3 ms·

I see no problem with home ownership being out of reach, so long as housing is affordable. IMO all asset classes are at risk of exuberance and thus we cannot s

I see no problem with home ownership being out of reach, so long as housing is affordable. IMO all asset classes are at risk of exuberance and thus we cannot stop investors from over pricing them. However, their underlying value (rent price) should remain sustainable for those who need somewhere to live. How is this possible? Simple, someone who has capitalized in the past is free to rent for far lower than someone who has purchased in the present. Someone who bought in 1970 likely has extremely low operating costs and thus is free to lower rents to meet market demands, some asset owners may go bankrupt in falling rents/asset prices... Thats just how capitalism works. IMO we should be building far more supply to cause an eventual shock and real drop in housing value. Make those who are doing idiotic things like paying more than asking price for a home learn the lessons of capitalism .

nopriorarrests 9y ago
>home ownership being out of reach, so long as housing is affordable. But it does not work this way, if we actually talking about capitalism. House ownership is having an asset (stock or house) and affordable housing is a cashflow (rent + house deprecation, or dividend) which this asset generates. These two are interconnected, always. If your house provides you with 2% rent and your S&P500 portfolio gives you 0.02% dididend yield, it means that house is overvalued or portfolio is undervalued. So, point being, you can't have 3M houses ("home ownership being out of reach") AND 24k/year rent ("affordable housing"). House prices should fall or rents should rise.
- aianus 9y ago
  People aren’t rational. There are many people around here in Toronto that will buy a home and rent it at a loss because “home prices always go up”. I did the math and my previous landlord was losing money on a cash flow basis renting to me; the rent could not have covered the property tax, condo fees, and mortgage interest (or inflation / opportunity cost if he owned outright). My long distance girlfriend at the time also knew a family who owned a $2m house and left it empty while they lived in HK. We used to stay in it when she was in town. They were too rich to care and “home prices always go up”.
- maerF0x0 9y ago
  >So, point being, you can't have 3M houses ("home ownership being out of reach") AND 24k/year rent Sure you can. Because previous investors capitalized at the old market rates (ie, what they really have is a $300k house investment w/ $24k annual cashflow). The main issue I see with that is competing uses of the capital, ie, if they can sell the $300k house investment for a $2.7M Profit and reinvest it at something > 1-2% w/ similar risk profile. But if we can put a lot more housing stock on the market the prices will decline and money will go elsewhere looking for returns.
  - nopriorarrests 9y ago
    But why should anyone buy a house for 3M, if you can rent it for 24k/year? 3M gives you 125 years of renting. In fact, you can set aside 100K for 4 years of rent, and allocate the rest - 2.9M - into working somewhere else, like bonds. Look, you put 2.9M into bonds yielding very conservative 3% per year (say, a mix of AAPL bonds and US treasuries), and you have 87K per year. 24K covers your rent, you have 63K to spend on drinks, you are not tapping your main capital, _and you live in 3M house for free_. Buying the same house commiting all your capital into it is very definition of insanity. Obviously it's too good to be true, so rents should rise.

nopriorarrests 9y ago

>home ownership being out of reach, so long as housing is affordable. But it does not work this way, if we actually talking about capitalism. House ownership is having an asset (stock or house) and affordable housing is a cashflow (rent + house deprecation, or dividend) which this asset generates. These two are interconnected, always. If your house provides you with 2% rent and your S&P500 portfolio gives you 0.02% dididend yield, it means that house is overvalued or portfolio is undervalued. So, point being, you can't have 3M houses ("home ownership being out of reach") AND 24k/year rent ("affordable housing"). House prices should fall or rents should rise.

aianus 9y ago
People aren’t rational. There are many people around here in Toronto that will buy a home and rent it at a loss because “home prices always go up”. I did the math and my previous landlord was losing money on a cash flow basis renting to me; the rent could not have covered the property tax, condo fees, and mortgage interest (or inflation / opportunity cost if he owned outright). My long distance girlfriend at the time also knew a family who owned a $2m house and left it empty while they lived in HK. We used to stay in it when she was in town. They were too rich to care and “home prices always go up”.
maerF0x0 9y ago
>So, point being, you can't have 3M houses ("home ownership being out of reach") AND 24k/year rent Sure you can. Because previous investors capitalized at the old market rates (ie, what they really have is a $300k house investment w/ $24k annual cashflow). The main issue I see with that is competing uses of the capital, ie, if they can sell the $300k house investment for a $2.7M Profit and reinvest it at something > 1-2% w/ similar risk profile. But if we can put a lot more housing stock on the market the prices will decline and money will go elsewhere looking for returns.
- nopriorarrests 9y ago
  But why should anyone buy a house for 3M, if you can rent it for 24k/year? 3M gives you 125 years of renting. In fact, you can set aside 100K for 4 years of rent, and allocate the rest - 2.9M - into working somewhere else, like bonds. Look, you put 2.9M into bonds yielding very conservative 3% per year (say, a mix of AAPL bonds and US treasuries), and you have 87K per year. 24K covers your rent, you have 63K to spend on drinks, you are not tapping your main capital, _and you live in 3M house for free_. Buying the same house commiting all your capital into it is very definition of insanity. Obviously it's too good to be true, so rents should rise.