5 ms·

When someone buys a house to let, they are making property prices more expensive for everyone. I do however agree with you, in essence. But I find it genuinly s

by okc 11y ago

When someone buys a house to let, they are making property prices more expensive for everyone. I do however agree with you, in essence. But I find it genuinly shocking you that you see a low cost portfolio as the road to ownership. Perhaps this is a uniquely American philosophy? The point of contention in this debate, probably boils down to if you see access to housing as a social issue or an investment opportunity.

tempestn 11y ago
I'm Canadian, not American, but perhaps? I honestly (literally) don't understand what shocks you exactly. Save money -> invest money to grow savings -> time passes -> eventually you have enough to buy a home, if you want. I'm guessing you're saying that homes are so expensive, most people could not reasonably afford one even with disciplined saving and investing. But at least as a long term state, that seems logically impossible. The reason being, if homes were that expensive, no one would buy them to rent out either; because, either they would have to charge rent sufficiently low that people could afford it, in which case they wouldn't make any return on their investment given the high cost of the house, or they would charge high enough rent to make a decent return, in which case no one could pay it. Since the supposed problem is with home ownership rather than with finding decent places to rent (aside from special cases like San Francisco,) that doesn't seem to be the case though. Now, special cases may certainly exist in some markets that causes housing to be scarce, but that will tend to make both prices and rents high. I agree that that situation (limited access to housing) IS an important social issue. But it is distinct from the ability to purchase a house, which doesn't seem necessary or wise for everyone to be able to do without first saving. Edit: Perhaps you were just saying that given low interest rates, one would not expect to earn much on a conservative portfolio. If so, I agree; any appreciation would be a bonus, but the main thing is the savings side.
- okc 11y ago
  Like I said, I think we have a similar view. My objection if any, is based on the idea of a risk based portfolio. But it seems you actually mean more generally: savings. All these issues are of course very local. Being English I probably have a very different perspective on what the issues are regarding the affordability of houses, let alone what our specific views are. Primarily I see housing as a necessity rather than a financial opportunity. Do you think people who own a house should be allowed to buy a 2nd one and push first time buyers out the market? What this means practically for me is that societies using these rental and Lordship systems, should give preference to those seeking to buy a house over those who have one already. The delivery and form of this preference is obviously complex and very tied to local variables like employment and banking structures. Generally I think the renting system exploits the renter and benefits the landlord - esp when the renter has no other option. This is a big issue in England as the gap between house prices and peoples average savings has rocketed in the last 50 years - especially for those in the lower average salary bracket. What does society do when the average working person cant even with savings get a mortgage? In this scenario renting fuels the inequality.
  - shoover 11y ago
    I hadn't thought about first time home ownership in terms of access to the market like that. Possibly related (among other factors) in 2008 the US tax code gave $8000 tax credits to first time homebuyers. It was enough for me to jump from renting a little earlier, because I knew that money would be there to fund repairs and start chipping away at the mortgage principal. Of course this assumes prices are in reach and one has some savings ready to go for the opportunity, and I'm sure more people took advantage in rural areas to mid-sized cities than, say, SF or NYC. The issue of rentals adding inefficiencies to the market is also quite complex and tied to local variables. If supply is ok, I think there's not such a premium on rentals. Where I live (Indianapolis) it's generally cheaper to own, but not by a lot. The overall value greatly depends on local pricing, interest rates, and definitely on not moving around and paying closing costs very often. In such an environment, renters may be enjoying the value of extra flexibility for not too much premium while landlords have to work harder to extract efficiencies in maintenance and management. Consider me as a homeowner looking up a few contractors or appliance servicers in the phone book vs. a landlord who has the experience and the rolodex to know who to call for the best price and service for each problem? Also, less money goes to financial servicing when landlords pay cash. Without knowing how many pay cash vs. use leverage it's hard to say if there is an overall effect. I see your point on the fueled inequality, though, and have no naive market analysis for that.
    - ap3 11y ago
      You do understand that the $8000 tax credit just made houses more expensive right ?
      - shoover 11y ago
        My parenthetical was admitting I don't know what other complexities were involved with the tax credit, but to the grandparent's point it was closed to landlords and perhaps lowered rents as some like me bought houses instead.
      - OrwellianChild 11y ago
        Not when the tax credit is only for first time buyers and the majority of buyers are not first-time... This type of credit is an attempt to address the concern of @okc in providing preference to new home buyers over existing homeowners.

