this post was submitted on 24 May 2024
96 points (86.9% liked)

News

23266 readers
3229 users here now

Welcome to the News community!

Rules:

1. Be civil


Attack the argument, not the person. No racism/sexism/bigotry. Good faith argumentation only. This includes accusing another user of being a bot or paid actor. Trolling is uncivil and is grounds for removal and/or a community ban. Do not respond to rule-breaking content; report it and move on.


2. All posts should contain a source (url) that is as reliable and unbiased as possible and must only contain one link.


Obvious right or left wing sources will be removed at the mods discretion. We have an actively updated blocklist, which you can see here: https://lemmy.world/post/2246130 if you feel like any website is missing, contact the mods. Supporting links can be added in comments or posted seperately but not to the post body.


3. No bots, spam or self-promotion.


Only approved bots, which follow the guidelines for bots set by the instance, are allowed.


4. Post titles should be the same as the article used as source.


Posts which titles don’t match the source won’t be removed, but the autoMod will notify you, and if your title misrepresents the original article, the post will be deleted. If the site changed their headline, the bot might still contact you, just ignore it, we won’t delete your post.


5. Only recent news is allowed.


Posts must be news from the most recent 30 days.


6. All posts must be news articles.


No opinion pieces, Listicles, editorials or celebrity gossip is allowed. All posts will be judged on a case-by-case basis.


7. No duplicate posts.


If a source you used was already posted by someone else, the autoMod will leave a message. Please remove your post if the autoMod is correct. If the post that matches your post is very old, we refer you to rule 5.


8. Misinformation is prohibited.


Misinformation / propaganda is strictly prohibited. Any comment or post containing or linking to misinformation will be removed. If you feel that your post has been removed in error, credible sources must be provided.


9. No link shorteners.


The auto mod will contact you if a link shortener is detected, please delete your post if they are right.


10. Don't copy entire article in your post body


For copyright reasons, you are not allowed to copy an entire article into your post body. This is an instance wide rule, that is strictly enforced in this community.

founded 1 year ago
MODERATORS
top 50 comments
sorted by: hot top controversial new old
[–] paultimate14@lemmy.world 131 points 5 months ago (19 children)

people put off buying homes and other big purchases because they know it will be cheaper later

What absolute drivel. This myth was obviously formulated by some wealthy economist who had only ever worries about purchasing vacation homes.

People put off buying homes UNTIL THEY CAN AFFORD IT. How many people does the author think are currently in the streets or renting for years just so they can save a bit on their mortgage? Completely garbage.

[–] Clent@lemmy.world 54 points 5 months ago

But companies will have to lay off workers! Oh wait, they're already doing that despite record profits.

Companies will stop giving raises! Oh wait, they've been doing that for decades.

The economy stopped working for the average person. It's been going on so long now that it's normalized. People are afraid. We need to wake up to our exploitation.

And I say this as a person who is well paid, at a company that treats its people well. I've worked enough other jobs to know how abnormal my situation is and will gladly fight alongside those who aren't as lucky as me because I refuse to accept the "fuck you, I've got mine" mantra.

[–] xmunk@sh.itjust.works 20 points 5 months ago (4 children)

I mean - I could afford a home now, it's just stupid expensive and I'd be leveraged up to my eyeballs. You do usually need to have the deposit in on-hand cash (though if you're sneaky and an utter idiot you could probably find some way to borrow for the down payment).

I understand where you're coming from but it's accurate language to use because a lot of people technically could afford to buy homes right now they just know it's dumb and realize the market is about to collapse and they'd end up underwater on like an 8% mortgage.

[–] ME5SENGER_24@lemmy.world 11 points 5 months ago (2 children)

I could make mortgage payments standing on my head considering what I pay in rent. It’s the down payment that’s the killer for me.

[–] xmunk@sh.itjust.works 10 points 5 months ago

Aside, it is absolutely fucking insane that rents usually far exceed mortgages. The rent does need to account for the lack of liability for depreciation property damage (like, if your apartment floods you're not on the hook to replace your floor boards) but in a lot of markets it's become entirely detached from reality.

[–] SeaJ@lemm.ee 3 points 5 months ago

With persistent deflation, that down payment would have to be 100% of the price of the house.

