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Priced out of home ownership

bbc.co.uk

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Re: Priced out of home ownership

#371

Post by jandrewrogers »

alex_duf wrote: post #302
fairity wrote: post #208

I don’t get articles like this. It’s arguably a better financial decision to NOT buy a home, and park your downpayment in a broad based index fund. I get that there are arguments for or against, but there doesn’t seem to be a clear financial advantage to home ownership. So, what’s the big fuss about? Just pay rent and carry on? Surely, there are better things to focus on?

Surely you can see the difference between giving away a significant portion of your income to your landlord, or paying towards your mortgage. In one case you can sell your property and get your money back, so you can decide to do whatever you want with it (like index fund if you so chose). And in the other it's your landlord who's either paying their mortgage with your money, or placing it in said index fund...

At least in many parts of the US, the financial loss of renting is currently less than the financial loss of a mortgage, after subtracting contribution to principal. In Seattle there are places where renting is $2k+/month cheaper than the non-principal carrying costs of the same place. Buying it instead of renting it would literally be lighting $2k/month on fire that you don't need to. A renter can invest that extra $2k/month, so they come out ahead.

The cost structure of landlords is often very different than the cost structure of new homeowners. They can make a tidy profit charging rent that is significantly lower than your mortgage payment.

Re: Priced out of home ownership

#372

Post by robertlagrant »

The problem is lack of supply vs demand. In 2022,England and Wales:

- built 254000 homes[0]

- had 745,000 people immigrate (net)[1]

- had 600000 people turn 21[2]

- had 577160 people die[3]

If you gain a load of people, far more than you increased dwellings for, prices will go up and dwelling size will go down. It's not particularly complicated.

[0] https://www.savills.co.uk/research_articles/229130/357082-0

[1] https://www.bbc.co.uk/news/uk-politics-67612106

[2] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...

[3] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...

Re: Priced out of home ownership

#373

Post by alexpetralia »

shuckles wrote: post #318
tmnvix wrote: post #274

People intuitively jump to the conclusion that the problem is caused by a lack of building. While more building would help, a lack of it isn't the main cause of this problem. Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause? In my view this is symptomatic of a more fundamental issue - global asset price infla…

> People intuitively jump to the conclusion that the problem is caused by a lack of building. In my experience, people "intuitively" jump to basically every conclusion besides this one. "Greedy landlords" or "[favorite scapegoat] collusion" are intuitive conclusions which are far more common than supply and demand. > Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same ina…

Asian countries have a lot more people and build a lot more housing.

Re: Priced out of home ownership

#374

Post by dgfitz »

Carrok wrote: post #254
IAmGraydon wrote: post #248

Earlier quoted context omitted.

The recent rate of appreciation is not typical. Homes generally appreciate at 3-4% per year. Subtract from that taxes, insurance and upkeep. They’re a terrible investment unless you own rental property, at which point your tenants are paying down the loan.

So, the alternative to buying, which is a terrible investment according to you, is renting, where you pay down the loan of the landlord. That’s better, how?

It’s not. This trope is repeated on this forum all the time.

Some people prefer the freedom of not being stuck in one place. Super duper. That’s excellent, they prefer renting.

Trying to convince the rest of the world that it is a sound financial decision in lieu of buying a home and establishing equity is where the argument over “renting is better than buying from a financial perspective” falls apart and the absurdities start getting thrown about.

Re: Priced out of home ownership

#375

Post by Macha »

ivan_gammel wrote: post #366
aegypti wrote: post #325

Earlier quoted context omitted.

The OECD link you’ve provided shows the complete opposite of your point. The UK, Ireland, Canada, and New Zealand are at the bottom of % vacant dwellings indicating the opposite of underutilization.

Iirc, 20% of all bedrooms in UK are spare bedrooms in houses that are too big for their owners. This is indeed underutilization.

As someone with spare bedrooms, this itself is a problem of undersupply. If you can't be sure of being able to trade up when you need to (e.g. after starting a family) because house prices are up 100% in 10 years, then you're going to want to buy a house for all possible future needs, rather than current needs.

