Why a house is a terrible investment (2013) • Hacker News Board

Re: Why a house is a terrible investment (2013)

#71

Post by smnrchrds » Mon, Apr 23, 2018, 1:01 AM UTC

FLUX-YOU wrote: post #66

smnrchrds wrote: post #51

Earlier quoted context omitted.

> I really fail to see how most of those points are relevant when you consider that a home is an investment you can, you know, live in. The alternative would be to rent indefinitely, which apparently we're ok with even though its not just a 0% return on investment, its an infinitely negative percent return on investment. This would only make sense if you want to live in a place indefinitely. When the economy here (Al…

Towns that depend on one or a few employers have been a losing bet for home ownership. This has been learned multiple times already. It seems good if you get out before it goes bust, but that's like catching a falling knife (especially if the company is not forthright about its impending doom).

It was not that there was one or few employers. There were many companies, large and small, operating in Calgary, Edmonton, and the rest of Alberta. The problem was that the lion's share of the economy was directly or indirectly related to a single industry: oil and gas. When the price of oil went down, they all suffered.

I think the majority opinion on HN is that unlike other industries like energy, auto manufacturing, agriculture, etc., tech is uniquely immune to downturns. My impression is that most people on HN believe that the tech scene in California is only ever going to get bigger and more lucrative, and with it property prices are always going to go up. Even suggesting that tech and SF bay area might end up like, say Detroit and auto manufacturing industry, would make many to dismiss your point entirely. But as an outsider who does not have a horse in this race, I don't share the same mindset. Only time will tell the truth. But I won't be surprised if the sustained tech boom goes bust at some point during the next half century.

Re: Why a house is a terrible investment (2013)

#72

Post by sulam » Mon, Apr 23, 2018, 1:02 AM UTC

smnrchrds wrote: post #51

013a wrote: post #16

I really fail to see how most of those points are relevant when you consider that a home is an investment you can, you know, live in. The alternative would be to rent indefinitely, which apparently we're ok with even though its not just a 0% return on investment, its an infinitely negative percent return on investment. Even if your house breaks even over 10 years, you still got to live in it for ten years for what is…

> I really fail to see how most of those points are relevant when you consider that a home is an investment you can, you know, live in. The alternative would be to rent indefinitely, which apparently we're ok with even though its not just a 0% return on investment, its an infinitely negative percent return on investment. This would only make sense if you want to live in a place indefinitely. When the economy here (Al…

You know what's worse than homes when it comes to investments? Kids! They don't give you any return on investment at all until possibly late in life, depending on your culture and relationship (better hope they stay near you) and they make you a lot less mobile, both in terms of geography and career opportunities. They suck up a lot of your income and they probably shorten your life span due to lost sleep in the early years.

Stay away!

Re: Why a house is a terrible investment (2013)

#73

Post by sulam » Mon, Apr 23, 2018, 1:03 AM UTC

dman wrote: post #70

sulam wrote: post #69

Earlier quoted context omitted.

I recently sold and bought a house, and as far as I know I paid no taxes on it, and I am still deducting mortgage payments. I could pay off my mortgage tomorrow (it's Sunday here, so I'd have to wait for my bank to open) but my accountant tells me that's a horrible idea.

How long did you hold it? Where was the home located?

I sold my primary residence after buying a new primary residence. California.

Homes are heavily taxes if you don't live in them, to the above poster's point.

Re: Why a house is a terrible investment (2013)

#74

Post by DrScump » Mon, Apr 23, 2018, 1:04 AM UTC

sulam wrote: post #69

timr wrote: post #68

Earlier quoted context omitted.

This is excellent analysis. Every one of the bullet points is correct, and you've picked one to debate (and misinterpreted the argument): relative to virtually every other investment you can make, homes are heavily taxed. Arguing that you can (possibly) deduct some of those taxes misses the point. I don't have to pay my state and local governments annual taxes on the stocks and bonds that I own. On average, homes in…

I recently sold and bought a house, and as far as I know I paid no taxes on it, and I am still deducting mortgage payments. I could pay off my mortgage tomorrow (it's Sunday here, so I'd have to wait for my bank to open) but my accountant tells me that's a horrible idea.

In the USA, you would face capital gains taxes if your sales basis was greater than your cost basis.

Re: Why a house is a terrible investment (2013)

#75

Post by DrScump » Mon, Apr 23, 2018, 1:05 AM UTC

sulam wrote: post #73

dman wrote: post #70

Earlier quoted context omitted.

How long did you hold it? Where was the home located?

I sold my primary residence after buying a new primary residence. California. Homes are heavily taxes if you don't live in them, to the above poster's point.

Then you face capital gains taxes if your home appreciated over your cost basis.

Property taxes also apply to home ownership.

