The Shock of Sweden's Housing Market Is Hitting the Country's Currency • Hacker News Board

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

#221

Post by bogomipz » Wed, Nov 15, 2017, 5:49 PM UTC

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…

>"No country should let the "landed gentry" hold them hostage over interest rates or tax policy so that their assets - many of which they do not even actually own - can appreciate."

Can you elaborate on what you mean here?

What would be examples of ways in which people who live in places with strong housing markets hold others hostage via interest rates or tax policy? What policies are the policies that accomplish this specifically?

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

#222

Post by njarboe » Wed, Nov 15, 2017, 5:50 PM UTC

opportune wrote: post #15

selectodude wrote: post #12

Earlier quoted context omitted.

> Too long mortgages (100 years or more) means nominal prices are high which add to the risk That is absolutely bananas. Almost like a Chinese-style 99 year lease. Your kids might be dead by the time it's paid off, you'll never own it. Edit: apparently the AVERAGE mortgage term is 140 years! Just recently the Swedish government limited the maximum mortgage term to 105 years. That is some absolutely stupid policy.

As an American I am absolutely shocked anybody thought that was a good idea. If an average person making $50k/year finds it affordable to pay $1200/month on housing, they're just going to shop for a house that will yield that desired monthly payment. When interest rates are low, how is this not a recipe for runaway housing costs? What's worse is that this is actually a huge subsidy for landlords, unless their mortgag…

"shocked"; a bit of sarcasm perhaps?

A 30 year loan is not much different really. Too long. It was rare in the US before various government subsidies and encouragements. First, Fannie Mae (1938), securitizing FHA backed home mortgages. Next, Freddie Mac (1970), securitizing home loans not backed by the US government.

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

#223

Post by mbesto » Wed, Nov 15, 2017, 5:50 PM UTC

yawz wrote: post #195

ttul wrote: post #159

Earlier quoted context omitted.

Awww poor baby. You’ve made more than $500K, much of which will be untaxed, simply by owning a house. Jesus fucking Christ. Cry me a river. Most people would trade their arm in for that kind of leveraged gain.

> You’ve made more than $500K Nope! This is all speculative until you need to "sell & move". If you want to move to another place in the same area, guess what, you've probably made nothing. With all the taxes and fees that you have to pay on the sale price you can't buy the equivalent of your house. You can only capitalize on that appreciation if you move somewhere considerably cheaper. Not only that, the owner faces…

> With all the taxes and fees that you have to pay on the sale price you can't buy the equivalent of your house.

So why on earth would someone want to sell their house and buy an equivalent house in the same area...?

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

#224

Post by ZeroGravitas » Wed, Nov 15, 2017, 5:50 PM UTC

astura wrote: post #208

ttul wrote: post #159

Earlier quoted context omitted.

Awww poor baby. You’ve made more than $500K, much of which will be untaxed, simply by owning a house. Jesus fucking Christ. Cry me a river. Most people would trade their arm in for that kind of leveraged gain.

Except you can really only "cash out" in a meaningful way if you sell and relocate to a cheaper area/somewhere without a housing bubble, which is extremely disruptive to your life.

There are financial instruments that will allow you to cash out if you own property while continuing to live in it for as long as you want to e.g.

https://en.wikipedia.org/wiki/Reverse_mortgage

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

#225

Post by chaostheory » Wed, Nov 15, 2017, 5:53 PM UTC

Danihan wrote: post #199

el_benhameen wrote: post #172

Earlier quoted context omitted.

You arguably have a point (so does the parent), but this isn’t the way to express it in a respectful discussion.

I dislike the notion that discourse needs to be respectful at all times. Discourse shouldn't be baselessly disrespectful, sure. But the robotic, tsk tsk , shaming attitude that gets thrown around on forums whenever someone expresses any negative emotion gets old too. In any case, complaining about having to pay capital gains tax on gains OVER $500k really is the ultimate first world, privileged problem.

Maybe if the comment added to the conversation somehow it'd be more tolerable. However, all the comment does is insult someone without adding anything interesting. It's a waste of space and time for everyone else reading it. It doesn't belong in HN.

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

#226

Post by opportune » Wed, Nov 15, 2017, 5:54 PM UTC

lisper wrote: post #212

opportune wrote: post #192

Earlier quoted context omitted.

Capital gains is only applicable when you sell the house and it's not your primary residence, or if you made a ton of money on it. And it's only a tax on the appreciation of the house, not its market value. Real estate agent fees are only applicable on x% of the value of the house you sell. Higher property taxes do stink but are not applicable after you sell the house. I'm not sure why you can't afford to move. Have…

Suppose I bought my house for $1M and prices are stable. I can sell my $1M house and buy a different $1M house and the net cost to me is 6% agent fees. But if prices have doubled now the net cost to me is much higher. The agent fees are double what they were, and I have to pay cap gains on $500k. All that is money I have to come up with somehow in order to complete the transaction. I either have to write a check, or…

Aren't agent fees and capital gains only applicable after the sale of the house?

