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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

#821

Post by angarg12 »

olyjohn wrote: post #704
vjk800 wrote: post #644

Earlier quoted context omitted.

Indeed. If your complaint is that you need to be a millionaire to get basic housing, it's because you live with other rich people. Since the overwhelming majority of humanity lives in houses with value far below 1M$, we can conclude that no-one really has to live in a place with only 1M$ houses, but you, for some reason, want to do so. Living in a posh neighbourhood is a luxury, like Ferrari (which, by the way, costs…

Dude, this guy isn't talking about some posh high end part of Seattle. I just sold my "quaint 1200sqft starter house" in a remote South Seattle neighborhood for $675,000. It's 45+ minutes by transit to downtown. You know what I paid for that just 5 years earlier? $350,000. This is the part of town where the grocery store has security guards all over the place, and the bank has thick bulletproof glass between you and…

Funny reading some comments. I currently live in the northern part of Kirkland, in a very average suburb.

This isn't rich people houses folks, these are middle (possibly lower middle) class houses. Most people here didn't pay 1M for their homes, they most likely paid a very affordable price many years ago. It's worth repeating that house prices increased an average of ~40% since the beginning of Covid. That should help to put prices on perspective.

Re: Maybe treating housing as an investment was a mistake

#822

Post by silisili »

s1artibartfast wrote: post #741
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…

What exactly seems to be the problem or concern? With 300k income you should be able to save a 200k/20% down payment in a year, especially if you have 6 figures already. With todays rates you looking at 70k/year mortgage and <25% of your income.

300k isn't 300k, as we all know. Probably want to drop 40k in 401k, maybe some in an HSA, probably paying for health insurance. Then the Fed and potentially state/city want their share, which is about a third if you're lucky, closer to half if you're not. Then you're paying outrageous rents, transportation/parking costs, etc.

It's easy for me to believe that a family making 300k in Seattle could be living paycheck to paycheck without being extravagant. Definitely not frugal, though, either.

Re: Maybe treating housing as an investment was a mistake

#823

Post by kyllo »

ok_dad wrote: post #697
vjk800 wrote: post #644

Earlier quoted context omitted.

Indeed. If your complaint is that you need to be a millionaire to get basic housing, it's because you live with other rich people. Since the overwhelming majority of humanity lives in houses with value far below 1M$, we can conclude that no-one really has to live in a place with only 1M$ houses, but you, for some reason, want to do so. Living in a posh neighbourhood is a luxury, like Ferrari (which, by the way, costs…

> If your complaint is that you need to be a millionaire to get basic housing, it's because you live with other rich people. Hawaii would like to have a word with you, unless you suggest every single non-rich local would just have to move to the mainland. I believe the cheapest home I've seen available, where the neighbors aren't cooking meth, is probably in the $500-600k range and going up.

That is also happening--lots of Hawaiians are being forced to move to the mainland because they can't afford housing in their home state. https://news.yahoo.com/native-hawaiians-flock-las-vegas-1357...

Re: Maybe treating housing as an investment was a mistake

#824

Post by pzone »

lalos wrote: post #116

Easily fixed with a tax system: 1) first home tax-free - the address you submit your yearly taxes on. Incentivize people to own at least one home. 2) second property you pay taxes for both homes now - no more tax free benefit since you are able to afford more than one place. 3) more than 2 properties you pay taxes for all of them times some factor 0.05*N houses. Fudge around with the factor to allow more supply for a…

Incentivizing people to own their primary residence tax-free kills almost 90% of the Georgist incentive structure. The only justification for doing that is if you consider homes an investment asset. Almost all homeowners own only one home and would have the exact same incentives to advocate development restrictions. Governments would forego almost all of the land value tax and be forced to continue with high levels of other less efficient taxes.

Re: Maybe treating housing as an investment was a mistake

#825

Post by vannevar »

Fernicia wrote: post #637
vannevar wrote: post #458

Earlier quoted context omitted.

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…

>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.

You're making the mistake I mentioned, confusing demand for actual housing with demand for real estate. It will indeed marginally depress demand for housing, but capital can step in and absorb the marginal supply, for rental or other purposes. As long as there is more demand from capital than supply, real estate prices will stay high even if actual demand for low income housing remains stable or even declines.

>This is like banning supermarkets buying from farmers.

