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US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

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Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#111

Post by all_blue_chucks »

pyoung wrote: post #71

Anecdote, but my wife and I dropped out of the market recently and rented instead. The rent was 30-40% cheaper than a mortgage would have been on a similar place (including taxes, insurance, etc...). So we figured we would just put the after-tax difference into a 401k (because 401k is pre-tax, for every dollar we 'saved' in housing cost, we are putting ~1.4 dollars into 401k). I figure that building equity in a house…

My house in Seattle has been appreciating by about $100k/year over the past five years. In other words, I'm making $100k/year on a $50k investment. You wont find returns like that in a 401k. And my interest payments are less than rent would be. Last but not least, home appreciation is TAX FREE up to half a million bucks.

By all means, max out the $20k or so you are allowed to put into a 401k, but don't fool yourself into thinking it will outperform what is essentially a government-subsidized leveraged investment. You have to have exceptionally bad timing or move very frequently to lose in real estate.

Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#112

Post by AnthonyMouse »

scarface74 wrote: post #73
dantheman wrote: post #60

Earlier quoted context omitted.

The high tax states drive the federal tax policy and spending. When California and New York push large federal programs and higher federal taxes and then are able to exclude themselves from the cost it's wrong.

How can the high tax states push policy when they mostly elect Democrats and the Republicans control Congress? The tax law that just passed was very unfriendly to blue states.

> How can the high tax states push policy when they mostly elect Democrats and the Republicans control Congress?

The Republicans don't always control Congress, and the Democrats generally favor program expansions when they do have control.

Moreover, even when they're not in the majority, they're still in Congress. Even though the vote was mostly along party lines, the deciding vote on the Medicare expansion under Bush was a Democratic Congressman from New York.

And have a look at the parties of the Representatives from California and New York. A majority of their Representatives are Democrats but they still elect more Republicans than most states have Representatives.

Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#113

Post by AnthonyMouse »

aceon48 wrote: post #39
jeffbax wrote: post #33

Earlier quoted context omitted.

This is all true, but the mortgage interest deduction should be $0, particularly in the rich cities that refuse to let enough homes get built and fix things like zoning. It's an awful distortion that's a handout to the wealthy to the penalty of renters (generally less well off)

It also encourages debt and is effectively a subsidy to banks

> It also encourages debt and is effectively a subsidy to banks

I have no idea who is downvoting you. That's absolutely correct.

If they really wanted to subsidize ownership they would make it tax deductible to pay down principal. (And then give you zero tax basis so it's all taxable income when you sell, and cap the maximum sunk deduction per person at the median home value so rich people don't buy twelve houses to avoid their taxes.)

Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#114

Post by paulcole »

all_blue_chucks wrote: post #111
pyoung wrote: post #71

Anecdote, but my wife and I dropped out of the market recently and rented instead. The rent was 30-40% cheaper than a mortgage would have been on a similar place (including taxes, insurance, etc...). So we figured we would just put the after-tax difference into a 401k (because 401k is pre-tax, for every dollar we 'saved' in housing cost, we are putting ~1.4 dollars into 401k). I figure that building equity in a house…

My house in Seattle has been appreciating by about $100k/year over the past five years. In other words, I'm making $100k/year on a $50k investment. You wont find returns like that in a 401k. And my interest payments are less than rent would be. Last but not least, home appreciation is TAX FREE up to half a million bucks. By all means, max out the $20k or so you are allowed to put into a 401k, but don't fool yourself…

It’s also quite difficult to go back in time and buy a house in Seattle 5 years ago.

Don’t fool yourself into thinking that buying into what would become a ridiculously hot market is much more than dumb luck.

Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#115

Post by shoo »

brandall10 wrote: post #110
shoo wrote: post #80

Earlier quoted context omitted.

It depends why you were buying it. Were you buying to flip it as a short term investment, or a place to live in for the next 5-10-20+ years? the market price only matters if you're forced to sell or forced to buy. if you dont need to sell or dont need to buy, you can ignore it

I bought my last place in 2006, intending to live there at least 5-10 years. I ended up living there for 11 years, with the majority of the time being there with it some $120k underwater. It was terrible and I wished I had waited a year or two - not only did I pay more to service a more expensive mortgage, I walked away with considerably less equity than I would have if I just waited. I don't know how anyone could po…

> As always, if you can help it, buy low, sell high

I agree. If housing is overvalued, and renting is a cheaper alternative that is feasible, rent & plug the saved money into some other form of investment.

I guess it's a bit tricky with housing as well, as buying into housing tends to involve borrowing a large amount of money, which then exposes you to risk of potentially being forced to sell if the market or your circumstances change significantly.

Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#116

Post by tzs »

jsoc815 wrote: post #95
mark212 wrote: post #84

Earlier quoted context omitted.

The entire (expressly stared) reason to make mortgage interest deductable was to encourage more home ownership. You may disagree that that’s a desirable policy goal (and I might agree with you), but comparing it to some other payment that isn’t deductable misses the point entirely. Especially rent. Congress wanted to create an economic dis-incentive to being a renter and push people to own the homes they live in.

