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Maybe treating housing as an investment was a mistake

goodreason.substack.com

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Re: Maybe treating housing as an investment was a mistake

#101

Post by n00shie »

last_responder wrote: post #30
mjr00 wrote: post #10

> While the rich are more likely to own homes, tons of middle class and poor people also bought homes and planned their lives under the assumption that housing prices would go up. Tanking housing prices would destroy their trust in the system that they bet everything on. This is pretty much the crux of it. High housing prices could be "fixed" almost overnight, but for almost every citizen of the first world, their ho…

>You'd be destroying everyone's retirement plans Everyone?

everyone that matters...

Re: Maybe treating housing as an investment was a mistake

#102

Post by duped »

The math at the top seems suspect. In all three cases Alice should have "spent" the same amount of money after 18 years. In the cases of renting you pay more each year and get no equity back, so you should be less able to save and you get none of your money back at the end.

I guess the only difference is whether that 20% downpayment on the loan better spent sitting in a house or in bonds/ETFs.

Re: Maybe treating housing as an investment was a mistake

#104

Post by yboris »

higgins wrote: post #55
yboris wrote: post #42

Related: Is It Better to Rent or Buy? - an interactive data visualization / calculator. https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

is there a non-paywall version of this online?

Try incognito? For some reason I see the visualization with no block - and I'm not registered / paying to NYT.

Re: Maybe treating housing as an investment was a mistake

#105

Post by Idiot_in_Vain »

svachalek wrote: post #49
Idiot_in_Vain wrote: post #18

I haven't played with the NY times calc, but is the following correct: Housing prices only keep pace with inflation. America realizes it totally forgot about a few million homes it built, greatly expanding supply. Housing prices rise only 2%. Alice is much, much worse off for buying. In total, buying costs ~$1.75M, where renting would have cost her ~$1.3M. Because her finances were tied up in the house while the home…

Principal is only part of the cash flow. You're also paying for interest, insurance, taxes, and maintenance, which the renter does not, and these are also money down the drain. In my experience, owning a house in many (most?) areas is a losing proposition unless you assume that housing prices rise at an unreasonable rate for a long period of time. However, that's exactly what's happened.

Despite the interest, insurance, taxes, and maintenance when paying a mortgage the majority or at least a big part of your payment goes to pay off the house - so after 15 or 20 or 30 years you own a very expensive house. When renting all the money you pay goes down the drain and in 30 years you own nothing.

Re: Maybe treating housing as an investment was a mistake

#106

Post by lbotos »

dangwhy wrote: post #61
photon12 wrote: post #6

> Meanwhile, renters are desperate. They’re begging for housing prices not just to slow, but to fall. I have a friend who is a head chef at a decently popular bar and restaurant on Broadway in Capitol Hill, Seattle (very trendy part of town if you aren't familiar, steep commercial rent). He lives in a 400 sq ft studio and is barely, barely making it from one paycheck to the next. I am sitting on a 2.6% interest rate…

> I am sitting on a 2.6% interest rate mortgage and my prices are set for the next 30 years. I probably work half as hard as he does, if not even less than half. If i follow this correctly. you will work half as hard because your housing costs are set while his will keep increasing ?

I don't think it's "they will work half as hard" but "working a tech desk job is easier". The two thoughts are separate as I read it.

Re: Maybe treating housing as an investment was a mistake

#107

Post by tempsy »

photon12 wrote: post #6

> Meanwhile, renters are desperate. They’re begging for housing prices not just to slow, but to fall. I have a friend who is a head chef at a decently popular bar and restaurant on Broadway in Capitol Hill, Seattle (very trendy part of town if you aren't familiar, steep commercial rent). He lives in a 400 sq ft studio and is barely, barely making it from one paycheck to the next. I am sitting on a 2.6% interest rate…

This is an absurd statement.

Median rent in Seattle for a 1 bedroom is $2k. Using the 40x rule someone who makes $80k could easily afford this, which is a low bar for someone with a moderately decent job.

Locking in a low rate alone has nothing to do with whether owning is more affordable than renting. The rate could be 0% but with a sales price high ala 2021-2022 buying mania and then adding property taxes, insurance, maintenance, and HOA the vast majority of "high" cost metros have and will continue to be much more expensive to buy in than rent in whether rates go up or down.

Re: Maybe treating housing as an investment was a mistake

#108

Post by jejeyyy77 »

photon12 wrote: post #6

> Meanwhile, renters are desperate. They’re begging for housing prices not just to slow, but to fall. I have a friend who is a head chef at a decently popular bar and restaurant on Broadway in Capitol Hill, Seattle (very trendy part of town if you aren't familiar, steep commercial rent). He lives in a 400 sq ft studio and is barely, barely making it from one paycheck to the next. I am sitting on a 2.6% interest rate…

I know people who made good investments in the stock market/crypto that sold at the right time. They are set for life. I also know people who are founders of startups and they grind day in day out but haven't gotten traction (yet?).

Luck. Choices. Right time, right place. Such is life.

Re: Maybe treating housing as an investment was a mistake

#109

Post by distrill »

photon12 wrote: post #6

> Meanwhile, renters are desperate. They’re begging for housing prices not just to slow, but to fall. I have a friend who is a head chef at a decently popular bar and restaurant on Broadway in Capitol Hill, Seattle (very trendy part of town if you aren't familiar, steep commercial rent). He lives in a 400 sq ft studio and is barely, barely making it from one paycheck to the next. I am sitting on a 2.6% interest rate…

I feel similar cognitive dissonance every time I compare myself to people I know outside of tech. Pretty much without exception, they work harder jobs than me or my colleagues with worse hours and for a fraction of the income. I don't think my observation is tied to the housing market, other than it being a vehicle to expedite the wealth gap.

Re: Maybe treating housing as an investment was a mistake

#110

Post by giraffe_lady »

photon12 wrote: post #38
lotsofpulp wrote: post #20

Earlier quoted context omitted.

Cognitive dissonance means harboring contradicting thoughts. The difference in you and your friend’s situation is caused by the fact that they are selling labor which has a much lower price than the labor you are selling. This is not contradictory, just a consequence of supply and demand.

Yes, there is an inconsistency in the amount of effort expended to survive versus the outcomes of that effort. I can't reconcile them in my head. I'm watching my friend trying not to physically deteriorate and have some modicum of comfort while I sit here on my couch living off savings from the job I recently quit. Nothing I do can be so much more valuable than what he does.

Everyone trying to convince you to be ok with this but no, you have seen it correctly and it is wrong. People can work themselves to death doing jobs that benefit us, and what they receive for it is misery and precarity. Trust your own judgement and don't accept this as a natural, inevitable, or just state.
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