As for right now, you don't need a 20% down payment for a house. That just avoids mortgage insurance. You can get rid of that once the remaining mortgage is at ~80% of the current value of the house. We got rid of ours in 3 years with a 10% down payment but that was in a booming market in the fastest growing large city in the country. It may not even make financial sense to buy in your area. If it is going to be an extra $1000+/month to buy vs renting, stick to renting and make sure you are filling up your Roth IRA and if you have more, throw it into a savings account which actually bears interest now.

And of course if you are doing something as lavish as eating avocado toast or getting coffee from a coffee shop....keep doing that of it makes you happy. It is not going to really amount to shit.

[–] grue@lemmy.world 4 points 5 months ago (1 children)

(though if you're sneaky and an utter idiot you could probably find some way to borrow for the down payment).

I borrowed for my down payment. It was in 2009, and I bought a 3bed/2bath house in a major city for ~$100k that is worth probably close to $500k now.

Am I an utter idiot, or are there circumstances where borrowing for the down payment is the right move?

[–] xmunk@sh.itjust.works 5 points 5 months ago

There are circumstances when it's appropriate but it's really risky. It's extremely easy to find yourself underwater in debt if you've borrowed the full amount. In 2009 when the housing market had fully crashed it was probably an acceptable level of risk.

[–] Socsa@sh.itjust.works 3 points 5 months ago

People have been saying the housing market is about to collapse since 2012.

load more comments (1 replies)
[–] errer@lemmy.world 5 points 5 months ago (2 children)

With the interest rates what they are, it makes sense to wait on buying a home, even if you can technically “afford” it. My mortgage would be 60% higher if I bought today vs. 2 years ago when interest rates were a lot lower.

[–] paultimate14@lemmy.world 7 points 5 months ago

Except even then you can plan to refinance. There's tradeoffs- it's a pain and you have to pay additional costs, but if the rate is that much of a problem it's usually worth it. Plus the additional history of a few years of mortgage will likely help your credit score.

And there's even more context. You're talking about buying today- my parents had immaculate credit and a huge down payment when they bought their house in the 80's. Their interest rate was 15%. The US has had artificially low rates for decades, to the point where people are considering 6% and 7% to be "high".

Rates will certainly impact who can or cannot afford to buy a home of course, but the only ones who are deferring purchasing at all for that reason are people viewing their home as a financial instrume that needs return on investment. If you need a home for shelter, a slightly higher rate is still a way better financial decision in the long-run than renting most of the time.

[–] glomag@kbin.social 4 points 5 months ago* (last edited 5 months ago) (4 children)

I'm sorry to be pedantic but this is a pet peeve of mine. If you bought a house you would not have any mortgage payment. You (and everyone else usually) are talking about financing a house.

Maybe I'm the crazy one but when I buy something I like to look at the total amount that I'm paying for it.
If I wanted a house listed for $300,000 5-years ago and I wanted to finance it, the rate might have been 3% so the total amount I would be paying would be $455,332.36 over 30yrs. Therefore I would only finance if I thought ~$450,000 was a fair price. If I thought the house was only worth $300,000 then I would need to pay in cash.

Today rates are at 7% so a house listed at $300,000 actually costs $718,526.69 when financed. Do I think the houses I see listed for $300,000 are worth over $700,000? No. Do I have more than $300,000 needed to afford to pay in cash? Also no. Therefore, I'm not buying.
*These calculations are ignoring the down payment but the principle is still valid.

[–] xmunk@sh.itjust.works 8 points 5 months ago

I'll up your pedantry with even more pedantry, colloquially "bought a house" is understood to mean "closed a deal on a house with financing" - "bought a house outright" would be for a full cash purchase.

I don't mind unnecessary pedantry where appropriate, but you're incorrect in this context.

And, technically speaking, when you buy a house (mortgage or not) you become the owner of that house - you're just also receiving a loan with your house as collateral. So, if you fully paid off your house and then applied for a loan to start a business would you consider your house no longer owned by you?

If we really dig down here your pedantry about buying a house becomes quite meaningless because the loan using your house as collateral doesn't mean you're any less an owner of your house - you own it, fully and completely, you just also have an outrageously large loan using it as collateral (granted it's a pretty special loan for a number of good social reasons).

It is extremely good to acknowledge how much that loan interest rate is effectively increasing the price of your house though, far too few people realize how much actual money they end up paying.

