what I've read there's no example in recent history of nominal house prices falling during a period of rising interest rates.

If you're talking about real home prices they might fall. If inflation is 10% and house prices go up by 5%, they're falling in real terms.

But people don't want to, and sometimes financially are unable to, sell a house for less than they paid for it. Where's the inventory going to come from if people are underwater on their loans and won't sell? New construction. What happens to new construction when interest rates skyrocket? It grinds to a halt.

I mean that's what the Fed is doing, on purpose, to kill inflation.

This is incorrect. Houses can be sold and folks can move in with family. Or, you can rent out the house, often at a profit. I know several people who have done this. Furthermore, in most places in the U.S. a mortgage payment is cheaper than the rent on a similar dwelling.

I originally had no plans to buy a house, but I did the math and my mortgage is about 25-35% less that what I would pay for an equivalent rental. Even factoring in maintenance costs, that's still a huge win. And that's not even getting into the tax benefits.

In the case of a job loss or financial disaster, you can sell the house, or if you can't you can just go on living there, often for years while the bank meanders its way through the foreclosure process. So you may lose some principal in the end, but you'll have had several years of free housing to make up for it.

There are plenty of reasons not to own a house - maintenance is a pain and time consuming, yard work sucks, etc., but financially, owning a house is a no brainer in most U.S. geographies.