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The Shock of Sweden's Housing Market Is Hitting the Country's Currency

bloomberg.com

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Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#141

Post by RobertoG »

saosebastiao wrote: post #108
tom_mellior wrote: post #28

Earlier quoted context omitted.

I agree. The article isn't very clear on what the problem would be, though it does mention deflation. Deflation is bad by axiom, and we must be pathologically afraid of it. If housing prices sink enough, that may mean that the overall inflation rate turns negative, which is deflation, and thus bad. Even if this "bad" thing, in this case, would just mean that people could consume, save, and invest more.

The fact that you take that as an axiom is frightening. Moderate deflation is no more scary than moderate inflation, and the idea that an "overall inflation rate" determines people's behavior is laughably wrong. I mean, which of the thousands of inflation rate definitions are you talking about? The FRED database tracks 34,000 different series of some 10,000 inflation measures. More importantly, people don't sense ove…

Is it not deflation a signal of underutilization of available resources in the economy, and necessarily, in the long term, of diminishing capacity?

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#142

Post by ollebro »

eikenberry wrote: post #95
opportune wrote: post #14

When will we learn that a "strong" housing market is not necessarily a good thing? High housing prices are great for those who already owned houses but terrible for everyone else (e.g. the entire generations born after prices became inflated). Not to mention people are greedy and will over leverage themselves when interest rates are good. No country should let the "landed gentry" hold them hostage over interest rates…

> High housing prices are great for those who already owned houses... Not unless you are ready to sell, otherwise it kind of sucks to have your property taxes go up 10-20% every year.

We don't have a property tax in sweden.

Also no inheritance or gift tax. Very good place to live if you are wealthy and don't make money the peasant way of going to work.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#143

Post by jackcosgrove »

mrec wrote: post #3

The relentlessly negative reporting here would be funny if it wasn't so pernicious. "risk ... backfire ... risks sinking ... worrying". And yet they're explicitly talking about a correction . Making something that isn't correct, correct. You might think that was a good thing. If you don't want a correction, stop pumping up bubbles. You can keep 'em inflated a long time, longer than many people can remain solvent, but…

The funny thing about the housing correction in the US was that prices dropped back to their historical trendline, as if the housing bubble had never happened. There wasn't even much overshoot.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#144

Post by notyourday »

lisper wrote: post #128
Dylan16807 wrote: post #114

Earlier quoted context omitted.

That's more because prop-13 is a garbage fire than any other factor.

The cap gains is also a big factor. Even if prop 13 were not a factor, the higher prices go, the more expensive it becomes to make a lateral move, or even to downsize.

This is pure nonsense.

Lateral move or downsize are two different transactions. Capital gains has no effect on the second one.

People who are complaining about the capital gains taxes pretending that such taxes prevent them from either moving laterally or downsizing are complaining that other properties also appreciated in price. What they would have preferred is that their property appreciated and the properties they wanted to move to did not.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#145

Post by notyourday »

opportune wrote: post #40
maxxxxx wrote: post #25

Earlier quoted context omitted.

Totally agree. It seems one of the factors that helped the US until the 90s was that housing was affordable so people could move around easily. A "strong" housing market seems to indicate that there are no productive places for investing and no wage growth so people need to gamble on houses to rise instead.

I think a strong housing market may be the result of lack of productive capital, but I think it has more to do with supply and demand. Most average people pay for a house using a mortgage payment, so when buying a house, they'll be looking for a house that has an affordable mortgage payment. Let's say Joe wants to spend / can afford a $1000/month mortgage payment. If interest rates are 5% and the maximum mortgage per…

If this is the case and Joe wants to bet that the housing prices will continue to rise, Joe gets an interest only ARM with a 7 year balloon.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#146

Post by whatyoucantsay »

paulsutter wrote: post #139
lisper wrote: post #107

Earlier quoted context omitted.

> High housing prices are great for those who already owned houses Not really. Rising prices (not high prices) are great for people holding houses as investments . But for owner-occupied houses, rising prices are as bad for the owners as they are for everyone else. my wife and I own a house in Northern California, which we bought during the sub-prime crash. Since then it has nearly doubled in price. It is also too bi…

Consider renting out your current house and buying that smaller house to live in. Talk to your tax person, you may get depreciation and more. EDIT: person

Not every reader of HN possesses "a tax guy".

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#147

Post by coderholic »

lisper wrote: post #129
sigi45 wrote: post #119

Earlier quoted context omitted.

'nearly doubled' is more like gambling than investing. Investemnt would be fine if your money is little above inflation. 1-8% with renting it out.

Just to be clear, we didn't buy this house as an investment, we bought it to live in. We're actually hoping for prices to come down so we can downsize without taking a huge financial hit in the process.

Won't you only pay a % of the gain in price in tax? In that case you're strictly worse if it goes down in price. You'd pay less tax, yes, but as tax is % of gains you're net worse off. If this really isn't the case can you share some example numbers showing how you can be worse off with a house that's worth more?

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#148

Post by gohardorgohome »

lisper wrote: post #129
sigi45 wrote: post #119

Earlier quoted context omitted.

'nearly doubled' is more like gambling than investing. Investemnt would be fine if your money is little above inflation. 1-8% with renting it out.

Just to be clear, we didn't buy this house as an investment, we bought it to live in. We're actually hoping for prices to come down so we can downsize without taking a huge financial hit in the process.

Why not rent this one out and then rent a smaller place yourselves? Anyways, this is a good problem to have. I don't think 1.) and 2.) justify wanting prices to come down since they only affect a % of your appreciation.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#149

Post by JumpCrisscross »

pacala wrote: post #133
astura wrote: post #69

Earlier quoted context omitted.

Jeez, nobody said the desire to own your home was irrational, by definition. You can have a rational desire to own a home or you can have an irrational obsession. Irrational obsession would include things like when you prioritize homeownership over financial security and other basic necessities like healthcare or food. For example I know someone who gave up health insurance to buy house - and she readily admits this.

A broader definition of financial security _includes_ home ownership. The other options are homelessness and renting. The first one is silly, the second is just paying the landlord mortgage while being exposed to financial risk over the long term.

> the second is just paying the landlord mortgage while being exposed to financial risk over the long term

Homeownership, for most, is a leveraged play on a politically-sensitive asset. Consider two companies. One goes all in—-with borrowed money—-on a deal that does well if the cards fall right but results in default if e.g. property taxes or zoning laws change. The other has higher fixed costs but diversifies its investments. It’s apparent which one is riskier.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#150

Post by xbzbanna »

alkonaut wrote: post #84
charlesdm wrote: post #80

Earlier quoted context omitted.

I'm assuming that $80k/year is gross? Given Sweden has high income taxes, borrowing say $800k on a $40k net salary (for a house!) seems like extremely bad financial management. Which sane person who is good with money does that? That sets you up for a life of misery (and not unrealistically, an underwater house during your lifetime).

Yes gross. $80k gross is around $53k net (depends on where you live but roughly). Now, remember that reason we are in this mess is because interest rates are so low. We still have pretty low living costs. Our $1M house at 80% is pretty cheap, due to low interest rates. Now, everyone knows interest rates can and will be higher in the future, but people have to buy on the current market regardless (And everyone seems t…

You're talking about these interest rates as though they can just move around - are these adjustable-rate mortgages? In the US, the standard mortgage has a fixed rate. So people with those mortgages would benefit from increased interest rates and/or inflation in the wider economy.
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