8 ms·

As a foreigner, I don't understand this attitude. Why would you want all your wealth to be invested in a single leveraged asset that's also depreciating, requir

• jschwartzi 11y ago
  Because it means you don't have to pay rent after you retire.
  • refurb 11y ago
    But you're not paying rent because you have hundreds of thousands of dollars locked up in tye house? The real question is, how much money would you have made if all that equity was in the stock market? Sometimes that can be more than what rent would be.
    • reverend_gonzo 11y ago
      And sometimes the stock market crashes and takes everything with it. See: every ten years. At least with a house, even if the value goes down, you still have a home.
      • kspaans 11y ago
        You say "stock market crashes", I say "dividend yields go way up!". The losses are usually paper losses (hello tax-loss harvesting!), which don't bother long-term investors (whether they are home owners or stock investors). (I don't think you can tax-loss harvest a home though...)
        • deegles 11y ago
          Only after you own enough homes to create a publicly traded REIT :)
      • drudru11 11y ago
        ... If you can still swing the mortgage
      • refurb 11y ago
        True, but what is more risky? Having most of your money in a single, non-liquid asset with a very local market or having most of your money in a diversified, liquid asset? I'm not saying owning a home is a bad idea, just having 80%+ of your money in it.
        • Domenic_S 11y ago
          Diversification can include real estate. Besides, it's the leverage. You can buy $625,500 of house with 2.5% down + a monthly payment with a ~4% vig. Nowhere else can you get that kind of money at that kind of rate with ~$16k down. Then if you're smart you invest other money other places to diversify. You can live in house, unlike Vanguard funds. But you should have both.
          • scurvy 11y ago
            Where can you buy with 2.5% down? Those days are long gone. Skin in the game and all that.
            • heywire 11y ago
              Not 2.5%, but close, FHA still allows 3.5% down.. but then you're talking MIP and such
              • Domenic_S 11y ago
                Yep, I was talking about FHA but misremembered the %. Still crazy low. MI sucks but hey, 3.5%.
          • refurb 11y ago
            You are correct, but with leverage comes risk. Here is my nightmare scenario: I live in the Bay area and if I wanted to buy a single-family house, I'd be looking at $900K at a minimum (if you avoid the really run-down/dangerous areas of the city). Let's say I have the down payment of 20%. That's $180K. I buy the house and I can swing the $6000 per month in PMI, utilities, maintenance, etc. Then the market takes a dip of 20%. If you own a $200K home, the hit would be $40K. That would suck, but with a good paying job, you could handle it. In SF, a 20% drop (still within the realm of possibility) means you just lost $200K (if you include the other costs of closing on the home). $200K would be 5+ years of savings down the tubes.
      • mywittyname 11y ago
        Everything? When was the last time the stock market went to zero? Every market crash in the US has been follow by a even bigger boom.
  • OldSchoolJohnny 11y ago
    There are untold retired people who have been forced to move due to rising property taxes. Many of the benefits of owning evaporate when you take into account everything.
    • Domenic_S 11y ago
      Evaporate? No. Those retired people would still be paying property taxes -- you think landlords just eat that cost? Rent includes taxes, maintenance, etc, it's just spread out through the year.
    • scurvy 11y ago
      CA prop 13 fear monger much?
  • deleted 11y ago
    [deleted]
• reverend_gonzo 11y ago
  A number of reasons: 1) You don't pay rent. Once you own the place free and clear, it's yours and you always have a home. 2) While the house depreciates, property may may still appreciate, especially if you live in a nice area, and even more so if you own the land beneath you. 3) There are tax benefits to owning your own house. 4) When you start out, it's usually not that much wealth, since you're taking a loan on it, though it is highly leveraged. As you pay more of it down, if you're smart, you'll have diversified your assets, so it's not all in one spot.
  • fiatmoney 11y ago
    You pay rent to the government, around here about 1.25% of the purchase price / year.
    • GavinMcG 11y ago
      That's not rent. That's a tax, which is what you agree to in exchange for living in one of the most advanced societies on earth.
      • pascal1usa 11y ago
        It's theft. People don't explicitly agree to it. It's forced on you. And most taxes don't go towards the advancement of society. Advancement comes from the people and businesses.
        • mywittyname 11y ago
          This applies to most every law. You never agreed to 99.99% of the laws you're required to follow everyday.
          • geggam 11y ago
            No one follows you around to ensure you follow them. Rest assured most people dont follow the laws they do know 100% of the time and better yet... No one knows 100% of the laws they are required to follow.
• surfmike 11y ago
  Most of the value is in the land. And historically the prices have gone up over the long term, so your leveraged investment allows you to get more returns. Also, unlike stocks, if housing falls, at least you get utility from it-- you live in it. Finally, there are many neighborhoods in the US where the rental options are pretty limited. You need to buy to live a lot of places.
