8 ms·

>> They probably purchased thinking it was a great investment You would think by now people would have learnt their lesson and stopped thinking of housing as a

>> They probably purchased thinking it was a great investment You would think by now people would have learnt their lesson and stopped thinking of housing as a 'great investment'.

DougN7 10y ago
>> You would think by now people would have learnt their lesson and stopped thinking of housing as a 'great investment'. Especially at a price of $1.5 million!!
zitterbewegung 10y ago
For most people your house is one of your largest investments .
- lazaroclapp 10y ago
  Largest, sure, but not most effective. A house is for most people primarily a purchase they intend to use (live in), with the added benefit that over the long term is likely one of their few material possessions that will appreciate instead of depreciate. Granted, even if the 1.5M house falls by 30% this year, over decades it is likely it will still come out ahead, adjusted for inflation, compared to say, a savings account. But chances are, on average, it won't beat an index fund.
  - deleted 10y ago
    [deleted]
- rtpg 10y ago
  It's an investment in the sense that you have to spend a lot of money/get a huge loan upfront. But many people also see it as a way to make money. Unlike basically everything else we buy for living, people think that the only direction the value of their house can go is up. If you look at it like your car (it costs money, but maybe you'll get some money back), then you can't be disappointed. In the worst case, it's no different from paying rent. Plus, unlike penny stocks, you can live in the house. The obvious protip here: don't buy a second house unless you can afford losing money on it.
- WalterBright 10y ago
  Once you factor in mortgage interest payments, taxes, maintenance, inflation, real estate commissions, your time, and the time it sits vacant while you try to sell it, it's usually a lousy investment. Much better off investing in the S&P 500.
  - smsm42 10y ago
    You can't live in S&P 500 ;) Also, when you factor this in - the landlord also knows how to factor those in. So rental prices won't be far behind. There are a lot of factors in renting vs. owning, but it's not clear-cut either side - you need to always look to specific local prices.
    - seanmcdirmid 10y ago
      You can always tell if a market is insane if rent/sale ratio becomes too low. There are many markets where renting makes perfect financial sense.
    - WalterBright 10y ago
      > You can't live in S&P 500 Getting a place to live is quite different from getting one as an investment. > the landlord also knows how to factor those in Rents are determined by supply & demand. They are not determined by whatever the landlord pleases to charge any more than whatever the renter pleases to pay.
      - smsm42 10y ago
        > Getting a place to live is quite different from getting one as an investment. Not really. You need a place to live anyway, so why not get one that can also would appreciate in value? Alternatively, getting one that would depreciate can be financially ruinous. So investment consideration is always there, even if they might not be always the primary one. > Rents are determined by supply & demand. That's a platitude. But you are thinking of "supply and demand" to narrowly - nobody would purchase a rental property that brings in less money than it takes out, whatever demand is around. There's a price floor for rental price, and that's how much it costs to the owner to get and maintain the property. Short-term, the price can drop below it since selling house takes time, and the market may be not good. Long-term, nobody would keep such asset. People don't do it for fun, they do it for money. If selling is more profitable, they'd do that.
rinze 10y ago
This. In Spain, where the housing bubble bust is still widely felt, economic and finance newspapers are starting to report (or pitch, I'm not really sure) that "Spaniards are starting to invest in housing again". We don't learn.
fnordsensei 10y ago
I have no way of substantiating this, but it seems to me that there has been a shift in mindset, at least where I live, from the investment being that you slowly pay it off and eventually own your home, to speculation that the housing market will go up. A coworker was particularly happy that his apartment had appreciated a lot in value since he bought it. Now, what he doesn't take into account is that the rest of the market has appreciated just as much. It isn't that his apartment has magically become more valuable, it's the entire market that has moved. The only way to realise that profit (without renting) would be to move somewhere where apartments are less expensive for the same standard, which he is not going to do.
lordnacho 10y ago
I think the reasons people like property are: - They think they understand it. Everyone lives in a property, right? And they have an opinion about which parts of their town are nice. - Access to leverage. There's not a lot of things you can buy where the bank gives you 60-95% of the money you need, depending on the country and your situation. Other places where you can get this kind of leverage tend to have a bad rep, such as spread betting.

