7 ms·

So are you recommending to invest savings on stocks and bonds rather than a house? I mean, I wont argue / refute you reasoning, I just simply dont have the know

So are you recommending to invest savings on stocks and bonds rather than a house? I mean, I wont argue / refute you reasoning, I just simply dont have the knowledge to do a proper analysis. Ill just say that my 78 years old parents, that not even finished high school, always told me to first buy a house, then think about the rest. Being an owner feels like the best decision Ive ever made. If something happens to me, I have the safety that my family have a place to live in.

cm2187 10y ago
You could have savings and investment you could use to cover a lower rent the rainy days. House prices are only high because everyone is over-bidding to buy them. And that's driving rents up. Now this is different to the question of whether you should individually follow the crowd in a country where everyone over-bids on property. If you don't, you still pay a high rent to repay the massive mortgage of the guy who bought the property. And in a country like the UK, there is a massive moral hazard: because so many voters are all-in into property, politicians will do anything it takes to ensure prices never go down, even if that means printing massive amounts of money, robbing savers from their investments, having negative interest rates, etc. In that world, it probably doesn't make sense to bet against the central bank. But as a society I think it is a bad allocation of resources.
- standel 10y ago
  so as a society, it would be better to have a handful of house owners collecting the rent of everyone else? Is that a good allocation to you?
  - aianus 10y ago
    Yes. Owning your own home is like cooking your own food. It might be cheaper but only if you don't value your own time or have anything better to do. There's a reason why even rich, successful businesses rent office space instead of buying. They just can't manage a property as efficiently as the companies that focus on that.
    - standel 10y ago
      Facebook, Google, Apple, Microsoft, IBM, HP and many others would certainly not agree with you. They cook their own food, own lot of real estate and I am pretty sure they don't think it's time they lost. These big companies do not manage one single house (office). They manage a real estate portfolio. Most of big companies have a mix of rented and acquired office space. Ultimately, owning real estate or not is an investment decision. Some big companies, like HP recently, went from owning most of its real estate to sell large chunk of it ... Reason is to get some cash flow and to rationalise some expenses. But not because someone else could manage better their real estate.
      - Veen 10y ago
        That's because they have a lot of superfluous capital and cash flow that needs investing somewhere. If your profits aren't like Apple's it's often smarter to rent and use the capital for something else.
      - Grishnakh 10y ago
        It's not just real estate. I'm not sure about today, but in the 2000s when I worked at Intel, they owned their own jet planes. They had so many employees flying between certain cities they had locations in, that it was more cost-effective for them to operate their own mini-airline. Outsourcing stuff always costs more, because you have to pay for the profit of the company you're outsourcing to. It's worth it when it's something you don't do that much of, or aren't very good at, but if you do a lot of it, it's worth it to do it yourself. For an extreme example, think about printing: is it worth it to outsource all your computer printing needs to a specialized printing company? Or should you just buy a laser printer for $100-500 and do it yourself? It doesn't take very much printing for it to be a massive waste to pay someone else to print stuff for you.
    - criddell 10y ago
