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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

#281

Post by kurthr »

goosedragons wrote: post #177
kurthr wrote: post #92

Earlier quoted context omitted.

Every time I see this I have to laugh. If you live in Tokyo, I'd love to hear your anecdotal experience. I have stayed and visited japan for the last 35 years, and find all of the "Tokyo is so affordable and buildable" is hilarious. The breathless articles I read about it leave out fundamental aspects (the incredible density, the absolute destruction 70 years ago, the corruption [especially in Shinjuku], the size of…

So why is the population of Tokyo steadily increasing while the population of Japan overall is decreasing? Is it all just foreigners explaining 2+% growth rate in recent years despite them making up less than 3% of the cities total population? Or are the people stuck in 100 year mortgages just having lots more kids than everybody else?

The pricing is set by the marginal housing. Marginal housing is older tiny apartments that would be considered deathtraps in the US or Europe. Those older 7 story buildings are torn down and replaced with 30+ story apartments (in less corrupt ways than in the past at densities that most other countries would consider too high) which are unaffordable to the people who are forced to leave and commute long distances to newer/safer, but similarly high density housing.

Because ALL of the jobs are in Tokyo (or Osaka, or Fukuoka). Note that Chiba city is growing faster than Tokyo and it's a suburb (same with Tsukuba)! Shin-Yokohama is getting too expensive.

Re: Maybe treating housing as an investment was a mistake

#282

Post by gwright »

kspacewalk2 wrote: post #225
scruple wrote: post #204

Earlier quoted context omitted.

What are the mortgage terms where you're from? In always curious to understand how other countries and systems deal with this but I'm largely ignorant to it outside of anecdotes like this.

The standard in Canada, for example, is a 25 year mortgage which you renew every 5 years (fixed or variable, your choice).

Could you clarify what you mean by "renew"? That sounds a mortgage with rates that are reset every five years, which doesn't sound like "fixed" to me.

Re: Maybe treating housing as an investment was a mistake

#283

Post by mortehu »

highwaylights wrote: post #140
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 astonishes me about the US real estate market and is something I was only educated to on HN in the last week or so. I had absolutely no idea that 30 year fixed mortgages were not only widely available but the common standard there.

I just love this quote from Sid Verma:

"A lot of Americans are bragging that in their country they can get a fixed mortgage for 30 years. But it's worth remembering that for cultural and historic reasons, a lot of Europeans choose to reject socialism."

https://twitter.com/_SidVerma/status/1575185906218442752?s=2...

Note that the mortgages aren't even fixed rate, since you can replace them with a lower rate mortgage if rates drop, with insignificant penalty. Nobody will sell a mortgage like that if their goal is profit (other than to hand off to the US government).

Re: Maybe treating housing as an investment was a mistake

#286

Post by thatfrenchguy »

ska wrote: post #166
highwaylights wrote: post #140

Earlier quoted context omitted.

This astonishes me about the US real estate market and is something I was only educated to on HN in the last week or so. I had absolutely no idea that 30 year fixed mortgages were not only widely available but the common standard there.

I can't think of another country that has anything like it, and it's largely because of the government market interference (via Fannie/Freddy especially) It's going to continue to have some weird knock on effects.

France has fixed rate mortgages

Re: Maybe treating housing as an investment was a mistake

#287

Post by __derek__ »

nostromo wrote: post #182
uoaei wrote: post #126

Earlier quoted context omitted.

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

Downpayments need to be substantial because the owner needs to have skin in the game. Otherwise the borrower could walk away from the house and the mortgage with very little downside.

Your GP wrote:

> I had to pay PMI

... meaning that they did not have a substantial downpayment. Assuming they bought in Washington state, they probably also had a non-recourse mortgage.

Re: Maybe treating housing as an investment was a mistake

#288

Post by rs999gti »

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…

> but they just can't afford that down payment (especially the 20% needed so as to not need to get mortgage insurance)

Mortgage insurance is not a bad thing. But the FHA loans in the US solves the 20% issue by only requiring 3.5% down.

Re: Maybe treating housing as an investment was a mistake

#289

Post by mypalmike »

bacchusracine wrote: post #242
steveBK123 wrote: post #94

Earlier quoted context omitted.

To be fair, being a chef has never been a well paying role. Read Bourdain's writing on the NYC restaurant scene in the 90s. Hard work, hard drugs and hard life.

>Hard work, hard drugs and hard life. Not having read the book I must admit my kneejerk response is to wonder if the latter part could have been avoided by not indulging in the middle part? Not to say that hard work always pays off or anything but drugs are expensive are they not?

A lot of restaurant workers I've known in Seattle make like $30K. And no they aren't drug users.

Re: Maybe treating housing as an investment was a mistake

#290

Post by redmorphium »

kwhitefoot wrote: post #235
highwaylights wrote: post #175

Earlier quoted context omitted.

Tax on non-primary properties solves this if you can get it past vested interests. Reasonable tax breaks for your primary or only home, and none for second homes / investments you let out. That gives a valve to perform qualitative easing on the housing market whenever you need to, and is not uncommon in other parts of the world. EDIT: Having read the responses below I’ve realised I didn’t clearly word what I meant he…

You mean that in the US you don't pay tax on the capital gain when you sell a property that is not your home? It's a great country to be rich in!

You do pay tax on that.

However, you don't have to if you die and pass the property down to your spouse and/or children. This is the step-up in basis and is key to building generational wealth in the US.

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