I think I'm beginning to see your problem, which is that a lateral move is expensive. But the lateral move is only more relative to your initial buying price. A lateral move (in terms of value of your house and in the same area) would in your example cost about ~$135,000. I see why that would cause a liquidity problem but your actual equity is still higher than before.

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

#227

Post by jordanb » Wed, Nov 15, 2017, 5:54 PM UTC

tmikaeld wrote: post #77

staticelf wrote: post #47

Earlier quoted context omitted.

Well, if you are increasing the population a lot, all of those people are going to need somewhere to live. It isn't really hard to figure that out but most people don't seem to make that connection. Don't understand how it could even be remotely racist or popular. The statistics of housing prices correlates very well with increases in immigration. Of course, correlation does not imply causation but in this case I'm p…

I'm kind of expecting to see a chain reaction happening next.. - Housing falls - Investors sell - Stock drops - SEK value drops (We are here) - Import prices goes up - Goods prices goes up - Less people are wiling to buy goods due to risk - Wages go down - People are let go - Fewer people are willing to buy goods - and so on..

Your chain breaks at "less people willing to buy goods due to risk".

SEK going down will push the costs of imports up. It will also make Swedish exports more competitive. Imports being more costly will cause Swedish consumers to substitute imported goods with local alternatives.

The net will be that wages will go up and unemployment will go down. This is good. But the price of goods will become dear to the Swedish consumer and this is bad. And there's a possibility of a wage/price spiral driving up inflation.

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

#228

Post by GordonS » Wed, Nov 15, 2017, 5:55 PM UTC

awjr wrote: post #53

mhandley wrote: post #22

Earlier quoted context omitted.

In the UK, around a fifth of mortgages are interest-only, which I guess is effectively an infinite-term mortgage. In comparison, at least you're paying some part of the capital back on a 100 year mortgage. Of course, both are storing up trouble for the future. https://www.ft.com/content/4e0377e6-6ad4-11e7-bfeb-33fe0c5b7...

I would agree that my interest only mortgage is storing up trouble for my future. However given I bought my 1st house in 1996 with no deposit, the reality is that interest only has worked well given that I have leveraged the housing market over 20 years and have now have a mortgage that is around 40% of the value of the house and is probably enough to move somewhere significantly less expensive and retire. However I…

Interest-only mortgages can work well - but only if you know what you are doing. Historically at least, the biggest issue with these kinds of mortgages is that most people simply don't.

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

#229

Post by tom_mellior » Wed, Nov 15, 2017, 5:57 PM UTC

JumpCrisscross wrote: post #153

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.

Deflation means a drop in price levels, a systematic effect. Housing prices falling while consumer prices hold steady isn’t deflation. Deflation is scary because (a) it encourages capital to hold money over productive investments and (b) it is very difficult to fight. Deflation usually occurs once an economy is already at the zero bound of interest rates; no help there. You could monetise a bunch of fiscal spending,…

> Housing prices falling while consumer prices hold steady isn’t deflation.

We're both handwaving here, but Wikipedia says: "In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate)." https://en.wikipedia.org/wiki/Deflation

The inflation rate is given by a price index which typically includes housing. If housing prices fall while everything else holds steady, that index has nowhere to go but below 0%.

I realize that this is distinct from a systematic deflationary spiral that affects the entire economy. The point was, some people might only look at the inflation rate, see it's below 0, and start panicking and doing stuff to "prop up" prices instead of letting people profit from affordable housing.

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

#230

Post by davidw » Wed, Nov 15, 2017, 5:58 PM UTC

Danihan wrote: post #199

el_benhameen wrote: post #172

Earlier quoted context omitted.

You arguably have a point (so does the parent), but this isn’t the way to express it in a respectful discussion.

I dislike the notion that discourse needs to be respectful at all times. Discourse shouldn't be baselessly disrespectful, sure. But the robotic, tsk tsk , shaming attitude that gets thrown around on forums whenever someone expresses any negative emotion gets old too. In any case, complaining about having to pay capital gains tax on gains OVER $500k really is the ultimate first world, privileged problem.

It's not about a "negative emotion", it's about saying something that you probably wouldn't say to someone's face.

If I were talking to lisper over a beer, I'd probably smile and say that that problem is one that 99% of the world's population would love to have, or something to that effect. Or maybe without the smile and straight to the point "complaining about profits so high that you're getting taxed on them when there are people who are homeless is not a great look".

OTOH, I don't think he's really complaining, just pointing out that the system is pretty screwy even for someone who is in no uncertain terms doing pretty well.