The market is an living organism
When I purchased my house in 2021 it was quite the task. Many open houses had lines, everyone was overbidding, and most were settling. Locking in a 30 year fixed loan at 3% was just too good to pass up. Even with prices on the rise, many justified owning less simply because the monthly payment was just so cheap. As the fed began to hike rates you could definitely see the housing market slow down. Into 2022 and 2023 things seemed to calm down. Interest rates were just too high. That monthly payment became too steep, and the overall price wasn’t falling much. At the time my theory was that there wasn’t enough sellers in the market. Why would interest rates rise, but home prices not fall? Well think about it. If you get locked in a fixed 30 year loan for around 3$ sometimes 2%, you probably don’t have plans of leaving that arrangement. Especially now that interest rates are more like 7%. So there seemed to be a lack of sellers. We’re all locked in at a low rate.
It’s February of 2024 as I write this and on my way home from work today in the car I heard an advertisement for TruHold. “Sell your house but keep living in it! Get money for your house, but keep living in it until rates comes back down and you decide to buy!” What in the hell I thought to myself. How is that even possible. I wasn’t sure if my ears were playing tricks on me or what was going on. But then I heard the same advertisement repeated over again.
After further investigation it was real. I real turn of the century scam I called it, but it exists. This is why I like to call the market a living organism. If it doesn’t exist, it will. It lives, and dies, and even breathes. Essentially what this company is doing is purchasing your home and then renting it back out to you. I’m not sure who would ever do this but I guess in theory IF you could time the market PERFECTLY (which is impossible; due to Murphys law) then I guess I see the idea. Sell your house to this company in January, pay the same company a fraction to rent there in February, ideally the fed cuts in March like everyone thinks they will (they probably won’t), and then boom rates are down and you can purchase a new house at a lower rate… Sounds cool right? Wrong. I mean what the ****
Problem 1 is that you can’t time the market obviously, problem 2 is that even if you did guess which month the fed was going to cut rates you would quickly realise they usually only cut .25 to half a percentage at a time. Also when you purchase a house there’s closing fees and inspection fees and fees on top of fees on top of fees. Same with renting, dog fee, water damage fee, leak in the roof except now you can’t fix it yourself you have to incur whatever cost or fee this “TruHold” throws at you. Like just sell your home and buy a new one then hope to refinance at a lower rate, or don’t sell and stay locked in for 30 years with the rest of the world. This whole thing seems scammy and unecessiary, but that’s the market for you ALWAYS ADAPTING. Plus I’m sure there’s a few very niche scenarios where this works out. Surely it’s a lot like ARMs. Adjustable Rate Mortgages, yea scammy and unecessiary. But I guess if you’re loaded, need a vacation home, and want to gamble your money, then sure maybe it’s useful to you. FRED actually released an article yesterday about who’s buying ARMs, their research concluded that mostly young wealthy people bought ARMs, the elder or middle class had no interest in anything other than fixed. Some lower income buyers utilised an ARM, but I would have to assume they were tricked into purchasing an ARM instead of a fixed.
