Americans still think they can make money flipping houses • Hacker News Board

Re: Americans still think they can make money flipping houses

#161

Post by ip26 » Sat, Jul 09, 2022, 3:50 PM UTC

jmyeet wrote: post #82

Whoever wrote this doesn't really understand what they're talking about. Side note: this is written in 2019. Can we update the title? First, terminology. "Flipping" houses has a completely different meaning. The author mentions buying a house and "flipping" it 5 years later. That's not what flipping is. Flipping is short-term and typically means rehabing a property. Done quickly, you can make a profit on this if you'…

Successful flipping, as I’ve come to understand it, is basically a general contractor plus capital. In other words, it’s a variation on an existing line of work that allows the gc more control & speed, but it’s still a job, and most of the profits are the result of cost efficiency & sweat equity.

Re: Americans still think they can make money flipping houses

#162

Post by s1artibartfast » Sat, Jul 09, 2022, 3:59 PM UTC

gonzo41 wrote: post #158

ryan93 wrote: post #103

Earlier quoted context omitted.

You have to get government approval to build. What are you talking about?

The government should have disincentivized using houses as an investment vehicle. Houses are for families to live in. The primary asset houses should provide are the family and the work they do, not the house. But if a house costs so much money that the family can't really take risks, then the house just becomes a debt prison.

However, you can't ignore the fact that homes have real tangible value and limited supply. As long as this is true, they will be a store of value.

Re: Americans still think they can make money flipping houses

#163

Post by jjav » Sat, Jul 09, 2022, 3:59 PM UTC

m0llusk wrote: post #67

chrisseaton wrote: post #42

Earlier quoted context omitted.

> House prices were bounded by wages and were understood to be depreciating assets. When was this ever true? If you literally abandoned a house and let it rot then yeah maybe in ten years it will have lost value because it will need a lot of work, but other than that I think it's never been the case they're depreciating in any meaningful sense.

Take just the roof alone. On a typical house roof replacement is at least a few thousand dollars and for a nice house in an urban area it will cost at least ten thousand and maybe much more. Even with good materials and installation roofs stay in good condition for around 30 years and become completely degraded in around 50. Some napkin math for a common and kind scenario is another $10k roof every 30 years which is…

For a typical US house that's about true, but I feel like your numbers show the opposite of what you're stating. Less than $30/mo for the major replacement item budget. So basically nothing.

Houses can be constructed better, as well. The house I grew up in is now over a century old and it's the same roof, because it's concrete.

Re: Americans still think they can make money flipping houses

#164

Post by s1artibartfast » Sat, Jul 09, 2022, 4:01 PM UTC

blululu wrote: post #57

chrisseaton wrote: post #42

Earlier quoted context omitted.

> House prices were bounded by wages and were understood to be depreciating assets. When was this ever true? If you literally abandoned a house and let it rot then yeah maybe in ten years it will have lost value because it will need a lot of work, but other than that I think it's never been the case they're depreciating in any meaningful sense.

Pretty much every capital asset depreciates. Even with basic maintenance everything wears out over time. Only legal entities are immune from the ravages of time.

Land is a pretty significant exception to this, and extremely relevant to the topic of housing.

Re: Americans still think they can make money flipping houses

#165

Post by jjav » Sat, Jul 09, 2022, 4:01 PM UTC

s1artibartfast wrote: post #73

blululu wrote: post #57

Earlier quoted context omitted.

Pretty much every capital asset depreciates. Even with basic maintenance everything wears out over time. Only legal entities are immune from the ravages of time.

My house has appreciated 500x since construction. Strange

Where is this? So if it was 20K new, it's 10M now?

Re: Americans still think they can make money flipping houses

#166

Post by antisthenes » Sat, Jul 09, 2022, 4:12 PM UTC

m0llusk wrote: post #67

chrisseaton wrote: post #42

Earlier quoted context omitted.

> House prices were bounded by wages and were understood to be depreciating assets. When was this ever true? If you literally abandoned a house and let it rot then yeah maybe in ten years it will have lost value because it will need a lot of work, but other than that I think it's never been the case they're depreciating in any meaningful sense.

Take just the roof alone. On a typical house roof replacement is at least a few thousand dollars and for a nice house in an urban area it will cost at least ten thousand and maybe much more. Even with good materials and installation roofs stay in good condition for around 30 years and become completely degraded in around 50. Some napkin math for a common and kind scenario is another $10k roof every 30 years which is…

You can get a copper roof that is pretty much permanent. The problem is that it will outlast your life and your plans for the house. You won't get to amortize it forever to realize those cost savings.

People don't generally want to enter 50+ year long commitments for physical assets/money.

