5 ms·

Or, you know, just get a place you like and understand that a home is a home, not an investment. The part whete people get into trouble is when they buy a home

by Swizec 10y ago

Or, you know, just get a place you like and understand that a home is a home, not an investment. The part whete people get into trouble is when they buy a home and think it's an investment. The implication of home != investment is that you get something you can afford.

aidenn0 10y ago
What does "you can afford" mean? By definition you can't be bankrupted by nonrecourse debt. On the other hand, I have a fairly significant fraction of my net worth tied up in my home, and a fair amount of equity at this point, so it would be fairly painful to lose it. That being said, in hindsight I am almost certainly financially in a better position than had I been renting for the past 5 years (I say "almost" because appraisals aren't worth the paper they are printed on as far as I'm concerned; I don't know a single person in this town who has bought or sold a house within 10% of the appraised value in the past decade). It seems like poor advice to not consider a home as an investment; investments come with risks, as well as opportunity costs. Particularly for smaller units, I've known places where renting was so much cheaper than buying that it should be considered a luxury to buy, and yet people just buy once they have a down-payment without considering the financial repercussions. Maybe you really mean one must understand that a home is not a risk-free investment, in which case we are in agreement.
- michaelt 10y ago
  What does "you can afford" mean? Presumably that your monthly loan payments (and routine maintenance costs and bills) should be a small enough portion of your income that you can cover your day-to-day living expenses and still have a financial safety net. You know, so you don't get into financial trouble because there's a gas price rise or your dog needs to go to the vet.
- Swizec 10y ago
  > yet people just buy once they have a down-payment without considering the financial repercussions. My desired location is in an anomalous realestate market. Mortgage for the place I live in would cost me about $6k/month, rent is about $3.5k/month. Even if that wasn't the case, do I really want an illiquid investment that ties me down with a loan for 30 years when there are so many other investments I could make? Just considering a downpayment of, say, $200k ... for that kinda money I could take 2 or 3 years off work and build a business that makes much more than that. Riskier investment, sure, but also a lot more profitable and more fun. Quicker returns too. Dunno, the arguments for buying never made sense to me. Unless of course you have high leverage (can buy cash, but choose not to). Then it's a whole different game.
  - metaphor 10y ago
    > My desired location is in an anomalous realestate market. > Just considering a downpayment of, say, $200k ... > Dunno, the arguments for buying never made sense to me. Makes complete sense to me: cost of living for your desired location is outrageously expensive!
    - Swizec 10y ago
      Eh cost of living is fine. Cost of buying an apartment, lulz.
      - metaphor 10y ago
        For the sake of analysis, I tend to lump considerations of purchasing a home in with the cost of living, even if I am a bachelor and currently lease...call it posturing to make the traditional American dream a reality, if you will. Completely OT but just realized you're that guy[1]. =) [1] https://www.youtube.com/watch?v=OAcOjTks9Ew https://www.youtube.com/watch?v=OAcOjTks9Ew
        Swizec 10y ago
        Hehe yep that's me. Buying never really appealed to me for reasons that go beyond the financial bit so I guess it never occurred to me that people consider it part of cost of living. Call me "grew up at a time when getting loans sounded crazy and kinda still does"
  - pjc50 10y ago
    > My desired location is in an anomalous realestate market. > the arguments for buying never made sense to me Well, there you go. I live in a market that's anomalous in the other direction: there's exactly one four-bedroom house advertised for rent in the city at the moment, and its price is about 20% higher than the mortgage would be. (Mortgage >> rent implies a really strange market where the landlords must be experiencing negative ROI?)
    - 10y ago
- metaphor 10y ago
  It sounds like you're somehow equating you can afford with does not lead to bankruptcy. It's a credit-driven world, and the damage done by defaulting on a mortgage can be quite massive. For a large chunk of the US population, losing your house almost certainly leads to losing your job[1], as seemingly backwards as that sounds. Without going off on a pedantic tangent, I think the general notion behind treating a home as an investment is an overarching intent to sell for profit in the near future. Play space and risk considerations are very different for turning profit vs. laying down roots. Consider home = sustainable commitment. [1] http://edition.cnn.com/2010/BUSINESS/10/29/foreclosures.govt.workers/ http://edition.cnn.com/2010/BUSINESS/10/29/foreclosures.govt...
  - jholman 10y ago
    You think that 24 individuals per year is "a large chunk of the US population"? That is confusing.
    - metaphor 10y ago
      You've taken that out of context. Try over 2 million employees between active duty and civilian workforce in the US Department of Defense[1] alone for which the discussion at hand is very much applicable. The devil is in the details. You'll lose your job not because you defaulted on a mortgage, but because you failed to maintain a valid security clearance, which is predicated on--amongst other factors--an ability to faithfully satisfy debts. What you read was a mere snippet of one study which reported 24 contractors in 2009 who appealed. What it doesn't touch upon is how many contractors simply accepted without appeal, and completely omits federal employees altogether. Furthermore, security clearance reinvestigations are a lagging indicator, generally running on 5-15 year cycles depending on clearance level[2]. If defaulting on a mortgage doesn't bite immediately, it inevitably will when reinvestigation rolls around. [1] http://www.defense.gov/About-DoD http://www.defense.gov/About-DoD [2] http://www.dss.mil/psmo-i/indus_psmo-i_updates.html http://www.dss.mil/psmo-i/indus_psmo-i_updates.html
      - jholman 10y ago
bbcbasic 10y ago
Except when house price appreciation means your house is making you more money than your job.

