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How Homeownership Became the Engine of American Inequality

nytimes.com

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Re: How Homeownership Became the Engine of American Inequality

#211

Post by kemiller »

dustingetz wrote: post #108
kemiller wrote: post #49

Removing the MID would make middle-to-upper-middle-class people poorer, and so reduce inequality that way, but would it help poor people at all? The net monthly cost of housing would stay the same, just shift the proportion of your payment that goes to the government vs the bank. It's true that it's regressive, but I'm skeptical that's a huge factor. I think it would just help landlords, who would retain the ability…

the article says that the MID causes upward pressure on prices, which you acknowledge in the edit but not in your first sentence

That's why it would make them poorer. Removing upward pressure on their largest asset makes them poorer as the price falls.

Re: How Homeownership Became the Engine of American Inequality

#212

Post by kemiller »

strictnein wrote: post #151
kemiller wrote: post #49

Removing the MID would make middle-to-upper-middle-class people poorer, and so reduce inequality that way, but would it help poor people at all? The net monthly cost of housing would stay the same, just shift the proportion of your payment that goes to the government vs the bank. It's true that it's regressive, but I'm skeptical that's a huge factor. I think it would just help landlords, who would retain the ability…

> "it was a huge windfall to whomever owned property when it was introduced" It is my understanding that all interest used to be tax deductible and college and home mortgage are the last ones remaining.

That's not what TFA said as I read it.

Re: How Homeownership Became the Engine of American Inequality

#213

Post by pkaye »

epistasis wrote: post #57
pkaye wrote: post #14

Earlier quoted context omitted.

The MID barely cancels out my property taxes. Imagine if your investment accounts had to pay 1% tax every year based on its current worth even if you didn't realize any profits.

Sounds like a lot of mutual funds...

I thought with mutual funds you still pay taxes only on the profits. With property taxes you pay it on the current value.

Re: How Homeownership Became the Engine of American Inequality

#214

Post by cbhl »

astrodust wrote: post #166
cbhl wrote: post #127

Earlier quoted context omitted.

Yes, this is the right thing to do. From /r/personalfinance: https://i.imgur.com/fb7Dtmh.png

Where's the part where medical bills bankrupt you and you die in your 40s from what's an otherwise easily treatable disease?

A great way to mitigate that is to move to Canada. :)

Re: How Homeownership Became the Engine of American Inequality

#215

Post by kudokatz »

microdrum wrote: post #95
spaceflunky wrote: post #77

This article is incredibly misguided for several reasons... 1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans. 2.) A lot of rich people don't really pay income taxes like middle class people do. This is s…

This, 1,000x. There are a lot of families making $1 million gross ($500K net) in income. They live in SF and NY. Both parents work 10 hour days. They live in an uncomfortably small house and have a $1 million mortgage. They can barely save for college after paying for childcare costs and the mortgage. But they're "rich." Yeah, right.

Their choice to buy a house like that in such a market and have a kid on top of a huge mortgage with almost no free time. Consider an alternative: live together in a tiny $3k/mo apartment, save hundreds of thousands of dollars a year, move to a low-cost market, and retire at 35 with an amazing amount of money. THEN have children while the investment portfolio goes bananas over the next few decades ...

Re: How Homeownership Became the Engine of American Inequality

#216

Post by kudokatz »

refurb wrote: post #40
DamnYuppie wrote: post #7

I don't know of anyone who bases a home purchase decision on the mortgage interest deduction. Seriously location, school district, cost of home, time to commute, yard size, cost of HOA are all more important to everyone I know. In fact it has never come up in conversations about home purchases with my peer group.

Sure it does. Think of it this way.... Targeting an all in home payment (principle, interest, insurance, taxes) of 1/3 your $100K income, so $30K or $2,500 per month. In a world with MID, the ~$1500 in interest payment each month can be paid with pre-tax money. Assume you're in the 30% bracket, that means an extra $450 each month. Now you can afford a mortgage that costs effectively $3000 per month, which comes out t…

> Now you can afford a mortgage that costs [more due to market distortions]

sounds like a great way to push up prices!

