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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

#761

Post by aeternum »

TheRealDunkirk wrote: post #676
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…

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.

Right, a better solution would be to package demand-stimulating legislation like FHA with supply-stimulating legislation like reductions in zoning restrictions.

The results of stimulating demand (FHA and similar) without changing supply is econ 101.

Re: Maybe treating housing as an investment was a mistake

#762

Post by [deleted] »

sokoloff wrote: post #278
xapata wrote: post #173

Earlier quoted context omitted.

I'm an economist, yet I only recently realized that adjustable-rate mortgages are economists' consensus best choice for consumers. Based on the expectation that personal economics are well-correlated with broad market economics, and that interest rates will decline when the economy struggles.

I have a hard time squaring that with 15 year fixed rate mortgages being under 3% for several years in the very recent past and 30 year fixed mortgages being at/under 3% for part of that time. How would an adjustable rate mortgage be the best choice for consumers in that situation? I got an initial mortgage at 5.625%, refi’d to 3.875%, then again to some ~3% 15-year. I never seriously considered an ARM (and now wish…

[deleted]

Re: Maybe treating housing as an investment was a mistake

#764

Post by freedude »

"But now, if she buys a home, she needs housing prices to keep going up to make her decision financially sound. And not just go up, but outpace inflation and — almost certainly — wage growth. Otherwise, she's cost herself hundreds of thousands of dollars. For buying to be worth it, she needs the price of her home to double."

They overstate this. All she needs is for rent to continue to rise for it to be worth it. With most sane mortgages the costs are fixed for the life of the mortgage. Rent is going up. Always. Well, almost. With the regulatory costs of new residential building in most of the West stifling growth, there will be no over-abundance of new rentals hitting the market any time soon.

That said, how did I do it? My wife and I knew we didn't know how to do it. So we asked someone who had made a lot of mistakes and was finally successful at owning property. "Take a Dave Ramsey class", they said. I didn't want to take the class, but I finally realized that I didn't know what I didn't know. It was shortly after someone I know well said something like, "suck it up buttercup!"

That was 9 years ago and our dream was to own a modest home on about 5 acres. 4 years later after changing our entire outlook on spending we bought a 3 bedroom, 2 bath home on 8 acres. Living through a pandemic on 8 acres was way better than the postage stamp we moved from. It was a blessing. My recommendation: Buy now before the next "Good Reason" to live in the country hits the fan. Look an hour to an hour and a half away from downtown in good traffic.

Have Fun!

Re: Maybe treating housing as an investment was a mistake

#765

Post by pc86 »

sokoloff wrote: post #571
kilgnad wrote: post #358

Earlier quoted context omitted.

Why don't you get fixed rate so that the rate never goes up. When the background rate goes down you refinance for another lower fixed rate.

It used to be the case that the adjustable rates were lower than the fixed rate. When a 30-year fixed was 8%, a 5/1 (5-year fixed, then adjusting every year) mortgage may have been 5% and a 10/1 may have been 6% for the fixed period. Once fixed rates got down to the 3-4% range, that seemed to no longer hold and I was frequently offered fixed-rate jumbo mortgages at rates slightly lower than adjustables (I have no ide…

When have adjustable rates for the same property and money down been higher than fixed? They'd sell approximately zero adjusted rates if that ever happened.

Re: Maybe treating housing as an investment was a mistake

#766

Post by Nemo_bis »

keerthiko wrote: post #725
Nemo_bis wrote: post #711

Earlier quoted context omitted.

"A lot"? I've been researching this earlier in another place and didn't come up with much, do you have a link on how to list them?

I used streeteasy[0] almost exclusively during my home search. They label every listing by home type (co-op, condo, townhouse, etc) I don't think I found a condo under 800k, while there are plenty of co-ops across the boroughs, including Manhattan, in the 300-800k range. EDIT: just noted you said "in another place". In my experience it's very hard to find this information in America outside NYC without investigating…

Thanks! I was looking in https://opencorporates.com (for Georgia) but I didn't know what to look for.

Super interesting: "Today, there are over 1,100 HDFC coops that make up a significant part of the fabric of New York City's affordable housing stock. " https://www.nyc.gov/site/hpd/services-and-information/hdfc.p...

"5,578 NYC Co-ops and Apartments for Sale" https://streeteasy.com/coops/nyc

Though many of these might be from giant projects, it's still interesting. https://en.wikipedia.org/wiki/Mitchell%E2%80%93Lama_Housing_...

This is what you can do if you don't delegate all the management of the housing market to the Fed.

Re: Maybe treating housing as an investment was a mistake

#767

Post by mattgreenrocks »

dfxm12 wrote: post #58
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…

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…

Dirty secret: many people get help from their parents to get over the hump of the initial down payment.

IMO, that is the best use of an inheritance: helping kids secure assets earlier rather than later, which sets up the rest of their life.

Re: Maybe treating housing as an investment was a mistake

#768

Post by taude »

fallingknife wrote: post #718
eddsh1994 wrote: post #642

Earlier quoted context omitted.

Oh I agree! But better to avoid renting in general imo, if it’s a possibility.

Not correct. In most HCOL cities in the US, you can rent space for less than the equivalent cost to own. https://www.nytimes.com/2022/06/23/realestate/owning-renting...

Before Covid, there's sections of my city where you could either A) put 500K down + have 1M in outstanding mortgage (whatever that payment was) + 1600/month taxes + 1600/month condo fees or B) Rent a place in the same building for $4K/Month for similar sized apartment

Re: Maybe treating housing as an investment was a mistake

#769

Post by cornholio »

pdonis wrote: post #682
cornholio wrote: post #326

Earlier quoted context omitted.

But the problem of your friend is not that you treat your house as an investment. By definition, if people "invest" in goods that can be produced at a certain price, then production should kick in and restore balance. In a functional housing market you shouldn't be able to get a better appreciation of housing than the inflation rate, except for perhaps some very limited and irreplaceble houses in the Hamptons or desi…

> This problem can only be solved politically, with the state taking a major role in the supply of housing The state already takes a major role in the supply of housing, as you yourself acknowledge. That's the problem, not the solution.

The upper levels of government can and should correct the failures of the lower levels which are captive to local homeowner interests.

The ideea that you can eject the state from regulating the use of a resource with so many externalities is a pipe dream, you either get some sort of favela or the residents re-invent a much more exclusionary and bigoted version of the state, for example the HOA.

Re: Maybe treating housing as an investment was a mistake

#770

Post by parineum »

carom wrote: post #731
parineum wrote: post #463

Earlier quoted context omitted.

One size fits all zoning regulations for rural Montana, Manhattan and the suburbs of Los Angeles.

Yes. It is your property, build it out as dense as you wish. There is not the demand in rural Montana to build out a 160 acre ranch with apartments. Just remove density restrictions and let people build to meet demand.

You're proposing removing zoning, parent is proposing federalized zoning.
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