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> Care to explain? Sure! Caveat: please ignore taxes, emotional value and a few other country-specific details. When you're buying a home, you're doing 3 ind

> Care to explain? Sure! Caveat: please ignore taxes, emotional value and a few other country-specific details. When you're buying a home, you're doing 3 independent things: 1) Borrowing money (optional) 2) Making a capital investment into an illiquid, immovable asset 3) Renting an asset that you own to yourself for you own usage Give how much little money you have (compared to a company) and how your earnings and spending might oscillate, having so much of your assets locked up in an illiquid, immovable, single piece is a bad idea. It prevents you from moving around and taking a new job, for example. Also, given your individual risk, you have to pay interest rates much higher than what you'd expect from an institutional investor. Also, you don't have any economies of scale for renting out, selling, doing maintenance, etc. Now if an institutional investor bought a large stock of housing and rented it out, it is: 1) Borrowing money at lower rates than you 2) Making capital investment in thousands of individual, immovable assets 3) Renting an asset to you With a much larger scale, the institutional investor has massive gains in economies of scale on selling, buying, renting, fixing, etc. Also, it is able to spread the risk of a single house or resident across its entire base, essentially transforming the individual risk into a financial cost to the renters, reducing the exposure to extreme events. Finally, renting increases an individual's mobility, allowing for better allocation of jobs to different places in a country, improving economic growth and enabling the economy to adapt faster to changing situations. PS: NIMBYism fucks this up. This only works if new housing is allowed to be built freely based on supply and demand, which is not the case in the most "progressive" parts of the US (Bay Area, for example).

dv_dt 9y ago
If you're borrowing at a fixed interest rate (or buying outright), you're also locking in price for housing against future rent increases.. and, currently in CA, against uncontrolled property tax increases too. It doesn't really prevent you from moving to another job, one could always rent out the owned property and rent in your new location. (Though if the area you own in has crashed in prices that's a more difficult proposition...)
- ucaetano 9y ago
  > If you're borrowing at a fixed interest rate (or buying outright), you're also locking in price for housing against future rent increases.. and, currently in CA, against uncontrolled property tax increases too. Again, that's irrelevant from a financial perspective. The rates are priced to account for the risk of increase, and in this case the markets are liquid and competitive enough to allow correct market pricing. > It doesn't really prevent you from moving to another job, one could always rent out the owned property and rent in your new location. (Though if the area you own in has crashed in prices that's a more difficult proposition...) There is a large overhead cost to renting out, which is significantly higher than the overhead cost of renting a home. Renting out is essentially a part-time job.
  - dv_dt 9y ago
    > Again, that's irrelevant from a financial perspective. The rates are priced to account for the risk of increase, and in this case the markets are liquid and competitive enough to allow correct market pricing. The markets can be irrational for longer than you can stay solvent. You can pull out silly tropes like some concept of "correct market pricing". Which means "correct" according to some group of concerns vs some other group of concerns. Rarely do we get to directly design markets, and designed changes often go vastly wrong with unintended side effects. It's not irrelevant from a life stability perspective if you get priced out of your domicile for rent increases, vs keeping it for an owned property. People can individually value that stability or not, but it's a real consideration. There is also large overhead in not choosing the time that one wants to move if rents increase uncontrollably.
    - ucaetano 9y ago
      > The markets can be irrational for longer than you can stay solvent. Cute quote, now show me the data. > You can pull out silly tropes like some concept of "correct market pricing". Which means "correct" according to some group of concerns vs some other group of concerns. Rarely do we get to directly design markets, and designed changes often go vastly wrong with unintended side effects. Correct market prices are the cost plus risk-adjusted returns. Essentially, the point at which economic profits are zero. > It's not irrelevant from a life stability perspective if you get priced out of your domicile for rent increases, vs keeping it for an owned property. People can individually value that stability or not, but it's a real consideration. That only happens if there is an artificial constraint in supply, generated by NIMBY policies. > here is also large overhead in not choosing the time that one wants to move if rents increase uncontrollably. Again, with freedom to build, prices won't move like that.
bobthechef 9y ago
I couldn't help but notice that you didn't address anything I wrote. You also ask me to ignore important factors like property tax which, frankly, can make owning land unprofitable for landlords if people move away. Also, an economics stripped of human beings and divorced from the social and the political is not economics, just some Procrustean nonsense cooked up in an armchair. Economies exist to serve their participants, not the other way around. Anyway... First off, immobility is a problem only when there is a scarcity of jobs. It is a bad sign when lots of people have to move frequently to get jobs. Optimizing for mobility is kind of like treating a symptom instead of the cause and will likely deepen the problem because, hey, we can always count on people moving. People don't generally move around just to move around. Appealing to "better allocation" and "adaptation" as ways to defend mobility is, again, the result of having adopted some kind of dehumanized economics that treats people like units of goods in a distribution chain. Mobility is really not the thing you should be most worried about. Second, it's not an either/or proposition. We can have renters and owners. Renting can cater to those who are mobile. But when a market is dominated by renters, then your market is fucked (see above).
- ucaetano 9y ago
  > You also ask me to ignore important factors like property tax Property tax is highly variable from location to location. But if you give me an example of property tax, I can tell you which makes more sense. > an economics stripped of human beings and divorced from the social and the political is not economics, just some Procrustean nonsense cooked up in an armchair Sure, and if I don't like the law of gravity, it should be abolished! > immobility is a problem only when there is a scarcity of jobs Which in the long term is everywhere. > Appealing to "better allocation" and "adaptation" as ways to defend mobility is, again, the result of having adopted some kind of dehumanized economics that treats people like units of goods in a distribution chain. Mobility is really not the thing you should be most worried about. You argument boils down to: "I don't like what you're saying, you're mean". I don't care, that's how life works. Not liking it won't change it. > Second, it's not an either/or proposition. We can have renters and owners. Renting can cater to those who are mobile. But when a market is dominated by renters, then your market is fucked (see above). Sure, that's the ideal market. Don't provide any incentives to owning or renting, and let people decide freely.
asdsa5325 9y ago
(2) is where your argument falls apart. Everyone wants to buy houses nowadays- it's not illiquid. In large cities, most houses only stay on the market for a few days. Buying houses with cash is becoming increasingly common also.
- ucaetano 9y ago
  > (2) is where your argument falls apart. Everyone wants to buy houses nowadays- it's not illiquid. It is illiquid. How long do you think it takes to sell a house? The median home takes 60+ days to sell. Don't let your limited view shape how you see the world. The world isn't the Bay Area or similar locations.