> Now add on to that interior details, floor coverings, appliances, and such many of which are lucky to last 10 years

Interior stuff pretty much lasts forever if the house is kept at a stable temperature range & humidity. I have 1 nice hardwood door inside my house installed 12 years ago. It looks and works like brand new. You can basically pick things for inside your house that will last forever.

There's a pretty common trend on HN and in general to embellish house upkeep costs. I think it's mostly people who rent doing it, because they have no idea what it actually costs or aren't handy enough to do simple repairs.

Re: Americans still think they can make money flipping houses

#167

Post by smcl » Sat, Jul 09, 2022, 4:15 PM UTC

jaclaz wrote: post #152

smcl wrote: post #83

Earlier quoted context omitted.

I did some very rough spreadsheet work, collecting average UK house prices[0] and rates of inflation[1] and tried to figure this out. So starting with January 2007's average price of GBP 176,758 I tried to repeatedly apply the annual interest rates I end up with: * Jan 2007 price (inflation adjusted to 2022): GBP 243,199 * Jan 2022 price (actual): GBP 273,762 So it seems that in the UK at least the prices do seem to…

>Further still I think many people's wages have kept pace with inflation. Inflation: 243,000/177,000-1=37% House: 274,000/177,000-1=54% In 2007 the yearly wage for a 22-29 year old was 20,000 pounds, in 2021 it was 26,000: https://www.statista.com/statistics/802196/full-time-annual-... 26,000/20.000-1= 30% If you try with an higher income, let's say 30-39, respectively 26,000 and 33,000 33,000/26,000-1= 27% I think w…

Ah damn I messed up part of my comment, it should've read:

> Further still I don't think many people's wages have kept pace with inflation

But yeah either way - houses were expensive, and have only gotten more unaffordable as inflation outpaced wage growth and house prices outpaced both. Wild.

Re: Americans still think they can make money flipping houses

#168

Post by epistasis » Sat, Jul 09, 2022, 4:19 PM UTC

nemo44x wrote: post #130

epistasis wrote: post #61

Earlier quoted context omitted.

MMT is the idea that inflation is the result of government spending, rather than "bankruptcy" or people being unwilling to buy US government bonds. And in particular that limited productive capacity will cause inflation. So if anything the past years show that MMT was exactly right all along.

Nah just look at Sri Lanka. Another exhibit of MMT and how it destroys economies.

How does Sri Lanka correspond to MMT more than what the proponents of MMT say? Can you be a bit more specific?

Edit: for example, Sri Lanka's outcomes are exactly what have been predicted by MMTers, and Sri Lanka took exactly the opposite of what MMTers have been recommending forever:

https://twitter.com/fadhelkaboub/status/1516630826896744451?...

I don't know what it is about MMT but it always seems like people are intentionally not listening to what people say, and then inserting other words in their mouth. Marxists like Henwood are particularly prone to doing that, for example. Critiques of MMT seem to be based on intentional misunderstanding and misrepresentation.

Re: Americans still think they can make money flipping houses

#169

Post by s1artibartfast » Sat, Jul 09, 2022, 4:24 PM UTC

lotsofpulp wrote: post #160

s1artibartfast wrote: post #155

Earlier quoted context omitted.

Only if you subsidize it below the expected value of return. Market rates are very different. There are a host of middle men making massive profits on loans. This is why there is an industry around it. If you offer non-profit loans at break even cost, this is much lower than a company with higher overhead and a profit margin

>Only if you subsidize it below the expected value of return. I do not see how anyone could know this, since it requires predicting economic conditions 30 years in the future. The government is guessing just as much as a non taxpayer funded lender would, except the government does not have to worry about running out of cash.

Even if it is unknowable, there is still the other factors I mentioned.

1) The government doesnt need to make a profit 2) The government has access to capital at a lower rate.

Put together, it should be clear that they could buy or back a mortgage at a rate below breakeven in the private market.

Re: Americans still think they can make money flipping houses

#170

Post by formerkrogemp » Sat, Jul 09, 2022, 4:27 PM UTC

briandear wrote: post #114

formerkrogemp wrote: post #44

Earlier quoted context omitted.

On the flip side, "red" states are seeing rapid population growth from climate and economic migration, so inflation is high for low wage earners in the low cost of living areas. We're probably going to see a smaller range in costs between LCOL and MCOL than we have recently.

Nobody is migrating to Texas over climate.

I want some of what you're smoking. Perhaps people are primarily moving for economic considerations for now, but come back here and tell me with a straight face with all of the flooding, subsidence, land slides, wildfires, and water issues don't force people out as well in the next year or two.