>> They probably purchased thinking it was a great investment You would think by now people would have learnt their lesson and stopped thinking of housing as a 'great investment'.

DougN7 10y ago

>> You would think by now people would have learnt their lesson and stopped thinking of housing as a 'great investment'. Especially at a price of $1.5 million!!

zitterbewegung 10y ago

For most people your house is one of your largest investments .

lazaroclapp 10y ago
Largest, sure, but not most effective. A house is for most people primarily a purchase they intend to use (live in), with the added benefit that over the long term is likely one of their few material possessions that will appreciate instead of depreciate. Granted, even if the 1.5M house falls by 30% this year, over decades it is likely it will still come out ahead, adjusted for inflation, compared to say, a savings account. But chances are, on average, it won't beat an index fund.
- deleted 10y ago
  [deleted]
rtpg 10y ago
It's an investment in the sense that you have to spend a lot of money/get a huge loan upfront. But many people also see it as a way to make money. Unlike basically everything else we buy for living, people think that the only direction the value of their house can go is up. If you look at it like your car (it costs money, but maybe you'll get some money back), then you can't be disappointed. In the worst case, it's no different from paying rent. Plus, unlike penny stocks, you can live in the house. The obvious protip here: don't buy a second house unless you can afford losing money on it.
WalterBright 10y ago
Once you factor in mortgage interest payments, taxes, maintenance, inflation, real estate commissions, your time, and the time it sits vacant while you try to sell it, it's usually a lousy investment. Much better off investing in the S&P 500.
- smsm42 10y ago
  You can't live in S&P 500 ;) Also, when you factor this in - the landlord also knows how to factor those in. So rental prices won't be far behind. There are a lot of factors in renting vs. owning, but it's not clear-cut either side - you need to always look to specific local prices.
  - seanmcdirmid 10y ago
    You can always tell if a market is insane if rent/sale ratio becomes too low. There are many markets where renting makes perfect financial sense.
  - WalterBright 10y ago
    > You can't live in S&P 500 Getting a place to live is quite different from getting one as an investment. > the landlord also knows how to factor those in Rents are determined by supply & demand. They are not determined by whatever the landlord pleases to charge any more than whatever the renter pleases to pay.
    - smsm42 10y ago
      > Getting a place to live is quite different from getting one as an investment. Not really. You need a place to live anyway, so why not get one that can also would appreciate in value? Alternatively, getting one that would depreciate can be financially ruinous. So investment consideration is always there, even if they might not be always the primary one. > Rents are determined by supply & demand. That's a platitude. But you are thinking of "supply and demand" to narrowly - nobody would purchase a rental property that brings in less money than it takes out, whatever demand is around. There's a price floor for rental price, and that's how much it costs to the owner to get and maintain the property. Short-term, the price can drop below it since selling house takes time, and the market may be not good. Long-term, nobody would keep such asset. People don't do it for fun, they do it for money. If selling is more profitable, they'd do that.

rinze 10y ago

This. In Spain, where the housing bubble bust is still widely felt, economic and finance newspapers are starting to report (or pitch, I'm not really sure) that "Spaniards are starting to invest in housing again". We don't learn.

fnordsensei 10y ago

I have no way of substantiating this, but it seems to me that there has been a shift in mindset, at least where I live, from the investment being that you slowly pay it off and eventually own your home, to speculation that the housing market will go up. A coworker was particularly happy that his apartment had appreciated a lot in value since he bought it. Now, what he doesn't take into account is that the rest of the market has appreciated just as much. It isn't that his apartment has magically become more valuable, it's the entire market that has moved. The only way to realise that profit (without renting) would be to move somewhere where apartments are less expensive for the same standard, which he is not going to do.

lordnacho 10y ago

I think the reasons people like property are: - They think they understand it. Everyone lives in a property, right? And they have an opinion about which parts of their town are nice. - Access to leverage. There's not a lot of things you can buy where the bank gives you 60-95% of the money you need, depending on the country and your situation. Other places where you can get this kind of leverage tend to have a bad rep, such as spread betting.