Re: How Homeownership Became the Engine of American Inequality

#217

Post by erroneousfunk »

kudokatz wrote: post #122
Retric wrote: post #63

Earlier quoted context omitted.

Savings are only part of the equation. Home ownership lowers income mobility by reducing the competitiveness of the labor market and increasing commuting costs. Worse it promotes moving to areas with the maximum possible jobs which destroys smaller towns and city's while creating even worse congestion.

> Home ownership lowers income mobility by reducing the competitiveness of the labor market Yep. But I still bought anyways, even though houses are what I consider "bad investments" if looking at them in the abstract: * high transaction costs * illiquid * concentrated * requires maintenance ... But the calculation was that since the local market and job market for me are amazingly hot right now, it'd transfer my vari…

I rented until just recently (mostly 1 year or less, over 10 years -- lots of different places in the greater Boston area), and although I ran the numbers to make sure I wouldn't be doing anything too stupid, in the end it just came down to "I want to own my own home"

My spouse and I have done a ton of work on it, don't mind the maintenance issues, and we still get a kick out of just pointing to things and saying "that's ours!" (Okay, well... it's most the bank's. But still.)

I think "I'm sick of renting someone else's house" is a very non-negligible factor that's not often brought up in cost/benefit analyses like these.

Re: How Homeownership Became the Engine of American Inequality

#218

Post by thescriptkiddie »

AnimalMuppet wrote: post #204
thescriptkiddie wrote: post #203

Earlier quoted context omitted.

People are going to downvote you for mentioning cryptocurrencies, but your point is true even of much more conservative investment strategies. A home is not an investment, it is a depreciating asset. If you can afford to buy a home (in cash or on a mortgage), you will almost always come out ahead if you put the money into mutual funds and rent instead.

I question your "almost always". If I buy a home, it's a depreciating asset. That is, I buy a home (via mortgage) for $300,000, and at the end of the mortgage, it's only worth $200,000. So I've paid $300K for an asset that's only worth $200K. But if I rented, at the end of the same time period, I have an asset worth $0, and still have to pay to live somewhere . But of course it's not that simple. I can often rent for…

The number I've always heard is 4% after inflation, but that assumes no capital gains tax. Here is an article [0] that claims 1.9% per year over 30 years after accounting for taxes and inflation. Plugging $0 starting capital, $12,000 addition per year, and 1.9% compounded annually into the compound interest formula yields $480,000 after 30 years. Then keep in mind that owning a home obligates you to pay for property tax, maintenance, and insurance. Of course, there are still some cities where buying is a sensible option [1].

[0] https://www.forbes.com/sites/advisor/2014/04/24/why-the-aver...

[1] https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci...

Re: How Homeownership Became the Engine of American Inequality

#219

Post by shados »

lotsofpulp wrote: post #181
ww520 wrote: post #171

Earlier quoted context omitted.

I see. Isn't property tax collected by the counties go up to the state? I thought municipal taxes are the ones collected by the cities and used by the cities.

I'm assuming that shados was using the term "municipal tax" to refer to property taxes. If not, then I'm not aware of any other type of large common tax that could referred to as municipal tax relevant to this discussion. Property tax is also for local use, such as schools, police, and city/county departments. Taxes for the state are mainly state income tax and state sales tax.

Correct. While I live in the US, english is absolutely my second language. I meant property taxes :)

Re: How Homeownership Became the Engine of American Inequality

#220

Post by [deleted] »

tanderson92 wrote: post #128
rootusrootus wrote: post #121

Earlier quoted context omitted.

Although the parent poster was being a little inflammatory with the choice of words, there is a bit of an interesting point there. Is there a benefit to society in general from people owning homes instead of renting? High portability can benefit the renter, but a bigger commitment to the neighborhood perhaps benefits the rest of us? Maybe enough to incentivize?

High portability might also benefit society. We hear a lot about families in the midwest who are locked into their employment markets which are declining.

[deleted]
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