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Maybe treating housing as an investment was a mistake

goodreason.substack.com

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Re: Maybe treating housing as an investment was a mistake

#631

Post by krisroadruck »

horsawlarway wrote: post #542
Glyptodon wrote: post #411

I think there are some factors missing in this piece: 1. Values go up because of density changes related to location desirability. My house is more valuable because more people want to live here, but space is finite. This should lead to it being worthwhile to pay me to leave so an apartment complex can replace the single family homes on my block. But it's more likely that someone will pay a lot to have the single fam…

> Not being adjacent to a major urban area is in many respects like going back in time some proportion to your distance from one. This whole conversation devolves into this single point, in my opinion. There is land out there that is cheap as fuck-all. Lots of places will flat out hand you the deed if you promise to live there and build a house. Some places will subsidize you moving into a house for $1. You just have…

I've lived all over the country (35ish moves in 41 years). There are a lot of things you can do to make other areas more appealing vs California (or the west coast in genera), but one thing you can't really fix is the weather. A lot of people really hate super cold winters or super hot humid summers, and for them there is no replacement for the rather unique climate conditions that exist along the west coast.

Here is a map of the world which shows where that relatively mild west coast climate exists - it exceedingly rare:

https://en.wikipedia.org/wiki/Mediterranean_climate#/media/F...

Re: Maybe treating housing as an investment was a mistake

#632

Post by mfer »

angarg12 wrote: post #610
eddsh1994 wrote: post #575

Earlier quoted context omitted.

Are you in the Bay Area? If so I saw an ad in SF for condos/1 bed flats starting at high $300k on the weekend. With recent zoning changes it might get easier for you soon.

Nope, Greater Seattle Area. Still, we are a couple nearing our 40s, it seems insane to me that we need to "settle down" for a 1 bedroom flat while making ~3x the median local income.

There are a few areas where housing values are massively higher than the rest of the country. You are in one of them.

Have you looked at how many people need to commute there to work because they can’t afford to live there

Re: Maybe treating housing as an investment was a mistake

#633

Post by sokoloff »

borroka wrote: post #500
rs999gti wrote: post #309

Earlier quoted context omitted.

I don't know why you are being downvoted. Buying small, building equity, and trading up has always been a thing in home ownership.

Because this assumes that the value of the property increases more than inflation. And this assumption means that you see and treat the place where you live as an investment.

It doesn't have to increase faster than inflation for it to be a good investment for a leveraged buyer.

Imagine inflation and property appreciation at exactly 5% and an interest-only mortgage (principal paydown is just forced savings, hitting cashflow, but not expenses).

Buyer buys a $500K house, puts $100K down. Next year, the house is worth $525K, meaning that $100K in equity they put down is now $125K, for a 25% increase, even though the value of the property exactly tracked inflation.

Re: Maybe treating housing as an investment was a mistake

#634

Post by MaxfordAndSons »

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…

30 minutes to is not a very useful metric in practice.

Re: Maybe treating housing as an investment was a mistake

#635

Post by balaji1 »

eddsh1994 wrote: post #575
angarg12 wrote: post #551

Earlier quoted context omitted.

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…

Are you in the Bay Area? If so I saw an ad in SF for condos/1 bed flats starting at high $300k on the weekend. With recent zoning changes it might get easier for you soon.

It might be good investment when you sell it in a few years. But lets leave the specifics...

To live (with long term attachment and commitment) at a place, people want something that is decent and new-ish and much bigger than a 1B condo. Especially given how laborious and costly the buying and selling process.

Re: Maybe treating housing as an investment was a mistake

#636

Post by pb7 »

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…

Pay is not exclusively a function of how hard you work.

Re: Maybe treating housing as an investment was a mistake

#637

Post by Fernicia »

vannevar wrote: post #458
nickelcitymario wrote: post #314

I may be wrong, but it seems to me like this is a simple supply/demand issue. Increase the supply. Yes, that's detrimental to those who already have homes (like me). But if I were a dispassionate judge-of-the-world, and I were weighing these two groups needs, I'd err on the side of supporting those without homes over those who have them. Also, increase the supply of SMALL homes. Why is every new house a McMansion? Wh…

It is a supply/demand issue, but it is not simple. Demand for housing in the sense of people needing housing is not the same as economic demand for housing. And in order to have economic demand for housing, you have to have people with the means to buy. The housing market is not a smooth curve from zero to McMansion---there is effectively a cutoff. Right now, even if builders sold their houses at cost, in places with…

> even if builders sold their houses at cost, in places with sufficient economic activity to support employment, the real estate cost would still put those houses out of reach of most low-income buyers

This makes no sense. Even if the low income families can't buy the new units, the people who do vacate their old units and there is less demand for the unit those low income families currently occupy.

> Renters simply can't accumulate the capital needed for a down payment, nor the credit rating needed for a reasonable mortgage interest rate.

Both of these are variable costs, depressed by increases to the housing supply.

> prevent the wealthy from continuing to capture a wildly disproportionate share of economic growth, which would both slow acute real estate appreciation in urban areas (by reducing the capital the wealthy have to buy up rental properties)

This is like banning supermarkets buying from farmers. Do we want every property developer to also have to specialise in rental management? Or are we trying to get every renter to open mortgages?

Re: Maybe treating housing as an investment was a mistake

#638

Post by adamrezich »

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…

it's interesting that so many here are quick to jump to the generalization that there's some sort of national problem here, when it's really just the big urban centers (and some other outliers) that have the problem. I just bought a three-bedroom house for $300k here in the Black Hills of South Dakota, where housing prices are (relatively) skyrocketing due to the local Air Force base expanding, yet this was entirely achievable with my modest need to live in big population centers, even after trying it out myself for some years.

if the big cities are making it miserable to live there if your income isn't ridiculously massive, then why stay? why not give one of the other bazillion places to live in the US a try? sure, you may have to deal with less-than-optimally-temperate weather. sure, you may not have access to a rich variety of ethnic dining options. sure, you may not have access to all sorts of trendy places to shop/dine/be entertained.

but why is trading all of that away to have a decent place to live so unthinkable for so many? I've rented for the past 13 years, and now I finally have a home to call my own, and I wouldn't trade that for anything.

Re: Maybe treating housing as an investment was a mistake

#639

Post by pc86 »

CobrastanJorji wrote: post #518
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?

I'm with them. "Earned" is really the big question. If I feel I earned my pay, and then I see someone else who's working harder and getting paid much less, it follows that I must also feel that they are receiving less than they have earned.

This assumes that pay is correlated to how hard you work, which it isn't and never has been.

Re: Maybe treating housing as an investment was a mistake

#640

Post by marcus_holmes »

I love this, but it missed out one factor: the banks.

Mortgages before the 80's were tied to your income, and for most households that was a single income. House prices couldn't rise beyond a fairly low point because no-one could get a mortgage for them.

Then in the 90's this broke two ways: most households had 2 incomes as the norm became that married women also worked, and the banks started giving mortgages on much higher ratios, leading to the 100% no-deposit mayhem of the early 00's and eventually to 2008's crash.

We will spend as much as we can on a house. If you lend us 3x our salary, we'll buy the best house we can with that. If you lend us 10x our salary, we won't sensibly buy a house that costs 3x our salary, we'll buy the best house we can find for that 10x loan.

House prices are therefore free to rise spectacularly fast, as they did, because any dip in supply leads to price increases. Until we're here, where no-one can afford to buy a house unless they have a house to sell.

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