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I don't see things getting any better anytime soon. No large developers want to build SFH or condos. It's all rental apartments or nothing. Labor and material costs are sky high and I don't think they can reliably make a profit on new construction. With AirBnB's and VRBOs being a thing, even the existing stock of homes and condos are being turned into rentals. The pandemic created a K-shaped recovery where the rich get richer and the poor get poorer and I think it's only going to get worse. I like to think it'll be unsustainable, but I don't know anymore. If the people with money are always there to buy up the stuff the people without money can't, what's to stop it? What I think needs to happen, and never will, is two things. The government needs to ban short term rentals to get that inventory back onto the market, even if as a long term rental, and it also needs to jack the gently caress out of taxes on investment/second properties to put a hard squeeze onto landlords and people with vacation homes. Nobody should have beach houses when many people don't have any houses. e: a hot take for a new page
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Sep 20, 2023 02:24
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Housing can either be a reliable reasonable investment or it can be affordable. There's absolutely zero overlap between those two things because the former requires that housing appreciate faster than inflation and the latter requires that it not. I want to scream when I see articles complaining about lower income folks getting locked out of the ability to build generational wealth through housing appreciation. It reminds me of this tweet: 
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Sep 20, 2023 02:28
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Shifty Pony posted:Housing can either be a reliable reasonable investment or it can be affordable. There's absolutely zero overlap between those two things because the former requires that housing appreciate faster than inflation and the latter requires that it not. Extremely well put. Will be stealing this.
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Sep 20, 2023 02:31
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Housing does not have to rise faster than inflation to be a good investment, both because you live in it and buying it instead of renting builds equity, and because it generates income. If you have to spend money on your home one way or another, it's good-with-money to purchase instead of rent if at the end of 30 years you get to stop paying rent and then when you die or need to go to a nursing home or whatever you can resell that house - let's say for exactly the same inflation-adjusted prices as you paid for it - and that's money you wouldn't have at all if you'd just rented for the same amount of money the whole time. Similarly, because a rental property generates income, it can be a good investment even if its base price never goes up. In fact it can make you money even as it deteriorates in market value, which is exactly what slumlords take advantage of. This does not mean we have to have commoditized, profit-generating housing that is open to speculators as it is today. It only means that even if the government literally fixed the price of housing at some per-square-foot value that adjusted annually with inflation, it'd still be a thing that both investors and homeowners might want to own as financially advantageous investments. Leperflesh fucked around with this message at 02:42 on Sep 20, 2023 |
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Sep 20, 2023 02:40
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I'm interested in hearing more about this world where housing provides excess risk-adjusted returns but does not see appreciation greater than other assets in the economy.
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Sep 20, 2023 02:53
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Jenkl posted:I'm interested in hearing more about this world where housing provides excess risk-adjusted returns but does not see appreciation greater than other assets in the economy. Well, it's just about the one thing that you can get 5-20x leverage on, really easily. And even write off the interest (if you still itemize I guess). Leverage gives excess returns, as long as prices keep going up. But they do, so easy peasy.
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Sep 20, 2023 03:06
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The point is: the idea that investments must outpace inflation is true only when you include all of that investments' mechanisms of return, and rent is one avenue of return on investment. "Excess" risk-adjusted return does imply that prices rise until that rate of return becomes the same as the return from similar levels of risk elsewhere, but you added the word "excess", not me. I mean, hell. 30-year treasuries right now yield 4.3%. The return on $500k of 30-year treasuries is about $21,500 a year. This implies that, if a house was about as risky as bonds, you could collect $1792/mo of profit via rent (that is, charge all of your costs and add this much more) and get the same rate of return. If we assume the house is more risky, a higher return is implied. But, in a perfectly spherical world, you can find some rate of return that is correct, risk-adjusted, and which implies a stable long-term value of the property. If the property goes up in value, a lower rent is implied. If it goes down in value, a higher rent is implied. There's an equelibrium price, if you get to adjust all the other numbers freely. We obviously don't live in that world. e. for the homebuyer, the "rate of return" doesn't even have to be competitive with other investments, it only has to be competitive with paying rent.