[–] acchariya@lemmy.world 4 points 5 months ago (1 children)

*$700,000 in 2054 money. By 2054 a new car might be $150k, and 700k won't feel too bad.

load more comments (1 replies)
[–] paultimate14@lemmy.world 3 points 5 months ago

I would disagree with you on the pedantry. There would be two separate transactions: a buy buys the property from the seller, and the borrower borrows from the lender.

The property is treated as collateral, but the buyer/lender is the owner of the property. Mortgages are a bit special different from most common consumer debt because of the timing- the transactions need to be simultaneous because you need to have the collateral to get the money, and you need the money to get the property, but afterwards you still have ownership of the property.

Whether it's a mortgage, a car, putting a latte on your credit card, or a multi-billion dollar corporate acquisition it's the same.

That aside, the rest of your comment I agree is good advice to consider, but it's just part of the equation. You're assuming the mortgage is actioned as plan throughout it's lifetime. However, the borrower has options. They might want to pay early and will save a lot of interest that way (maybe more than just interest if they have PMI). There's also the option to refinance out of a higher rate later on.

Also... You're comparing two different things by asking if a house listed for $300,000 is worth $700,000. In order to do a fair comparison, you need to do the same calculation for every house you consider and for the entire market you're basing your expectations around. The only houses worth $300,000 when you factor in the interest of a 30 year mortgage would be a fraction of that cost. Or if you're comparing to the alternative of not buying, then what you really need to compare is the cost of renting vs the interest you expect to save in whatever period you expect to defer buying for.

load more comments (1 replies)
[–] billiam0202@lemmy.world 4 points 5 months ago (1 children)

So in theory, it's not exactly wrong. If you're going to buy a house that's $300k today, but you knew that it would be $250k tomorrow, why wouldn't you wait? And the next day you see that the price has dropped to $225k, so why wouldn't you wait a little bit longer?

That's why the Fed tries to maintain a positive inflation rate- if your money is going to be worth less tomorrow than it is today, you would want to spend it as soon as possible to maximize your purchasing power (assuming you're a rational actor, which is always a toss-up when discussing economics).

In practice, you're exactly right. I've seen people not buy houses because inflation was too high and they couldn't afford it, but nobody was waiting when inflation was low for it to get even lower before buying a house. Mostly because when housing gets too low, rent-seekers start buying them en masse.

The problems are 1) when your inflation rate is too high, because then people just don't have the money to buy things so instead of not buying because they don't want to, they stop buying because they can't spend more, and 2) corporations used COVID as an excuse to jack prices up because they could. When your production is back at pre-Covid levels but your pricing isn't, simple supply/demand curves aren't enough to explain why. (Also I'm not saying that all production and manufacturing has returned to pre-Covid levels, only that it's been a long time since I went to the store and couldn't get what I wanted or a reasonable substitute yet those things are more expensive than they were five years ago.)

[–] bluGill@kbin.social 4 points 5 months ago

The other thing missing is you need to live somewhere now. You also have other considerations - if you are starting a family you typically will need to have a place for the family to live and that forces you to buy now. This is why most deflation arguments fail - people need to live, so they will buy food, and shelter (including clothing). People will replace their broken down car. People will buy toys if they can afford it.

Even if you can buy the house for $200k next year, you don't know that the price will go down - I've seen prices go down and then go back up more than once in my life. Maybe you get unlucky, but maybe you bought the bottom, you have no idea what inflation/deflation will do in 5 years and only educated guesses for next year.

[–] FlyingSquid@lemmy.world 3 points 5 months ago

Yeah, we would move tomorrow if we could afford to. We own a house that is a nice house in a nice neighborhood, but not in a desirable town, so it's not worth much. We can't afford to sell it and buy a house somewhere else. We're not waiting for a good deal, we can't afford any deal right now.

[–] Socsa@sh.itjust.works 2 points 5 months ago* (last edited 5 months ago) (1 children)

This is a misunderstanding of the issue. If money gains value by sitting in a mattress, there is incentive to not spend or invest and large portions of it effectively gets removed from the economy altogether.

[–] paultimate14@lemmy.world 3 points 5 months ago

How many people can afford to keep their money under a mattress though? According to studies last year, 57% of Americans could not afford a $1,000 expense.

Why is saving such a bad thing? There's so many articles about how people aren't saving enough for retirement (especially with pensions disappearing as a concept over the last several decades). I know it's been a couple of decades, but just a couple generations ago consumers used to actually benefit from the interest on their savings. My mom likes to talk about how she used Certificates of Deposit to slowly get low-risk, passive income that exceeded the rate of inflation and her mortgage rate and helped to pay off her house. I check every few years and even now CD's just aren't worth bothering with because the rates are so low.

