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> (1) Americans consider housing to be an investment. Apparently I'm the lone dissenter on this, but I think for many people this is a side benefit that they m

• mrep 7y ago
  I'm with you. Granted, I do consider it an investment in the sense that every month I pay off part of the principal and thus I can get some money back when I sell it whereas I'd get nothing if I was renting but I don't expect greater than inflation appreciation on the house. However, this could just be because I grew up in Chicago where there is endless farmland that can be developed and thus expecting greater than inflation appreciation on your house is foolish as someone else can just develop some farmland and sell it for the cost of building the house thus forever increasing the supply at the marginal cost of building a house.
  • fred_is_fred 7y ago
    I assume that people are willing to pay more to have a better commute or live in a better town? I know that I am.
    • mrep 7y ago
      > better commute Wasn't a big issue for us at least as we have double decker commutator trains. The one that ran through my town has 3 tracks even so the train only has to stop at a few stations and then it hops onto the middle track and drives the rest of the way downtown. Only took 30 minutes to go 20 miles downtown and going out further doesn't add much time as your just adding distance traveled at top speed. > better town Not sure what metric you are interested in that regard but if it is school wise, I went to one of the highest rated public schools and you could still find smaller more affordable homes in the school district. While there were plenty of wealthy people, I had some friends whose parents were firefighters and USPS delivery men.
  • jlmorton 7y ago
    > but I don't expect greater than inflation appreciation on the house. Even expecting the house to hold its value is rather strange. You would naturally expect the value of a home to decrease by some amount each year. Most of us would prefer a modern home to an older home. The only reason it does not is because supply of new homes is restricted. In well functioning markets like Tokyo, that's exactly what we see: homes tend to lose value each year until around 25-30 years most are simply torn down and re-built. So in Tokyo, not only is the average rent sharply lower than a city like San Francisco, the housing is also more modern. The average age of a home in Tokyo is 20 years. More than half of Tokyo's housing stock has been built since the year 2000. In San Francisco, more than half of the housing stock was built before 1940.
    • jerf 7y ago
      "You would naturally expect the value of a home to decrease by some amount each year." If you deduct maintenance from your home value, it more-or-less does. I don't see why a maintained home "should" decrease in value, though. A lot of the value of a home is in the structure, which tends to wear much more gracefully than, say, a car's body.
      • asdff 7y ago
        There is little that maintenance can do to prevent a 100 year old foundation from 'settling' in a pretty precarious way. Or finding out one day that the water pipe is a 100 year old wooden pipe that is now rotted through. As a house gets older, maintenance ($) turns into renovation ($$) then critical overhaul ($$$), even in the houses with good bones.
    • PeterisP 7y ago
      I'd expect the value of a properly built and maintained house to decrease very slowly (e.g. the building I live in is ~110 years old and not that much worse than when it was built), and while that's still a negative, on the other hand the value of the land would appreciate even (and especially if) there's active building of new homes, so the total value of house+land can be quite stable even if supply is not restricted. It won't skyrocket, though.
• helen___keller 7y ago
  I don't know your age, but from my experience this is a generational thing. During the great suburban expansion, houses were parroted as your greatest asset and your biggest investment. In the modern era, if you don't own a home already you probably couldn't care less about the investment quality of a home. You just want a home to live in and call yours without an 80 minute commute.
  • mschuster91 7y ago
    > During the great suburban expansion, houses were parroted as your greatest asset and your biggest investment. The "investment" should not be "I can sell this in 20 years for a boatload of profit" but rather "I don't have to pay rent when retired, only property taxes + maintenance + energy".
    • helen___keller 7y ago
      Heck, for all I know maybe that was originally the idea. Buying a place that you'll live for 30-50 years is absolutely an investment in your future, regardless of the paper value of your property. But when property values are wielded as arguments to beat down proposals for growth, for transit, etc, it's clear that this isn't the meaning in use.
    • arcticbull 7y ago
      A boatload of tax-free profit, the first $250K is tax exempt for individuals and 500K for couples.
