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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

#661

Post by vjk800 »

anonymouskimmer wrote: post #88
voisin wrote: post #68

Earlier quoted context omitted.

The fruits of your labour can be sold continuously at low marginal cost. His cannot.

I don't know. An unclogged pipe is used multiple times per day.

A point that used to be made a lot in copyright wars discussions a decade ago was that most "old fashioned" professions (like plumber, carpenter, architect, etc.) only get paid once, not every time someone uses their product, whereas creators of digital goods somehow are entitled to get money every time someone uses their creation. Super star musicians and software engineers making obscene amounts of money is a direct result of this.

Re: Maybe treating housing as an investment was a mistake

#662

Post by Night_Thastus »

The age of owning a home is going away.

No one wants to hear it, it sounds like nonsense, but I really think it's true.

Over the next few decades, home ownership will be reserved for the very wealthy. Everyone else will be renting in some form or another. If you're less well off it will be a cheap apartment. If you have a better job, it might be a nicer single-family home.

But it'll all be rented, because that's where the real money is and the system is successfully squeezing out the possibility of ownership.

Re: Maybe treating housing as an investment was a mistake

#663

Post by difflens »

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…

The worry is understandable. As someone who's been in a similar situation before, the worry with a work visa and housing tends to go away one way or another. Either you get out of a work visa at some point, or you accept that you will never receive a green card in your productive years and you jump into the property market with that risk anyway.

Re: Maybe treating housing as an investment was a mistake

#664

Post by mixmastamyk »

s1artibartfast wrote: post #629
mixmastamyk wrote: post #499

Earlier quoted context omitted.

Returning your money (at 0% ROI) is not what people want in an investment. What you're describing is a savings account, or even a bit less. Historically you might make a percent or two after inflation, but not the last couple of decades.

I disagree. I think a lot of people would be fine with a 0% ROI investment if it comes coupled with a free house to live in for the rest of their lives. A house is not a stock, bond, or number in a savings account. You get utility from living in it as well. A 0% ROI would however make that investment unattractive for 3rd parties who don't live in the house.

This sounds like an "inflation hedge" rather than an ordinary investment:

https://www.investopedia.com/terms/i/inflation-hedge.asp

Re: Maybe treating housing as an investment was a mistake

#665

Post by ericmay »

swatcoder wrote: post #630
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...

I'm not sure if you meant to, since you seemed to be talking framing it around individual choice, but you've just made the case that something is fundamentally damning the economy in cities like Seattle. That's exactly why issues like housing affordability need to be identified and treated at the systemic level. If people can't satisfyingly live near their work, then they can't work there, and then the work can't be…

Well because individual choice and governance choices both exist simultaneously and dynamically.

In this particular case, though, I think the thing that is daming Seattle (and similar locations: Santa Barbara, San Francisco, Denver, Aspen, anywhere remotely desirable) is geography and climate and there isn't much you can do to fix that because you can't create new geography out of thin air. "Ohio is so boring", "I need to be near mountains and fresh air", "I like to surf", "I love to hike" are all things that can't be effectively replicated and so wherever those things exist prices will skyrocket relative to other locations.

Can Seattle literally build more? Yes. Will that solve Seattle's housing affordability problems? No it won't. In the short term interest rates and cost to build mean that most units will be higher end. Certainly won't mean a 2-3br house anyway. In the long-term unless something drastically changes Seattle is just desirable and there will be many more people who want to live there than there will be homes unless we could just snap our fingers and create new housing, nevermind governance issues, it just isn't happening folks.

I do empathize though. Please don't mistake my comments for callousness. But sometimes the truth (as I see it) just needs to be state. If you want to work as a chef and afford a 2br house it just is not happening in Seattle and you should make peace with that.

Re: Maybe treating housing as an investment was a mistake

#666

Post by pertymcpert »

nottathrowaway3 wrote: post #524
gambiting wrote: post #455

Earlier quoted context omitted.