"Savings lowers spending, that's the paradox of thrift. Keep that money in your pocket and the growth will never lift" has some truth to it, but why do we need to perpetually grow on a planet constrained with finite resources? When will our hunger be satisfied?

A lack of savings creates more volatile markets and a worse quality if life for everyone because of it. Toyota famously led the way with their "just in time" business model- reducing inventory down to the absolute bare minimum to operate (savings is not just limited to money). Pretty much every manufacturer in every industry followed suit. Toyota learned it was a bad idea when Japan was hit by an earthquake and they struggled to get parts to make cars- they then reversed course and kept a modest supply of parts on-hand. Most other companies saw this during Covid when "logistical issues" (really the greed of these businesses leading to inadequate insulation from supply chain disruption) led to shortages of almost every consumer good.

Economists seem to forget sometimes that money needs to be used for things other than passively making more money.

load more comments (13 replies)
[–] TigrisMorte@kbin.social 77 points 5 months ago

No, that isn't remotely what is happening. They rolled back price increases that were more than the public would accept.

[–] Boozilla@lemmy.world 51 points 5 months ago (4 children)

Conventional economists spinning deflation as "almost always bad" has always felt like pro-corporate voodoo bullshit to me. Especially when the inflation that proceeded it was driven by boardroom greed and pathological profit-seeking.

I'm not saying deflation is always good. But right now it would likely just be a correction back to the usual Reaganomics greed instead of the post-pandemic let's-burn-it-all-down levels of greed.

[–] someguy3@lemmy.world 14 points 5 months ago* (last edited 5 months ago) (2 children)

This deflation from the bumpy COVID, supply chain, and corporate greed is good. But sustained long term deflation is very bad. The easiest way to explain it is basically everything runs on debt. If your revenue keeps going down but your debt is fixed, your debt effectively grows and the company is fucked. Same thing on a personal level if your wages go down and your mortgage is fixed.

[–] jmcs@discuss.tchncs.de 7 points 5 months ago (1 children)

Even without debt, sustained deflation is a sign the economy went to shit. Prices go down when there's no one buying, if there's no one buying companies close, people lose jobs, which causes other companies to go bankrupt and so on. Debt is the icing on the cake. People that think that long term deflation and deflationary policies are good never went through one.

[–] bluGill@kbin.social 2 points 5 months ago (1 children)

The Apple II sold for $1298 in 1977. You can buy a mac mini for $599 today. Deflation is real in some markets and we are just fine.

load more comments (1 replies)
load more comments (1 replies)
[–] Clent@lemmy.world 12 points 5 months ago (2 children)

Per the article deflations caused people to put off making larger purchases such as house because they'll wait for prices to fall. As opposed to inflation when people put off large purchases such as houses because they cannot afford it with out saving longer.

It's about protecting capital. The government literally ensures inflation so that accumulated wealth doesn't decrease because profit is more important than you surviving.

Anyone that believes their survival relies on capitalism has been sold the narrative that benefits only those with wealth. Some are convinced that owning a billionth of a percent of the market makes them part of the game; like a younger brother handed a second controller that isn't hooked up to the system.

[–] Boozilla@lemmy.world 5 points 5 months ago

like a younger brother handed a second controller that isn’t hooked up to the system.

I'm definitely remembering that one.

load more comments (1 replies)
[–] RestrictedAccount@lemmy.world 5 points 5 months ago

Still the same level of greed. Just all the juice had been squeezed from the lemons.

[–] isles@lemmy.world 2 points 5 months ago (1 children)

I think most things economists say is pro-corporate voodoo bullshit. It's a social science, they're the priests of the ruling class.

load more comments (1 replies)
[–] xmunk@sh.itjust.works 43 points 5 months ago (4 children)

I'm not convinced this is deflation as I don't think the market ever adjusted to 12$ big whoppers - I think this is just some companies that tried to really fucking exploit price increases to get a more comfortable profit margin being taken to task by low demand.

Let me know when the housing market corrects.

[–] HubertManne@kbin.social 28 points 5 months ago (1 children)

I was thinking the same. cutting back gouging is not deflation.