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Sep 20, 2023 03:06
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TheBacon posted:So your point is basically timeline? Like I’ll talk about myself. I just bought a 3 bedroom 1300sqft “starter home”. I have some personal goals of children within the next 10 years. If that comes to fruition I imagine I would want a larger house sometime in 7-10 years, but in the meantime wanted the equity and more importantly the ability to do whatever I wanted with my house (especially have a garage) even at the potential expense of 7% if rates do not come back down. I may never have kids and then this house is great, but if I do I do not see having multiple kids growing to adults without desiring a bigger house. Is that reasonable or do you think I would have been better served trying to get a 4-5 bed 2k+ sqft house of the jump? It sounds like you bought your house because you liked it, you didn't buy a house solely with the intention to sell it in a few years for a bigger house; that's what OP is talking about.
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Sep 20, 2023 05:07
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Pilfered Pallbearers posted:I feel like this “equity” argument is some stupid bullshit made up by the real estate industry to trick people into not renting. There are some major flaws in this logic, especially when you factor in a 7% interest rate. It's predicated on decades of nationwide mostly constant and in some places exponential property value increases. Even out here in the flyovers, I happened to catch my Dad's old house on the market recently. He sold in 1999 for $140k. It's tax assessed today at $240k, and pending sale at $310k.
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Sep 20, 2023 06:25
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Liquid Communism posted:It's predicated on decades of nationwide mostly constant and in some places exponential property value increases. Even out here in the flyovers, I happened to catch my Dad's old house on the market recently. He sold in 1999 for $140k. It's tax assessed today at $240k, and pending sale at $310k. If you put these numbers into a calculator and ignore all the expenses involved with owning and selling a house, that's an annualized Rate of Return of around 3.3% excluding inflation. If you want take it even further, you can put the 1999 price in an inflation calculator and in today's dollars, the 140k turns into 258k. Then when you factor in 24 years of taxes and maintenance, it works out that holding that house from 1999 to 2023 would have a negative real rate of return, not a positive one. However, the argument can be made that owning it for that period time still creates some generation wealth compared to renting because it's unlikely (but not always) that whoever owned it would have been able to save 250k. However again, it's also highly likely that whoever owned it would have cashed out equity for home repairs and still owes a bunch of money on it at the time of sale. Do Never Buy a house as an investment. It's a lifestyle choice.
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Sep 20, 2023 12:17
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right arm posted:I definitely trust the same IT professionals doom posting earlier about a house purchase that went fine to come up with a good solution to this problem If you didn't comprehend or learn a single thing about that situation, including the fact that it's very much not over, why do you bother reading at all? What do you get out of it? And what life experience leads you to a place where you think everyone was wrong about that? I'm all ears.
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Sep 20, 2023 13:48
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goons constantly being wrong about their insane predictions is always funny 
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Sep 20, 2023 13:56
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right arm posted:goons constantly being wrong about their insane predictions is always funny No one predicted anything. You truly didn't understand what you were reading. Baffling.
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Sep 20, 2023 13:57
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Pilfered Pallbearers posted:My dude, your unwillingness to spend a fraction of a percent (~0.25%, being generous with how high a fee an attorney would have charged initially for this clusterfuck) of your 3/4 of a million dollar purchase is going to cause you months of pain and significantly more in costs than that attorney would have cost you. in a well actually posted:Spoiler alert: it is not going to go uneventfully. Baddog posted:When you show up, they very likely are going to ask for the 25K before they hand you the keys. And things have a high chance of getting real weird. So unless you are comfortable in those situations, you should get a lawyer *before* then. Well gently caress, even if you like really weird tense situations involving tens of thousands of dollars, you should talk to the lawyer first. Situation is/was dumb but people were absolutely predicting things
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Sep 20, 2023 14:25
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Motronic posted:No one predicted anything. You truly didn't understand what you were reading. Baffling. (USER WAS PUT ON PROBATION FOR THIS POST)
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Sep 20, 2023 14:33
