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

#391

Post by scarface74 » Thu, Jun 20, 2019, 11:19 PM UTC

SketchySeaBeast wrote: post #361

scarface74 wrote: post #183

Earlier quoted context omitted.

But you have to live somewhere. The eviction process is a lot faster than the foreclosure process. A landlord is incentivize to evict you as fast as possible. The bank does not want your house - especially during a recession where the value is dropping and then they become responsible for insurance and upkeep. Anecdotally when my parents bought their house in 1978, the $600 a month they were paying on their mortgage…

> Anecdotally when my parents bought their house in 1978, the $600 a month they were paying on their mortgage was a slight stretch. When they were in their last year in 2008, that amount was laughably small. Hopefully wage growth keeps up with inflation then.

That’s the beauty of a fixed mortgage. Wage growth doesn’t have to keep up with inflation. The mortgage stays the sane - the only thing that goes up is the property taxes and insurance. One of the few benefits of living in one of the most conservative suburbs of one of the more conservative states is their aversion to raising taxes.

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

#392

Post by adrianmonk » Thu, Jun 20, 2019, 11:22 PM UTC

Luxury items of any type are usually poor investments, for several reasons:

1. Price range. By definition, you're above the normal price range. This means fewer potential buyers, thus less liquidity.

2. Over-specialized. The upgrades or enhancements that made it into a luxury item, which were valuable to you, may not be valuable to someone else. You will take a loss on features that are included but others don't care about.

3. Experimental. People who make luxury items tend to include novel things that sound nice but don't pan out and turn out to be useless or even undesirable.

4. Status. Luxury and status are often linked. Luxury buyers aren't too excited about secondhand. A used sports car doesn't impress your friends like a new one.

If you buy a luxury item (like a giant house), the most rational thing to do is just accept that you are buying it because you want that luxury for yourself, and don't expect to get the money out of it later.

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

#393

Post by mamon » Thu, Jun 20, 2019, 11:33 PM UTC

stale2002 wrote: post #156

newsoul2019 wrote: post #139

Earlier quoted context omitted.

Am I the only one who has always seen renting as a temporary arrangement only? If you don't own something, somewhere, doesn't that mean the same as being homeless? Not trying to offend anyone. Genuinely wondering, are there people who really don't want to own real estate ever in their lives?

No? It give me freedom to rent. At any point that I feel like it, I can pick up and move. Whether it is to a place across the street or on the other side of the country. I wouldn't have nearly that much freedom if I had the misfortune of owning my own place.

As someone put it: freedom is just another word for "having nothing left to lose". Homeless people are generaly most free of all, they do not have any obligations, bills to pay, work to show up, but I wouldn't consider that something we should aspire to.

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

#394

Post by taurath » Fri, Jun 21, 2019, 12:17 AM UTC

munificent wrote: post #180

pbuzbee wrote: post #97

This article claims that these homes are going because buyer preferences have shifted towards smaller homes in walkable areas. I don't disagree with this, but I'm surprised the article didn't factor in the cost of these homes. These homes are priced in the millions and are generally not in areas known for high salaries. Coming up with that much money is out of reach for most members of younger generations. Some peopl…

I hate to sound so cynical and negative, but, God, this article is really just a case study in how stupid, materialistic, and short-sighted many Boomers are. That generation was raised on the idea that happiness comes from owning as many things as possible. They've had decades to learn — like the generations after them did — that this is nonsense and that happiness comes from connection to family, friends, and commun…

They had a 5000 square foot house BUILT when they were 82 - more money than sense.

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

#395

Post by taurath » Fri, Jun 21, 2019, 12:20 AM UTC

Theodores wrote: post #314

What gets me is the absence of ballrooms. Yes, ballrooms. In former times grand mansions would have a ballroom. There would be hundreds of people or even just modest gatherings of thirty people, which could be just a few families with a huge amount of kids each. But the McMansions never seem to have a ballroom. There may be vast swimming pools and all kinds of huge extra bedrooms but they lack the fantasy aspect that…

Because these are not estates (which might own a lot of land, have vassals, and have economic and social connections to the surrounding area), so there is nobody to use the ballrooms, even if they invited everyone they knew. Its cargoculting for the rich with no sense whatsoever.