[–] xmunk@sh.itjust.works 11 points 5 months ago

Gouging is the word I was looking for - that's a perfect expression, thanks.

load more comments (3 replies)
[–] FlyingSquid@lemmy.world 42 points 5 months ago (2 children)

Local drive-through coffee places here are cheaper than Starbucks and they don't get the deals that a huge corporation that Starbucks has, meaning their profit margins are a lot lower.

This has all been about price gouging.

[–] Boozilla@lemmy.world 16 points 5 months ago (1 children)

Absolutely. There's a nice sit-down restaurant close to where I work. I go there and get a much better meal for less than I would pay at the shitty McDonald's half a mile away.

Meanwhile, McDonald's: Where did everybody go? IS THIS DEFLATION!?

[–] QuarterSwede@lemmy.world 4 points 5 months ago

Same for my family. We just stopped going to fast food at all and eat at much better restaurants since it’s costs the same or nearly so. They screwed themselves hard I think.

[–] SkybreakerEngineer@lemmy.world 6 points 5 months ago (1 children)

When in all of history has Starbucks not been price gouging

[–] FlyingSquid@lemmy.world 2 points 5 months ago

Well for a while, local places were able to rise their prices as well to keep up with Starbucks, but now they've realized that they don't need to.

[–] ZombiFrancis@sh.itjust.works 27 points 5 months ago

"Reversing some price hikes"

Thanks for all the past gaslighting how they're not price hikes, just the market driving prices up!

Only to admit they've been price hikes to gaslight how the market is driving prices down.

But just 'some'. They get to keep most of the hikes.

The contempt of consumers is just so baked into the logic of the author.

[–] DudeImMacGyver@sh.itjust.works 13 points 5 months ago* (last edited 5 months ago)

Inflation and price gouging are two different things, corporations went unpunished because the rules don't really apply to them and even when the government can be bothered to hold them accountable, it's a laughable slap on the wrist: A fraction of how much they profited from their crimes.

Meanwhile, you or I break a law and our lives are irrevocably ruined. Corporations are valued more than people, that's a fact.

[–] AnarchistArtificer@slrpnk.net 5 points 5 months ago
[–] tal@lemmy.today 4 points 5 months ago* (last edited 5 months ago)

So, technically, "inflation" can refer to many metrics. But in terms of CPI, which is usually what people are talking about, deflation isn't happening. We had 0.4% inflation (not annualized, just for the month) in April, the last month for which data is available.

https://www.usinflationcalculator.com/monthly-us-inflation-rates-1913-present/

[–] yarr@feddit.nl 2 points 5 months ago

The world is turning upside down! Prices going down, wages going up, it's like living in a dream! But wait, what's that? Ikea cutting prices? McDonald's slashing their prices too? What madness is this? The store where everything costs $99.99 is giving me a discount! And those golden arches, always symbolizing greed and gluttony, suddenly become a beacon of frugality. It's like walking into another dimension, one where consumerism takes a holiday.

But hold your horses, folks! Not all hope is lost for the corporations yet. They still got us hooked on their overpriced clothes and ice cream desserts. Ah, McFlurries - those sweet treats that make us forget our financial woes even if they cost an arm and a leg (figuratively speaking). And let's talk about Ikea; despite their low-cost furniture luring us into traps of assembly nightmares, they still know how to keep the overall bill sky-high. Seems like some things never change.

Now let's dive deeper into this craziness. Walmart – oh mighty Walmart – also joins the bandwagon. Lowering prices to attract customers who once flocked towards cheaper alternatives? Oh, the irony! The same store blamed high prices for driving away shoppers now resorts to lowering them. Is nothing sacred anymore?

And then comes the saving grace of it all: reduced storage costs. Phew! Companies can finally breathe easy knowing they won’t be burdened with storing excess inventory anymore. It’s almost as if Mother Nature herself intervened in this chaotic price war.

But alas, dear reader, don't get too excited just yet. Despite these seemingly miraculous changes, certain goods remain unaffected by this newfound affordability. Clothes are still expensive enough to break banks (unless we're talking about those $1 fast fashion disasters), McFlurries continue to take a chunk out of our paychecks, and Ikea, well... Ikea remains Ikea.

So what does this all mean? Will the inflation rate plummet? Will the Federal Reserve lower interest rates this summer? Who knows? Maybe we'll wake up from this dream world soon enough and return to the harsh reality of inflated prices and dwindling savings. Until then, let us enjoy every cent we save on flat-packed furniture and double cheeseburgers while they last.

load more comments
view more: next ›