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The Shock of Sweden's Housing Market Is Hitting the Country's Currency

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Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#321

Post by marvin »

lisper wrote: post #298
kgwgk wrote: post #287

Earlier quoted context omitted.

Do you mean “win” compared to the counterfactual where the house has appreciated and you don’t move to a similar one, or compared to the counterfactual where the house didn’t appreciate and you move to another one at the original price? If there had been no appreciation, your final wealth (cash + home equity) would be lower than in the case where the houses are more expensive, even after paying taxes, so it’s hard to…

> Do you mean “win” compared to the counterfactual where the house has appreciated and you don’t move to a similar one, or compared to the counterfactual where the house didn’t appreciate and you move to another one at the original price? Either one. We put a certain intrinsic value on a local lateral move. If the cost of moving is less than that intrinsic value, and we find a house we like, we'll move. If the cost o…

I must say I am thoroughly impressed by your patience. You're repeatedly explaining what seems to me like a pretty simple calculation to lots of different people who only gets it after a lengthy explanation.

It's a first-world problem, but as you say, it's still a problem. Unless you're okay with taking the loss, or just moving somewhere far away because the market decided that this area has now become too expensive to allow existing homeowners to downsize.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#322

Post by mbesto »

lisper wrote: post #305
ng12 wrote: post #291

Earlier quoted context omitted.

I feel like you're really making your own problem here -- you want to downsize while keeping a large portion of your equity. The ratio of profit you make moving from a $2m house to a $1m house is the same as moving from a $200k house to a $100k house in a "stable" area.

This has nothing to do with equity (except insofar as equity is part of your net worth). This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles. The higher prices go, the higher that cost goes. It's easiest to see that when considering a purely lateral move, but the cost of a move doesn't really depend on the cost of what you buy with t…

> The higher prices go, the higher the actual cost of moving goes

Sans CA taxes, this is relative to the increase of wealth you've accumulated. So yes in the absolute it's higher, but relatively speaking you've still are earning more money in liquidity during the transaction.

> This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles.

I think I finally understand your position now. The cost isn't prohibitive, it's the negative impact on your wealth. Which is true. The reason I and others are reacting strongly to your position is because your conflating transactional costs (expenses, fees, etc) with wealth (accumulation of assets). Two very different things that use a common medium to interact (i.e. currency).

Here's the predicament. Your implying that you can transfer assets (wealth) without any transactional costs. This is just not how the market for any asset transfer works (stocks, cash, etc), because someone or some system has to be setup to broker the transaction. What your essentially complaining about is why you have to pay fees to complete an asset transfer. I know very few markets were transferring assets doesn't incur a fee. I don't know what to tell you other than this is basically economics 101.

CA taxes on the other hand - that's something to complain about. CA taxes inadvertently nudge people to hold on to property longer, reducing supply and thus driving overall prices up.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#323

Post by Retric »

lisper wrote: post #284
Retric wrote: post #273

Earlier quoted context omitted.

You also save that 500,000$ of appreciation when selling the second house. AKA, if house 1 gained 2 million and house 2 gained 2 million your better off than if house 1 gained 4 million. Now, you can get into cash flow issues etc. But, with home interest being tax deductible and long term capital gains being below normal taxes your almost always better off over time to sell after a bubble than before. PS: If your inv…

> if house 1 gained 2 million and house 2 gained 2 million your better off than if house 1 gained 4 million. No, that's not true because the $500k cap gains exemption is per-transaction.

> cap gains exemption is per transaction.

Reread what I said?

That's why 2 houses with 2 mill gains is better than 1 house with a 4 million gain.

Selling 1 house with a 4 million gain is one transaction with a 500k cap so you pay taxes on 3.5 million. But selling one house with a 2 million gain then another house with another 2 million gain is 2 transactions so you pay capital gains on 3 million and get an extra 500k tax free.

Remember, until you sell the second house it's value is meaningless but when do sell it's purchase price and value become important.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#324

Post by lolsal »

zanny wrote: post #268
lolsal wrote: post #93

Earlier quoted context omitted.

Your mindset completely boggles my mind.

Alternate economic views are incomprehensible?

No, not at all. Other economic views are definitely comprehensible to me, however this particular one is mind boggling because me and OP seem to have genuinely incompatible principals and values. "housing should be free" - according to who? What entity is coercing the 'should' in that sentence? What law of nature says that housing should be free? It implies in a society that you have a right to someone else's time and labor. That's amazing! It makes me wonder why the OP thinks that way and what circumstances led them to think that way.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#325

Post by marvin »

xbzbanna wrote: post #150
alkonaut wrote: post #84

Earlier quoted context omitted.

Yes gross. $80k gross is around $53k net (depends on where you live but roughly). Now, remember that reason we are in this mess is because interest rates are so low. We still have pretty low living costs. Our $1M house at 80% is pretty cheap, due to low interest rates. Now, everyone knows interest rates can and will be higher in the future, but people have to buy on the current market regardless (And everyone seems t…

You're talking about these interest rates as though they can just move around - are these adjustable-rate mortgages? In the US, the standard mortgage has a fixed rate. So people with those mortgages would benefit from increased interest rates and/or inflation in the wider economy.

