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Maybe treating housing as an investment was a mistake

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Re: Maybe treating housing as an investment was a mistake

#401

Post by WalterBright »

orangepurple wrote: post #349
mortehu wrote: post #283

Earlier quoted context omitted.

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 i…

Insignificant penalty?! Maybe if all you think about is your monthly payment and not the total payment amount over time. You should check the amortization schedule of a typical 30 year fixed rate loan. You are paying nearly nothing but interest for about 10 years, THEN you start paying down the principal balance significantly more. The first ten years you are basically renting your property from the bank. When you re…

I've refinanced many times to get lower interest rates. Did not pay any "points" or penalties to do so.

> The banks always need their cut before you are allowed to build equity.

I've never had a mortgage that had any sort of prepayment penalty. (Always read the mortgage contract front to back to make sure there isn't one.)

Re: Maybe treating housing as an investment was a mistake

#402

Post by Miraste »

nemo44x wrote: post #339
Miraste wrote: post #319

Earlier quoted context omitted.

This is completely ignoring the increase in house prices, unless by "not the most desirable location" you mean "move to the middle of Kansas." The fact is, in many areas, buying any house at all is not feasible for the vast majority of young adults.

> This is completely ignoring the increase in house prices Guess what, the small and lower cost place you bought 10 years ago went up in price too. So you have equity and you've been in the rising market. > The fact is, in many areas, buying any house at all is not feasible for the vast majority of young adults. 100% untrue. Buying a house in the place they feel they deserve to live is. You can buy a home that is a 3…

> the small and lower cost place you bought 10 years ago went up in price too.

Exactly, that's the problem. There exist people who did not buy houses 10 years ago, due to personal failings such as being teenagers at the time. Yet the houses continued to appreciate much faster than inflation and are now out of reach.

> Buying a house in the place they feel they deserve to live is. You can buy a home that is a 30m commute by train or bus to NYC for A: You absolutely cannot.

B: Why don't they deserve it? Why should would-be buyers be forced out of every major city and even the surrounding areas, due to artificial price increases, when that was never the case for previous generations?

Re: Maybe treating housing as an investment was a mistake

#403

Post by grumple »

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…

This misses the two biggest problems with prices going down:

1) if losses are small, people will refuse to move / sell, reducing housing stock.

2) the really, really big problem is if prices go down enough that people have to start taking big losses when selling, or if it stops making sense to pay the mortgage. People would instead default on the mortgages, sending our economy into a 2008-like crash. This would lead to less construction (again) and more housing capture by the wealthiest people and corporations.

The biggest problem we have right now is insufficient supply. Builders won't build if they can't profit; if they can't sell at relatively high prices, they can't profit.

Re: Maybe treating housing as an investment was a mistake

#404

Post by Ekaros »

sokoloff wrote: post #278
xapata wrote: post #173

Earlier quoted context omitted.

I'm an economist, yet I only recently realized that adjustable-rate mortgages are economists' consensus best choice for consumers. Based on the expectation that personal economics are well-correlated with broad market economics, and that interest rates will decline when the economy struggles.

I have a hard time squaring that with 15 year fixed rate mortgages being under 3% for several years in the very recent past and 30 year fixed mortgages being at/under 3% for part of that time. How would an adjustable rate mortgage be the best choice for consumers in that situation? I got an initial mortgage at 5.625%, refi’d to 3.875%, then again to some ~3% 15-year. I never seriously considered an ARM (and now wish…

In past 10 year, variable rates commonly used in Europe have even been sub-0%. Meaning effective rate could have been under 1%.

Re: Maybe treating housing as an investment was a mistake

#405

Post by s1artibartfast »

ethanbond wrote: post #367
s1artibartfast wrote: post #332

Earlier quoted context omitted.

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.

I think annual land value taxes are efficient at resource allocation but unacceptably punitive on owners. You should not be penalized or motivated to sell simply because a 3rd party can get a higher return.

Similarly, value gains from land appreciation are taxed at the time of sale. IF I pay annual taxes on land appreciation, I should be exempt from taxes at the point of sale, otherwise I am paying for that appreciation twice.

Re: Maybe treating housing as an investment was a mistake

#406

Post by majani »

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…

Also, aesthetically, you have to admit, most YIMBY cities are ugly AF compared to NIMBY cities. Aesthetics are very important to human beings; people love pretty things.

Re: Maybe treating housing as an investment was a mistake

#407

Post by yt-sdb »

nh23423fefe wrote: post #372
distrill wrote: post #109

Earlier quoted context omitted.

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.

Do you believe your income is unearned? Or are you just virtue signaling about what the labor market values?

That's quite the either/or.

Re: Maybe treating housing as an investment was a mistake

#408

Post by mortehu »

orangepurple wrote: post #349
mortehu wrote: post #283

Earlier quoted context omitted.

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 i…

Insignificant penalty?! Maybe if all you think about is your monthly payment and not the total payment amount over time. You should check the amortization schedule of a typical 30 year fixed rate loan. You are paying nearly nothing but interest for about 10 years, THEN you start paying down the principal balance significantly more. The first ten years you are basically renting your property from the bank. When you re…

Prepayment penalties are illegal after three years so there's no reason you would pay only interest for 10 years. If you can get a better loan, you can pay all the principal instantly and no more interest.

Re: Maybe treating housing as an investment was a mistake

#409

Post by aeternum »

leaving wrote: post #356

The author misses the big picture: housing is embedded in an economic system based upon perpetual growth. The scarcity of housing, as the author correctly points out, is related to location, location, location. The old saw is "buy land; they're not making any more of it". As the population continues to grow, there may be more houses, but there certainly will not be more houses in desirable locations that are already…

We used to make more land in desirable places, much of SF's population lives on on man-made land. Scarcity mindset sounds right, but most of that status refute it. Known reserves of pretty much every resource has only increased over time.

If you take the big picture view, then the earth itself has only a temporary lifetime, and thus we should switch to looking outside our planet. For that, optimizing for growth and tech progress above all else is probably the right goal.

Re: Maybe treating housing as an investment was a mistake

#410

Post by [deleted] »

fxtentacle wrote: post #301
e40 wrote: post #276

Earlier quoted context omitted.

Yeah, my mortgage is $800 for a 2,000 sq ft house and my son's rent for 1/2 of a 1 bdrm apt is $1700. The situation is completely out of control. (We're both in CA.)

For comparison, in northern Germany one can rent a 1000 sq ft house + 1000 sq ft garden in walking distance from offices, supermarkets, restaurants, etc. for about $1000 cold per month. Sounds like CA is 5x more expensive for young people. But salaries are "only" 2x to 3x those of Germany.

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