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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

#531

Post by parineum »

vondur wrote: post #248
dfxm12 wrote: post #58

Earlier 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…

Wasn't that a part of the problem with the real estate meltdown back in 2008? We had people getting into loans with either zero down or far less than 20% paying only the interest and not the principal for the first 5 years. They were told that real estate value only ever increases and they'll be able to refinance the loan and put the new equity into a standard loan. That worked fine until it didn't and the whole thin…

You're missing a major factor.

Those loans had variable interest rates and balloon payments.

They were told they could refinance before the balloon payments came due into conventional loans but when housing prices drop, you can't refinance because you owe more than it's worth. Combined with "no document" loans (aka, people lying about their income), people were buying houses that they very literally couldn't afford, not just in the "that's too much of your income" way, actually in the, "that's more than your income" way. Those were the subprime loans you hear about.

2008 would have been very different if everyone was on a conventional 30yr fixed loan.

Re: Maybe treating housing as an investment was a mistake

#532

Post by ghaff »

mxkdodi wrote: post #273
jedberg wrote: post #195

Earlier quoted context omitted.

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.

It makes absolute sense, because maintenance costs are non-negligible. I just paid a fifteen thousand dollar plumbing bill. Since rent would include the ability to call the landlord to make him fix that, I sure would expect rent to be higher for the same place than my mortgage is. Last year I spent twenty grand on a new roof. What's next? Idk, but that's why my mortgage isn't half of my salary. If it was rent, these…

Depending on what you include I figure property taxes, insurance, ongoing maintenance of my house and property are a good $1K/month (obviously with a fair bit of lumpiness for large projects). Some things you can postpone and some things you can trade money for your time & effort but it's still a non-trivial amount.

Re: Maybe treating housing as an investment was a mistake

#533

Post by yieldcrv »

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 have a lot of cognitive dissonance associated with that.

Play the cards you're dealt.

Rate of capital is intended to exceed rate of labor. If you're from a working class background, its common to think more labor = more rate of labor .... and that's it. Not how the higher rate transitions into more capital earning more than the labor.

Re: Maybe treating housing as an investment was a mistake

#534

Post by Forgeties79 »

ericmay wrote: post #501
lukeschlather wrote: post #470

Earlier quoted context omitted.

In a well-functioning city, a head chef should be able to comfortably afford to rent a 2-3 bedroom apartment within walking distance of their restaurant. They should not be spending 1/3rd of their income and only getting a studio out of it.

You can, just move out of Capitol Hill in Seattle which is one of the most desirable areas in one of the most desirable cities located in one of the most desirable geographies in the wealthiest country on earth. This place looks nice! https://www.zillow.com/homedetails/2742-Lincoln-St-NE-Minnea...

The people who build, own, and operate the very luxury services (such as culinary destinations) that contribute to an area's reputation as "one of the most desirable areas in one of the most desirable cities located in one of the most desirable geographies in the wealthiest country on earth" should be able to afford living there.

Re: Maybe treating housing as an investment was a mistake

#535

Post by CobrastanJorji »

patcon wrote: post #425
nh23423fefe wrote: post #372

Earlier quoted context omitted.

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

Bah, "virtue signaling" accusations are such a toxic thought-terminating cliche :/

Sometimes people worry that they are a little broken for not feeling compassion or empathy for others, and one way to feel better is to decide that anyone who does feel empathy is a liar engaged in virtue signaling. "It's not that I am wrong for not caring for the downtrodden, it's that neither of us cares, but I am honest about it and you are a liar."

Re: Maybe treating housing as an investment was a mistake

#536

Post by dsfyu404ed »

HarryHirsch wrote: post #526
dsfyu404ed wrote: post #495

Earlier quoted context omitted.

I did what you're saying can't be done. It's fucking great. The occasional late night poppity pop, the nip bottles in the street, the un-mowed lawns gaurded by un-trained dogs, they all serve as amazingly effective repellent for the types of people who think they know how I or anybody else ought to live.

Good on you! I didn't have the stomach for Upper Hill, not everyone does. (Out of curiosity, where did you buy?)

Not Springfield but basically the same thing. I don't feel like sharing that kind of info here. Go down the list of former industrial cities that make white collar Boston types squeamish and it'll probably be on the list. They're all pretty close to the same in my experience.

Re: Maybe treating housing as an investment was a mistake

#537

Post by smileysteve »

judge2020 wrote: post #371
dfxm12 wrote: post #58

Earlier 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…

> especially the 20% needed so as to not need to get mortgage insurance PMI affects the affordability but not by much - maybe $300-400/mo or so, and if you can get a conventional loan with a 3-4% down payment (which do exist) then it'll drop off once you've paid off 20% of the principal. For conventional mortgages, the max DTI most lenders will be fine with is 45%, but let's be safe and go 40%. Let's take a household…

> maybe $300-400

If you're paying this in PMI; while your monthly principle payment is also less than $300-$400; you're renting from the bank -- ignoring outlier home price increases.

Re: Maybe treating housing as an investment was a mistake

#539

Post by hd95489 »

politician wrote: post #456
lolinder wrote: post #383

Earlier quoted context omitted.

> 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.

The problem appears when you try to buy a home from a seller entertaining 10 other offers, most of which are cash offers for 10-20% over listing price with escalation clauses. It can be really hard to buy a home, especially in markets like Seattle, because the seller chooses which offer to accept and, all else being equal, will accept the offer with the fewest conditions (no financing required, inspection waived, etc…

That was 6 months ago offer asking now and you will get it

Re: Maybe treating housing as an investment was a mistake

#540

Post by borroka »

nineplay wrote: post #268
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…

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…

> 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.

On average, this may be true, although "how hard they are to replace" is difficult to quantify and most of the scarcity is artificial. But there is enormous variability in the relationship between pay and revenue/profits provided and opportunities for replacement. I am certainly paid much more than I should be, since I work in a cost center and in that group I am definitely not the one bringing in work or revenue, and I suspect I would be very easy to replace. But at the time the contract was signed, I had the right certifications (e.g., PhD) and the right resume. Like many others, though.

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