Adjustable at a month's notice in Norway. You're free to refinance or change banks whenever you want. But if some crisis forces your bank to increase rates quickly (e.g. due to increased costs for the bonds that support their loan portfolio), you can bet every other bank will be forced to increase rates too.

This happened in 2008, and a disaster was averted only because the government bailed out the banks by allowing them to trade their now-bad commercial bonds for government bonds. It turned out to be a good deal for the government, because commercial bond rates came back down quickly. (No guarantee that this would have happened, just luck).

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#326

Post by lisper »

mbesto wrote: post #322
lisper wrote: post #305

Earlier quoted context omitted.

This has nothing to do with equity (except insofar as equity is part of your net worth). This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles. The higher prices go, the higher that cost goes. It's easiest to see that when considering a purely lateral move, but the cost of a move doesn't really depend on the cost of what you buy with t…

> The higher prices go, the higher the actual cost of moving goes Sans CA taxes, this is relative to the increase of wealth you've accumulated. So yes in the absolute it's higher, but relatively speaking you've still are earning more money in liquidity during the transaction. > This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles. I t…

> you've still are earning more money in liquidity during the transaction.

So? How does that benefit us in any way? We don't need to sell to have liquidity. We have a HELOC so we can turn our equity into cash on demand.

> your conflating transactional costs (expenses, fees, etc) with wealth

No, I'm not. I'm just saying that transactional costs decrease your wealth, which is simply a fact.

> The cost isn't prohibitive, it's the negative impact on your wealth

What exactly is the difference between "cost" and "negative impact on your wealth"? Those two seem like the same thing to me.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#327

Post by marvin »

alkonaut wrote: post #173
xbzbanna wrote: post #150

Earlier quoted context omitted.

You're talking about these interest rates as though they can just move around - are these adjustable-rate mortgages? In the US, the standard mortgage has a fixed rate. So people with those mortgages would benefit from increased interest rates and/or inflation in the wider economy.

Yes, many homeowners have all or a large part of the mortgage at a rate adjusted several times per year. Right now these variable rates are around 2%. So a lot of people will see their interest rate expenses double if (when) rates normalize at say 4%. I have my mortgage split between 5year fixed, 2 year fixed and the 3month rate, in order to limit my exposure to variations somewhat. The general consensus is long fixe…

Of course, most people who borrow 80+% can't _really_ afford the risk of an adjustable-rate mortgage, but they think they can because rates are always low and will never go back up ;)

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#328

Post by MisterPC »

nvarsj wrote: post #157
ppeetteerr wrote: post #115

Earlier quoted context omitted.

I agree with everything except for the "make them and their other rich buddies even richer." Let's not bundle all politicians into this. :)

It's sort of telling how many prominent politicians in the UK make much of their income off of housing. Boris Johnson, George Osbourne, and David Cameron all come to mind - all who were in prime places to improve the situation, but it was against their best interests.

I don’t think you can really blame 3 conservative politicians for the home price boom in most western countries over the past 20 years! They weren’t even in power for a major part of the boom in the UK (Labour were in power from 1997-2010).

The most recent part of the increase has come from the slashing of interest rates to rock bottom following the global financial crisis and quantative easing, neither of which is the responsibility of the government.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#329

Post by lisper »

marvin wrote: post #321
lisper wrote: post #298

Earlier quoted context omitted.

> Do you mean “win” compared to the counterfactual where the house has appreciated and you don’t move to a similar one, or compared to the counterfactual where the house didn’t appreciate and you move to another one at the original price? Either one. We put a certain intrinsic value on a local lateral move. If the cost of moving is less than that intrinsic value, and we find a house we like, we'll move. If the cost o…

I must say I am thoroughly impressed by your patience. You're repeatedly explaining what seems to me like a pretty simple calculation to lots of different people who only gets it after a lengthy explanation. It's a first-world problem, but as you say, it's still a problem. Unless you're okay with taking the loss, or just moving somewhere far away because the market decided that this area has now become too expensive…

Thank you, I'm glad someone noticed that.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#330

Post by ng12 »

lisper wrote: post #326
mbesto wrote: post #322

Earlier quoted context omitted.

> The higher prices go, the higher the actual cost of moving goes Sans CA taxes, this is relative to the increase of wealth you've accumulated. So yes in the absolute it's higher, but relatively speaking you've still are earning more money in liquidity during the transaction. > This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles. I t…

> you've still are earning more money in liquidity during the transaction. So? How does that benefit us in any way? We don't need to sell to have liquidity. We have a HELOC so we can turn our equity into cash on demand. > your conflating transactional costs (expenses, fees, etc) with wealth No, I'm not. I'm just saying that transactional costs decrease your wealth, which is simply a fact. > The cost isn't prohibitive…

I think the core contention here is that, at the end of the day, you are better off because of rising housing prices. You're complaining about transnational prices on your massive amount of equity while brushing aside the fact that you have such a massive amount of equity because of the real estate market.
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