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

#396

Post by taurath » Fri, Jun 21, 2019, 12:24 AM UTC

SwellJoe wrote: post #190

Several of my younger friends live in cooperative housing, where they rent a big house, and individually rent out the rooms. Sometimes as many as 8 or 10 people live in a "single family" home. This seems like a great solution for all parties involved (including cities with very high rents), until you learn that the cities they're in often consider this an illegal use of the property and will force their landlord to e…

It works if you own the house, but yes for over 5 tenants renting becomes a total pain due to "equal" tenant laws. Only in areas which allow "master" tenant does this end up working - you have to have a smaller set that is ultimately responsible for the home, else nobody is.

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

#397

Post by taurath » Fri, Jun 21, 2019, 12:33 AM UTC

bfrog wrote: post #111

Well the solution is communal living in these large homes. I'm doing just such a thing with extended family and children and its quite nice. I get not everyone loves being around their family, so its not for everyone, but it makes things far more affordable, and the house you can get by pooling money together can be quite amazing compared to what you can get by splitting the pot. There are fewer people wanting to buy…

Thats what I and my friends do do - however, in the areas of these homes the cost can be absolutely gargantuan to buy - like completely out of range. A $3mil house is $15,200 per month just for the mortgage, round up other expenses to around $18,000. Its very hard to get 10 people together that can afford $1800/mo that wouldn't prefer their own place, and as the amount of people go up the risk of people moving in and out constantly goes higher.

We live in a $600k large house and pay a lot less. We may upgrade eventually, but keeping a group of people together for that long can be difficult - even if socially there's a lot of cohesion, most often its a job opportunity that requires someone to move.

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

#398

Post by djakjxnanjak » Fri, Jun 21, 2019, 12:50 AM UTC

thorwasdfasdf wrote: post #326

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.

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...

That’s a percentage of the value of the structure, not the structure+land.

When buying insurance, you answer questions about your property and the insurance company estimates the cost of replacement of the structure. In my case, it’s about 30% of the market value of the home.

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

#399

Post by djakjxnanjak » Fri, Jun 21, 2019, 12:56 AM UTC

secabeen wrote: post #368

thorwasdfasdf wrote: post #328

Earlier quoted context omitted.

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

It's also not clear if any of these numbers are %ages of the total property value, land + house, or just house rebuilding costs (which are often over $400/sqft in California after a disaster). My worry with CEA is in "the big one", will they have enough money? They have $17 billion in assets, which is theoretically enough. However, the Northridge quake caused over $10 billion in damage, and the 1906 earthquake was ov…

I do agree it will be a shit show when the big one hits. Don’t rely on earthquake insurance to fix your problems. Unless you have $$$$, your house is not going to be in the front of the line for rebuilding. Spend a thousand dollars now on braces and bolts.

I imagine everyone in the building trades will be fully employed in the rebuilding effort even if CEA runs out of money. The state would probably bail the CEA out, but either way people are going to be waiting for a long time for someone to come give them a new house.

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

#400

Post by i_am_proteus » Fri, Jun 21, 2019, 1:24 AM UTC

treis wrote: post #279

i_am_proteus wrote: post #221

Earlier quoted context omitted.

Several thousand more per year doesn't sound too far off: if you own, you're responsible for home repairs: roof, HVAC, electrical, plumbing, appliances, siding, painting, etc. I budget $2,000 a year for repairs on a modest-sized home; most years it's under $1,000, but HVAC and roof are infrequent and fairly expensive.

Even if we say that the owner is spending those several thousand dollars on maintenance that just means they're cash flow neutral. They are still making thousands through increased equity and appreciation.

The landlord makes the down payment and the landlord takes the risk.