Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Maybe treating housing as an investment was a mistake

goodreason.substack.com

Post reply on HN
Print view View original

611–620 of 1001 posts

Re: Maybe treating housing as an investment was a mistake

#611

Post by jimbokun »

lukeschlather wrote: post #470
gknapp wrote: post #435

Earlier quoted context omitted.

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…

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.

When, and in what city, has that ever been the case?

I haven't been to Seattle, but in major cities space is at a major premium and many dwellings are tiny. This is offset by the amenities living in a prominent city have to offer.

Re: Maybe treating housing as an investment was a mistake

#612

Post by lsllc »

jeppine wrote: post #436

I think one of the main issues with pricing is the deferral of taxation for the sale of rental or investment properties. A lot of people are seeing housing as a potential retirement savings account that can be reinvested and also produce income at the same time. If I had $100k to put as a down payment on a $500k house, and was able to rent at a rate that would pay, mortgage, taxes and upkeep. In 30 years, even assumi…

> The fun little trick to this is you have to find a new property within 45 days of selling the previous property to keep the tax deferral benefits.

This is a 1031 exchange [0], when selling a business and buying a "like" business -- if you can identify the new one within 45 days of selling the old and close within 180, you can defer (not avoid) the long term gains on the deal. So let's say you bought a gas station in a crappy part of town, but you want to sell it and buy a bigger/better/more profitable one by the highway, this is how you do it. If your "business" is rental housing, then you can do the same thing.

Tax evasion is illegal, tax avoidance isn't. Why would you want to pay 15-20% long term gains tax on your gas-station trade-up if you didn't need to?

> Unfortunately, the landlords have increased their rents to correspond with local housing prices, and normal hardworking people are getting squeezed more than they ever have been.

It's just supply and demand -- capitalism at work. I don't think that many landlords are altruistic enough to not want match their rates to the "competition" (in this case housing prices).

[0] https://www.investopedia.com/financial-edge/0110/10-things-t...

Re: Maybe treating housing as an investment was a mistake

#613

Post by NovemberWhiskey »

riku_iki wrote: post #459
piqi wrote: post #251

Earlier quoted context omitted.

> ...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?

> low/no-risk investment foreclosure makes it no-risk leveraged investment modulo downpayment.

That depends significantly on state law w.r.t anti-deficiency rules and so on. California is a non-recourse state where a mortgage lender can only repossess the home, but there are other states where the lender can foreclose and then come after you for the difference in case of a short sale.

Re: Maybe treating housing as an investment was a mistake

#615

Post by dougmwne »

riskcomplex wrote: post #583

I'm one of the lucky ones. Bought a house for $350k during my PhD, while everyone tried to talk me out of it. This was 6 years ago. Today, not is my mortgage $1,300/month (while renters are paying double for a single bedroom apartment) but the house is valued at $800k-$900k. There's no way I'd be able to afford my current home today. It almost feels unfair.

Well, yeah, it is unfair!

But unfortunately, this is not a case of good for you, too bad for them. Unaffordable housing will cause political extremism and will increase crime as more people realize that the deck is hopelessly stacked against them and that they will not receive any reward for playing along with our current economic system.

Basically, California is an early experiment in this. Take a zig-zagging walk from the top of Market street to the Mission and you will know the future of America if we don’t keep housing affordable.

Re: Maybe treating housing as an investment was a mistake

#616

Post by jimbokun »

djmips wrote: post #591
ericmay wrote: post #501

Earlier quoted context omitted.

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...

But then you'd have to live in Minneapolis?

Which is maybe why rent in Seattle is so relatively expensive?

Re: Maybe treating housing as an investment was a mistake

#617

Post by Firmwarrior »

lotsofpulp wrote: post #156
giraffe_lady wrote: post #110

Earlier quoted context omitted.

Everyone trying to convince you to be ok with this but no, you have seen it correctly and it is wrong. People can work themselves to death doing jobs that benefit us, and what they receive for it is misery and precarity. Trust your own judgement and don't accept this as a natural, inevitable, or just state.

Then how do you allocate who gets to live in a highly desirable place like Seattle?

I think you're both right actually

The answer is very simple. They just need to tear down a small fraction of those endless twisting mazes full of tiny single-family homes and replace them with large apartment buildings like you see in Asia. Right now there's no free market at work, since there are too many artificial restrictions on building.

In Tokyo, you can work part time as a janitor and still live within a 10 minute train ride to work.

Re: Maybe treating housing as an investment was a mistake

#618

Post by [deleted] »

angarg12 wrote: post #551
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'm a new immigrant to the US, and housing is my single biggest worry together with my work visa. Our household income is north of 300k, but housing still seems unaffordable. It might sound like whining, but we only achieve this level of income recently, so our lifelong savings are in the low 6 figures. We got no assets or property abroad, and no family that can help us to get in the property ladder. Even old, basic…

[deleted]

Re: Maybe treating housing as an investment was a mistake

#619

Post by hd95489 »

smileysteve wrote: post #537
judge2020 wrote: post #371

Earlier quoted context omitted.

> 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.

And you are so over levered the only way you can get out of pmi is if the house market goes up 25-30% (re appraisal Usally comes in low)

Re: Maybe treating housing as an investment was a mistake

#620

Post by korroziya »

angarg12 wrote: post #551
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'm a new immigrant to the US, and housing is my single biggest worry together with my work visa. Our household income is north of 300k, but housing still seems unaffordable. It might sound like whining, but we only achieve this level of income recently, so our lifelong savings are in the low 6 figures. We got no assets or property abroad, and no family that can help us to get in the property ladder. Even old, basic…

Most working class people die with savings below five figures. You should re-evaluate how good you're doing.

Of course, if you live in California or New York, you're basically broke, since the cost of living in those states is designed to keep people poor. But that's why people left those two states in droves over the last few years.

Post reply on HN