Maybe treating housing as an investment was a mistake • Hacker News Board

Re: Maybe treating housing as an investment was a mistake

#671

Post by aeternum » Mon, Mar 06, 2023, 7:40 PM UTC

Keegs wrote: post #563

aeternum wrote: post #362

Earlier quoted context omitted.

Not sure if it counts as privatized when the vast majority of Americans are homeowners. The gov had a ton of programs to increase the home ownership rate over the last 50 years, they were somewhat successful. Now you have a situation where the networth of 65-70% of the population is tightly coupled to their home price. And we wonder why it's so hard to get them to vote for new housing. As Munger says, Show me the inc…

The majority of homes in America are occupied by their owners (this is what home-ownership rates measure). It is not true to to say the majority of American adults are homeowners - that ratio is a lot lower.

Looking at the flip statistic, 36% of households rent so the numbers do seem to add up.

For many households, some of the residents may not technically share ownership of the house (not on the deed) such as kids or extended family living together, but still have a vested interest in the value going up.

Re: Maybe treating housing as an investment was a mistake

#672

Post by distrill » Mon, Mar 06, 2023, 7:40 PM UTC

pb7 wrote: post #654

distrill wrote: post #109

Earlier quoted context omitted.

I feel similar cognitive dissonance every time I compare myself to people I know outside of tech. Pretty much without exception, they work harder jobs than me or my colleagues with worse hours and for a fraction of the income. I don't think my observation is tied to the housing market, other than it being a vehicle to expedite the wealth gap.

>they work harder jobs than me What makes it harder? Could they do your job? Or do they miss the bar for doing the level of knowledge work that you do? This "they work harder" cliche is really tired. They might work hard but they're easily replaced. You are likely not, and even more likely, they wouldn't be able to do your job. If you really feel so bad, donate some of your money to them, otherwise it's just empty vi…

idk why this position is so offensive.

yes i think most of the population can sub into most tech work. honestly a bootcamp will make most people ready to perform at an acceptable level for your average FAANG swe role. admittedly the interview process is a tougher experience and keeps many people out but does not reflect the actual work.

your being tired of this "cliche" does not make it untrue and this response is as lazy as "if you have any criticism of the current climate why don't you just leave". wah.

there are other ways to help people than just giving them money, like by getting them into tech. i have done this for a number of friends and they're thriving, despite initial reservations.

Re: Maybe treating housing as an investment was a mistake

#673

Post by NDizzle » Mon, Mar 06, 2023, 7:41 PM UTC

staringback wrote: post #529

cool_dude85 wrote: post #423

Earlier quoted context omitted.

It's more usual than ever, but living at home or with roommates still makes it very difficult to ever afford a home. Let's take a look: 1999 median home cost: $165,000; 1999 median household annual income: $42,000; 1999 home cost / annual income: 3.9 2022 median home cost: $468,000; 2022 median household annual income: $71,000; 2022 home cost / annual income: 6.6

You can't mention home prices without the interest rate as well. 1999 interest rate: 4.74% 2022 interest rate: 0.08% Source: https://www.statista.com/statistics/187616/effective-rate-of...

"2022 interest rate: 0.08%" that's not true for 2022 as a whole. Did you mean 2021?!

Re: Maybe treating housing as an investment was a mistake

#674

Post by TedShiller » Mon, Mar 06, 2023, 7:41 PM UTC

gwright wrote: post #266

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…

> It took a handful of years of renting cheap places (with roommates) Is this now considered unusual? I didn't purchase my own home for almost 12 years after graduation from college. I lived at home, then with roommates, which was a completely normal thing to do at the time (1987 college graduation).

[flagged]

Re: Maybe treating housing as an investment was a mistake

#675

Post by nottathrowaway3 » Mon, Mar 06, 2023, 7:41 PM UTC

zo1 wrote: post #626

nottathrowaway3 wrote: post #562

Earlier quoted context omitted.

>maybe betting against human lives doesn’t feel right This is an inappropriate emotional appeal. Real estate is dependent upon the price/value of labor. It's betting for/against labor prices. Labor is not your life. You are more than your job.

Warning, uncomfortable honesty ahead. I'd be betting against labor. With all the automation going on, and the "Huge" technological advancements I foresee probably Of course, I won't step on others, and I'll help where my conscience requires me. But at the end of the day (or the end of the world) I am here to provide a safe future for my children, and perhaps secondary, my culture's children... but definitely not to s…

>The more I have of it [capital], the more likely I'll be part of the upper strata of society when whatever dystopian tech hell hole we end up getting.

Why do you conclude that money will keep you safe? Easy to hyperinflate currency, freeze bank accounts, seize gold, etc. Typically in a "violent revolution" you mentioned, power lies in the military.