dv_dt 9y ago

If you're borrowing at a fixed interest rate (or buying outright), you're also locking in price for housing against future rent increases.. and, currently in CA, against uncontrolled property tax increases too. It doesn't really prevent you from moving to another job, one could always rent out the owned property and rent in your new location. (Though if the area you own in has crashed in prices that's a more difficult proposition...)

ucaetano 9y ago
> If you're borrowing at a fixed interest rate (or buying outright), you're also locking in price for housing against future rent increases.. and, currently in CA, against uncontrolled property tax increases too. Again, that's irrelevant from a financial perspective. The rates are priced to account for the risk of increase, and in this case the markets are liquid and competitive enough to allow correct market pricing. > It doesn't really prevent you from moving to another job, one could always rent out the owned property and rent in your new location. (Though if the area you own in has crashed in prices that's a more difficult proposition...) There is a large overhead cost to renting out, which is significantly higher than the overhead cost of renting a home. Renting out is essentially a part-time job.
- dv_dt 9y ago
  > Again, that's irrelevant from a financial perspective. The rates are priced to account for the risk of increase, and in this case the markets are liquid and competitive enough to allow correct market pricing. The markets can be irrational for longer than you can stay solvent. You can pull out silly tropes like some concept of "correct market pricing". Which means "correct" according to some group of concerns vs some other group of concerns. Rarely do we get to directly design markets, and designed changes often go vastly wrong with unintended side effects. It's not irrelevant from a life stability perspective if you get priced out of your domicile for rent increases, vs keeping it for an owned property. People can individually value that stability or not, but it's a real consideration. There is also large overhead in not choosing the time that one wants to move if rents increase uncontrollably.
  - ucaetano 9y ago
    > The markets can be irrational for longer than you can stay solvent. Cute quote, now show me the data. > You can pull out silly tropes like some concept of "correct market pricing". Which means "correct" according to some group of concerns vs some other group of concerns. Rarely do we get to directly design markets, and designed changes often go vastly wrong with unintended side effects. Correct market prices are the cost plus risk-adjusted returns. Essentially, the point at which economic profits are zero. > It's not irrelevant from a life stability perspective if you get priced out of your domicile for rent increases, vs keeping it for an owned property. People can individually value that stability or not, but it's a real consideration. That only happens if there is an artificial constraint in supply, generated by NIMBY policies. > here is also large overhead in not choosing the time that one wants to move if rents increase uncontrollably. Again, with freedom to build, prices won't move like that.

bobthechef 9y ago

I couldn't help but notice that you didn't address anything I wrote. You also ask me to ignore important factors like property tax which, frankly, can make owning land unprofitable for landlords if people move away. Also, an economics stripped of human beings and divorced from the social and the political is not economics, just some Procrustean nonsense cooked up in an armchair. Economies exist to serve their participants, not the other way around. Anyway... First off, immobility is a problem only when there is a scarcity of jobs. It is a bad sign when lots of people have to move frequently to get jobs. Optimizing for mobility is kind of like treating a symptom instead of the cause and will likely deepen the problem because, hey, we can always count on people moving. People don't generally move around just to move around. Appealing to "better allocation" and "adaptation" as ways to defend mobility is, again, the result of having adopted some kind of dehumanized economics that treats people like units of goods in a distribution chain. Mobility is really not the thing you should be most worried about. Second, it's not an either/or proposition. We can have renters and owners. Renting can cater to those who are mobile. But when a market is dominated by renters, then your market is fucked (see above).

ucaetano 9y ago
> You also ask me to ignore important factors like property tax Property tax is highly variable from location to location. But if you give me an example of property tax, I can tell you which makes more sense. > an economics stripped of human beings and divorced from the social and the political is not economics, just some Procrustean nonsense cooked up in an armchair Sure, and if I don't like the law of gravity, it should be abolished! > immobility is a problem only when there is a scarcity of jobs Which in the long term is everywhere. > Appealing to "better allocation" and "adaptation" as ways to defend mobility is, again, the result of having adopted some kind of dehumanized economics that treats people like units of goods in a distribution chain. Mobility is really not the thing you should be most worried about. You argument boils down to: "I don't like what you're saying, you're mean". I don't care, that's how life works. Not liking it won't change it. > Second, it's not an either/or proposition. We can have renters and owners. Renting can cater to those who are mobile. But when a market is dominated by renters, then your market is fucked (see above). Sure, that's the ideal market. Don't provide any incentives to owning or renting, and let people decide freely.

asdsa5325 9y ago

(2) is where your argument falls apart. Everyone wants to buy houses nowadays- it's not illiquid. In large cities, most houses only stay on the market for a few days. Buying houses with cash is becoming increasingly common also.

ucaetano 9y ago
> (2) is where your argument falls apart. Everyone wants to buy houses nowadays- it's not illiquid. It is illiquid. How long do you think it takes to sell a house? The median home takes 60+ days to sell. Don't let your limited view shape how you see the world. The world isn't the Bay Area or similar locations.