A Growing Problem in Real Estate: Too Many Too Big Houses • Hacker News Board

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#321

Post by BeetleB » Thu, Jun 20, 2019, 8:11 PM UTC

partiallypro wrote: post #274

I generally wonder what is going to happen to the real estate market once retirees are forced to sell their homes to stay in nursing homes, or just pass away, etc. The kids could inherit the homes, but that will still leave a flood of houses on the market. It will be interesting to see play out.

>The kids could inherit the homes, but that will still leave a flood of houses on the market. It will be interesting to see play out.

Investors will buy them, and get the city/county to rezone those properties for multiple houses. They will tear the house down, and build N houses on it and sell it.

In the short term, there might be a local HOA that will fight it. But when the oversupply gets large enough to really impact everyone's prices, the existing owners will favor this solution, as it will raise the value of their own mansion.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#322

Post by thorwasdfasdf » Thu, Jun 20, 2019, 8:12 PM UTC

nybble41 wrote: post #247

thorwasdfasdf wrote: post #203

Earlier quoted context omitted.

One way to think about it is the Spread between the cost of owning vs the cost of renting. For example, in SF, the spread is very small and hence favors the renter. Here's an example: In SF, your cost of ownership is roughly 2% per year (1.4% property taxes, 0.5% for Earthquake Insurance, 0.3% for repairs and depreciation and HOA), which comes to a total of 2.2%. The average Rent for an equivalent house is roughly 3%…

In a high-demand area like SF you're probably seeing an appreciation in the value of the owned property equal or greater than whatever you would be likely to earn from other investments. According to Trulia[1] the median sale price for two-bedroom homes increased from $1.010M five years ago to $1.407M today, which corresponds to an annual return of about 6.8%. Assuming that trend continues, the actual spread would be…

The very long term house/condo appreciation will always match incomes. Don't expect SF real estate to appreciate the way it has in the last 40 years.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#323

Post by cblum » Thu, Jun 20, 2019, 8:13 PM UTC

kasey_junk wrote: post #270

mox1 wrote: post #252

Earlier quoted context omitted.

As an engineer (software) who owns his own SFH, I absolutely love doing repairs to my house. I preemptively replaced my water system this spring (electric to gas heater, added water softener). Took me a whole week (5-10pm work) and lots of pre-planning, but every time I walk downstairs I can't help but admire all the coppers lines I piped in. I dunno it was kinda like Hello World of the building trades, hearing the h…

As an engineer (software) who owns his own SFH and also did a gut rehab. I hate doing repairs on my house. Between not having the correct tooling, the time premium I pay beyond what a reputable tradesman will take and how much I prefer working on software for dealing with home repair, it makes _zero_ sense for me to do this work. Every time I do repairs I think of my run rate vs the professional I could be paying to…

Same. I just wrote in another comment in this thread that I hate spending hours at Home Depot searching for tools and parts. I find the whole world of home repairs hard to navigate. I watch a video on YouTube on how to repair X, and they talk as if things are standardized, but then I try it at my place and everything looks completely different and I don’t even know what those things are called.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#324

Post by clairity » Thu, Jun 20, 2019, 8:15 PM UTC

zcid wrote: post #305

LarryDarrell wrote: post #108

Earlier quoted context omitted.

The thing I've noticed is that in my area all the modest neighborhoods (2 bed, 1 bath, sub $200k) are being bought up by landlords. This leads to a neighborhood of renters, which is a lot different than a neighborhood of owners. The Havers can buy a lot more houses than the Have-Nots and I'm left wondering what the price of single family homes would be if renting them was illegal and they were all placed on the marke…

We really need some stronger regulation on renting. I'd like something along the lines of federal rent control. Limit the rent that can be charged to reduce the profitability of buying up house after house. This would be unpopular with the current owners of homes as it would lower property values, but over time they would remain much more stable.

i agree with your sentiment, but i don't think that rent control is a federal concern. we need to hold our state legislators accountable here. living in CA frustrates me in that regard, because we cannot pass a single f'ing bill about housing affordability generally, even though democrats have a super-majority and every politician and news outlet talks a big game on the topic. i'm ready to vote against every incumbent at this point.

in any case, part of the solution is to equalize the capital gains tax with income tax rates and have the capital gains tax escalate with the number of homes owned (but keep a small tax advantage for long-term owners of a primary lived-in home). and get rid of 1031 exchanges for investment property, which greatly advantage large capital holders over the average citizen.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#325

Post by ndarwincorn » Thu, Jun 20, 2019, 8:16 PM UTC

munificent wrote: post #186

pdpi wrote: post #134

Earlier quoted context omitted.

For the families in the story, the problem is they can't get rid of homes that are uncomfortably big. Definitely a 1%-ish problem (hell, a .1% problem. I would have plenty of use for more space but I simply can't afford it in London). However, there's another problem here, one for the rest of us — The site used for a single-family 700sqm home could've been used for something denser, that would've lowered housing cost…

> However, there's another problem here, one for the rest of us — The site used for a single-family 700sqm home could've been used for something denser, that would've lowered housing costs for everybody else. That's not really relevant in this case. All of the neighborhoods mentioned are low density distant suburbia. There are few jobs nearby and little incentive for growth there for working people. Housing costs are…

Same. I'm looking at buying here in ~2021, and I'm looking at houses that are ~half the size of the one I grew up in on ~half the land for 2x the price. Shortly after I moved here I rented a 450 square foot condo that sold last fall for around the current value of the house I grew up in (2800 square feet, 1 acre, creek out back).