      > It might be cheaper but only if you don't value your own time or have anything better to do. No way. My family of four eats around $250 of food every week. That works out to $3 per person per meal. The other expenses would have to total more than $600 before we would break even eating fast food every day. The food we make at home is considerably better than fast food, so I think it would cost an extra $1000 to eat out than cook at home.
- to3m 10y ago
  Why is there room for rents to go up? Why aren't they in general already around the maximum the market will bear?
  - switch007 10y ago
    As a native of England and not an economics professor I feel here it's because it's the only alternative to buying (many can't buy) and there's still a juicy percentage of combined monthly wages /not/ spent on rent up for grabs. The market is bearing the increases by not saving, reducing food spend, etc.
  - Trombone12 10y ago
    Because not everyone is poor yet, and rent is among the last things you can save on.
  - manarth 10y ago
    As an example, in the UK, social security provided a formula that determined the "permissible rent". If I claimed housing benefit, they would look at the formula, and tell me "Your housing benefit is a maximum of £x: if your rent is more than that, you have to pay it out of your own pocket". The formula dictated the maximum rent for state-subsidised housing: almost no tenant claiming social security could afford to pay above the subsidised amount from their own pocket. However, the formula accounted for rental prices in the region over the previous few years, and effectively acted as a price escalator. All DSS landlords priced their rent at the maximum permitted, and the subsidy therefore regularly increased with their prices. As a result, buy-to-let became very popular, with a number of training courses/presentations pitching this price-escalation practice, which also helped sustain the price escalation. As rental prices increased for state-subsidised landlords, unsubsidised private tenants also had their rents increased, both sectors mirroring each other. The government have since introduced caps to various benefits, which may put a stop to the routine escalation, but it's a good demonstration of some of the legislative flaws. For most people, a place to live is high if not top on their priorities, and most debt advice councilors recommend paying rent/mortgage as the top priority, above every other bill, so even given excruciating increases, most people will still pay it.
  - deleted 10y ago
geon 10y ago
Owning a house might be good for you (risk free), but bad for society (low productivity). That's how I read it.
huherto 10y ago
> So are you recommending to invest savings on stocks and bonds rather than a house? I don't think he is saying that. As an individual it may be better to invest in the house. Depending on many individual factors. e.g. Capital gains, timeframe, etc. What I think he is saying is that collectively it is better for society that more people invest in productive activities that generate new wealth.
- rsync 10y ago
  "What I think he is saying is that collectively it is better for society that more people invest in productive activities that generate new wealth." It's incredible that we've gone this deep into thread and subthread talking about aggregate economic benefits and not once mentioned families and children. Never mind the plants you're buying at the nursery - what is the long range economic impact, in the aggregate, of creating additional human beings ? (which, according to many, works best in a stable environment of ownership)
refurb 10y ago
Nothing wrong with investing in a home. However, make sure you aren't putting all your eggs in one basket by not diversifying. Having 100% of your net worth in your home is very risky and comparable to having 100% of your net worth in a single stock.
nommm-nommm 10y ago
>I have the safety that my family have a place to live in. Unless your family can't afford maintenance, upkeep, insurance, and taxes.