by okc 11y ago

tempestn 11y ago

I'm Canadian, not American, but perhaps? I honestly (literally) don't understand what shocks you exactly. Save money -> invest money to grow savings -> time passes -> eventually you have enough to buy a home, if you want. I'm guessing you're saying that homes are so expensive, most people could not reasonably afford one even with disciplined saving and investing. But at least as a long term state, that seems logically impossible. The reason being, if homes were that expensive, no one would buy them to rent out either; because, either they would have to charge rent sufficiently low that people could afford it, in which case they wouldn't make any return on their investment given the high cost of the house, or they would charge high enough rent to make a decent return, in which case no one could pay it. Since the supposed problem is with home ownership rather than with finding decent places to rent (aside from special cases like San Francisco,) that doesn't seem to be the case though. Now, special cases may certainly exist in some markets that causes housing to be scarce, but that will tend to make both prices and rents high. I agree that that situation (limited access to housing) IS an important social issue. But it is distinct from the ability to purchase a house, which doesn't seem necessary or wise for everyone to be able to do without first saving. Edit: Perhaps you were just saying that given low interest rates, one would not expect to earn much on a conservative portfolio. If so, I agree; any appreciation would be a bonus, but the main thing is the savings side.

okc 11y ago
Like I said, I think we have a similar view. My objection if any, is based on the idea of a risk based portfolio. But it seems you actually mean more generally: savings. All these issues are of course very local. Being English I probably have a very different perspective on what the issues are regarding the affordability of houses, let alone what our specific views are. Primarily I see housing as a necessity rather than a financial opportunity. Do you think people who own a house should be allowed to buy a 2nd one and push first time buyers out the market? What this means practically for me is that societies using these rental and Lordship systems, should give preference to those seeking to buy a house over those who have one already. The delivery and form of this preference is obviously complex and very tied to local variables like employment and banking structures. Generally I think the renting system exploits the renter and benefits the landlord - esp when the renter has no other option. This is a big issue in England as the gap between house prices and peoples average savings has rocketed in the last 50 years - especially for those in the lower average salary bracket. What does society do when the average working person cant even with savings get a mortgage? In this scenario renting fuels the inequality.
- shoover 11y ago
  I hadn't thought about first time home ownership in terms of access to the market like that. Possibly related (among other factors) in 2008 the US tax code gave $8000 tax credits to first time homebuyers. It was enough for me to jump from renting a little earlier, because I knew that money would be there to fund repairs and start chipping away at the mortgage principal. Of course this assumes prices are in reach and one has some savings ready to go for the opportunity, and I'm sure more people took advantage in rural areas to mid-sized cities than, say, SF or NYC. The issue of rentals adding inefficiencies to the market is also quite complex and tied to local variables. If supply is ok, I think there's not such a premium on rentals. Where I live (Indianapolis) it's generally cheaper to own, but not by a lot. The overall value greatly depends on local pricing, interest rates, and definitely on not moving around and paying closing costs very often. In such an environment, renters may be enjoying the value of extra flexibility for not too much premium while landlords have to work harder to extract efficiencies in maintenance and management. Consider me as a homeowner looking up a few contractors or appliance servicers in the phone book vs. a landlord who has the experience and the rolodex to know who to call for the best price and service for each problem? Also, less money goes to financial servicing when landlords pay cash. Without knowing how many pay cash vs. use leverage it's hard to say if there is an overall effect. I see your point on the fueled inequality, though, and have no naive market analysis for that.
  - ap3 11y ago
    You do understand that the $8000 tax credit just made houses more expensive right ?
    - shoover 11y ago
      My parenthetical was admitting I don't know what other complexities were involved with the tax credit, but to the grandparent's point it was closed to landlords and perhaps lowered rents as some like me bought houses instead.
    - OrwellianChild 11y ago
      Not when the tax credit is only for first time buyers and the majority of buyers are not first-time... This type of credit is an attempt to address the concern of @okc in providing preference to new home buyers over existing homeowners.