Maybe treating housing as an investment was a mistake • Hacker News Board

Re: Maybe treating housing as an investment was a mistake

#121

Post by Animats » Mon, Mar 06, 2023, 5:32 PM UTC

"The idea that home prices should outpace inflation is insane and maybe has broken modern society."

At least in the US. Not Japan, which seems to hit the economic problems of the US about 20-30 years earlier. House price growth came partly from population growth. But population growth is over in the developed world.

The US fertility rate is around 1.8 babies/female. 2.1 is breakeven. It peaked at 3.8 in 1958. "Peak Baby" for the US was in 2018. The US population hasn't started to decline yet, but it will.

House prices increasing faster than inflation started in the 1950s. US housing used to be cheap. In the 1950s, NYC residents spent, on average, 12% of income on housing. [cite needed]. Clothing and food were bigger items. Now, with a declining population, that trend turns around.

Re: Maybe treating housing as an investment was a mistake

#122

Post by dheera » Mon, Mar 06, 2023, 5:32 PM UTC

sclarisse wrote: post #90

dheera wrote: post #54

Earlier quoted context omitted.

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Who exactly is being “shafted” by occupying $100,000 worth of house/land, that has not otherwise been paid for, for $216 a month? That’s a great rate.

No, that's not a great rate.

It's only "$100K worth" because some other rich bums have collectively occupied and bought multiple houses that they don't live in and increased the price of land, AND lobbied for no more housing to be built to artifically keep the market price high. They treat housing as an investment, rather than a dwelling, which is exactly what's being discussed here.

It's ridiculous that 99%+ of people are not able to buy a reasonable place to live in by 30.

We should be subsidizing it for those who cannot afford housing, not charging them $216 more just to line the pockets of the already rich.

Re: Maybe treating housing as an investment was a mistake

#123

Post by hinkley » Mon, Mar 06, 2023, 5:32 PM UTC

svachalek wrote: post #24

beebmam wrote: post #8

Earlier quoted context omitted.

China has an enormous amount of housing. Their prices are still sky high

There's a huge cultural difference there though -- people don't trust stocks, bonds, or bank accounts. Housing is the only investment most people will consider.

There are old men who still remember their neighbors being dragged out of those houses, tried, and executed by Mao's kangaroo courts.

Most martial arts schools with ties to China have stories of expatriation or of practicing in the dark in basements.

All those houses bought in Vancouver aren't just about financial investments, they're also a potential bolt-hole if things get ugly again.

Re: Maybe treating housing as an investment was a mistake

#124

Post by pxmpxm » Mon, Mar 06, 2023, 5:32 PM UTC

tlholaday wrote: post #39

Policy solution to intractable social differences: Fund UBI with 2.5% SALSA, problem solved. https://www.radicalxchange.org/concepts/plural-property/ Yes, new problems appear. Maybe new problems are less vexing.

Straight out of Libertopia.

Losing your house and being forced to move because of a mistake in assessed value or someone else's specualtive bid is as much of feature as losing all your money when you mistype a bitcoin address.

Tesla moving to Texas? It would take me about 3 days to syndicate enough money to displace half of downtown Austin.

Re: Maybe treating housing as an investment was a mistake

#125

Post by photon12 » Mon, Mar 06, 2023, 5:33 PM UTC

tempsy wrote: post #107

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, insuranc…

> $80k could easily afford this, which is a low bar for someone with a moderately decent job.

$80k is not a low bar, and this is insulting to really talented people I know stuck in below $40k jobs.

Re: Maybe treating housing as an investment was a mistake

#126

Post by uoaei » Mon, Mar 06, 2023, 5:33 PM UTC

SoftTalker wrote: post #113

dfxm12 wrote: post #58

Earlier quoted context omitted.

What sucks is a lot of young renters with steady jobs can afford to pay off a mortgage month to month, but they just can't afford that down payment (especially the 20% needed so as to not need to get mortgage insurance)! I was in that position for a while. Every time it seemed like I could afford to put that money down, the housing prices went up! It took a handful of years of renting cheap places (with roommates), l…

That’s normal. I bought my first house in the early 1990s. Saving the down payment was tough. I lived in a real shithole apartment, anything nice and the rent ate up too much of my cash flow. And I I had to pay PMI, but the monthly payment was still cheaper than rent.

Normative statements don't hold much weight for justifying why things are the way they are.

Re: Maybe treating housing as an investment was a mistake

#127

Post by legohead » Mon, Mar 06, 2023, 5:33 PM UTC

koolba wrote: post #4

The biggest real world advantage for the average person for buying a house is forced savings. If a mortgage is $3K and rent is $2K per month, Joe Sixpack is not going to save $1K in a sinking fund. He’s going to spend some extra non-zero portion of that money. So in the long run, for average real consumers, not a theoretical economically minded consumer, a mortgage forces frugality.

That's definitely the case for my family. Every time we gain some extra money, it disappears. 5 years later however, our house has gained a ton of value, and we can upgrade to a better house with the same mortgage. And in my experience, the better house rises in value faster than our previous houses. My homes have gained far, far more value than I've ever added thru my own equity payments.

Not that I'm promoting this system. The cost of housing and rent is so insane at the moment, I don't know what to do about my kids who are growing up fast...

Re: Maybe treating housing as an investment was a mistake

#128

Post by treeman79 » Mon, Mar 06, 2023, 5:33 PM UTC

atemerev wrote: post #85

arberx wrote: post #5

That implies housing has risks. Since 2009, that risk has been eliminated by the FED owning 30% of all mortgages on its balance sheet. We've nationalized housing risk and privatized the gains.

And the fed is absolutely, 100% riskless, right? Nothing ever will happen to it?

Well we still have 60 and 90 year mortgages as tricks to use. Plus paying for mortgages on places that don’t yet (never will) exist. So government can probably increase house prices several times over before whole thing collapses.

See China for how that’s working out. (Not well)

Re: Maybe treating housing as an investment was a mistake

#129

Post by rqtwteye » Mon, Mar 06, 2023, 5:33 PM UTC

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.

My mortgage (including property tax and insurance) is 1300 of which 700 goes to principal. So the money going down the drain is around 600. A comparable rental would be at least 1500. So basically I can save 800 per month for maintenance. Even if prices don’t go up or even go down this is still a good deal. Especially since rents will probably keep rising while my mortgage will be flat for the next 14 years and then go to 0.

This equation doesn’t work in California where buying makes financial sense only if house prices keep going up. But in a lot of other areas buying a house is a very good deal.

Re: Maybe treating housing as an investment was a mistake

#130

Post by spaniard89277 » Mon, Mar 06, 2023, 5:33 PM UTC

pradn wrote: post #25

It's practically impossible for US society to get out of treating housing as an investment. Americans believe in home ownership as evidence of prudence (hard work + savings), acumen (housing always goes up so it's smart to buy a house!), and sense of security and achievement. These ideas aren't going to change any time soon. That's the ideological component. Home-owners also protect their investments because they're…

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