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

Re: Maybe treating housing as an investment was a mistake

#361

Post by duncan-donuts » Mon, Mar 06, 2023, 6:13 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…

When my wife and I bought our first house we made significantly less money but were in this situation. We worked with a local bank that would do downpayment assistance where you'd have 2 mortgages, but your primary mortgage would get a 20% downpayment that would prevent having to carry mortgage insurance for the life of the loan. It worked our pretty well for us. I dunno how common this is or available it is to people.

Re: Maybe treating housing as an investment was a mistake

#362

Post by aeternum » Mon, Mar 06, 2023, 6:14 PM UTC

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.

Not sure if it counts as privatized when the vast majority of Americans are homeowners.

The gov had a ton of programs to increase the home ownership rate over the last 50 years, they were somewhat successful. Now you have a situation where the networth of 65-70% of the population is tightly coupled to their home price.

And we wonder why it's so hard to get them to vote for new housing.

As Munger says, Show me the incentives and I'll show you the outcome.

Re: Maybe treating housing as an investment was a mistake

#363

Post by NineStarPoint » Mon, Mar 06, 2023, 6:14 PM UTC

treis wrote: post #231

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…

The solution in the past was for people to move to a different city. Migration is way down compared to generations past and continues to fall: https://www.pewresearch.org/fact-tank/2021/12/16/in-2020-few... The change in city living is also a big difference. Cities used to have parts of the city with the lowest cost of living in the metro area. Things like boarding houses and single room apartments w/ shared bathroom…

It’s worth noting that these stats don’t show a difference in moving between cities, but between residences. And if you do look at stats showing moves between counties, those have been fairly flat going back to at least 2005 (I couldn’t find data going back farther).

Which is to say that it seems people find less reason to move from one house to another where they already live than they used to. I expect this is because the difference between your current house and a better house has become substantially more expensive than it used to be, making it harder for people to improve their standard of living over time.

Re: Maybe treating housing as an investment was a mistake

#364

Post by s1artibartfast » Mon, Mar 06, 2023, 6:14 PM UTC

luckylion wrote: post #152

eloisant wrote: post #91

Earlier quoted context omitted.

The problem isn't retirees who paid out their house already, it's the households who still have a big mortgage on their house.

What would change for them? They still need to pay that down in either case, don't they? Granted, they can sell at some point and make a 3x their investment. But by then, buying another house will also be 3x, and rent will be 5x, so they're kind of back where they started.

The point is that if housing prices tank, they won't have made 3x on their investment. They are talking about the case where you sell below what you paid.

Re: Maybe treating housing as an investment was a mistake

#365

Post by wankle » Mon, Mar 06, 2023, 6:14 PM UTC

jedberg wrote: post #195

Muromec wrote: post #165

Earlier quoted context omitted.

And here at the bottom of the see, there is no down payment (financing up to 100%), but young renters still can't get the a mortage of the same monthly amount as they pay rent, because of regulatory reasons -- mortage ceiling is defined as something like 5x gross yearly salary. Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage.

That sort of makes sense. When you own a property, you have to maintain it and pay property taxes. When you add all that up, you either need a lot more than rent, or you need the mortgage to be lower than rent so you can afford those other expenses.

Our home was $200K. If we own it for 30 years, the property taxes will average to about $180K over that time. If we have $70K expenses (roof, HVAC, etc.) then the total would be 250K.

If we sell our home at the end of 30 years for exactly what we bought it for, no raise in value at all, 200K, then 250K of maintenance works out to around $700 per month for each month of those 30 years.

Any amount we can sell the house for over the original $200K price, reduces the taxes and maintenance down from $700 potentially to zero.

If we sell at the end of 30 years for $450K, even accounting for taxes and maintenance, we lived rent free for 30 years.

Re: Maybe treating housing as an investment was a mistake

#366

Post by nineplay » Mon, Mar 06, 2023, 6:14 PM UTC

dcre wrote: post #327

nineplay wrote: post #268

Earlier quoted context omitted.

People aren't paid by how hard they work, they're paid by how much money they generate and how hard they are to replace. A head chef might be hard to replace but popular bars and restaurants are not, as we saw during Covid. They have often been replaced by people deciding to save money and eat at home. Your cognitive dissonance isn't unusual but I think it does a disservice to our ability to have productive discussio…

There's no reason to want to make it better (or understand it at all) unless you're also thinking about something besides the raw numbers.

There's no way to make it better if you don't start with the root cause.

Re: Maybe treating housing as an investment was a mistake

#367

Post by ethanbond » Mon, Mar 06, 2023, 6:14 PM UTC

s1artibartfast wrote: post #332

arcticbull wrote: post #3

My refrain remains: housing cannot be both affordable in perpetuity and a good investment. These are mutually exclusive goals. Let people build.

I don't think that is true at all. A good investment can be one that tracks inflation and simply pays out the labor and capital you put into it. Owning should be cheaper than renting in the long run for the same reason it is cheaper to cook at home than eating out. Savings by owning should be commensurate with the risk taken, cost of upkeep, and time value of money.

A high Land Value Tax accomplishes this. It negates the appreciation generated merely by land scarcity and value of surrounding land, which means the only way to get gains from your real estate holdings is indeed to put labor and capital into improving it.

Re: Maybe treating housing as an investment was a mistake

#368

Post by davidw » Mon, Mar 06, 2023, 6:14 PM UTC

lotsofpulp wrote: post #325

davidw wrote: post #52

Earlier quoted context omitted.

> every citizen of the first world Where I lived in Italy, people certainly purchase houses, but they don't expect them to have crazy returns like in the US. It's just a way to not pay rent and have something that you can hang on to even if there's inflation or other funny business (something that Italy has seen a lot of). People even invest in, say, apartments, but it's a similar story: they expect them to hold thei…

There is lots of boring housing in the US. It is not going to be in the Willamette Valley in Oregon. Just like houses in the Alps in Italy versus less desirable places in Italy.

"Just go somewhere else" is causing even the 'boring' places to have problems:

https://www.nytimes.com/2022/02/20/business/economy/spokane-...

We need some more fundamental reforms.

Re: Maybe treating housing as an investment was a mistake

#369

Post by waynesonfire » Mon, Mar 06, 2023, 6:14 PM UTC

distrill wrote: post #109

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.

what are you doing to deal with this?

Re: Maybe treating housing as an investment was a mistake

#370

Post by adverbly » Mon, Mar 06, 2023, 6:14 PM UTC

lalos wrote: post #116

Easily fixed with a tax system: 1) first home tax-free - the address you submit your yearly taxes on. Incentivize people to own at least one home. 2) second property you pay taxes for both homes now - no more tax free benefit since you are able to afford more than one place. 3) more than 2 properties you pay taxes for all of them times some factor 0.05*N houses. Fudge around with the factor to allow more supply for a…

I feel like I'm taking crazy pills. Georgism(LVT) would fix so many things.

I'd literally vote for a single issue party to get it passed at this point.