Sure but obviously that number needs some common sense, right. To make a clearly ridiculous example - if you were making 100k a month and paying 25k for rent you wouldn't be poor in any possible meaning of that word. If you bring home 6k a month after taxes, and after rent you're left with 4.5k, I'd also argue that's not "barely making ends meet". That leaves a very comfortable breathing room that is unimaginable lux…

>If you bring home 6k a month after taxes, and after rent you're left with 4.5k, I'd also argue that's not "barely making ends meet". That leaves a very comfortable breathing room that is unimaginable luxury for most of the world. Another aspect of this issue is that, when you take out a typical mortgage, you take a 4-5x leveraged long position on real estate. Rent for a nice 1br in Seattle area is $2K, but the hidde…

That's true about the risk, however before the recent spike in rates, that leverage was ultra-cheap.

Re: Maybe treating housing as an investment was a mistake

#667

Post by bluGill »

mayormcmatt wrote: post #318
ska wrote: post #166

Earlier quoted context omitted.

I can't think of another country that has anything like it, and it's largely because of the government market interference (via Fannie/Freddy especially) It's going to continue to have some weird knock on effects.

Too lazy to do the legwork for the actual information, but Japan has, or had, similar mortgages to the US -- even 100-year intergenerational mortgages. An anecdote related to this: when I worked at a Japanese company, one of my coworkers' parents had gone underwater on some commercial real estate in Tokyo after the bubble burst there in the 90s. They had taken out such a mortgage and now the adult children were all w…

The Us has bankruptcy laws so that the children don't have to work to pay it off. Though depending on your situation and belief in the future maybe you would want to - if things turn around you have that building, while if you go bankrupt it is sold. (of course we are talking above Japan of 30 years ago so you can now check how things have gone, but that doesn't mean they will go the same next time)

Re: Maybe treating housing as an investment was a mistake

#668

Post by Workaccount2 »

gwright wrote: post #373
czbond wrote: post #83

Earlier quoted context omitted.

Will GPT-6 replace a plumber? I think not. Will GPT-6 replace some subset 10..80% of engineering, law, medical hours? absolutely

I'm not so sure. There is a Planet Money episode that talks about the effect the digital spreadsheet had on accounting employment: > Thanks to spreadsheets, there are 400,000 fewer accounting clerks than in 1980, but 600,000 more regular accountants. Might something like GPT-6 cause employment to shift to higher value job responsibilities? https://www.npr.org/sections/money/2015/02/25/389027988/epis...

People raise arguments like this frequently, but in every other case throughout history people were made obsolete by tools that intelligences use. Never before has the intelligence part been made obsolete though.

Re: Maybe treating housing as an investment was a mistake

#669

Post by ben7799 »

The math in the article seems wonky and oversimplified to support the author's viewpoint. It seems the writer doesn't have enough perspective as the answer to the question of whether a house is a good investment has to do with which house you buy in which market at which time. Some houses in some areas are bad buys at some times. Lots of other houses in lots of other areas are good buys at other times.

The author completely glosses over:

- Land space near powerful economic areas is finite

- No one will let you build infinite new houses if it requires you making them sell and move off the land they already own

- The article makes it out like you could pay the same rent your whole life and/or stay in the same place all that time. That's unlikely, smart landlords are always going to raise prices as much as they can, not overspend on anything to do with services, and will decide to not renew your lease if they decide you're not worth it.

- The math about a $700k house versus a $2900/month mortgage is highly suspect. $2900 is not renting much of a house in an area where a house is $700k. $700k here will get you a modest older house. $2900 will rent a studio in my area. (Expensive area). There are many 2 bedroom apartments going for $5000/month. I've been in my house 13 years and my mortgage payment has gone down 3x as interest rates fell and we were able to re-finance. The last apartment I was renting has more than doubled in rent in the last 13 years. It is 2.5x what the mortgage on the house is, and the house is 4x the size of the apartment and we actually own land.

- Nailing down a fixed rate mortgage with a payment that doesn't rise versus ever ascending rent means you can actually save money to invest in other things if you're smart and diversify your assets.

Not all of us are going to see what the Baby Boomers saw. But owning a house is still a way to get ahead of peers. Certainly smarter than burning massive money on expensive cars every few years and lots of the other excessive spending that happens. You have to keep in mind the returns the baby boomers got were due to massive changes in the economy and interest rates over their lifetime. Boomers bought their starter homes sometimes with 15-20% interest rates back in the 1970s. Those sky high interest rates were what kept house prices so low back then. Population growth & density in the areas they bought in made land scarce while interest rates fell to nothing so it was natural for prices to skyrocket.

Re: Maybe treating housing as an investment was a mistake

#670

Post by GoodJokes »

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…

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