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

Re: Maybe treating housing as an investment was a mistake

#251

Post by piqi » Mon, Mar 06, 2023, 5:51 PM UTC

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…

> ...their house is the single biggest investment

Is it really anyone's fault but their own? I don't recall housing being offered as a low/no-risk investment with guaranteed profits. Financial blogs, podcasts, and Reddit commenters might have shared that view.

Are there any examples of mortgage issuers or home builders advertising housing as an investment?

Re: Maybe treating housing as an investment was a mistake

#252

Post by Joel_Mckay » Mon, Mar 06, 2023, 5:51 PM UTC

When residential zoned buildings are used for commercial purposes, a fundamental shift in the communities purpose occurs. The situation we have now is people leveraging overvalued assets to acquire more speculative risk with nonexistent equity.

Tip about the "200 month rule": if a rented property valuation is more than 200 months revenue (empty occupancy adjusts to $0 unlike the "creative accounting"), than you can be 100% certain a market correction is coming soon.

I would recommend reviewing post-hype markets in Japan if you want to understand where this cycle ends in more detail. No, your shed in a gloomy remote town is not worth what you paid for it friend. As interest rates must increase to dampen inflation, the overexposed gamblers will lose their assets in the next 3 years.

Try to find a ETF that isn't a dumping ground for a firms real-estate mistakes... Hint, it is mission difficult indeed, as cultural bias drives most of these markets.

Get some popcorn, and invest wisely friend. =)

Re: Maybe treating housing as an investment was a mistake

#253

Post by freitzkriesler2 » Mon, Mar 06, 2023, 5:51 PM UTC

kongolongo wrote: post #214

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…

I don't think that necessarily is a a bad thing. Just because someone can theoretically afford a mortgage payment now its pretty difficult to predict say 5+ years out whether or not that steady job will hold, especially if they're young and have a short credit history. The down payment adds a cushion for that risk. There's less inherent risk to renting, you're looking at a commitment of 6 months to a max of maybe 2 y…

You don't need 20% down. This is a lie that keeps getting perpetuated.

I put 3.5% down on my first house and even with PMI the mortgage payment is less than rent.

To add insult to injury, the massive housing inflation of the past 2 years got the LTV well above 20% which then allowed me to remove PMI lowering my payments even further.

Re: Maybe treating housing as an investment was a mistake

#254

Post by hammock » Mon, Mar 06, 2023, 5:52 PM UTC

svachalek wrote: post #87

hammock wrote: post #47

Earlier quoted context omitted.

Is worker productivity going up?

See the graph halfway down the page https://www.bls.gov/productivity/home.htm

Why does the chart start at 1973?

Re: Maybe treating housing as an investment was a mistake

#255

Post by pif » Mon, Mar 06, 2023, 5:52 PM UTC

credit_guy wrote: post #23

beebmam wrote: post #8

Earlier quoted context omitted.

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

Housing in ghost cities doesn't count. Housing needs to be available where the jobs are.

I think it's time to reverse the equation: jobs have to be available where housing is!

In other words, we must learn how to improve the economy without turning the cities into antlers.

Re: Maybe treating housing as an investment was a mistake

#256

Post by smallerfish » Mon, Mar 06, 2023, 5:52 PM UTC

dfxm12 wrote: post #58

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…

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…

I did an FHA loan on my first house 15 years ago, and the down payment was peanuts. Unless you have a poor FICO or your debt ratio is high, you probably qualify. https://www.fha.com/fha_loan_requirements

Re: Maybe treating housing as an investment was a mistake

#257

Post by plaidfuji » Mon, Mar 06, 2023, 5:52 PM UTC

WaitWaitWha wrote: post #171

For me, there are two differences between Alice and I, how we think about rent v buy. She is looking at national details. Real-estate prices are very much localized in my experience. I can have a property that is plummeting in value, while a neighborhood just on the other side of the main road is nicely increasing in value. To me if I sell for no profit at the time the house is sold, I won. If I pay rent X every mont…

Somewhat agree, especially with the localized nature of the market, but you do have to account for the fact that a mortgage is essentially paying 90% rent to the bank for the first ~1/4 of its lifetime, and the opportunity cost of tying up your down payment in housing vs other investments.

It’s why I find it odd that first-time homeowners describe themselves as, well, owners - in all likelihood you just have a new landlord - the bank - and the penalty for not making rent is quite a bit worse. Especially if you’re looking at a short time-frame e.g. less than 5 years, if you sell at the exact price you bought, you’re out essentially all of your mortgage payments (pure interest), opportunity cost of down payment appreciation, buyer and seller fees (not insignificant), property taxes and insurance (usually rolled into the mortgage but worth mentioning), and maintenance. You very likely lose to renting.

One aspect that’s relevant is the ratio of rent to mortgage payment for an equivalent property in a given locale - and this varies strongly. Some markets are very favorable to renters and vice versa.

Re: Maybe treating housing as an investment was a mistake

#258

Post by dheera » Mon, Mar 06, 2023, 5:53 PM UTC

sclarisse wrote: post #185

dheera wrote: post #122

Earlier quoted context omitted.

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 peop…

It sounds like your main objection is to the price of the house. That might indeed be pretty terrible. The answer is to build more houses in places that we need them, or extend the alternatives. (And we would, as a society, save for the barriers that are put up.) But opportunity costs are real. The time value of money is a thing. If you distort the price of capital, then capital is misallocated, and society ends up w…

> 2.6% is dirt cheap for money.

For something that isn't a basic necessity, yes, money isn't free and that's a good rate.

But for basic things like a house, transportation, food, and clothing, I am of the view that we shouldn't be charging interest from those who cannot afford these things, particularly housing, since it's the most expensive of the four. Society should perhaps even be subsidizing it with negative interest rates while taxing the hell out of people who own more than one house.

Mortgages are part of the entire housing-as-an-investment scheme that's the very subject of this article and thread. It's capitalism at an extreme being used to extract an extra 2.6% from lower- and middle-class people who cannot afford it, instead of extracting that 2.6% from the billionaires who can afford it.

McMansions in Stockton is perfectly fine. We need more housing bubbles. We need the housing market to collapse. We need housing to become available for people to live in, not as an investment.

(Oh, and more direct, fast 300 km/h service between Stockton and SJ/SF with local light rail that reaches all the houses would make all that housing much more usable. The ACE train is an abomination.)

Re: Maybe treating housing as an investment was a mistake

#259

Post by anonymouskimmer » Mon, Mar 06, 2023, 5:53 PM UTC

lotsofpulp wrote: post #176

anonymouskimmer wrote: post #88

Earlier quoted context omitted.

I don't know. An unclogged pipe is used multiple times per day.

If plumbers can figure out how to sell flushing as a service, this whole disparity can be resolved. They might need to hire a software engineer though.

:D

Your comment got a chuckle out loud. And then I saw your user name and can't stop.

Re: Maybe treating housing as an investment was a mistake

#260

Post by jackson1442 » Mon, Mar 06, 2023, 5:54 PM UTC

kongolongo wrote: post #214

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…

I don't think that necessarily is a a bad thing. Just because someone can theoretically afford a mortgage payment now its pretty difficult to predict say 5+ years out whether or not that steady job will hold, especially if they're young and have a short credit history. The down payment adds a cushion for that risk. There's less inherent risk to renting, you're looking at a commitment of 6 months to a max of maybe 2 y…

My rent for a 1 bed, 1 bath apartment is higher than the mortgage on a family member's 4 bed, 3 bath. _That's_ the issue: homeowners are putting less money into an investment vehicle while renters are burning even more money.

If rent actually reflected the value received versus owning a home I'd be less opposed to it.