• jseliger 11y ago
  1. People don't understand the time value of money, or how the alternative to owning a house is owning stocks / bonds. 2. Buying a house is a form of forced savings. This can be useful because people are irrational, per Kahneman's Thinking, Fast and Slow. 3. Cultural brainwashing (I think this is the biggest factor).
  • rconti 11y ago
    Favored tax treatment of housing
  • switch007 11y ago
    I often read counterarguments to buying that apply to our younger years, but rarely see them declared as such. Should a 40, 45 year old still be renting?
• nattaylor 11y ago
  In addition to what reverend_gonzo said, there is the simple fact that rents (mostly) go up and mortgage payments don't.
  • kspaans 11y ago
    Interest rates aren't guaranteed to stay low. Here are the historic rates: http://b-i.forbesimg.com/phildemuth/files/2013/07/image001.png http://b-i.forbesimg.com/phildemuth/files/2013/07/image001.p... Though if you have a long-term fixed-rate mortgage, you are probably OK.
    • nattaylor 11y ago
      True, I was assuming fixed rate.
  • nattaylor 11y ago
    I've always thought this calculator was an insightful way to play out various home buying scenarios since you can adjust pretty much anything, including the tax benefits and the market return of an equivalent investment. http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=1 http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...
  • spriggan3 11y ago
    Yes, like subprime mortgage rates didn't go up ...
    • jorts 11y ago
      They were variable rate loans or had balloon payments... If you get a fixed rate loan the amount you pay per month on your mortgage will not go up.
• earlz 11y ago
  Even without all of the financial aspects everyone else has mentioned, if you own the home you can do whatever (well, with approval from the local homeowner committee if applicable). Don't like a wall separating the kitchen and living room? Tear it down. Want to rip up your yard and install new grass and a garden? Go ahead. My current landlord allows pretty much no modifications to anything, just recently cut down the only 2 (40+ year old) trees around the house (for insurance purposes apparently), and won't allow anything to be planted in the yard except for flowers in a garden. I want an actual vegetable garden, and I would've never cut down those two trees. All of this is on top of the financial aspects of actually owning the house and paying rent to contribute to an asset (which at least in my area is about 40% cheaper, sans maintenance and taxes) and when it's paid off, I don't have any more rent...
  • dionidium 11y ago
    You always have rent, by some name or another. Homeowners pay property taxes and homeowners insurance. Homeowners with an extant loan pay interest.
• chrisabrams 11y ago
  Real Estate is an awesome investment, but when done correctly. The irrationalness of buying a house gets in the way at times. To address some of your concerns: - Time: It only depreciates if you buy at the top of the cycle and sell before it recovers it's value - assuming you're able to stay in a house long enough for the cycle to recover. Many people can't wait for cycles - when it's time to move, it's time to move. Don't buy if you're unsure about the future of your market. Definitely don't buy if you believe your market will _never_ go down. That's called irrational exuberance and the '07-08 crash was aided by that psychological non-sense. - Money: Let's say you put 200k down into a house in SF and take out a 800k loan, so you pay 1M total for the house. If the market drops 10% over the next year, you've lost 100k in your downpayment. That sucks. Now let's say you waited 2 year from now when the market has cooled off, and you purchase the same home for 850k. You put your 200k down again, but this time, the home increases in value 10% over the next 2 years. Sounds like a better deal, right? Value is correlated to many things, but timing is one that cannot be ignored. - All my money is locked into my house!!!!!: No, it really isn't. I don't understand why many people think this. It's called a HELOC, or Home Equity Line of Credit. You can get one for around 4% annual interest right now. You can take ~80% of your current principal in the house, and pull it out as needed through your HELOC. This is very common and a great way to use principal money as needed. So taking the same example as above, if you have ~250k in principal in your house after 1-2 years, you can use roughly 200k of that money (assuming you pay back your HELOC of course). Now if you're thinking...wait...that means I'd have 2 loans...we'll of course. But when you rent, you get to use 0% of that money for anything. Housing, for most of us, is a long term investment - unless you just have millions lying under your mattress. Looking at things from a 1-3 year perspective is why so many people rent. Again, for some people that's their only option, but if you are fortunate to be able to plan for the 5-10-15 years down the road, you can really make housing work in your favor. Just don't buy this year. Let things cool down :)
  • mtanski 11y ago
    > Value is correlated to many things, but timing is one that cannot be ignored. The real estate market as a general rule moves slower then the stock market (when it does crash in a day or a week). Timing the stock market is hard, much more doable with the real estate market. Example Houston, clearly the area is losing oil and gas jobs which make a decent chunk of their economy and also drive commerce downstream locally (car sales, entertainment, etc...) but the house prices currently do not reflect that reality in Houston.
• beatpanda 11y ago
  Because in America, the balance of rights is heavily tilted in favor of landlords, and if you're a renter, you are constantly in danger of losing your home with little to no legal or social consequences for your landlord.