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Liquid Communism posted:It's predicated on decades of nationwide mostly constant and in some places exponential property value increases. Even out here in the flyovers, I happened to catch my Dad's old house on the market recently. He sold in 1999 for $140k. It's tax assessed today at $240k, and pending sale at $310k. See Daslog’s post, it’s exactly what I was talking about. Even extremely conservative $2,000 a year in property taxes eats (not inflation calculated) $48,000. Then there’s homeowners insurance which is significantly more than renters, and an absolute gently caress ton of maintenance over a 24 year spread. 24 years is a long enough spread where we are talking roof, HVAC, water heater, significant renovations for most people, etc etc etc. We haven’t even included the $150,000 of interest paid by year 24 (mortgage rate in 1999 was just over 8%). The interest goes way higher if you don’t drop a 20% down payment. Ignoring all of the other factors above, including inflation, the interest alone puts you at a negative return, and you don’t even have full equity after 24 years.  Everything else everyone has said about motivation to save money via mortgage payments is significantly stronger than just saving cash is correct though. But if took your down payment and dropped it into your 401k for 24 years, or even just a savings account, you’d end up with nearly just as much extra cash as the house appreciated, but without any of the overhead cost. The point my OP was trying to drive home is that buying a house you live in as an asset with the express goal of making money via equity is mostly a fools errand. As an individual homeowner, outside of outlier markets or buying for straight cash, you will almost never end up ahead vs taking that cash and putting it in a safe, traditional investment vehicle. And the math is significantly more dire on a 7-10 year time frame. Buy homes to live in and live the homeowner lifestyle. Don’t delude yourself that you’re making a sound financial decision by building “equity” that further increases your personal wealth. All you’re really doing is giving yourself the self-inflicted consequence of homelessness if you fail to drop money in your “savings.”
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Sep 20, 2023 15:16
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Pilfered Pallbearers posted:See Daslog’s post, it’s exactly what I was talking about. Even extremely conservative $2,000 a year in property taxes eats (not inflation calculated) $48,000. Then there’s homeowners insurance which is significantly more than renters, and an absolute gently caress ton of maintenance over a 24 year spread. 24 years is a long enough spread where we are talking roof, HVAC, water heater, significant renovations for most people, etc etc etc. Gotta factor in that you are either living in the house or renting it out. It's not as bad as you are making it out to be. But I hear you, once you figure in maintenance and upkeep hours. Property management doesn't come free. My index fund doesn't have a flooded basement. However the risk on an sp500 index fund is still higher than on a house. Part of the reason why it's cheaper to get a loan to buy a house than it is to get a loan to buy stocks.
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Sep 20, 2023 15:55
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Does all that take into account rising rent prices as years go on?
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Sep 20, 2023 16:01
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A house is a place to live. You may or may not make money on it. A lot of that comes down to luck and timing. There is so much that goes into it.
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Sep 20, 2023 16:01
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Spikes32 posted:Does all that take into account rising rent prices as years go on? Even with a 30 year fixed mortgage the payment isn't fixed when you consider Taxes and insurance. This year my insurance went from $1700 to $2300 and my taxes are going from $2900 to $3700. So I am absorbing another $100+ a month.
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Sep 20, 2023 16:05
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People with bad spending habits who can't leave a cash account alone can be forced to build savings via equity by buying a house. That happened to a big percentage of the generations from 1948, the boomers and their parents, and that's significant. A ton of people with blue collar and low-end white collar jobs moved firmly into the middle class via home equity. When that's the case, it doesn't really matter that they paid an enormous overhead on that "investment," because gradually buying and eventually owning outright an asset with enormous overhead that at least doesn't lose its value, is still better than being broke at age 65. Not everyone won. My stepmom divorced my philandering dad when I was 18 and they sold the house in California, she bought a house in Oklahoma while working as a high school English teacher, became disabled ten years later and couldn't keep paying for it, and let it get foreclosed instead of selling it. She lost all the money she'd put in including her share of the CA house, and that was more than rent would have cost her. She never told me what she was doing and at that time in my life I was not paying attention, and I didn't know she was behind on her house till it was already long gone. If she'd invested her money and just rented she'd be in much better shape today. Circumstances and details matter, and so do decisions like what to do when you lose your job and can't afford your mortgage. I think in this thread the general tone shifting between "houses suck as investments" and "houses are amazing builders of wealth" can give people whiplash, but the reality is that both can and have been true, and the details and specifics are always critical. Leperflesh fucked around with this message at 16:31 on Sep 20, 2023 |
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Sep 20, 2023 16:17
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Spikes32 posted:Does all that take into account rising rent prices as years go on? This is the big one that I keep coming to, and admittedly it is EXTREMELY area specific. I have no doubt that there are places in rural America where rents have stayed static for decades. But poo poo, my in-laws live in what I'm going to call a medium-COL area. Decent sized exurb between a bigger city and a college town, neither of them anyone's definition of a major metro. No giant tech employer pumping thousands of highly paid software engineers into the local economy, no extraction or tourist industries, etc. Just a medium sized city that's of regional interest but isn't the kind of place that anyone is likely to travel to if they don't have family there. They recently paid off their mortgage, but when they were servicing it it was right around $500/month. I remember that because when my wife and I were dating that's about what the apartment I had in the same basic area cost, only I was getting a 500 square foot bachelor's apartment in a kind of sketchy part of town and they had a 3000 square foot 4br/3ba in a nice development that went up in the 90s. Now, not quite apples to apples because I'm pretty sure that was their mortgage payment before taxes and insurance, but still.