      • beamatronic 7y ago
        That is mouse nuts compared to how much people get paid in stock around here
      • mywittyname 7y ago
        You pay taxes on the funds used to maintain the property. So unless you're in a market with obscene growth rates, you still lose money even if you earned capital gains on the transaction. I just put together a spreadsheet assuming 1% maintenance, 1% tax rate, and 3.5% mortgage rate on a 250k house. You still would need a 5% annual rate of return to make money. After 15 years you would have hit your $250k capital gains limit, but you'd only have $70k in profit after taxes, interest and maintenance. At 3%, you lose money until well after the house is paid off.
• deleted 7y ago
  [deleted]
• ryandrake 7y ago
  No, OP is painting with an extremely broad brush. There are a lot of reasons to own a home that have nothing to do with its investment potential. I don’t care how much my home is worth because I don’t plan to sell it until I retire.
  • bobthepanda 7y ago
    The problem is that even if it is a minority contingent, it is a loud, high-turnout contingent, and local politicians generally do not want to get turfed out. It results in farcical scenarios, like homeowners opposing workforce housing for the local school district because the people teaching their kids are too low-income to fit in. https://www.citylab.com/equity/2018/10/san-jose-trying-build-low-cost-housing-teachers/572665/ https://www.citylab.com/equity/2018/10/san-jose-trying-build...
• jdmichal 7y ago
  I always like to say that everyone is short a house, and your first property is just covering that short position. It's only properties after that first one that are investments.
  • saiya-jin 7y ago
    This doesn't cover many many people for various reasons. Ie I own 2 properties and I live in neither (house that I bought for my parents 1500km away, investment apartment in the mountains). I rent, because a) it doesn't make much sense to buy a property in traditional sense here where I live, too costly; b) we're not yet stabilized on location with first kid coming, and pinning us down to specific place before this is clear might be a huge mistake on many levels and massive stressor for our lives and relationship. We might end up not buying anything else till rest of our lives, dunno now. Others might have other reasons for similar state.
    • jcheng 7y ago
      I think jdmichal’s point was that if you don’t own a property, you’ll lose money (in the form of increased rent) if the real estate market goes up. In effect, you are born with a short position on the market just by needing a place to live, and owning your primary residence gets you to neutral.
    • jdmichal 7y ago
      I mean, I guess I could refine it to say "primary residence" instead of "first property"? Otherwise, yea it's an analogy and it will break down at some point. This is more meant to attack the idea of a primary residence being an "investment". If people insist on calling it an investment, then it's fair for me to insist that it's only covering a short position, because you need somewhere to live.
  • downerending 7y ago
    That's quite catchy. But nonetheless, people can "cover" by renting or buying. And in particular, to the degree that mortgage payments are greater than the equivalent rent, one is indeed investing in the real estate market. This is often good, but it can actually turn out much worse than (say) simply parking the money in an index fund.
• exabrial 7y ago
  At worst, you'll break even, at best, you'll make a profit, and if you don't, it's an automatic loss.
• mywittyname 7y ago
  There are dozens of us! I think most of this comes down to the fact that Americans generally had little savings outside of their home equity. This only became relevant in the 90-00s when home equity loans/LoCs took off and were widely available to almost anyone. Suddenly, it mattered how much equity you had in your home because you could spend it. There's another group of people that look at their parents' home and realize that it has doubled in value since the early 90s. But these people usually don't account for interest, tax, and maintenance payments over those 20 years.
  • svachalek 7y ago
    Simple inflation too, the value of a dollar in 1990 was twice as much as now. But for most owners, inflation works in your favor since it negates some of the mortgage interest.
  • arcticbull 7y ago
    Or interest tax deductions, property tax deductions and the fact any renovations you do can be used to raise your cost basis to offset some of those gains. Also your mortgage inflates away over time too.
• 0x0aff374668 7y ago
  Right there with you. I'm guessing we're both over 40. Thinking your home is an investment is some "flip that house" 1990's reality TV show bullshit.
  • asdff 7y ago
    There is no home in LA county that didn't see price rise in an arbitrary 10 year period. Flip that house is a real thing in the rat race real estate markets in the U.S.
• pdonis 7y ago
  > the primary objective is simply to own a home that they can live in and raise a family. And owning that home, as opposed to renting it, is an investment.