by Swizec 10y ago

aidenn0 10y ago

What does "you can afford" mean? By definition you can't be bankrupted by nonrecourse debt. On the other hand, I have a fairly significant fraction of my net worth tied up in my home, and a fair amount of equity at this point, so it would be fairly painful to lose it. That being said, in hindsight I am almost certainly financially in a better position than had I been renting for the past 5 years (I say "almost" because appraisals aren't worth the paper they are printed on as far as I'm concerned; I don't know a single person in this town who has bought or sold a house within 10% of the appraised value in the past decade). It seems like poor advice to not consider a home as an investment; investments come with risks, as well as opportunity costs. Particularly for smaller units, I've known places where renting was so much cheaper than buying that it should be considered a luxury to buy, and yet people just buy once they have a down-payment without considering the financial repercussions. Maybe you really mean one must understand that a home is not a risk-free investment, in which case we are in agreement.

michaelt 10y ago
What does "you can afford" mean? Presumably that your monthly loan payments (and routine maintenance costs and bills) should be a small enough portion of your income that you can cover your day-to-day living expenses and still have a financial safety net. You know, so you don't get into financial trouble because there's a gas price rise or your dog needs to go to the vet.
Swizec 10y ago
> yet people just buy once they have a down-payment without considering the financial repercussions. My desired location is in an anomalous realestate market. Mortgage for the place I live in would cost me about $6k/month, rent is about $3.5k/month. Even if that wasn't the case, do I really want an illiquid investment that ties me down with a loan for 30 years when there are so many other investments I could make? Just considering a downpayment of, say, $200k ... for that kinda money I could take 2 or 3 years off work and build a business that makes much more than that. Riskier investment, sure, but also a lot more profitable and more fun. Quicker returns too. Dunno, the arguments for buying never made sense to me. Unless of course you have high leverage (can buy cash, but choose not to). Then it's a whole different game.
- metaphor 10y ago
  > My desired location is in an anomalous realestate market. > Just considering a downpayment of, say, $200k ... > Dunno, the arguments for buying never made sense to me. Makes complete sense to me: cost of living for your desired location is outrageously expensive!
  - Swizec 10y ago
    Eh cost of living is fine. Cost of buying an apartment, lulz.
    - metaphor 10y ago
      For the sake of analysis, I tend to lump considerations of purchasing a home in with the cost of living, even if I am a bachelor and currently lease...call it posturing to make the traditional American dream a reality, if you will. Completely OT but just realized you're that guy[1]. =) [1] https://www.youtube.com/watch?v=OAcOjTks9Ew https://www.youtube.com/watch?v=OAcOjTks9Ew
      - Swizec 10y ago
        Hehe yep that's me. Buying never really appealed to me for reasons that go beyond the financial bit so I guess it never occurred to me that people consider it part of cost of living. Call me "grew up at a time when getting loans sounded crazy and kinda still does"
- pjc50 10y ago
  > My desired location is in an anomalous realestate market. > the arguments for buying never made sense to me Well, there you go. I live in a market that's anomalous in the other direction: there's exactly one four-bedroom house advertised for rent in the city at the moment, and its price is about 20% higher than the mortgage would be. (Mortgage >> rent implies a really strange market where the landlords must be experiencing negative ROI?)
  - 10y ago
metaphor 10y ago
It sounds like you're somehow equating you can afford with does not lead to bankruptcy. It's a credit-driven world, and the damage done by defaulting on a mortgage can be quite massive. For a large chunk of the US population, losing your house almost certainly leads to losing your job[1], as seemingly backwards as that sounds. Without going off on a pedantic tangent, I think the general notion behind treating a home as an investment is an overarching intent to sell for profit in the near future. Play space and risk considerations are very different for turning profit vs. laying down roots. Consider home = sustainable commitment. [1] http://edition.cnn.com/2010/BUSINESS/10/29/foreclosures.govt.workers/ http://edition.cnn.com/2010/BUSINESS/10/29/foreclosures.govt...
- jholman 10y ago
  You think that 24 individuals per year is "a large chunk of the US population"? That is confusing.
  - metaphor 10y ago
    You've taken that out of context. Try over 2 million employees between active duty and civilian workforce in the US Department of Defense[1] alone for which the discussion at hand is very much applicable. The devil is in the details. You'll lose your job not because you defaulted on a mortgage, but because you failed to maintain a valid security clearance, which is predicated on--amongst other factors--an ability to faithfully satisfy debts. What you read was a mere snippet of one study which reported 24 contractors in 2009 who appealed. What it doesn't touch upon is how many contractors simply accepted without appeal, and completely omits federal employees altogether. Furthermore, security clearance reinvestigations are a lagging indicator, generally running on 5-15 year cycles depending on clearance level[2]. If defaulting on a mortgage doesn't bite immediately, it inevitably will when reinvestigation rolls around. [1] http://www.defense.gov/About-DoD http://www.defense.gov/About-DoD [2] http://www.dss.mil/psmo-i/indus_psmo-i_updates.html http://www.dss.mil/psmo-i/indus_psmo-i_updates.html
    - jholman 10y ago

bbcbasic 10y ago

Except when house price appreciation means your house is making you more money than your job.