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Home ownership is the West’s biggest economic-policy mistake

economist.com

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Re: Home ownership is the West’s biggest economic-policy mistake

#451

Post by ethagknight »

bradlys wrote: post #449
ethagknight wrote: post #369

Earlier quoted context omitted.

This is not correct, both land and structure have differing but related values. With persistently increasing construction complexity and building code, replacement cost generously outpaces existing building value. At least from a USA perspective, many neighborhoods are stuck with older, dated housing stock that would be aesthetically better off scraped and rebuilt in modern form, but the existing home is too valuable…

> With persistently increasing construction complexity and building code, replacement cost generously outpaces existing building value. At least from a USA perspective, many neighborhoods are stuck with older, dated housing stock that would be aesthetically better off scraped and rebuilt in modern form, but the existing home is too valuable and ground-up new construction too expensive relative to market. Is this not…

Not NIMBY, that’s a separate, complicated issue. I’m just referring to the intrinsic value of an existing structure, replacing like for newer like, in a rational “middle America” market (not california).

Re: Home ownership is the West’s biggest economic-policy mistake

#452

Post by sn9 »

deepstack wrote: post #245
yrgulation wrote: post #78

Property ownership is bad. Rent for life, dont leave inheritance to your children so they can rent for life too. All you need in life is clothing, entertainment, a bit of travel to distract you from your tiny living space, maybe a gadget or two and of course onsite work. Oh and praise from you manager to add meaning to your daily grind. Or so “they” say while “they” amass thousands of properties and massive fortunes…

Upvote! Private property ownership and intergenerational wealth transfer is the foundation of middle class, and bigger middle class leads to better education for the masses, and a more democratic society!

That may have been historically true, but that's also because people have historically not relied on much better investment vehicles.

Historically, housing has actually been a poor investment relative to investing in the stock market. Most people simply didn't know how or whether to invest, but nowadays investment vehicles like index funds and target date funds make that relatively straightforward.

We should be discouraging housing as investment so affordable housing can be a thing that exists and the housing market can respond to demand by building out the supply at levels people can afford while also encouraging people to sock away at least 5-15% of every paycheck into passively managed investment vehicles that have way higher long term returns than housing ever did.

The current situation is that we subsidize the middle and upper classes in terms of housing at the expense of the poor and those just starting out by artificially and unnecessarily pushing up the price of housing and constraining supply.

Re: Home ownership is the West’s biggest economic-policy mistake

#453

Post by viraptor »

daemin wrote: post #370
viraptor wrote: post #320

Earlier quoted context omitted.

There's another way out which seems to be popular recently - move out of the city and get prices closer to $200k median for an ok house. You can see available houses in Victorian towns disappearing off the market over the last year as people move out enabled by remote work. I get that not everyone can do it, but it's a possibility for more sanity in house ownership for a groups. Unfortunately that also allows Melbour…

The problem is there's already a lot of demand for property in those smaller towns, at least the more desirable ones. So the locals are now the one's getting priced out of the market as more and more city-dwellers are moving to the popular smaller towns.

True. I don't think we can ever avoid that - city people moving out will raise prices elsewhere, but 1. there's a limit to it - it's a relatively small increase spread across many towns 2. small towns can grow aggressively around the current centres. Wang for example was planning for up to +23% 20y change in population until 2031 with all the related development areas and infrastructure. Many towns an do the same and will still be more attractive than the far suburbs of Melbourne (north beyond the airport).

So basically, as long as regional towns keep up with development and infrastructure, the overall result may not be a crash, but rather slow exodus from the cities. Now if only transport/trains would keep up with the times...

Re: Home ownership is the West’s biggest economic-policy mistake

#454

Post by WalterBright »

Nursie wrote: post #440
WalterBright wrote: post #430

Earlier quoted context omitted.

Not at all. Bubbles are only obvious in hindsight. If somehow you are prescient enough to recognize them reliably in advance, you can make yourself a cool billion easy.

This still ignores that speculation can contribute to them, and can move the market. It's is not a rebuttal or an explanationa.

If speculators realize there's a bubble, they'll short it and thereby make money when it collapses.

Shorting a bubble moderates its price rise.

Re: Home ownership is the West’s biggest economic-policy mistake

#455

Post by NiceWayToDoIT »

RobertoG wrote: post #142
NiceWayToDoIT wrote: post #97

Huge difference is that wealthy/landlords buy properties with debt and operate with cash-flow while for them liability creates wealth. For working people properties on mortgage are just expense. https://www.singsaver.com.sg/blog/robert-kiyosaki-advice-on-...

Until you pay the mortgage. Then, your bigger expense, rent, disappear and you can start saving. Also, the thread of homelessness disappear from your life. That's something never will happen if you keep just renting.

