Let’s face it. Buying a house is way too expensive. A $500,000 mortgage amortized over 30 years at 4% costs $2378 per month. Who wants to pay that much? Car leases give us the answer.
With a car lease we recognize that a car still has some value after the end of its lease. The customer only has to pay enough to cover the difference between the car’s starting price and its value after the lease runs out.
This should work out even better for houses because they go up in value. Let’s be conservative and assume that houses will go up 10% over the next 3 years. Then a home buyer should only have to pay enough so that the amount owed on the house goes from $500,000 to $550,000 over 3 years. At 4% interest, this would only cost $343 per month!
The rising debt isn’t a problem because you can always sell the house to pay it off. Compared to the old type of mortgage where the payments are $2378, this saves over $2000 each month. This is the kind of innovation we need to keep house values rising.
(In case it’s not obvious, I’m not serious about this. I’m simultaneously mocking (1) over-emphasis on monthly cash flow, (2) car leases, and (3) the growing belief that house prices will rise indefinitely.)