cm2187 10y ago

You could have savings and investment you could use to cover a lower rent the rainy days. House prices are only high because everyone is over-bidding to buy them. And that's driving rents up. Now this is different to the question of whether you should individually follow the crowd in a country where everyone over-bids on property. If you don't, you still pay a high rent to repay the massive mortgage of the guy who bought the property. And in a country like the UK, there is a massive moral hazard: because so many voters are all-in into property, politicians will do anything it takes to ensure prices never go down, even if that means printing massive amounts of money, robbing savers from their investments, having negative interest rates, etc. In that world, it probably doesn't make sense to bet against the central bank. But as a society I think it is a bad allocation of resources.

standel 10y ago
so as a society, it would be better to have a handful of house owners collecting the rent of everyone else? Is that a good allocation to you?
- aianus 10y ago
  Yes. Owning your own home is like cooking your own food. It might be cheaper but only if you don't value your own time or have anything better to do. There's a reason why even rich, successful businesses rent office space instead of buying. They just can't manage a property as efficiently as the companies that focus on that.
  - standel 10y ago
    Facebook, Google, Apple, Microsoft, IBM, HP and many others would certainly not agree with you. They cook their own food, own lot of real estate and I am pretty sure they don't think it's time they lost. These big companies do not manage one single house (office). They manage a real estate portfolio. Most of big companies have a mix of rented and acquired office space. Ultimately, owning real estate or not is an investment decision. Some big companies, like HP recently, went from owning most of its real estate to sell large chunk of it ... Reason is to get some cash flow and to rationalise some expenses. But not because someone else could manage better their real estate.
    - Veen 10y ago
      That's because they have a lot of superfluous capital and cash flow that needs investing somewhere. If your profits aren't like Apple's it's often smarter to rent and use the capital for something else.
    - Grishnakh 10y ago
      It's not just real estate. I'm not sure about today, but in the 2000s when I worked at Intel, they owned their own jet planes. They had so many employees flying between certain cities they had locations in, that it was more cost-effective for them to operate their own mini-airline. Outsourcing stuff always costs more, because you have to pay for the profit of the company you're outsourcing to. It's worth it when it's something you don't do that much of, or aren't very good at, but if you do a lot of it, it's worth it to do it yourself. For an extreme example, think about printing: is it worth it to outsource all your computer printing needs to a specialized printing company? Or should you just buy a laser printer for $100-500 and do it yourself? It doesn't take very much printing for it to be a massive waste to pay someone else to print stuff for you.
  - criddell 10y ago
    > It might be cheaper but only if you don't value your own time or have anything better to do. No way. My family of four eats around $250 of food every week. That works out to $3 per person per meal. The other expenses would have to total more than $600 before we would break even eating fast food every day. The food we make at home is considerably better than fast food, so I think it would cost an extra $1000 to eat out than cook at home.
to3m 10y ago
Why is there room for rents to go up? Why aren't they in general already around the maximum the market will bear?
- switch007 10y ago
  As a native of England and not an economics professor I feel here it's because it's the only alternative to buying (many can't buy) and there's still a juicy percentage of combined monthly wages /not/ spent on rent up for grabs. The market is bearing the increases by not saving, reducing food spend, etc.
- Trombone12 10y ago
  Because not everyone is poor yet, and rent is among the last things you can save on.
- manarth 10y ago
  As an example, in the UK, social security provided a formula that determined the "permissible rent". If I claimed housing benefit, they would look at the formula, and tell me "Your housing benefit is a maximum of £x: if your rent is more than that, you have to pay it out of your own pocket". The formula dictated the maximum rent for state-subsidised housing: almost no tenant claiming social security could afford to pay above the subsidised amount from their own pocket. However, the formula accounted for rental prices in the region over the previous few years, and effectively acted as a price escalator. All DSS landlords priced their rent at the maximum permitted, and the subsidy therefore regularly increased with their prices. As a result, buy-to-let became very popular, with a number of training courses/presentations pitching this price-escalation practice, which also helped sustain the price escalation. As rental prices increased for state-subsidised landlords, unsubsidised private tenants also had their rents increased, both sectors mirroring each other. The government have since introduced caps to various benefits, which may put a stop to the routine escalation, but it's a good demonstration of some of the legislative flaws. For most people, a place to live is high if not top on their priorities, and most debt advice councilors recommend paying rent/mortgage as the top priority, above every other bill, so even given excruciating increases, most people will still pay it.
- deleted 10y ago

geon 10y ago

Owning a house might be good for you (risk free), but bad for society (low productivity). That's how I read it.

huherto 10y ago

> So are you recommending to invest savings on stocks and bonds rather than a house? I don't think he is saying that. As an individual it may be better to invest in the house. Depending on many individual factors. e.g. Capital gains, timeframe, etc. What I think he is saying is that collectively it is better for society that more people invest in productive activities that generate new wealth.

rsync 10y ago
"What I think he is saying is that collectively it is better for society that more people invest in productive activities that generate new wealth." It's incredible that we've gone this deep into thread and subthread talking about aggregate economic benefits and not once mentioned families and children. Never mind the plants you're buying at the nursery - what is the long range economic impact, in the aggregate, of creating additional human beings ? (which, according to many, works best in a stable environment of ownership)

refurb 10y ago

Nothing wrong with investing in a home. However, make sure you aren't putting all your eggs in one basket by not diversifying. Having 100% of your net worth in your home is very risky and comparable to having 100% of your net worth in a single stock.

nommm-nommm 10y ago

>I have the safety that my family have a place to live in. Unless your family can't afford maintenance, upkeep, insurance, and taxes.