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The house I was born in sold for $4000

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Re: The house I was born in sold for $4000

#51

Post by auctiontheory »

cletus wrote: post #44

This is going to be an increasing issue and it's something that Western nations in particular just haven't had to deal with until now. The West came out of Europe. Europe is small. To put it in perspective, the distance from SF to NYC is ~2900 miles. The distance from London to Baghdad is ~3100 miles. So abundance of land is not a problem the West has traditionally had (not until colonization anyway). Added to this,…

Detail: the flight distance from SFO to JFK and the distance from LHR to BGW are about the same - between 2500 and 2600 miles, depending who you ask.

Re: The house I was born in sold for $4000

#52

Post by nilkn »

raldi wrote: post #34
jluxenberg wrote: post #15

Homeowners of HN: how do you justify tying up a large percentage of your net worth in a home?

You're asking two questions: 1. Why do you choose to live in a house rather than an apartment? 2. Why do you choose to own that house, rather than rent it? To the first question, a house often provides a much higher quality of life than an apartment. You might get a backyard garden, or a workbench, a guest room, an office, a full kitchen, etc... and, you can drill all the holes you want, paint it your favorite color,…

> To the second question, buying a house rather than renting it generally increases your options by about a hundredfold -- many, many more houses are available for sale than for rent. And while property tax can be painful, it's generally substantially cheaper than what you'd pay in rent on the equivalent property. So you get to save a lot more of your income, or at least apply it to paying down your mortgage.

It also reduces your options, in the sense that your mobility may be drastically reduced.

To me, though, the main advantage of home ownership is the promise of one day not having a rent or mortgage payment at all. That's one of the main steps towards retirement.

Re: The house I was born in sold for $4000

#53

Post by cperciva »

The population of California has a perception of growth, while the Rust Belt has a perception of decline. This must effect the collective psyche to point where taking risk becomes less socially acceptable. Taking entrepreneurial or financial risk when you are gainfully employed is less tolerated when many people around you (and in fact entire industries) are struggling to get by.

I think there's something more subtle going on here. If the economy as a whole is doing well, risks tend to pay off; if the economy as a whole is not doing well, risks tend to not pay off. You don't even need any social pressure to make people in the rust belt take fewer risks than people in silicon valley; you just need people who use past performance as an indicator of future returns.

Re: The house I was born in sold for $4000

#54

Post by ww520 »

jluxenberg wrote: post #15

Homeowners of HN: how do you justify tying up a large percentage of your net worth in a home?

Why not typing up a large percentage of the net worth in housing? What is net worth for beyond the cash needed for basic living? If the cash part of the net worth has already covered all/most of your needs, why not putting the rest in somewhere else? Like housing.

Of course you should do asset allocation to balance out the risk involved with each asset class, housing being one of the classes.

Re: The house I was born in sold for $4000

#55

Post by jackalope »

jluxenberg wrote: post #15

Homeowners of HN: how do you justify tying up a large percentage of your net worth in a home?

If you do your homework, a house can be:

- A big piggybank.

- A safe, stable living environment for your family.

- A way to get a quality education for your children at a bargain price.

- Tweakable in a way no rental can ever be.

Home ownership isn't necessarily a burden. It can be a liberating experience in many ways.

Re: The house I was born in sold for $4000

#56

Post by redblacktree »

rdl wrote: post #40
Wingman4l7 wrote: post #39

Earlier quoted context omitted.

I think you forgot a crucial bit of infrastructure that's a lot harder to slap together than power or internet: plumbing.

Septic tanks and water tanks work pretty well in semi-ruralish areas; you could either have a couple of trucks, or lay pipe. Or, have no plumbing in the temporary structures themselves, but have shower/bathroom trailers (which, admittedly, would suck a bit) separate from the temporary structures. I assume you'd build more infrastructure with time; putting in a real sewage plant would be expensive up-front and not rea…

Real-life SimCity?

Re: The house I was born in sold for $4000

#57

Post by actuary »

jluxenberg wrote: post #15

Homeowners of HN: how do you justify tying up a large percentage of your net worth in a home?

This is an excellent question. First, note that you will always need a place to live. If you rent, you have no option but to pay market rents forever. Another way to put this, in the language of finance, is that you are "short" housing. Purchasing a home covers this short position - a homeowner must pay their mortgage, but need not be exposed to market fluctuations in the cost of housing. In this sense, the purchase of a first home is a risk reduction technique.

Second, market forces keep the cost of owning a home below the cost of renting a home (in most markets).

Third, there are substantial legal and financial benefits to owning at least your primary residence. Home sales are usually free of all capital gains tax; mortgage interest and property tax are tax deductible; and homestead exemptions exist in many states in the case of bankruptcy.

Finally, there are only so many other places to put your money. It is difficult for an employee of a corporation making in the low six figures (i.e. for a typical reader of this website) to shelter more than around $30,000 of earnings a year from taxation. Because of the advantages listed above, once you max out your retirement accounts and have an emergency fund set up, there is often no better investment than the purchase of a primary home. Also note that paying down your mortgage early is equivalent to investing your money in a savings account that earns a rate of interest equal to the rate of interest on the note (at this point, this rate is much higher than the rate you can earn in a savings account). This is on top of all of the other benefits.

Re: The house I was born in sold for $4000

#58

Post by ww520 »

nknighthb wrote: post #26
jluxenberg wrote: post #15

Homeowners of HN: how do you justify tying up a large percentage of your net worth in a home?

By not buying a house in the bay area. I just bought a house outside the bay area last year, and tacked on a partial remodel with new wiring, heat pump, water heater, and bathroom. My required payment -- including escrow for taxes, insurance, and (for now) PMI -- is comparable to the rent for a mediocre single-bedroom apartment in a sketchy area of the south bay. I'll be adding enough each month to have it paid off i…

Buying in the Bay Area is not that bad. It's a matter of trade-off, as with many things in life. You won't get huge lot or huge house for the cheap for sure, but there are other factors making up for it. For one thing the weather is fantastic. The food are amazing. It's closer to the tech center if that's your priority.

Re: The house I was born in sold for $4000

#59

Post by rdl »

redblacktree wrote: post #56
rdl wrote: post #40

Earlier quoted context omitted.

Septic tanks and water tanks work pretty well in semi-ruralish areas; you could either have a couple of trucks, or lay pipe. Or, have no plumbing in the temporary structures themselves, but have shower/bathroom trailers (which, admittedly, would suck a bit) separate from the temporary structures. I assume you'd build more infrastructure with time; putting in a real sewage plant would be expensive up-front and not rea…

Real-life SimCity?

I may be influenced by living from 2004-2010 in either bombed out wrecks or "camps" in warzones, where this kind of stuff is routine.

Re: The house I was born in sold for $4000

#60

Post by rjdagost »

This post struck a chord with me as I'm from the central NY region, not too far from the OP. I get back to my hometown every year or two and the decline is more apparent every trip. Everything from my youth- the places I worked part-time, the schools I went to, the places I used to hang out at, the major local employers, they're all gone or in major decline. Many houses are boarded up, abandoned, and are being slowly reclaimed by nature. Most of my school friends have moved away, and most of those that have stayed around have basically wasted away. In my own lifetime I have seen long-term economic decline happen and it has scarred me in a way that is difficult to articulate.
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