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How Homeownership Became the Engine of American Inequality

nytimes.com

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Re: How Homeownership Became the Engine of American Inequality

#141

Post by pc86 »

rb808 wrote: post #92
komali2 wrote: post #62

Earlier quoted context omitted.

Regarding 2: I cannot wait to pay off my debts (scheduled in September!) and start putting money in IRA and 401(k) :) Every time someone asks me if I'm using the 401k I always feel sheepish answering "no... because I have debts with a higher interest rate than I'd get on the return..." Nobody seems to buy it but I've run the math again and again, it's just true.

> "no... because I have debts with a higher interest rate than I'd get on the return..." Sorry to tell you now but this is the wrong way of looking at it. The 401k will save you from paying tax the next 50 years. The first few years you might be a little behind but its worth it because later you'll have your contributions throttled. (assuming you can pay that much in)

This is the financial planning equivalent of optimizing your MVP for 3 million concurrent users.

Re: How Homeownership Became the Engine of American Inequality

#142

Post by acchow »

Eerie wrote: post #133
ianai wrote: post #126

Earlier quoted context omitted.

I just personally disapprove of 401ks. For one, I remember the Great Recession. They bailed out the banks and left the little guy/gal to ruin. Contemporaneously, all those fancy market valuations stink of an economy about to tank, again. I value investing in stocks/bonds, but in current conditions I would not trust a 401k investment broker.

>For one, I remember the Great Recession. How old are you?

The Great Recession was right after the financial crisis triggered by subprime mortgages.

You're probably thinking of the Great Depression.

Re: How Homeownership Became the Engine of American Inequality

#143

Post by strictnein »

ianai wrote: post #126
komali2 wrote: post #62

Earlier quoted context omitted.

Regarding 2: I cannot wait to pay off my debts (scheduled in September!) and start putting money in IRA and 401(k) :) Every time someone asks me if I'm using the 401k I always feel sheepish answering "no... because I have debts with a higher interest rate than I'd get on the return..." Nobody seems to buy it but I've run the math again and again, it's just true.

I just personally disapprove of 401ks. For one, I remember the Great Recession. They bailed out the banks and left the little guy/gal to ruin. Contemporaneously, all those fancy market valuations stink of an economy about to tank, again. I value investing in stocks/bonds, but in current conditions I would not trust a 401k investment broker.

Most work 401ks feature a pretty small selection of funds, so I'm not sure why you'd ever talk to a broker. Usually a bunch of Retirement age focused funds (so the 2045 fund is if you want to retire in 2045), Index funds, and some pretty basic mutual funds.

The biggest benefit of 401Ks comes from your company provided match, because that's free money and instant ROI.

Re: How Homeownership Became the Engine of American Inequality

#144

Post by acchow »

accountyaccount wrote: post #69
blawson wrote: post #59

Earlier quoted context omitted.

Interest is only deductible on the first $1m of a loan already.

Right, I'm saying if a property requires a loan of $1m+ you'd kill MID entirely — including the first $1m.

These step-wise functions cause all sorts of weird, undesirable distortions.

Re: How Homeownership Became the Engine of American Inequality

#145

Post by ianai »

acchow wrote: post #142
Eerie wrote: post #133

Earlier quoted context omitted.

>For one, I remember the Great Recession. How old are you?

The Great Recession was right after the financial crisis triggered by subprime mortgages. You're probably thinking of the Great Depression.

I didn't think that term had to be defined. How can people forget so fast?

Re: How Homeownership Became the Engine of American Inequality

#146

Post by chimeracoder »

ianai wrote: post #126
komali2 wrote: post #62

Earlier quoted context omitted.

Regarding 2: I cannot wait to pay off my debts (scheduled in September!) and start putting money in IRA and 401(k) :) Every time someone asks me if I'm using the 401k I always feel sheepish answering "no... because I have debts with a higher interest rate than I'd get on the return..." Nobody seems to buy it but I've run the math again and again, it's just true.

I just personally disapprove of 401ks. For one, I remember the Great Recession. They bailed out the banks and left the little guy/gal to ruin. Contemporaneously, all those fancy market valuations stink of an economy about to tank, again. I value investing in stocks/bonds, but in current conditions I would not trust a 401k investment broker.

> For one, I remember the Great Recession. They bailed out the banks and left the little guy/gal to ruin.

What do you mean by the "little guy/gal"?