That said, those exurb mcmansions (particularly those featured in the OP) do push the boundaries of the wildland urban interface, and while their lack of density might not have the same impact on housing prices that you see in urban areas, they more or less have the same environmental impact.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#326

Post by thorwasdfasdf » Thu, Jun 20, 2019, 8:17 PM UTC

djakjxnanjak wrote: post #230

thorwasdfasdf wrote: post #203

Earlier quoted context omitted.

One way to think about it is the Spread between the cost of owning vs the cost of renting. For example, in SF, the spread is very small and hence favors the renter. Here's an example: In SF, your cost of ownership is roughly 2% per year (1.4% property taxes, 0.5% for Earthquake Insurance, 0.3% for repairs and depreciation and HOA), which comes to a total of 2.2%. The average Rent for an equivalent house is roughly 3%…

My earthquake insurance is more like 0.1% and I'm pretty sure the rates are set by the state - where are you getting your numbers? If the cost were 0.5% I don't think it would be worth paying, that would buy a lot of seismic reinforcement.

You must of got one hella of a deal!

For CA: "Based on where you live, insuring a single-family house can cost from $2.50 to $5.50 per thousand dollars of coverage" .25% to .55% That's quite significant.

https://www.valuepenguin.com/california-earthquake-insurance...

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#327

Post by dmitrybrant » Thu, Jun 20, 2019, 8:18 PM UTC

hn_throwaway_99 wrote: post #93

One of the trends that I can only hope continues is getting rid of this idea that home ownership (especially single family home ownership) is the American dream. I live in and own a detached single family home (was a compromise with my spouse) and to be honest, I hate it. I hate having to take care of the yard, to deal with unreliable tradespeople when things break, to deal with the huge expense of minor home repairs…

I think the point here is "to each their own", and there shouldn't be such a thing as "the" American dream, or rather that the American dream is for every person to live their life exactly as they want.

My wife and I would not give up owning our house for anything, and would never go back to renting. I pride myself in being able to make minor repairs to all kinds of things around the house, and seeing them as fun engineering challenges rather than burdensome responsibilities. My wife loves gardening and needs plenty of yard space for planting.

Most of all (and I may be in the minority here), I really value peace and quiet, and true peace and quiet can only be achieved in a detached house, and preferably even with some generous distance from the next house. If I think back to living in an apartment, I was super easily annoyed by any noise made by neighbors, including pounding footsteps, loud music, screaming children, barking dogs, etc.

Of course the house we own isn't exorbitantly large, or not larger than what we need it for, but even if we'll need to "downsize" at some point in the future, it will be to another detached house, and not an apartment.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#328

Post by thorwasdfasdf » Thu, Jun 20, 2019, 8:18 PM UTC

bonniemuffin wrote: post #307

djakjxnanjak wrote: post #230

Earlier quoted context omitted.

My earthquake insurance is more like 0.1% and I'm pretty sure the rates are set by the state - where are you getting your numbers? If the cost were 0.5% I don't think it would be worth paying, that would buy a lot of seismic reinforcement.

+1, my annual SF earthquake insurance premium is 0.06% of the appraised value of the house. It's not even worth mentioning in adding up the total cost of ownership.

are you sure? That's almost 5-10 times cheaper than the averages posted, above.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#329

Post by BeetleB » Thu, Jun 20, 2019, 8:20 PM UTC

dfischer wrote: post #132

Insight into younger generations: I hate the idea of owning property. I don't want to be stuck to a city or a location. The world, and the universe have so much to offer. To me, buying a house is cementing your location and stunting the amount of knowledge you can acquire by handcuffing you to a location and limiting your exposure to the world. That is the philosophical side, then there's the debt and the overall ass…

>To me, buying a house is cementing your location and stunting the amount of knowledge you can acquire by handcuffing you to a location and limiting your exposure to the world.

Too many people have a narrow view of home ownership and end up believing in things like this.

Whether it is true or not depends entirely on the location and the market. In the right places, you can buy a house that is near all the amenities (walking distance, even). The only real risk is the RE market, and how much loss you're willing to take to sell the house quickly (i.e. 6% RE fees when selling). In my case, the value rose enough in one year that I could have sold and still made a gain.

If you can't sell because the loss will be too high, there are other alternatives (e.g. renting your house), but as I said, it all depends on the market.

>If I do it, it would be to exploit financial interests with the right opportunity.

Umm - isn't that why many do it? I mean yes, people do buy houses for other reasons, but if they don't perform due diligence in the math, it could end up hurting.

At the moment my house is limiting my opportunities - I'm turning down any offer to move to SV, for example. But it has nothing to do with being shackled financially. I'm making the choice because of all the fringe benefits my house provides, which I would instantly lose were I to move to SV. Am I missing out on broadening my world view by not moving? Sure. Are others missing out on experiences by not owning? In some cases, yes.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#330

Post by malandrew » Thu, Jun 20, 2019, 8:22 PM UTC

ethagknight wrote: post #288

mensetmanusman wrote: post #275

Earlier quoted context omitted.

Maybe someone could disrupt the ownership model here and invite a number of families to move in together?

Not so much a disruption, but splitting these huge homes into duplexes is an easy ticket. HOAs and neighborhoods will fight it because "there goes the neighborhood"

The design of many of these doesn't really lend themselves into being split into duplexes.