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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

#161

Post by teekert »

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 also very nice for banks and benks control nations. Essentially all mortgage money is created as dept. Banks can simply say: Here you go ma'am/sir, here is your money, created out of thin air. Now, please sign here to pay for your house twice, 1 time to the original owner and 1 time to us, because we created this money for you out of thin air.

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

#162

Post by ttul »

ollebro wrote: post #142
eikenberry wrote: post #95

Earlier quoted context omitted.

> 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.

I see your problem right there...

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

#163

Post by dmode »

lisper wrote: post #107
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 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…

I am very confused on your reasons not being able to downsize. Capital gains should have no impact, since first 500K is exempt. So you will have at least 500K in cash. Real estate agent fees are everywhere and can be negotiated to 2%. Property taxes are not really high. I live in Union City, and pay 1.2%.

I guess you cannot downsize because a smaller home costs a lot of money these days. Which is fair enough, but you can book your profits, invest that cash in other assets and rent for a few years till the market comes down.

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

#164

Post by asabjorn »

sliverstorm wrote: post #86
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.

People don't consume more in a deflationary world, per the economists, because that dollar you've got today is worth more tomorrow, so you put off as many purchases as possible. Fewer people would take out loans as well, because the loan would become harder and harder to repay over it's life (which means fewer opportunities for investors)

That doesn’t make sense at all except for with housing. If I want to go vacation I will, if I need a new washing machine I will get it, if I want a cappuccino every morning now I can afford it no matter who I am!

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

#165

Post by and0 »

whatyoucantsay wrote: post #146
paulsutter wrote: post #139

Earlier quoted context omitted.

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".

An HN reader who doubled their money on a house in California can find a tax guy.

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

#166

Post by mnm2 »

teekert wrote: post #161
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 also very nice for banks and benks control nations. Essentially all mortgage money is created as dept. Banks can simply say: Here you go ma'am/sir, here is your money, created out of thin air. Now, please sign here to pay for your house twice, 1 time to the original owner and 1 time to us, because we created this money for you out of thin air.

Yes and no: The bank wants 2% as interests, but inflation is 3%

--> The Bank effectively loses money

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

#167

Post by lisper »

coderholic wrote: post #147
lisper wrote: post #129

Earlier quoted context omitted.

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?

Suppose we bought our house for $1M and now it's worth $2M. We have to pay 25% cap gains (federal + state) on $500k so it costs us $125k to move to a house of equal value. If prices were stable, we could move without taking that hit. The higher prices go, the higher the cost of moving.

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

#168

Post by sliverstorm »

asabjorn wrote: post #164
sliverstorm wrote: post #86

Earlier quoted context omitted.

People don't consume more in a deflationary world, per the economists, because that dollar you've got today is worth more tomorrow, so you put off as many purchases as possible. Fewer people would take out loans as well, because the loan would become harder and harder to repay over it's life (which means fewer opportunities for investors)

That doesn’t make sense at all except for with housing. If I want to go vacation I will, if I need a new washing machine I will get it, if I want a cappuccino every morning now I can afford it no matter who I am!

If you want to go on vacation, but you can go on a little bit of a nicer vacation if you wait until next spring...

If your old washing machine still mostly works, the new one will be cheaper if you can get the old one to limp along for a while longer...

People don't completely stop buying things; life must go on. But people would start to drag out purchases where ever they can.

Have you ever put off buying a computer or phone because you know next year's chips will be faster and batteries will last longer?

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

#169

Post by mijamo »

xbzbanna wrote: post #150
alkonaut wrote: post #84

Earlier quoted context omitted.

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.

Rates in Sweden are adjustable. Recipe for a future desaster and huge pressure on the Central Bank should they move up their rate...

As a French living in Sweden,this system seems sooo fucked up but everybody seems to think it's normal.

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

#170

Post by lisper »

gohardorgohome wrote: post #148
lisper wrote: post #129

Earlier quoted context omitted.

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.

Because we don't want to be landlords. And yes, it's a nice problem to have, but it's still a problem.
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