Re: Why a house is a terrible investment (2013)

#76

Post by asahi23 » Mon, Apr 23, 2018, 1:05 AM UTC

dman wrote: post #70

sulam wrote: post #69

Earlier quoted context omitted.

I recently sold and bought a house, and as far as I know I paid no taxes on it, and I am still deducting mortgage payments. I could pay off my mortgage tomorrow (it's Sunday here, so I'd have to wait for my bank to open) but my accountant tells me that's a horrible idea.

How long did you hold it? Where was the home located?

In the USA, if you live in your home for 2 out of the 5 years prior to selling, you can qualify to pay 0 capital gains tax up to 500k if you're married and filing a joint return (250k if single)

Re: Why a house is a terrible investment (2013)

#77

Post by tofu8 » Mon, Apr 23, 2018, 1:06 AM UTC

ajross wrote: post #12

This is awful analysis. Almost every one of the bullet points is just wrong, or at least terribly spun. I mean, one of them argues that homes are "heavily taxed" when of course they are the source of the biggest single deduction category in the whole budget, another claims with a straight face that the ability to leverage the investment via a (again, government subsidized!) loan is a bad thing! Now, obviously not all…

Mortgage is leverage (debt) and that can be bad. When you buy a house you speculate, to some degree, on the price of the house. I am sure a no-arbitrage condition exists in the housing market so your guess regarding housing prices in 10y is as good as anyone's.

Also, the point about diversification is a valid concern. Would you put (50% of your net worth + loaned money) into only FB/AMZN/XYZ stocks, today (tomorrow)? Probably not.

Re: Why a house is a terrible investment (2013)

#78

Post by smnrchrds » Mon, Apr 23, 2018, 1:07 AM UTC

asfasgasg wrote: post #67

smnrchrds wrote: post #51

Earlier quoted context omitted.

> I really fail to see how most of those points are relevant when you consider that a home is an investment you can, you know, live in. The alternative would be to rent indefinitely, which apparently we're ok with even though its not just a 0% return on investment, its an infinitely negative percent return on investment. This would only make sense if you want to live in a place indefinitely. When the economy here (Al…

> potentially leading to their bankruptcy Whoa, you have to go bankrupt to stop paying a mortgage in Canada? In the US, these are (in my experience) secured, non-recourse loans. That means that the bank's final option is to take the house, but if they do that, you owe them nothing else.

> Whoa, you have to go bankrupt to stop paying a mortgage in Canada?

It depends on which province your property is located at. In Alberta and Saskatchewan, mortgages are non-recourse. In the rest of the country they are not. So for the majority of Canadians bankruptcy is the only way to get rid of their mortgage.

Admittedly in the specific example I gave this would not be the case. However to the best of my knowledge, defaulting on a non-recourse mortgage ruins your creditworthiness the same as declaring bankruptcy. Considering how many landlords and employers check your credit report, defaulting on a mortgage could have serious consequences for your livelihood, even if it is non-recourse.

Re: Why a house is a terrible investment (2013)

#79

Post by DrScump » Mon, Apr 23, 2018, 1:08 AM UTC

asfasgasg wrote: post #67

smnrchrds wrote: post #51

Earlier quoted context omitted.

> I really fail to see how most of those points are relevant when you consider that a home is an investment you can, you know, live in. The alternative would be to rent indefinitely, which apparently we're ok with even though its not just a 0% return on investment, its an infinitely negative percent return on investment. This would only make sense if you want to live in a place indefinitely. When the economy here (Al…

> potentially leading to their bankruptcy Whoa, you have to go bankrupt to stop paying a mortgage in Canada? In the US, these are (in my experience) secured, non-recourse loans. That means that the bank's final option is to take the house, but if they do that, you owe them nothing else.

  the bank's final option is to take the house

Sometimes not even that, in states with homestead exemption protections.

Re: Why a house is a terrible investment (2013)

#80

Post by pragmatic » Mon, Apr 23, 2018, 1:08 AM UTC

DrScump wrote: post #74

sulam wrote: post #69

Earlier quoted context omitted.

I recently sold and bought a house, and as far as I know I paid no taxes on it, and I am still deducting mortgage payments. I could pay off my mortgage tomorrow (it's Sunday here, so I'd have to wait for my bank to open) but my accountant tells me that's a horrible idea.

In the USA, you would face capital gains taxes if your sales basis was greater than your cost basis.

Do I have to pay taxes on the profit I made selling my home?

It depends on how long you owned and lived in the home before the sale and how much profit you made. If you owned and lived in the place for two of the five years before the sale, then up to $250,000 of profit is tax-free.

If you are married and file a joint return, the tax-free amount doubles to $500,000. The law lets you "exclude" this much otherwise taxable profit from your taxable income. (If you sold for a loss, though, you can't take a deduction for that loss.)