It's true that the 2008 financial crisis only resulted in one banker going to jail, and he was not an executive. It's also true that the crisis only resulted in one bank getting indicted for criminal charges, and it was a small family-run bank in Chinatown with a stellar mortgage default rate (0.5%), and which reported activity that they discovered themselves, not a (metonymical) Wall Street conglomerate[0].

But if you're referring to people who own 401(k) accounts or receive pension funds, that's exactly who was bailed out. "Let the banks fail" is a common refrain, except what that literally translates to is letting people's retirement funds get wiped out due to impropriety that they weren't involved with at all.

[0] They identified an employee who had falsified loan applications, and reported it to regulators after firing the employee. They were acquired of all charges brought to trial, and the prosecutors themselves later requested that the charges be dismissed, because they realized how ridiculous they were.

Re: How Homeownership Became the Engine of American Inequality

#147

Post by kcorbitt »

naravara wrote: post #131
kcorbitt wrote: post #25

So this article advocates for the removal of the mortgage interest tax deduction, because subsidizing home ownership leads to a larger economic divide between owners and renters. As a renter, I appreciate the intent, and I also appreciate any measure to simplify the tax code. That said, I also see compelling arguments in the deduction's favor. The sad truth is that most Americans are terrible at saving and in very po…

>And empirically, a home mortgage is perhaps the most successful mass-market forced-savings program in American society today, with much higher participation than tax-deferred retirement accounts[2]. You just made an argument for a forced-savings program, not for a home mortgage deduction. Moreover, I think the issue with savings is a service problem, not an impulse control problem. Tax deferred accounts are complica…

Yes, I am also in favor of auto-enrolled savings programs. I would be happy from a public policy perspective if we replaced the MID with some sort of automatic savings program that was difficult and annoying to opt out of (maybe intentionally overtax everybody and then stick the tax refund in an IRA by default, and require annoying paperwork to actually get your money back in cash?).

Re: How Homeownership Became the Engine of American Inequality

#148

Post by gumby »

gumby wrote: post #64

The mathematics of the MID are dumb; the optics are what sell it. If it lets someone making, say, $100K a year able to spend 30% more on a house payment, it also enables everyone else making 100K/year to pay that much more. So the same people compete for the same houses. Its main effect is to push up the commissions the agents pay and increase the amount of interest banks earn. It doesn't actually help the person buy…

A reply to my comment is marked dead and I can't revive it, but I can still reply to it:

> So, in effect, large, publicly traded corporations would then own the land, as you describe it? You think that's a good idea?

I don't mean it "in effect" I mean it explicitly. The advantages are large and the risks addressable:

- It spreads ownership around: the shareholders all own the housing stock the corporation owns. Thus they are buffered from the risks of a local market downturn.

- It makes moving easier (if you live in a place that suffers, say, a huge factory closure, you can't sell your house since everybody else wants to do so as well).

- It encourages a variety of housing types (single family to semi detached to large apartment blocks) and again buffers against, let's call it, "style risk").

And frankly when you have a large corp you can regulate some of the most egregious problems like fair housing rules, environmental and code issues, etc. Such companies are likely to be stable equities good for retirement funds etc similar to publicly traded utilities and less like airlines much less high tech businesses.

Re: How Homeownership Became the Engine of American Inequality

#149

Post by ianai »

strictnein wrote: post #143
ianai wrote: post #126

Earlier quoted context omitted.

I just personally disapprove of 401ks. For one, I remember the Great Recession. They bailed out the banks and left the little guy/gal to ruin. Contemporaneously, all those fancy market valuations stink of an economy about to tank, again. I value investing in stocks/bonds, but in current conditions I would not trust a 401k investment broker.

Most work 401ks feature a pretty small selection of funds, so I'm not sure why you'd ever talk to a broker. Usually a bunch of Retirement age focused funds (so the 2045 fund is if you want to retire in 2045), Index funds, and some pretty basic mutual funds. The biggest benefit of 401Ks comes from your company provided match, because that's free money and instant ROI.

So not talking to the person I'm trusting my largest capital investment to is a feature?

Re: How Homeownership Became the Engine of American Inequality

#150

Post by strictnein »

njharman wrote: post #91
pkaye wrote: post #14

Earlier quoted context omitted.

The MID barely cancels out my property taxes. Imagine if your investment accounts had to pay 1% tax every year based on its current worth even if you didn't realize any profits.

Imagine other investments supplying roads, police, fire, parks, and education (or at least a place to store kids during work day) for 12 years.

Imagine the fact that property taxes pay for a lot of that. Now imagine house values plummeting because you removed the deduction and you've put the funding for all of that in peril.
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