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MocoMojo t1_ivees7a wrote

Sorry if this is a dumb question, but when the red solid line crosses above the green shaded area, should that make us worried folks can’t afford their mortgage payments?

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ThePandaRider t1_ives3l3 wrote

The average person will struggle making mortgage payments on the average house going forward. Keep in mind that only people who bought in the period where the red line is above the green shaded area are in trouble. Everyone who bought when the red line was below, which is most people, should be alright as long as they are on a fixed rate loan. When the orange dotted line crosses the green area housing is likely to be overvalued.

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Dont____Panic OP t1_ixzvegw wrote

Looking back at this… the orange dotted line has no relation to the shaded area, they’re on different axis.

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ThePandaRider t1_ixzwnz1 wrote

What do you imagine the 30yr mortgage is used to pay for?

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Dont____Panic OP t1_ixzww69 wrote

Uh. The point is that one is on a different scale. To assign relevance of the green line to the other line would also say that the 1980s were cheap when everyone was struggling to get a mortgage.

They’re simply not that related.

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ThePandaRider t1_ixzylti wrote

I know they are on a different scale. The scale is linear so it doesn't matter. Houses were cheap in the 80s, you can buy them with cash as well as a loan.

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Dont____Panic OP t1_ixzz27d wrote

Correct. The green shaded area simply has no meaning regardless. :-)

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ThePandaRider t1_iy009pg wrote

The orange line represents the purchasing price. The purchasing price combined with the 30yr mortgage rates are used to calculate the monthly payment, the red line. The monthly payment is related to the monthly affordability. How do you not see something so obvious?

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Dont____Panic OP t1_ivf1w9k wrote

When the red line is above the green, that just means the median person can’t afford the median house.

It seems to have been that way a lot in the 70s and 80s.

Another challenge people have today is down payments are higher than they were, so that’s an additional hit against affordability.

When the red line is above the green, it SHOULD put downward pressure on prices.

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