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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

#381

Post by redmorphium »

hinkley wrote: post #123
svachalek wrote: post #24

Earlier quoted context omitted.

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.

This is a negative way to look at China's history.

As a Chinese-American, whose family and friends all profited greatly from China's rise, I do wonder, how much of that profit was just being lucky enough to support the "winning team," and how much blood was shed on the other side.

I guess the only true mindset is a neutral one.

Re: Maybe treating housing as an investment was a mistake

#382

Post by btilly »

abeppu wrote: post #297

I don't get how the example at the start works. In the scenario where housing prices increase dramatically, buying costs $1.1 today. In the scenario where housing only keeps pace with inflation, buying costs $1.75M and renting costs $1.3M. Why is renting in a world where we build a lot more housing somehow more expensive than buying in a world where we don't? I think this writeup also doesn't meaningfully touch on th…

It was presented in a confusing way, but it is accurate. Rent tends to move with housing prices. If the price of housing goes up, rent also goes up, and vice versa.

In scenario 1, buying cost $1.1 million today and saved $600k, meaning that renting cost $1.7 million.

In scenario 2 the house cost more and renting cost left making them about equal. We aren't given either number.

In scenario 3 the house cost $1.7 million and renting cost $1.3 million.

So you see that more houses = cheaper houses and cheaper rent. Fewer houses = expensive houses and expensive rent. Building housing is a tradeoff between wealth for homeowners and affordability for everyone else. For decades we've chosen wealth for homeowners and this is visible in everything from expensive houses to high rents to a huge homeless problem.

Re: Maybe treating housing as an investment was a mistake

#383

Post by lolinder »

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…

> especially the 20% needed so as to not need to get mortgage insurance

The mortgage insurance isn't nothing, but it's not a big enough cost to warrant waiting until you have 20% down if that's still a long way off. You can also very easily remove the mortgage insurance once you get to 20% equity, so it's not like it sticks around throughout the entire mortgage if you can't scrape enough together at the beginning.

Re: Maybe treating housing as an investment was a mistake

#385

Post by madduci »

The article might be based on the US market, but actually it has some fallacies, as seen in European cities:

- house prices go really up in in-demand cities (Lisbon, Berlin, Milan among others)

- rents do go up as well, you don't have fixed rent for 30 years, but, instead, you get an increase of 1.5-3% every year (so is seen in Berlin), sometimes you get contracts where rent is adjusted based on inflation as well

- you can still buy an house, use and enjoy it and decide to sell it when you want to move somewhere else. You don't loose all the money (if you are lucky, you might earn actually ). With rent, all the money paid is lost forever.

Re: Maybe treating housing as an investment was a mistake

#386

Post by kazen44 »

z3c0 wrote: post #298
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…

> It's economics and it starts and ends with raw numbers. No, it starts and ends with peoples' lives and how much of it they must expend to keep it going. There are no such thing as "raw numbers".

also, economics isn't a hard science.

We as a society can define how our economy looks like, it is not some hard defined concept like the speed of light or the very basic principles of mathematics.

Economics is a soft science, and we should treat it is suchs.

The raw numbers don't say much, expect the result of how we have shaped our economy. There is very little preventing us from changing the way the housing market is structured in a real, hard fact kind of sense.

Re: Maybe treating housing as an investment was a mistake

#387

Post by bumby »

mawadev wrote: post #205
codegeek wrote: post #48

Earlier quoted context omitted.

You will be surprised how much good plumbers make in the USA. You probably used a bad example. Source: I know my trusted plumber makes well over six figures a year and he cannot take all calls. I asked him once if he has problems generating leads and he smiled saying "I have too much business that I turn people away". He is a "master plumber" which these days is not easy to get certified for in many states. He told m…

This is always the same logic, where a plumber makes a ton of money. The reality is that your trusted plumber is actually a business owner. If you start out as a plumber, you need a ton of work to get to this spot by working for someone else for a bad wage. Meanwhile as a dev, I can comfortably work for someone else and don't have all the risk.

You might need to define a “bad” wage. According to BLS, the median wage for a plumber is slightly above the median wage in the US as a whole.

I do think some of the inflated values of some jobs is they are somewhat opaque, while the stuff of jobs like plumbing is easier to at least conceptualize, even if the work itself still requires skill and care. It’s easier for a BS job to inflate its importance if people don’t know exactly how it works.

Re: Maybe treating housing as an investment was a mistake

#388

Post by WalterBright »

ep103 wrote: post #169
hinkley wrote: post #53

Earlier quoted context omitted.

In Seattle, 45 minutes away is still within the city limits, unless you're right on the edge of the city limits to start with. And if it's toward Everett even that doesn't save you. In traffic I often thought about how when I was a kid we got uprooted to a new school at a bad time to save my dad 45 minutes of commute each way, and how 2 hours a day doesn't sound that awful.

Yeah, its 45 without traffic, 1h-1:10 on a normal day, 1.5h during the morning and evening commutes. So they're solidly outside the city radius. The thing is, before I moved in, I did research on 1bdroom apartments within a large radius of the city. And basically, unless I was willing to move to a very unsafe area or very unsafe or clearly problematic apartment, rents simply do not go beneath my current rent price. T…

> There seems to be an agreed upon price floor from all landlords

I doubt there's collusion. Being a landlord is expensive, and they're not going to set rents at loss levels.

Re: Maybe treating housing as an investment was a mistake

#389

Post by chipsa »

actionablefiber wrote: post #163
SoftTalker wrote: post #113

Earlier quoted context omitted.

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.

> I bought my first house in the early 1990s. Saving the down payment was tough. Compare housing prices since 1990 vs. wage growth over the same period. For the overwhelming majority of people entering the workforce today, there is no way to realistically save for a down payment unless you forego saving for anything else - no 401k, no IRA, no emergency fund, no car, no family.

With a Roth IRA, you can withdraw the principle penalty free, while the earnings stay in the account. Also, you can withdraw 10k for buying a house from either IRA type, penalty free. You lose out on the future earnings from that withdrawal, but you can use it.

Re: Maybe treating housing as an investment was a mistake

#390

Post by kazen44 »

thatfrenchguy wrote: post #286
ska wrote: post #166

Earlier quoted context omitted.

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

So has the netherlands. (although getting a 30 year long one might be hard, 20 years is far more common).
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