Ctrl+F federal reserve, CTRL+F interest rates-- nothing in the article. Should I even bother to read it? Housing prices can be "fixed" overnight if we'll stomach the medicine.
The article and most of the comments: Wet streets cause rain.
Maybe treating housing as an investment was a mistake
441–450 of 1001 posts
Re: Maybe treating housing as an investment was a mistake
#442> 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 know this is anecdotal, but whenever I hear these stories, I'm curious about the details. A quick search leads me to believe that head chef pay in Seattle typically ranges from about 90k-110k per year. Finding apartments off Broadway in Cap Hill, I can see that studios, though relatively expensive, range around $1.5-2k a month. An income tax calculator estimates about a 22% total tax bracket and a monthly adjusted…
“House poor” was typically having to pay at least 25% of your take-home income on housing.
Re: Maybe treating housing as an investment was a mistake
#443The biggest real world advantage for the average person for buying a house is forced savings. If a mortgage is $3K and rent is $2K per month, Joe Sixpack is not going to save $1K in a sinking fund. He’s going to spend some extra non-zero portion of that money. So in the long run, for average real consumers, not a theoretical economically minded consumer, a mortgage forces frugality.
Close to my numbers. My old rent plus monthly savings are close to monthly bank payment for my home. My real consumption is dropping to zero since I want to get rid of mortgage as quick as I can.
why do you want to pay off your mortgage so fast?
Re: Maybe treating housing as an investment was a mistake
#444Earlier 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 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
You may still need 3.5% down, and there are income limits on the FHA program. It doesn't fix the problems with high housing prices, either.
Re: Maybe treating housing as an investment was a mistake
#445Earlier 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.
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.
In Germany, standard terms are to have the interest rate fixed for 10, 15 or 20 years, independant of how long it takes to pay off. Additionally, the customer has the right to refinance at current rates after 10 years. So a longer fixed rate is always an advantage to the customer, and thus more expensive.
Re: Maybe treating housing as an investment was a mistake
#446I'm 38, so I basically came of age during the Great Financial Crisis. I had so many friends who were slightly older than I lose their asses on houses. Multiple of my single friends had partners who also owned houses, and when they finally got hitched, they had to either pay the mortgage for a house that sat empty, come up with five figures to pay someone to buy their house, try to negotiate a short sale (in a recourse state), or risk renting it out.
I'm not talking one or two people either, this was an extremely common situation, it was a common lunch time topic of conversation at every job I had in the 09-13 era. Even my parents were against my buying a house at the time, as they were severely underwater on the poorly-built boom-time piece-of-crap they ended up buying.
I'd argue part of the problem is an entire generation of people saw houses as anti-investments and avoided buying them when they were $80-120k because one look at the pricing history showed they used to be $100-140k for the same house just six years earlier. Renting was (at the time) cheap, had none of the maintenance requirements, and was less risky if you wanted to move.
Of course, the contrarian people who had a long-term outlook made out like bandits. People who bought those heavily discounted houses with ultra-low interest rates using the housing buyers credit are enjoying the housing boom right now.
Re: Maybe treating housing as an investment was a mistake
#447Earlier quoted context omitted.
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 beca…
I haven't been able to find great statistics, but you can look at state populations to get an idea. California, as an example, went from ~5 million to ~30 million in a few decades post WWII.
Re: Maybe treating housing as an investment was a mistake
#448> I hear advice from the older generation that “buying a house is an investment”. [...] With all due respect, this is a crock of shit.
I was lucky that my dad (an economist) told me that houses are lousy investments. It's been true for me. I've lived in serial houses that I've owned, and toting things up over the years, they've been a lousy investment.
Re: Maybe treating housing as an investment was a mistake
#449Earlier 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…
I agree with that. Investment homes, second or maybe just third homes, etc. should be taxed rather extremely aggressively.
The problem with this approach is the impact it has on areas that have availability problems, and where there is more demand than supply for housing (think big cities that are experiencing condo booms).
In those high-demand areas, owners will simply pass those tax costs down to their tenants, and the rents prices will go up, leading to even less affordability.
Re: Maybe treating housing as an investment was a mistake
#450Have we considered simply making mortgages illegal? Allowing the inclusion of future money (and thus future labor, usually) in bids must increase the cost of land (at least) as a percent of income, no?