I was pointing to something else, landlords have advantage as they can borrow money using (10x) leverage created on cash-flow, in that way landlords do not use "their own money" but operate on huge debt. Crude example is that for your mortgage bank will shake last penny and do XX number of checks, and then you will pay that money as your major expense paying with your salary. For you home is not an asset, it will become asset only when you pay it out, until then it is expense a burden, so for you debt is bad thing. For landlords on the other hand debt is good, as more debt they have more properties they have and they can create larger cash-flow. While you pay huge taxes on your salary 40-55%, landlords can pay no taxes at all as they are constantly in debt. (Trump's way) But government cannot do anything about it because if they do something crash will be worse than the 2008 one, any new policy could impact landlords with portfolios in billions. Now, if they are in debt how they make fortunes someone may ask? Property prices grow with time, and with different loopholes if you mass let say 100 properties over 10-20 years, and then you sell only ten you will probably get out money enough to pay out initial debt of first 50. (figures are rough just to get point at least in London they are very close to true figures). Also it is worth mentioning, that cash-flow is paying salaries, expenses, dividends ... and there are multiple other known tax loopholes how to get the money out ...

Re: Home ownership is the West’s biggest economic-policy mistake

#456

Post by snypher »

jimbob21 wrote: post #398
effingwewt wrote: post #391

Earlier quoted context omitted.

Then please stop providing the service. If we had no landlords renting we would all own domiciles. So please, stop providing these 'services'

If we had no grocery stores we would all own farms. Please stop providing these services

In an ideal world.

Re: Home ownership is the West’s biggest economic-policy mistake

#458

Post by jjav »

sn9 wrote: post #452
deepstack wrote: post #245

Earlier quoted context omitted.

Upvote! Private property ownership and intergenerational wealth transfer is the foundation of middle class, and bigger middle class leads to better education for the masses, and a more democratic society!

That may have been historically true, but that's also because people have historically not relied on much better investment vehicles. Historically, housing has actually been a poor investment relative to investing in the stock market. Most people simply didn't know how or whether to invest, but nowadays investment vehicles like index funds and target date funds make that relatively straightforward. We should be disco…

> housing has actually been a poor investment relative to investing in the stock market

Even if you wanted to think of housing as an investment, it should be compared not to the stock market but to the lifelong cost of renting, since it's one or the other (unless you plan to be homeless).

Re: Home ownership is the West’s biggest economic-policy mistake

#459

Post by jjav »

bluGill wrote: post #305
yrgulation wrote: post #78

Property ownership is bad. Rent for life, dont leave inheritance to your children so they can rent for life too. All you need in life is clothing, entertainment, a bit of travel to distract you from your tiny living space, maybe a gadget or two and of course onsite work. Oh and praise from you manager to add meaning to your daily grind. Or so “they” say while “they” amass thousands of properties and massive fortunes…

Renting and buying can both turn out well depending on your individual circumstances. If you buy you eventually have a house rent free. However if your rent you probably spend less on rent - so invest that difference and you end up with about the same. With real estate "location location location". In some areas there are situations that will make one or the other better. Everybody has their own life goals, and that…

> if your rent you probably spend less on rent

For a while, usually yes. Long term, no chance.

A mortgage can only ever go down. Rents most of the time only go up.

My mortgage was initially over 3K while rent had been ~1.5K. But years later, those equivalent rents are ~5K and my mortgage is under $1K. In a couple decades when I'm retired, who know how high those rents will be? But I know exactly what my mortgage will be, $0.

Re: Home ownership is the West’s biggest economic-policy mistake

#460

Post by jjav »

daemin wrote: post #425
bluGill wrote: post #305

Earlier quoted context omitted.

Renting and buying can both turn out well depending on your individual circumstances. If you buy you eventually have a house rent free. However if your rent you probably spend less on rent - so invest that difference and you end up with about the same. With real estate "location location location". In some areas there are situations that will make one or the other better. Everybody has their own life goals, and that…

One thing people seem to skip over is that once you have bought a house you will still need to pay many fees. Just owning a house isn't free, there will be property taxes, fees for services, and other actions that require money from you. In a lot of cases when renting these are taken care of by the landlord. So just the rent vs mortgage comparison (or rent vs no rent) is misleading at best, downright fraudulent at wo…

> In a lot of cases when renting these are taken care of by the landlord.

Approximately never are any of those costs taken care of by the landlord! The renter is paying for them, plus a profit margin for the landlord. That's what rent is. The landlord isn't running a charity.

Only exception is if you luck into a rental by someone who paid off the property long ago and doesn't care to charge market prices for it.

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