Farmers are selling perishable goods, not income-producing assets. As long as real estate is income-producing, it will be a viable investment, and as the old saying goes, they aren't making more of it. So whatever the dynamics of the actual housing market are, the underlying dynamics of the real estate market will tilt the table toward capital. And the sharper the income gradient is in society, the worse the problem will become.

Re: Maybe treating housing as an investment was a mistake

#826

Post by angarg12 »

s1artibartfast wrote: post #799
yawnr wrote: post #778

Earlier quoted context omitted.

What…? 300K post taxes is basically 150K, the are probably paying 60K+ in rent and another 30+ in other basic cost of living expenses.

If you take your numbers at face value and don't try to cut costs, that is still 60k savings per year and would take 2 years instead of 1 to hit a down payment. If you take the mortgage interest tax deduction, you will be spending about 35k/yr less on taxes and have more disposable income relative than renting at 60k/yr rent VS (70k mortgage - 35k less taxes). If two years is too long for the road map, you can rent a…

Cost of living is definitely much bigger than you make it to be. Just paying rent, car, bills, etc. easily cost 5k a month. A good chunk of my comp is stocks, which could go up or down with time, so a bit of a wildcard there. My wife is a freelancer, and she can bring home anywhere from 1k-10k each month depending on the market (and market is REALLY bad now), so can't count on that.

I might be able to save all my stocks, pray that they don't go down any further, and cash all of them for a down payment. Then I have to pray to not have any unexpected emergency or lose my job, since I dumped most of my life savings in a down payment.

Hardly what i'd call a middle class lifestyle.

Re: Maybe treating housing as an investment was a mistake

#827

Post by pzone »

svachalek wrote: post #24
beebmam wrote: post #8

Earlier quoted context omitted.

China has an enormous amount of housing. Their prices are still sky high

There's a huge cultural difference there though -- people don't trust stocks, bonds, or bank accounts. Housing is the only investment most people will consider.

The Chinese situation is caused by government rather than by their culture. Chinese corporations are forced into inefficient state-mandated investments and provide meager rates of returns for shareholders. They get tons of shiny public infrastructure while savers are given nothing, and are not allowed to invest internationally. In other words, it is pure financial repression.

Re: Maybe treating housing as an investment was a mistake

#828

Post by mitthrowaway2 »

gwright wrote: post #282
kspacewalk2 wrote: post #225

Earlier quoted context omitted.

The standard in Canada, for example, is a 25 year mortgage which you renew every 5 years (fixed or variable, your choice).

Could you clarify what you mean by "renew"? That sounds a mortgage with rates that are reset every five years, which doesn't sound like "fixed" to me.

Yes. In countries like Canada, the term "fixed rate mortgage" maps to what Americans would call an ARM. 25-year fixed-rate mortgages are simply not available to individual homebuyers. 5 years is generally the highest rate at which you don't have to pay a steep (ie, 1000 bps) premium for, essentially, adding a call option on your loan.

Re: Maybe treating housing as an investment was a mistake

#829

Post by aetherson »

yawnr wrote: post #778
s1artibartfast wrote: post #741

Earlier quoted context omitted.

What exactly seems to be the problem or concern? With 300k income you should be able to save a 200k/20% down payment in a year, especially if you have 6 figures already. With todays rates you looking at 70k/year mortgage and <25% of your income.

What…? 300K post taxes is basically 150K, the are probably paying 60K+ in rent and another 30+ in other basic cost of living expenses.

People with a $300k/year income don't face a 50% tax rate all in.

Re: Maybe treating housing as an investment was a mistake

#830

Post by throwaway6734 »

silisili wrote: post #822
s1artibartfast wrote: post #741

Earlier quoted context omitted.

What exactly seems to be the problem or concern? With 300k income you should be able to save a 200k/20% down payment in a year, especially if you have 6 figures already. With todays rates you looking at 70k/year mortgage and <25% of your income.

300k isn't 300k, as we all know. Probably want to drop 40k in 401k, maybe some in an HSA, probably paying for health insurance. Then the Fed and potentially state/city want their share, which is about a third if you're lucky, closer to half if you're not. Then you're paying outrageous rents, transportation/parking costs, etc. It's easy for me to believe that a family making 300k in Seattle could be living paycheck to…

>It's easy for me to believe that a family making 300k in Seattle could be living paycheck to paycheck without being extravagant

This is incredibly out of touch with what it means to actually live paycheck to paycheck. 300k is at a minimum 160k post tax which is a little over 13k a month

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