> The entire (expressly stared) reason to make mortgage interest deductable was to encourage more home ownership. IIRC it was actually to encourage more borrowing so that the banks could securitize and sell off the loans . Increased home "ownership" was/is the altruistic reason presented to the public so that they feel good about the whole thing. Not looking to start an argument here, but there are plenty of other wa…

Both that and the encourage home ownership theory seem unlikely when it comes to why it was deductible in the first place.

It became deductible in 1913, but simply because in 1913 all interest became deductible. The first $3k ($4k married) was excluded. Only the top 1% paid enough interest to take any deduction, and very little of that would have been mortgage interest because they usually bought their homes outright.

Wikipedia claims that the reason they made interest deductible on personal income taxes was that in a nation of small proprietors the line is fuzzy between personal and business expenses, and it was simpler to just make it all deductible instead of just trying to allow business interest to be deducted.

As for why credit card interest later became non-deductible, it is kind of the inverse of why mortgage interest is deductible. That is just as mortgage interest became deductible because all interest became deductible, credit card interest became non-deductible because almost all interest became non-deductible. The Reagan tax reforms took away almost all such deductions except the mortgage deduction.

As to why Congress decided to save the mortgage deduction when they were killing all the rest--I have no idea. That was in 1986, when a lot more than the top 1% were taking it, and most homes were bought using mortgages, so both the "encourage home ownership" theory and the "encourage more borrowing to please the banks" theories are plausible, at least.

Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#117

Post by tjr225 »

paulcole wrote: post #114
all_blue_chucks wrote: post #111

Earlier quoted context omitted.

My house in Seattle has been appreciating by about $100k/year over the past five years. In other words, I'm making $100k/year on a $50k investment. You wont find returns like that in a 401k. And my interest payments are less than rent would be. Last but not least, home appreciation is TAX FREE up to half a million bucks. By all means, max out the $20k or so you are allowed to put into a 401k, but don't fool yourself…

It’s also quite difficult to go back in time and buy a house in Seattle 5 years ago. Don’t fool yourself into thinking that buying into what would become a ridiculously hot market is much more than dumb luck.

I rent in a neighborhood in Seattle that has homes that sell from anywhere between 700k to tens of millions, and a lot of houses that I'm looking at aren't selling. The market is so saturated with people trying to sell their homes for more than they are worth, which is a notable change in what is an extremely hot housing market.

Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#118

Post by gnicholas »

ummonk wrote: post #100
mjevans wrote: post #38

Housing is only an 'investment' because of how expensive it inherently is. However, my opinion has been that housing /has been/ in a bubble since at least the mid 2000s (pre recession); and it didn't actually deflate (at least in the area I live in) /during/ that recession. It would really be nice if some way of fixing this bubble chasing nonsense happened. Maybe if healthcare and retirement were fully socialized thi…

Well, Prop 13 in California particularly incentivizes housing bubble chasing.

Doesn’t Prop 13 incentivize buy and hold? That’s the only way to keep your low property tax basis. Or am I misunderstanding your comment?

Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#119

Post by AnthonyMouse »

danjoc wrote: post #13
ChuckMcM wrote: post #10

Earlier quoted context omitted.

All true, I was thinking about the 'home price recessions' that happen periodically as opposed to the mortgage crisis which was precipitated in part by synthetic CDOs masking poor lending processes.

Ah, understood. I remember shopping for houses after the crash, and it seemed everything was either a trash heap, or in foreclosure. The bank wouldn't take an offer, preferring to cash auction to investors at the starting price of the highest offer they had. No cash, no house, no matter how good the credit rating. The cheap house thing was basically a myth from my vantage point.

> Ah, understood. I remember shopping for houses after the crash, and it seemed everything was either a trash heap, or in foreclosure. The bank wouldn't take an offer, preferring to cash auction to investors at the starting price of the highest offer they had. No cash, no house, no matter how good the credit rating. The cheap house thing was basically a myth from my vantage point.

Yeah, the sort of unspoken ethos after 2008 was that people had to be saved from all the underwater mortgages. But the only way to do that is to not pop the bubble. So we got a slew of policies from the banks and the government designed to shore up housing prices, and now they've rebounded to above the pre-crash prices.

But those prices are bubble prices. We didn't pop the bubble which means we're still in it. All we did was kick the can down the road. The prices are still unsustainable and have to come down.

The best thing they did in the interim was to print a bunch of money. If you can't lower nominal housing costs because people can't have underwater mortgages then lower real housing costs by keeping nominal housing costs the same and causing sustained moderate inflation of everything else. Also very effective for devaluing other existing debt (student loans, credit cards, public debt). It's possible that we're now at the point of needing more of that.

Re: US housing market hit a ‘significant slowdown’ in recent weeks, Redfin CEO says

#120

Post by mjevans »

gnicholas wrote: post #118
ummonk wrote: post #100

Earlier quoted context omitted.

Well, Prop 13 in California particularly incentivizes housing bubble chasing.

Doesn’t Prop 13 incentivize buy and hold? That’s the only way to keep your low property tax basis. Or am I misunderstanding your comment?

The effect on the market is to make the market even less liquid than it would be since sales cost such huge benefits.

Plus insulating existing homeowners from the rising market value of land is a tax on literally everyone that does NOT live there.

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