Add to that, things that might be desirable for other reasons, like garden space, rooms for use as offices, large kitchens, etc. all tend to scale with bedroom count too.

Re: Priced out of home ownership

#376

Post by deergomoo »

JumpCrisscross wrote: post #280
deergomoo wrote: post #243

Earlier quoted context omitted.

No-one can kick you out of your own home because they want to rent to someone they can charge more. No-one can tell you you can’t change the wallpaper in your own home, or remodel the bathroom, or get a dog. Not everything is a purely financial decision. A home is primarily a place to live, not an investment opportunity.

> No-one can kick you out of your own home because they want to rent to someone they can charge more Property tax isn’t voluntary and as exogenous as a landlord. (Also eminent domain, to say nothing of most peoples’ mortgages.) > Not everything is a purely financial decision Making the largest leveraged purchase of your life for an emotional comfort object is irrational. That doesn’t make it wrong. But it ceases to b…

> Property tax isn’t voluntary and as exogenous as a landlord

I live in the UK. I have to pay the same rate of council tax for the property whether I own it or rent it.

However that’s completely beside the point: my council tax isn’t suddenly going to double overnight because a single person decided they can extract more money.

> Making the largest leveraged purchase of your life for an emotional comfort object is irrational

You are completely missing the point. A place to live that is truly your own is not like buying some luxury good.

I could buy your argument were it about buying a mansion vs a small family home, but the article is about people being unable to buy any home.

Re: Priced out of home ownership

#377

Post by djbusby »

fairity wrote: post #208

I don’t get articles like this. It’s arguably a better financial decision to NOT buy a home, and park your downpayment in a broad based index fund. I get that there are arguments for or against, but there doesn’t seem to be a clear financial advantage to home ownership. So, what’s the big fuss about? Just pay rent and carry on? Surely, there are better things to focus on?

My favorite features of mortgage vs rent is that mortgage is constant.

So, in 10/yr I'm still paying $2000/mo while rents have moved to $3200/mo

Re: Priced out of home ownership

#378

Post by tmnvix »

dan-robertson wrote: post #351
tmnvix wrote: post #274

People intuitively jump to the conclusion that the problem is caused by a lack of building. While more building would help, a lack of it isn't the main cause of this problem. Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause? In my view this is symptomatic of a more fundamental issue - global asset price infla…

> do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build …? Sort of? See eg https://www.ft.com/content/dca3f034-bfe8-4f21-bcdc-2b274053f... for some graphs that show Europe vs anglophone countries in an obvious way. Obviously there are lots of differences between the countries, eg the specifics of their planning systems and economies. The US is different because of the…

> you see something like 20% more dwellings per person in developed EU countries vs English-speaking countries, which doesn’t feel like no difference at all.

I was attempting to highlight the change in numbers for those countries I mentioned and how they are clearly inadequate when trying to explain the change in prices over the same time.

In NZ there was little change from 2011 to 2022 but median house price went from NZD350k to NZD900k.

I agree with regard to demand being different in various locations within a country, but those localised demand differences would have had to shift pretty dramatically over the same ten year period to explain much I imagine.

Re: Priced out of home ownership

#379

Post by throwaway22032 »

ivan_gammel wrote: post #366
aegypti wrote: post #325

Earlier quoted context omitted.

The OECD link you’ve provided shows the complete opposite of your point. The UK, Ireland, Canada, and New Zealand are at the bottom of % vacant dwellings indicating the opposite of underutilization.

Iirc, 20% of all bedrooms in UK are spare bedrooms in houses that are too big for their owners. This is indeed underutilization.

Underutilized would imply that it's literally useless dead space.

I have more rooms in my house than people, they have purposes.

Re: Priced out of home ownership

#380

Post by whydid »

tmnvix wrote: post #274

People intuitively jump to the conclusion that the problem is caused by a lack of building. While more building would help, a lack of it isn't the main cause of this problem. Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause? In my view this is symptomatic of a more fundamental issue - global asset price infla…

Rare perspective, and I totally agree. Building more homes is like expanding roads. It doesn't solve the root problem.
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