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Sep 20, 2023 16:18
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Leperflesh posted:
This is absolutely true, but it's also true of investments. People making terrible financial decisions and having poor judgement in general can have bad outcomes regardless of what they're doing. The person living in an apartment and plowing their down-payment equivalent savings into investing is still loving themselves if they're going long on BBYQ and GME.
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Sep 20, 2023 16:22
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Shifty Pony posted:Housing can either be a reliable reasonable investment or it can be affordable. There's absolutely zero overlap between those two things because the former requires that housing appreciate faster than inflation and the latter requires that it not. So then it sounds like the problem is that making it affordable would piss off a bunch of people who decided to try and grow their wealth using a fuckin house. Yet another example of why my ideals have property as a purchase, not an investment. Leperflesh posted:Housing 
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Sep 20, 2023 16:25
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Leperflesh posted:
Yeah, I kinda kicked off this topic trying to make a point that folding to FOMO to buy a house you don't really want to stay in for more than a couple years is super risky. I'm old enough to remember people picking up properties in 2006 because "I'll just flip it", and I know several people who walked away from properties or had to wait out being underwater in places they did not want to be in for way longer than they wanted to be. But for others (myself included) buying a house (and refinancing) has been a great financial decision. The point is, there's no one true strategy.
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Sep 20, 2023 16:39
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I don't want houses to be a good investment. I want them to be a place I can live without having to outbid everyone with more money than me looking for somewhere to invest it.
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Sep 20, 2023 17:09
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yes, but have you considered how all of us with houses that have tripled in value would feel
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Sep 20, 2023 17:15
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Don't worry. Now that I've bought a condo in a high COL area, everything will crash just to make sure that I become a cautionary tale. Just doing my part. 
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Sep 20, 2023 17:36
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daslog posted:If you put these numbers into a calculator and ignore all the expenses involved with owning and selling a house, that's an annualized Rate of Return of around 3.3% excluding inflation. If you want take it even further, you can put the 1999 price in an inflation calculator and in today's dollars, the 140k turns into 258k. Then when you factor in 24 years of taxes and maintenance, it works out that holding that house from 1999 to 2023 would have a negative real rate of return, not a positive one. I strongly agree that you shouldn't buy a house as an investment, though. The question is, "If I had to live here for ten years, would I still be happy that I had bought it?" I have bought four houses now that I thought I'd live in forever. Surprise! The economy fell out from under two of them, and the third was in Silly Valley. I bought into a bubble, there was a temporary crash, then the bubble restarted. It could just as easily have been "worked in aerospace, bought a house, suddenly the Federal Government stopped funding aerospace."
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Sep 20, 2023 17:43
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Sundae posted:Don't worry. Now that I've bought a condo in a high COL area, everything will crash just to make sure that I become a cautionary tale. Just doing my part. Yeah, this is 100% how I feel.
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Sep 20, 2023 17:44
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Ham Equity posted:Yeah, this is 100% how I feel. Nah you're going to be a cautionary tale about changing your locks after moving in when your corpse is found stuffed under a mattress and $25K is missing. 