Re: Maybe treating housing as an investment was a mistake

#676

Post by TheRealDunkirk » Mon, Mar 06, 2023, 7:42 PM UTC

aeternum wrote: post #362

arberx wrote: post #5

That implies housing has risks. Since 2009, that risk has been eliminated by the FED owning 30% of all mortgages on its balance sheet. We've nationalized housing risk and privatized the gains.

Not sure if it counts as privatized when the vast majority of Americans are homeowners. The gov had a ton of programs to increase the home ownership rate over the last 50 years, they were somewhat successful. Now you have a situation where the networth of 65-70% of the population is tightly coupled to their home price. And we wonder why it's so hard to get them to vote for new housing. As Munger says, Show me the inc…

There's enough government involvement to insure the paper-printing game everyone is playing, and that's all that counts. They guarantee the low end with the FHA, and that props up everything else.

Re: Maybe treating housing as an investment was a mistake

#677

Post by judge2020 » Mon, Mar 06, 2023, 7:43 PM UTC

wonderwonder wrote: post #656

judge2020 wrote: post #564

Earlier quoted context omitted.

> If I rented all it costs me is a phone call to my landlord. Do you think your landlord would be fine staying in the red when all of these expenses creep up? Why wouldn't they just increase your monthly rent by 1/12th what they've spent upon lease renewal? Or is is that they actually get their Homeowner's Insurance claims taken seriously because they have n > 1 insured homes with the same provider?

A landlord increasing rent is capped by comparables in the area. It's not realistic for a landlord to increase rent by over $3,300 a month. They would never be able to rent it. So while they can increase rent it still has to be competitive with comparable rentals.

If you're already in a lease, chances are they will try to rent it for a few percent more than what they'd list it for on the open market. Many people are not attune to moving every year, especially if it's a house instead of an apartment, and will weigh the costs (incl. mental) of moving with the money they have left in their budget.

Re: Maybe treating housing as an investment was a mistake

#678

Post by harambae » Mon, Mar 06, 2023, 7:44 PM UTC

Kon-Peki wrote: post #240

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…

> Capitol Hill, Seattle My cousin owns a mansion in Capitol Hill. Because she was a broke-ass student at UW and couldn't afford rent. Back in the 1980s, buying a house there was seen as a crazy, insanely risky thing to do and likely to end up in death. The modern equivalent is the area around 105th and Euclid in Cleveland, near Case Western and the Cleveland Clinic. 150 years ago, that was the wealthiest neighborhood…

> But if you did, would you end up with Capitol-Hill like appreciation in 40 years???

My friend recently applied this same concept in a very rough area of South Bend, Indiana buying a house with bullet holes in the side using the same general logic ("it'll get gentrified someday").

The issue he's running into is that it turns out a city doesn't have to charge you property taxes on the actual sale price (which was only $3k) but can charge you property taxes on a higher amount of their choosing ($40k I think he said) in order to encourage revitalization and not just hoarding of slum houses, probably.

He's trying to fight that property tax assessment, but I'm not a lawyer and neither is he and he'll probably lose. In which case the holding costs defeat his whole plan.

Re: Maybe treating housing as an investment was a mistake

#679

Post by BurningFrog » Mon, Mar 06, 2023, 7:44 PM UTC

bityard wrote: post #625

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…

I don't mean to be blunt, but if modest homes in your area are $1m, then you are in a VERY high-cost-of-living area and what you see here is not at all typical of the rest of the country. Where I live, a charming 1200sqft starter home in a blue collar neighborhood goes for $150-$200k.

Well, the jobs that pay the high incomes are in the very high-cost-of-living areas.

This is a huge problem for economic growth. If housing costs in the Bay Area were at US average, easily 10M more people could live here and get high paying jobs. But that path to a better life is very constrained.

Re: Maybe treating housing as an investment was a mistake

#680

Post by borroka » Mon, Mar 06, 2023, 7:44 PM UTC

sokoloff wrote: post #633

borroka wrote: post #500

Earlier quoted context omitted.

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% i…

These are costs associated with owning a property (taxes, insurance) that come out of the portfolio + others that do not appear in the excel file, such as the risk associated with owning a property that is not covered by insurance, opportunity costs (less flexibility in terms of relocation if better professional opportunities arise elsewhere), and the occasional real estate crisis that can blow away all the gains on paper in a couple of months.

If real estate values do not rise faster than inflation (I would say substantially faster), it would be a very poor investment or not an investment at all.

Yesterday I was reading in the subreddit of the town where I live about people's complaints regarding the absurd cost of living here. It was funny and puzzling that people were saying, "Yes, it's so hard to live here, housing is so expensive. We were lucky to buy 10 years ago for $500,000, now our house is valued at $1.4 million." Not recognizing that they are the problem.