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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

#941

Post by 8note »

rootsudo wrote: post #727
olyjohn wrote: post #704

Earlier quoted context omitted.

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…

Going to the Safeway on Rainer is really on you. It does get dicey at night, but the day is okay. One reason I would never live in "South Seattle" it's a literal food desert. The WinCo being in Kent is it's only saving grace, but even the QFC a bit north of the Safeway on Rainer - yeah. The fun part is, all the good brands are routinely on sale/discounted heavily because the local population either does not like or c…

That's worth 350k though? The same as the whole house was 5 years ago?

Re: Maybe treating housing as an investment was a mistake

#942

Post by swearwolf »

turtlebits wrote: post #715
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'm not sure if I believe this. The places you "want" to live may cost 1M+, but I refuse to believe that if you just go another 15 minutes out (or add 15 mins to your commute), you can't get something for 2/3 of the price.

In the greater Seattle area you need to travel quite far out to cut the price by any significant amount. There are some very basic suburban houses in Bellevue, Kirkland and Issaquah selling for upwards of $2 million, and those are a good 15-20 miles away from the city itself.

If you don’t believe it, pull up Zillow or Redfin and set a price threshold under $1M and see how many listings instantly disappear. If you want a good laugh, take a look at what’s left.

Re: Maybe treating housing as an investment was a mistake

#943

Post by 8note »

RHSeeger wrote: post #594
DanTheManPR wrote: post #310

Earlier quoted context omitted.

But it's not as though property taxes and ongoing maintenance costs don't exist for apartments. The income the owner receives from the rents has to cover all of that.

Well, yes and no. If you own and the roof needs replacing, you need to have that money on hand (or be able to take out another loan to cover it, which isn't always possible). If you rent, you don't.

Well, if you rent, you rely on the landlord to be able to do that, and if they can't, you're still screwed

Re: Maybe treating housing as an investment was a mistake

#944

Post by 8note »

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…

Leveraged buyers are more likely to be people that already own houses rather than not though

Re: Maybe treating housing as an investment was a mistake

#945

Post by chrismcb »

khazhoux wrote: post #841
krferriter wrote: post #786

Earlier quoted context omitted.

A lot of jobs are in high cost of living areas. The reason they're high cost of living is because there are jobs there, the demand to live there is high, and they haven't built nearly enough housing. Some bay area municipalities have essentially not added any housing in the last 50 years. They made it illegal, because incumbent property owners don't want more people to be allowed to live there. And it's not just the…

I would rather Google and Facebook and the other mega-hire companies would build up outside the bay area, rather than continuing to pack more people in.

Pre COVID Google was doing this. They were trying to spread out and open offices on lower cost of living places.

Re: Maybe treating housing as an investment was a mistake

#946

Post by jjav »

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.

> With 300k income you should be able to save a 200k/20% down payment in a year

A 300K income is well below 200K net, so even if they could live with zero expenses, they can't save 200k in a year. But of course they do have expenses, so it'd be a lot less than that.

Re: Maybe treating housing as an investment was a mistake

#947

Post by prawn »

sethd wrote: post #876
tchaffee wrote: post #837

Earlier quoted context omitted.

> I spend an inordinate amount of mental energy calculating how we can jump into the property ladder as quickly and safely as possible You buy a cheap house far away from where you work, and rent it to someone. Let them pay your mortgage and before you know it, you've got enough equity to put towards another house. Rinse and repeat.

Is this path still actually viable for HCOL areas? I remember having a conversation with a real estate developer in SF in 2021. They said that this used to be the path to owning in places like SF, but that it’s no longer a viable option.

If you're renting out the house, does it need to be in a HCOL area and does it need to be just one house? It goes against the idea of 'housing as investment being a negative thing' though.

Re: Maybe treating housing as an investment was a mistake

#948

Post by zamnos »

sethd wrote: post #876
tchaffee wrote: post #837

Earlier quoted context omitted.

> I spend an inordinate amount of mental energy calculating how we can jump into the property ladder as quickly and safely as possible You buy a cheap house far away from where you work, and rent it to someone. Let them pay your mortgage and before you know it, you've got enough equity to put towards another house. Rinse and repeat.

Is this path still actually viable for HCOL areas? I remember having a conversation with a real estate developer in SF in 2021. They said that this used to be the path to owning in places like SF, but that it’s no longer a viable option.

I'd say not right this instant, given interest rates. But if you really want to, look for condos out by, like, American Canyon or Vallejo or similarly far out locations. 20% down for a $300k place is $60k. Which, while being a good chunk of change, isn't as far out of reach as the $200k down payment for a million dollar condo in SF.

Before you do the investment property thing though, make sure being a property manager is truely how you want to spend your life. Investing money into financial instruments is a lot less work these days, what with robo advisors platforms (eg wealthfront, betterment) providing easy places to invest from.

Re: Maybe treating housing as an investment was a mistake

#949

Post by AstralStorm »

tempsy wrote: post #689
photon12 wrote: post #125

Earlier quoted context omitted.

> $80k could easily afford this, which is a low bar for someone with a moderately decent job. $80k is not a low bar, and this is insulting to really talented people I know stuck in below $40k jobs.

so rent is now considered a massive burden on everyone because someone making the minimum wage cannot easily afford the median rent in the city they live in? that’s not how it works at all

Median means at least half of the people cannot afford it.

That means the rent is a massive burden on half of the locals at least, likely many more since the burden does not scale linearly.

Second, check median wage and check the distribution of wages compared to house prices.

We're talking how many millions of people here?

Re: Maybe treating housing as an investment was a mistake

#950

Post by xapata »

Godel_unicode wrote: post #548
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.

That math is my favorite example of economists not living in the real world. It doesn’t account for the ability to refinance.

It does, in fact. The bank prices that into the loan.
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