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America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

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Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#101

Post by John23832 »

SubuSS wrote: post #86
John23832 wrote: post #58

Earlier quoted context omitted.

> I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." I think we can amicably disagree. I'm not in the "fuck Wall St." camp. I understand what it is supposed to do and the value it is supposed to provide. > Maybe I'm wrong and I'm one of the lucky, shrinking few who still has this option, the option of mobility than once made the US great? Because I'm young and employable? Yes.…

>Your home is NEVER and investment. A house that you own, maybe. But, I repeat, your home is never an investment. Can you expand a bit more on this? Usually it might not directly turn into an investment, but it does act as a 'savings vehicle' in many cases. For example when I moved to US a long time ago, the choice was between a 1200 rent and a 1600 mortgage (assuming I put a down of 25k or so). At that point it felt…

You don't typically consume an investment.

If I buy a house and live in it, how quickly can I reasonable divest myself from the house? For the average American, not quickly at all. Why is that? Because I need to a home to live in. If not this one, another. And generally the equity in my current home will be used to secure my future one.

A house that you buy and don't live in (or is easily divested) could be seen as an investment because you don't live in (consume) it. If you need to sell it, that money could easily go to other things. And you can sell in a timely manner.

Edit: I was trying to be layman about it, but chillingeffect did a good job on the technicals.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#102

Post by John23832 »

jholman wrote: post #93
John23832 wrote: post #58

Earlier quoted context omitted.

> I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." I think we can amicably disagree. I'm not in the "fuck Wall St." camp. I understand what it is supposed to do and the value it is supposed to provide. > Maybe I'm wrong and I'm one of the lucky, shrinking few who still has this option, the option of mobility than once made the US great? Because I'm young and employable? Yes.…

> I'll go ahead and say this. Your home is NEVER and investment. A house that you own, maybe. But, I repeat, your home is never an investment. I'll go ahead and say this. My home is certainly an investment. I allocated some capital to some real property, and this real property generates value for me every day, which I might have purchased otherwise (indeed, would have been nearly forced to). Because of the ability of…

I'm not saying you can't make money by buying and selling houses, but the average person's home is not an investment.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#103

Post by latj »

John23832 wrote: post #10

The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…

The behavior you describe is the way every investor should act. And the behavior of the underlying fund managers, and the executives of the companies below- they're all acting the way they're supposed to be acting-- maximizing profit, minimizing risk. Its not the fault of whales, greedy fund managers, poorly managed banks, or ineffective governance. This is capitalism and it is working exactly as designed- to funnel private wealth to a few people and distribute the risk among the masses.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#104

Post by nommm-nommm »

Spellman wrote: post #90
NikolaNovak wrote: post #84

Earlier quoted context omitted.

Can you elaborate on the homeowners considering their home an investment - and why they shouldn't? I've moved from Europe to Canada 20 years ago, and I'm still coming up against it all the time - I consider home/condo a utility, a bill paid for purpose; it can go up, but it can also go down. EVERYbody around me thinks I'm crazy and that houses are #1 best investment ever.

Because, at least in the US, except for the '08 crash housing has ALWAYS gone up. Historical Graph: http://www.calculatedriskblog.com/2017/01/corelogic-house-pr... Now, it hasn't (and hadn't) gone up as quickly as the stock exchange, but it typically is a safe place to park your equity and let it grow. And especially during the height of the bubble and currently, it's growing in value rather quickly, so people (perha…

Why Your House Is Not An “Investment”... a true investment requires more than the prospect of an increase in value.

https://www.moneyunder30.com/why-your-house-is-not-an-invest...

* A house has a more important primary purpose

* A house can’t be an investment if you never plan to sell it

* Thinking of your house as an investment can lead to equity stripping

* The carrying costs of a house are too high for it to be an investment

* Your house won’t generate cash flow

* Price appreciation is the magic ingredient, but it’s not guaranteed

I'm not actually arguing against home ownership, I am a home owner myself. A primary home (for most people) should be thought of more as a commodity item.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#107

Post by dcherman »

nommm-nommm wrote: post #91
NikolaNovak wrote: post #84

Earlier quoted context omitted.

Can you elaborate on the homeowners considering their home an investment - and why they shouldn't? I've moved from Europe to Canada 20 years ago, and I'm still coming up against it all the time - I consider home/condo a utility, a bill paid for purpose; it can go up, but it can also go down. EVERYbody around me thinks I'm crazy and that houses are #1 best investment ever.

Most Americans (and apparently Canadians) think their home is a very good place to park their entire net worth. Meaning they think its guaranteed to appreciate and appreciate faster than all other assets and investments a person has. They also tend to only look at raw numbers that look impressive unless you don't think about it too much rather than the whole picture. Grandma bought her house in 1970 for $10,000 and s…

Depends on your definition of investment and what you're looking to get out of it. If they maintain value by appreciating at least at the rate of inflation, then they're a great store of value. At that point, you need to take all expenses into consideration (including any applicable tax deductions and rental incomes from rooms) in order to determine whether you're net positive or net negative versus renting. This can't be generalized since it depends on your local housing/rental market, however I can speak for my own situation where I pay about the same for my home as I would for a rental where I'd live by myself. If I was to rent out my extra room, I'd be paying significantly less.

That's a bit long winded, just don't want people automatically rule out home ownership since not only can it be a point of pride, it actually can be financially beneficial if you're willing to do the math for your own situation.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#108

Post by CalChris »

latj wrote: post #103
John23832 wrote: post #10

The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…

The behavior you describe is the way every investor should act. And the behavior of the underlying fund managers, and the executives of the companies below- they're all acting the way they're supposed to be acting-- maximizing profit, minimizing risk. Its not the fault of whales, greedy fund managers, poorly managed banks, or ineffective governance. This is capitalism and it is working exactly as designed- to funnel…

Rent seeking.

https://en.m.wikipedia.org/wiki/Rent-seeking

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#109

Post by tormeh »

John23832 wrote: post #102
jholman wrote: post #93

Earlier quoted context omitted.

> I'll go ahead and say this. Your home is NEVER and investment. A house that you own, maybe. But, I repeat, your home is never an investment. I'll go ahead and say this. My home is certainly an investment. I allocated some capital to some real property, and this real property generates value for me every day, which I might have purchased otherwise (indeed, would have been nearly forced to). Because of the ability of…

I'm not saying you can't make money by buying and selling houses, but the average person's home is not an investment.

Well, it is if you plan to sell it and move to a cheaper place once you retire, using the profit to fund part of your retirement. That's well inside the definition of retirement saving.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#110

Post by Florin_Andrei »

roymurdock wrote: post #23
John23832 wrote: post #10

The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…

> We're going to keep going from crisis to crisis because banks can't say no, and the government(s) deems them too big to fail Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. The elderly woman in the article initially refused the $50k renovation to her 5 bedroom home, but then agreed because she thought the government was going to subsidize it for her. Th…

> Consumers can say no

In a pink unicorns and sunny meadows theoretical scenario, that is correct.

In reality, when that whole part of society is corrupt and dishonest, saying "no" to an important instrument (money loans) is a heck of a lot harder.

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