I’m wondering about the systemic effects of large mortgages. I might be wrong, but here goes.
The scenario
So we are looking at moving houses. But moving up in house quality means moving up in price.
Twenty years ago, moving up in quality meant going from a $100,000 house to $200,000 – $300,000 house. Now, in 2025, moving up in quality means going from $750,000 up to $1.0 – $1.2 million house. House price inflation has blown house prices out the wazoo.
What was a $100,000 -$200,000 price increase is now a $250,000 – $450,000 maybe increase.
Given our current house’s value and it’s mortgage, it’s not inconceivable that the mortgage might increase from $300,000 up to $800,000 to pay for the next house. The bank was talking already talking about requiring us to take out and pay for mortgage insurance to cover their risk.
The complication
So, at the tender age of 53, I might be looking at an $800;000 mortgage for “the next house”. There’s no way, in the remainder of my working life, I will be able to repay a mortgage that size. So, that means I probably won’t be able to pay it back in retirement either.
The kicker
All this means that “the next house” is something I’ll ultimately need to sell to repay my mortgage to the bank.
And then, my final house needs to be able to be brought in its entirety from the net proceeds after the mortgage is repaid. So, i might be looking at a demand for maybe a $400,000 house towards the end of my life.
Will these exist? For these to exist in 20 years, what type of housing price deflation would be needed?
My question is whether this is typical of my generation X?