It's A Terrible Time To Buy An Expensive House • Hacker News Board

Re: It's A Terrible Time To Buy An Expensive House

#181

Post by fluidcruft » Tue, Sep 17, 2013, 6:46 PM UTC

VLM wrote: post #151

fluidcruft wrote: post #84

Earlier quoted context omitted.

Rent pays property tax, too. It's indirect, but it gets paid.

You can leave the district when it hits the fan in a month (or so) if you rent. If you own, you're stuck paying the "rent" aka prop tax or you eat the obvious capital loss. A owner is a sheep ready for the shearing... The older the district, the worse the financial conditions, roughly. If you rent and move to an exurb that didn't exist in 2005, they can't by definition have employees retiring from the local school in…

In every state I have lived, school retirement and health plans were handled at the state level. Hoping districts isn't going to shield you from your state government. The school districts pay into state plans as directed by the state legislature. It's the state legislature that's on the hook for the unfunded liabilities, not the school districts. School districts only make the equivalent of social security payments.

And it's not like the employees aren't playing into the system the same way that private sector employees pay into Social Security. Many/most state employees are excluded from participating in Social Security--the States in their infinite wisdom decided long ago that they would rather roll their own rather than submit to the tyranny of federal control.

Re: It's A Terrible Time To Buy An Expensive House

#182

Post by onedognight » Tue, Sep 17, 2013, 7:13 PM UTC

fluidcruft wrote: post #84

vermontdevil wrote: post #40

I now do not consider buying a house a good investment due to property taxes. The bill is coming soon for a lot of school districts (especially those with strong unions) with the rapid costs of health care for retirees. This is going to be our next crisis as we can see it playing out in Detroit.

Rent pays property tax, too. It's indirect, but it gets paid.

> Rent pays property tax, too. It's indirect, but it gets paid.

In California, due to Proposition 13, many many landlords pay 1970's level property taxes. It makes sense to rent these properties and split the savings with the landlord.

Re: It's A Terrible Time To Buy An Expensive House

#183

Post by codex » Tue, Sep 17, 2013, 7:47 PM UTC

It's a fantastic time to buy an expensive house. Interest rates are so low due to the Fed that money is essentially free. I will be keeping my 30 year mortgage for the next 30 years.

Re: It's A Terrible Time To Buy An Expensive House

#184

Post by muzz » Tue, Sep 17, 2013, 7:56 PM UTC

sliverstorm wrote: post #144

rtpg wrote: post #118

Earlier quoted context omitted.

I've always been confused about the housing as investment idea. We don't consider cars to be an investment either do we? I feel like the idea can only help to drive the prices up further.

houses are depreciating assets. The land they sit on can often be appreciating assets. Why is this? Because there are only so many acres of land within walking distance of downtown, or the major office complex.

usually by not necessarily-- the cost of construction can (and often does) go up, due to things like higher labor costs, material costs, etc. of course, it could go down due to better technology but the general trend seems to be up.

Re: It's A Terrible Time To Buy An Expensive House

#185

Post by matwood » Tue, Sep 17, 2013, 8:04 PM UTC

badman_ting wrote: post #6

The part about high price/low interest rate vs the opposite was really helpful. I am trying to figure out how to think about this so it's well-timed. Thanks.

People buy houses on payment. Obviously the best time to buy would be when rates are very high and drive down absolute prices (and hopefully rates fall soon after so you can refi). The problem is the 80s to now is a 30 year time scale. Are you willing to wait for high rates, possibly years, that may never happen?

Re: It's A Terrible Time To Buy An Expensive House

#186

Post by john_b » Tue, Sep 17, 2013, 8:07 PM UTC

snowwrestler wrote: post #129

rtpg wrote: post #118

Earlier quoted context omitted.

I've always been confused about the housing as investment idea. We don't consider cars to be an investment either do we? I feel like the idea can only help to drive the prices up further.

Cars are not an investment because, unless we are talking about collectible antiques, cars always depreciate. That's why it's more accurate to think of cars as expenses. Real estate can appreciate. It's not guaranteed to do so, but it can, and with significant leverage. That's why it's considered an investment.