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Sep 20, 2023 17:48
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Leperflesh posted:yes, but have you considered how all of us with houses that have tripled in value would feel lol, but I want to probe this, so bad I dunno if you other old timers do this, but every so often I have to look up my first house on zillow. Goddamn, that ancient shitpile "starter house" in somerville, mass, with no insulation in the walls, asbestos siding, floor falling into the basement, and the basement walls collapsing ..... it's going for 1.12 million. I bought it for 10K down. 30 years ago Even when you factor in all the work they undoubtedly put into that thing, it is pretty loving insane. For comparison (if this calculator I am using is correct), 10K into the SP500 30 years ago reinvesting dividends would be nearly 100K. Still not bad at all, even with 2001 and 2008 and 2020 in there. But that's no 1.1 million.
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Sep 20, 2023 17:54
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Baddog posted:lol, but I want to probe this, so bad   
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Sep 20, 2023 18:07
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Baddog posted:I dunno if you other old timers do this, but every so often I have to look up my first house on zillow. Goddamn, that ancient shitpile "starter house" in somerville, mass, with no insulation in the walls, asbestos siding, floor falling into the basement, and the basement walls collapsing ..... it's going for 1.12 million. I bought it for 10K down. 30 years ago Of course it's no 1.1 million. The thing most people seem to forget about in investing vs. home buying is that your mortgage is effectively a 5 or 10x leverage (or more with FHA insanity low down loans). You'd need to use the sale price of the home for a closer comparison, but then get into the risk adjusted factors of which I'm not even the slightest bit interested in attempting to calculate.
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Sep 20, 2023 18:09
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I mean at minimum you gotta back out all the property taxes and ongoing maintenance costs from your X-Y over time return calculation.
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Sep 20, 2023 18:17
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Sundae posted:Nah you're going to be a cautionary tale about changing your locks after moving in when your corpse is found stuffed under a mattress and $25K is missing. I don't think the new locks are going to stop someone who wants to murder us. But we did change the locks, it was remarkably easy. spwrozek posted:Even with a 30 year fixed mortgage the payment isn't fixed when you consider Taxes and insurance. This year my insurance went from $1700 to $2300 and my taxes are going from $2900 to $3700. So I am absorbing another $100+ a month. When you are renting, you are paying the property tax and insurance.
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Sep 20, 2023 18:26
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Ham Equity posted:I don't think the new locks are going to stop someone who wants to murder us. But we did change the locks, it was remarkably easy. Sure, but it's all baked in to the price. People often compare mortgage payments to rent payments and they're absolutely not apples to apples comparisons.
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Sep 20, 2023 18:42
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Motronic posted:Of course it's no 1.1 million. The thing most people seem to forget about in investing vs. home buying is that your mortgage is effectively a 5 or 10x leverage (or more with FHA insanity low down loans). You'd need to use the sale price of the home for a closer comparison, but then get into the risk adjusted factors of which I'm not even the slightest bit interested in attempting to calculate. Yah, that was sort of my point back there, the 20x leverage on my initial just 5% down enables these massive returns (as long as housing prices keep going up, but our whole political system is engaged in making sure that happens). I sold in 2006 and went back to renting for a number of years because I thought I was a supergenius, but the market in that area only went down maybe 15% in the worst housing crisis most of us will probably ever see. After commissions and all the other fees, probably barely came out ahead from ducking in and out of the housing market.
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Sep 20, 2023 18:42
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Pilfered Pallbearers posted:See Daslog’s post, it’s exactly what I was talking about. Even extremely conservative $2,000 a year in property taxes eats (not inflation calculated) $48,000. Then there’s homeowners insurance which is significantly more than renters, and an absolute gently caress ton of maintenance over a 24 year spread. 24 years is a long enough spread where we are talking roof, HVAC, water heater, significant renovations for most people, etc etc etc. What about that after you pay off your mortgage you save possibly 10-20 years of rent if you’re free and clear
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Sep 20, 2023 18:43
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KYOON GRIFFEY JR posted:I mean at minimum you gotta back out all the property taxes and ongoing maintenance costs from your X-Y over time return calculation. You also have to add in "what it would cost to live in an equivalent place during that time". I'm not trying to back into a rent vs buy calculator. I'm just pointing out that "down payment money in S&P 500 vs. home price now" isn't a useful comparison.
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Sep 20, 2023 18:44
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