581–590 of 1001 posts
My refrain remains: housing cannot be both affordable in perpetuity and a good investment. These are mutually exclusive goals. Let people build.
Like a lot of pyramid schemes, it’s actually quite good if you got in early
In the U.S. the SPY and real estate soak up most of this excess spending. In poorer countries, physical U.S. dollars. In China, real estate is the primary sink. In certain subcultures, GME/AMC/DOGE.
One of the philosophical ideals of "hard money" is that there should be a way of transporting spending power into the future without loss that is primarily useless. The issue with using real estate and the stock market to transport wealth is that they have real use cases. People need to live in houses, stock prices need to be rooted in fundamentals otherwise everything is built on pillars of sand, etc...
Gold and art are the most traditional ways of transporting wealth across time while bitcoin is one that is very techno but also very volatile. However, even for the very wealthy, a diversified stock portfolio is likely still the most pragmatic.
Most normal people rely on real estate (to a fault, e.g. w/ 2008) b/c investing in the stock market has operational risk & psychological risk ("investors" end up gamblers). The FIRE movement tries to get around this via SPY dollar cost averaging but the end result is using the SPY as a hopefully-too-big-to-fail pension plan replacement.
Through this lens, "just increase the supply of housing" is naive because it fails to account for the existing web of incentives. It's the engineering equivalent of re-routing entire rivers of cashflow. China's supply of ghost cities for e.g hasn't helped with housing b/c it's only certain locations where the traits of being a massive demand sponge are satisfied.
Governments need to prop up the asset prices of these stores of value b/c so much is already invested in them. They need to prevent a "bank run" on these de-facto inflation-adjusted savings.
Gold and bitcoin "solve" this problem because the withdrawals are theoretically distributed across infinite time as they are immortal systems. However most people do not think like vampires & instead want to solve problems like "how do we buy a house in a good neighborhood before we are past child-bearing age?" The assets become a carrier to play high volatility (but low expected return) games that are perceived as the only way to "win" (rational application of hail mary strategies)
To summarize, real estate price appreciation is due to it absorbing the "inflation" that would otherwise be distributed across other assets and commodities. This river of inflow has a lot of cultural momentum and pragmatism behind it. (the demand is real) Redirecting this river requires an alternative sink of money that 1. Has enough volume and low barrier to entry to constantly absorb this flow. 2. Has non-homogenous motivations for entering/exiting to prevent bank runs 3. Preserves spending power across both short, medium, and long time horizons.
Like the CAP theorem, it's unlikely one asset can satisfy everything b/c it's market value would be infinite. However it's interesting to think about the housing problem through the lens of demand sponges and all the layers of historical solutions and new solutions towards incentivizing/manipulating demand.
There's no way I'd be able to afford my current home today. It almost feels unfair.
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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.
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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…
> I can see that studios, though relatively expensive, range around $1.5-2k a month. Is that all? That's crazy cheap by the standards of my area. Where I live (a smallish city in western US), the cheapest housing you can find, in the least desirable part of town, starts at $1200/mo.
There is nothing bizarre about house appreciating despite being used when you realize that it's not the house that appreciate, it's the land. The land your house is build on doesn't get wear-and-tear, 100 years ago or 100 years from now it's still the same number of m2 of land. And it's getting rare because the population is still increasing and everyone want to live in the same big cities. If you find it ridiculous…
Different people have different preferences. I would (and do!) absolutely pay more to live "packed in with other people" than to live in a remote area for cheaper.
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> ...their house is the single biggest investment Is it really anyone's fault but their own? I don't recall housing being offered as a low/no-risk investment with guaranteed profits. Financial blogs, podcasts, and Reddit commenters might have shared that view. Are there any examples of mortgage issuers or home builders advertising housing as an investment?
If most people in the system are making similar mistakes, then the system is directing them there. Saying it's their fault does nothing but ensure it keeps happening.
I expect banks and home builders are careful with how they communicate with customers.
It's less about placing fault on the purchaser. It's more that there is no one else to blame. Never-ending bail-outs only hurt future generations. I wish I went into deep debt to buy a house a lot sooner. I didn't because I knew I couldn't afford it.
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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
How much was your total mortgage? Because housing prices have gone up dramatically in the last 15 years, and the math that worked back then (in terms of total mortgage amount, monthly payments, etc) doesn't work anymore today for a lot of people.
https://www.zillow.com/homes/for_sale/?searchQueryState=%7B%... (hopefully that abysmal URL still works for you).
$400,000 x 3.5% = $14,000. If you can't save a $14k down payment, you probably can't afford the mortgage on that and the associated upkeep anyway.
Don't get me wrong, I'm not defending the housing market. I just wanted to point out the FHA program since it helped me, personally.
Don't agree. Well, I'm from the UK; authorities are introducing more and more regulations requiring significant improvement in the housing stock. These kick in when you let the place or sell up; they are to do with insulation, damp and mould, fuel efficiency and so on. The authorities don't regulate granite counter-tops.
There is a lot of old housing stock in the UK. I think that in a lot of the USA, it's common to knock down the house you bought and build a new one; that's not common here, although it happens. There are good things about old houses; if it's stood for 120 years, it'll probably manage another hundred.
I know that's not why house prices rise; they rise because of increasing demand against a limited supply. But be fair; home improvement isn't all about paint, putting up shelves, or redesigning the kitchen. A lot of HI projects result in an objectively better house.
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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…
Yes, this can be a real problem. The mortgage company that we chose had a program where they did all of the underwriting before we even started making offers, and part of our offer was a certificate entitling the seller to $5000 at the mortgage company's expense if we couldn't get financing. Kind of like extra earnest money from the mortgage company offered as a guarantee that there wouldn't be any problems in closin…