To be precise, a house is a depreciating asset, but the land it sits on is (almost alwasys) an appreciating one. Most homes are built well enough that their rate of depreciation is slow. And since the purchase price is high compared to a car, it is more affordable to spend a few thousand dollars rennovating an aging house than an aging car. But eventually the house will break down and its value will go to zero. In terms of longevity, the most successful house to date is the Great Pyramid of Giza, and it is so heavily worn that its value is now mostly due to the tourist dollars it brings in because of its uniqueness.

If cars were tethered to a plot of land in the same way houses are, the comparison between cars and houses might be more valid. Investing in parking spaces can actually be profitable, in some cases. But whether you buy a house or a car, you're buying a construction that time and weather will ultimately beat into a worthless object. Ordinary homebuyers are too used to thinking of a house as an investment by its very nature and ignoring both the expenses of homeownership and the investment quality of the land the house sits on.

Even land is a depreciating invesment in an area where the population is sharply declining and tourism/business is minimal. Nothing is a good investment by its nature, only by the circumstances in which it exists.

Re: It's A Terrible Time To Buy An Expensive House

#187

Post by matwood » Tue, Sep 17, 2013, 8:13 PM UTC

VLM wrote: post #160

snowwrestler wrote: post #107

Earlier quoted context omitted.

Property prices never stay flat because of inflation. This matters because the payments on a fixed-rate mortgage do stay flat; they don't adjust with inflation. I just refinanced to 4.5%. Long-run inflation is 3% so my actual cost to borrow is 1.5%. With the mortgage deduction it is just over 1.1%--nearly free money, in other words. It's true that I pay property taxes. In my jurisdiction they are just over 1%, so now…

"Long-run inflation is 3%" LOL the political reported rate is what the .gov is willing to provide in COLA increases. It has nothing to do with actual costs. You're budgeting based on made up numbers provided for someone elses "pay" rate increases. Look at say... gas prices. Double in a decade. Thats about 7% per year. Or the price of food, or medical insurance, or tuition, or price of cars, etc. Think of what real pe…

The problem with 7% annual inflation rates is very few people can maintain those pay increases, every year, for an entire 30 year mortgage... So eventually you end up house poor.

Actually you end up inflation poor, not house poor. Your house payment stays mostly fixed. In your scenario of much higher inflation than reported, rents are also likely going up. In such a case the renter will be worse off than the home owner.

Re: It's A Terrible Time To Buy An Expensive House

#188

Post by sliverstorm » Tue, Sep 17, 2013, 8:37 PM UTC

muzz wrote: post #184

sliverstorm wrote: post #144

Earlier quoted context omitted.

houses are depreciating assets. The land they sit on can often be appreciating assets. Why is this? Because there are only so many acres of land within walking distance of downtown, or the major office complex.

usually by not necessarily-- the cost of construction can (and often does) go up, due to things like higher labor costs, material costs, etc. of course, it could go down due to better technology but the general trend seems to be up.

Yes, it could happen that way, but the construction costs would have to spike pretty fast to outweigh the simple deterioration an older building experiences.

Re: It's A Terrible Time To Buy An Expensive House

#189

Post by muzz » Tue, Sep 17, 2013, 8:44 PM UTC

sliverstorm wrote: post #188

muzz wrote: post #184

Earlier quoted context omitted.

usually by not necessarily-- the cost of construction can (and often does) go up, due to things like higher labor costs, material costs, etc. of course, it could go down due to better technology but the general trend seems to be up.

Yes, it could happen that way, but the construction costs would have to spike pretty fast to outweigh the simple deterioration an older building experiences.

Yes, agreed.

Re: It's A Terrible Time To Buy An Expensive House

#190

Post by mathgeek » Tue, Sep 17, 2013, 8:53 PM UTC

rtpg wrote: post #140

snowwrestler wrote: post #129

Earlier quoted context omitted.

Cars are not an investment because, unless we are talking about collectible antiques, cars always depreciate. That's why it's more accurate to think of cars as expenses. Real estate can appreciate. It's not guaranteed to do so, but it can, and with significant leverage. That's why it's considered an investment.

but the appreciation only happens because everyone wants it to right? I get that building a pool makes your house worth more, but trying to ride a bubble seems messy

> I get that building a pool makes your house worth more

Not necessarily. Many folks see a pool as an extra expense and will immediately disregard a potential purchase because the property has a pool. This is especially true for above-ground ones that aren't as durable as in-ground designs.