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

Re: Maybe treating housing as an investment was a mistake

#31

Post by 8note » Mon, Mar 06, 2023, 5:20 PM UTC

koolba wrote: post #4

The biggest real world advantage for the average person for buying a house is forced savings. If a mortgage is $3K and rent is $2K per month, Joe Sixpack is not going to save $1K in a sinking fund. He’s going to spend some extra non-zero portion of that money. So in the long run, for average real consumers, not a theoretical economically minded consumer, a mortgage forces frugality.

That rent will be 3K or higher. The competition is for who can pay the highest rent, and it won't be saved.

Without a mortgage, eventually Joe Sixpack's full paycheck goes to rent

Re: Maybe treating housing as an investment was a mistake

#32

Post by thriftwy » Mon, Mar 06, 2023, 5:21 PM UTC

Did anyone ever make this decision explicitly?

The city where I live is full of buildings which are all like "this was built by a %landlord name% as a means to support his retirement". This was ~150 years ago.

Re: Maybe treating housing as an investment was a mistake

#33

Post by [deleted] » Mon, Mar 06, 2023, 5:21 PM UTC

arberx wrote: post #5

That implies housing has risks. Since 2009, that risk has been eliminated by the FED owning 30% of all mortgages on its balance sheet. We've nationalized housing risk and privatized the gains.

[deleted]

Re: Maybe treating housing as an investment was a mistake

#34

Post by fooker » Mon, Mar 06, 2023, 5:21 PM UTC

rcme wrote: post #12

Buying a house is an investment. You're making a bet that worker productivity will improve near you. After all, what is the value of land? Some land can be farmed or house a factory. But usually, when we talk about residential real estate, we're talking about land that houses workers. So, the value of that land is directly proportional to the economic value those workers can provide. We refer to "economic value provi…

> You can't change that.

You don’t have to change that.

You can just make policies which make speculative investment less profitable while still allowing homeowners to buy houses.

Re: Maybe treating housing as an investment was a mistake

#35

Post by tagami » Mon, Mar 06, 2023, 5:21 PM UTC

It's the land that holds the value. The building depreciates.

Re: Maybe treating housing as an investment was a mistake

#36

Post by lnsru » Mon, Mar 06, 2023, 5:21 PM UTC

koolba wrote: post #4

The biggest real world advantage for the average person for buying a house is forced savings. If a mortgage is $3K and rent is $2K per month, Joe Sixpack is not going to save $1K in a sinking fund. He’s going to spend some extra non-zero portion of that money. So in the long run, for average real consumers, not a theoretical economically minded consumer, a mortgage forces frugality.

Close to my numbers. My old rent plus monthly savings are close to monthly bank payment for my home. My real consumption is dropping to zero since I want to get rid of mortgage as quick as I can.

Re: Maybe treating housing as an investment was a mistake

#37

Post by reocha » Mon, Mar 06, 2023, 5:22 PM UTC

last_responder wrote: post #30

mjr00 wrote: post #10

> While the rich are more likely to own homes, tons of middle class and poor people also bought homes and planned their lives under the assumption that housing prices would go up. Tanking housing prices would destroy their trust in the system that they bet everything on. This is pretty much the crux of it. High housing prices could be "fixed" almost overnight, but for almost every citizen of the first world, their ho…

>You'd be destroying everyone's retirement plans Everyone?

I presume by "everyone" they mean upper middle class folks

Re: Maybe treating housing as an investment was a mistake

#38

Post by photon12 » Mon, Mar 06, 2023, 5:22 PM UTC

lotsofpulp wrote: post #20

photon12 wrote: post #6

> Meanwhile, renters are desperate. They’re begging for housing prices not just to slow, but to fall. I have a friend who is a head chef at a decently popular bar and restaurant on Broadway in Capitol Hill, Seattle (very trendy part of town if you aren't familiar, steep commercial rent). He lives in a 400 sq ft studio and is barely, barely making it from one paycheck to the next. I am sitting on a 2.6% interest rate…

Cognitive dissonance means harboring contradicting thoughts. The difference in you and your friend’s situation is caused by the fact that they are selling labor which has a much lower price than the labor you are selling. This is not contradictory, just a consequence of supply and demand.

Yes, there is an inconsistency in the amount of effort expended to survive versus the outcomes of that effort. I can't reconcile them in my head. I'm watching my friend trying not to physically deteriorate and have some modicum of comfort while I sit here on my couch living off savings from the job I recently quit. Nothing I do can be so much more valuable than what he does.

Re: Maybe treating housing as an investment was a mistake

#39

Post by tlholaday » Mon, Mar 06, 2023, 5:22 PM UTC

Policy solution to intractable social differences:

Fund UBI with 2.5% SALSA, problem solved.

https://www.radicalxchange.org/concepts/plural-property/

Yes, new problems appear. Maybe new problems are less vexing.

Re: Maybe treating housing as an investment was a mistake

#40

Post by czbond » Mon, Mar 06, 2023, 5:22 PM UTC

RE was always a "meh" investment (nominal with inflation) - with growth due to prior demographic waves; The past 2008+, bubble interest rates and money printing have have created a difference in real returns and nominal ones. Which have subsided.

Realize the investment underpinning before taking on the investment. RE of a personal residence is rarely a good idea... buy cheap personal homes (small liabilities), and then use the excess to buy rental homes (income asset + depreciation).