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

Re: Maybe treating housing as an investment was a mistake

#961

Post by carlosjobim » Tue, Mar 07, 2023, 1:29 PM UTC

mxkdodi wrote: post #273

jedberg wrote: post #195

Earlier quoted context omitted.

That sort of makes sense. When you own a property, you have to maintain it and pay property taxes. When you add all that up, you either need a lot more than rent, or you need the mortgage to be lower than rent so you can afford those other expenses.

It makes absolute sense, because maintenance costs are non-negligible. I just paid a fifteen thousand dollar plumbing bill. Since rent would include the ability to call the landlord to make him fix that, I sure would expect rent to be higher for the same place than my mortgage is. Last year I spent twenty grand on a new roof. What's next? Idk, but that's why my mortgage isn't half of my salary. If it was rent, these…

> I just paid a fifteen thousand dollar plumbing bill.

That has to be for commercial real estate, or you've been ripped off. There is no possibility of a single family dwelling ever having plumbing problems of that scale.

But maintenance costs are in general a landlord lie. They wouldn't rent out their properties if costs where anywhere near income. As for my own anecdote, my landlord has spent at most 0,5% of what he's gotten in rent from me on maintenance over the years. A normal tenant won't break anything or induce any maintenance costs.

Re: Maybe treating housing as an investment was a mistake

#962

Post by bumby » Tue, Mar 07, 2023, 2:53 PM UTC

petsfed wrote: post #707

bityard wrote: post #625

Earlier quoted context omitted.

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.

Great, if only there were adequate jobs in those places, so we could all own homes without needing $300K annual family income. The dissonance comes from the fact that a lot of hackernews readers make apparently high incomes, but the cost of living in their areas keeps them squarely working class. The best example I can give is in the Bay Area. I lucked out with $2850/month to rent a 1400 square foot house in San Lean…

If any industry is poised well to make relatively high pay anywhere, it’s tech. It’s speculation on my part, but I assume tech has one of the highest remote work percentages.

This is a phenomenon that is prevalent in other industries, without that remote work luxury. Oil and gas workers get paid handsomely but often have to live near the worksite. Even then, rent is astronomical without all the luxuries that SV offers.

Re: Maybe treating housing as an investment was a mistake

#963

Post by ska » Tue, Mar 07, 2023, 3:14 PM UTC

thatfrenchguy wrote: post #286

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.

France has fixed rate mortgages

Lots of places have fixed rate, but not for long periods like the US. Does France offer 30 year low rates?

Re: Maybe treating housing as an investment was a mistake

#964

Post by harambae » Tue, Mar 07, 2023, 4:28 PM UTC

horsawlarway wrote: post #542

Glyptodon wrote: post #411

I think there are some factors missing in this piece: 1. Values go up because of density changes related to location desirability. My house is more valuable because more people want to live here, but space is finite. This should lead to it being worthwhile to pay me to leave so an apartment complex can replace the single family homes on my block. But it's more likely that someone will pay a lot to have the single fam…

> Not being adjacent to a major urban area is in many respects like going back in time some proportion to your distance from one. This whole conversation devolves into this single point, in my opinion. There is land out there that is cheap as fuck-all. Lots of places will flat out hand you the deed if you promise to live there and build a house. Some places will subsidize you moving into a house for $1. You just have…

> Vermont and Ohio will literally PAY YOU to have you move into some areas (10k).

I live near Vermont, and all I know of is this Relocation incentives [0], which was only $7.5k and is also already exhausted of funding.

[0] https://thinkvermont.com/relocation-incentives/

Re: Maybe treating housing as an investment was a mistake

#965

Post by mym1990 » Tue, Mar 07, 2023, 5:00 PM UTC

kwhitefoot wrote: post #235

highwaylights wrote: post #175

Earlier quoted context omitted.

Tax on non-primary properties solves this if you can get it past vested interests. Reasonable tax breaks for your primary or only home, and none for second homes / investments you let out. That gives a valve to perform qualitative easing on the housing market whenever you need to, and is not uncommon in other parts of the world. EDIT: Having read the responses below I’ve realised I didn’t clearly word what I meant he…

You mean that in the US you don't pay tax on the capital gain when you sell a property that is not your home? It's a great country to be rich in!

There are exceptions if you have lived in the property for 2 of the last 5 years.

Re: Maybe treating housing as an investment was a mistake

#966

Post by mym1990 » Tue, Mar 07, 2023, 5:01 PM UTC

amluto wrote: post #692

kwhitefoot wrote: post #235

Earlier quoted context omitted.

You mean that in the US you don't pay tax on the capital gain when you sell a property that is not your home? It's a great country to be rich in!

You can do a “1031 exchange” to trade a non-residence property for a different one.

This is just a tax deferral, you will still pay tax eventually.

Re: Maybe treating housing as an investment was a mistake

#967

Post by latchkey » Tue, Mar 07, 2023, 5:17 PM UTC

falcolas wrote: post #232

latchkey wrote: post #148

Earlier quoted context omitted.

> At best, you can borrow against it. Borrowing against it is a fantastic idea, what's wrong with that? People really need to learn that their assets can be used to generate additional returns. Otherwise you just have money sitting there, not doing anything. Where is the fun in that?

Nothing's wrong with it, but it's a bit orthogonal as viewing the property itself as an investment. Instead it's acting as guarantee against other investments.

That is the whole point though. People tend to stop at layer 1, when they are sitting on something that has value for other things as well.

Re: Maybe treating housing as an investment was a mistake

#968

Post by hot_gril » Tue, Mar 07, 2023, 5:28 PM UTC

jb3689 wrote: post #930

hot_gril wrote: post #569

Earlier quoted context omitted.

Doesn't fix it. People end up buying bigger homes just as a place to park money. The root of the problem is that housing is a subsidized investment; you're getting free money from the government by taking out a mortgage, and the market will figure out ways to take advantage of that with silly results.

Why does this matter? The problem stated is lack of supply generally, not that people want bigger homes, right? Who cares if people are parking their money in a bigger home if they only have a single home?

Bigger homes take more space, and that's the constrained resource in places where houses are expensive.

Re: Maybe treating housing as an investment was a mistake

#969

Post by tchaffee » Tue, Mar 07, 2023, 5:31 PM UTC

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 doubt it. I said "far away" meaning buy in a low cost of living area. Especially one that is popular and growing. Although it's convenient to live in your first property investment, it's not a requirement. Rent near work as cheaply as possible but very likely in a neighborhood where you can't afford to buy. And buy somewhere else.

Re: Maybe treating housing as an investment was a mistake

#970

Post by conradkay » Tue, Mar 07, 2023, 5:41 PM UTC

jb3689 wrote: post #930

hot_gril wrote: post #569

Earlier quoted context omitted.

Doesn't fix it. People end up buying bigger homes just as a place to park money. The root of the problem is that housing is a subsidized investment; you're getting free money from the government by taking out a mortgage, and the market will figure out ways to take advantage of that with silly results.

Why does this matter? The problem stated is lack of supply generally, not that people want bigger homes, right? Who cares if people are parking their money in a bigger home if they only have a single home?

The lack of supply is because of a lack of desirable land. I don't think viewing it through the lens of "houses" getting more expensive is correct, as many old homes being purchased for 500k+ near me will be immediately torn down. There's a finite supply of land in driving distance of a city and bigger suburban houses mean less homes can be built. If you don't view it like that, bigger homes still require more materials and man-hours.