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No idea why you're being downvoted here. You're absolutely right. As an investment, housing has some incredibly awful attributes: - Incredibly low liquidity—ta

No idea why you're being downvoted here. You're absolutely right. As an investment, housing has some incredibly awful attributes: - Incredibly low liquidity—takes months of effort to buy or sell - Very complex to buy/sell (usually requires lawyers, lots of inspections, documentation, etc) - High fees to both buy AND sell it - It's taxed every year, regardless of whether you actually earn any money on it (aka: sell it) - It's constantly falling apart, and requiring upkeep maintenance - It's completely undiversified: subject to not only one country, one state, one city, one neighborhood, but a single tiny plot of land at one specific location that could be hit by any sort of natural disaster, get bad neighbors, have the local economy collapse, etc. Its pool of potential buyers is also limited to this very tiny location. - Returns are relatively low, roughly in-line with inflation - It's almost always leveraged (often good, but that cuts both ways, and you have to pay the interest on it regardless of what happens) Sounds like a wonderful deal, eh?

usaar333 7y ago
Agreed in general, but there are some advantages. > It's taxed every year, regardless of whether you actually earn any money on it (aka: sell it) Property tax is generally lower than your imputed rent. In the US at least, there is a huge advantage of being shielded from capital gains taxes (up to $500k if married) > Returns are relatively low, roughly in-line with inflation This is market dependent. SF Bay is something like 5.4% nominally over the past 30 years, which crushes inflation. Housing prices in the Bay Area in fact imply heavy future price appreciation. [1] Also, the high leverage position (which you point out cuts both ways) does drive expected returns above inflation. Especially with, in the US, interest being somewhat tax deductible. Also strongest advantage of owning a house over renting is the stability you get. My rent can always go up, potentially above my ability to pay; my ownership costs (esp. in CA with prop 13 limiting property tax rise) only barely goes up. (and far less than inflation) [1] https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-the-bay-area-right-now-9eff37da8d6 https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...
- the_gastropod 7y ago
  > This is market dependent. SF Bay is something like 5.4% nominally over the past 30 years, which crushes inflation. Housing prices in the Bay Area in fact imply heavy future price appreciation. [1] Yes, but this is cherry-picking. In the US as a whole, RE typically matches the inflation rate. Some physical and temporal locations over- (or under-) perform. But in aggregate, that's the reality. There's no way of knowing ahead of time which market will out-perform. Investing in Bay Area real-estate today very well could continue to out-pace inflation. But that seems as big a risk as dumping $1M into Tesla stock today.
- dpc_pw 7y ago
  > Also strongest advantage of owning a house over renting is the stability you get. From: https://www.zillow.com/homedetails/3203-Benton-St-Santa-Clara-CA-95051/19597537_zpid/ https://www.zillow.com/homedetails/3203-Benton-St-Santa-Clar... Neighborhood home value 95051 home values have fallen 8.3 % over the past 12 months. One-year prediction Zillow predicts the home values in 95051 will fall 9% in the next year. http://www.stock-market-crash.net/wp-content/uploads/2012/06/Japan-Real-Estate-Prices.jpg http://www.stock-market-crash.net/wp-content/uploads/2012/06...
  - toast0 7y ago
    Do you have rent trends? Did they follow the housing trends, or did they just keep going up (either one sometimes happens, I'm not in the market anymore).
    - dpc_pw 7y ago
      From what I can tell, they are roughly flat since around 2016. Example: https://www.zillow.com/homedetails/1174-Pomeroy-Ave-Santa-Clara-CA-95051/19596535_zpid/ https://www.zillow.com/homedetails/1174-Pomeroy-Ave-Santa-Cl... . Depends on what and where, of course. And AFAIK, generally rents are lagging behind house prices and are more sticky. If you're a prospective buyer and houses are loosing and are projected to loose hundreds of thousands of dollars each year, that's pretty big incentive to stick around in your rental and wait.
maxsilver 7y ago
> - Returns are relatively low, roughly in-line with inflation I wish. The problem with housing is that the returns are not low, they're reasonably high and really safe. You can buy a property in basically any city, sit on it for 5-30 years, and be guaranteed to beat inflation by at least a small margin -- often a wide one. Sometimes this is true, even if you never maintain the place, even if you level the existing structure, and it's just an empty grass lot. I wish housing was not a good investment. If housing could depreciate the way a car does, that alone would solve like 40% all problems in the housing market today.
- the_gastropod 7y ago
  The Case-Shiller Index [1] has increased ~3.4% annually since 1900. The general rate of inflation over that same period has been about 2.9%, leaving you with a ~0.5% rate of return. Savings accounts tend to have significantly better returns. Even if you account for the effects of leverage. Note: this doesn't include maintenance costs, taxes, buy/selling fees, inspections, or anything else. So all-in, RE very likely under-performs inflation. [1] https://en.wikipedia.org/wiki/Case–Shiller_index#/media/File:Case–Shiller_Index.svg https://en.wikipedia.org/wiki/Case–Shiller_index#/media/File... ETA: I wonder why this is such a common belief? Is it because most HN (myself included) readers live in booming real-estate markets like NYC and SF? Those markets have done very well in the past 10 years. But remember: places like Detroit, Atlanta, Chicago, and Cleveland also exist.
  - SubuSS 7y ago
    How come you count inflation for house and not for savings? :) As others point out, houses can be easily setup in and around the metros to give a steady 3% return not including appreciation. Considering dense living is the future and the house will materially remain through a market downturn, why wouldn't you diversify your portfolio with a few?
    - the_gastropod 7y ago
      If you have enough money to buy a few metropolitan homes to add "diversification" to your portfolio (you know, well north of a $10 Million net worth), you're not at risk of feeling any sort of pain from major market downturns. FWIW, broad-market index funds hold REITS, which give you a market-weighted chunk of the RE market. No need to "diversify" into RE. Doing so only skews your portfolio to be overweight in RE.
rayhendricks 7y ago
It’s a terrible investment for many. However the government has made a holy war against tiny houses/high density and anything which costs less than 500k, because tax revenue and vested interests. I’d say that upkeep and taxes on a house will be much greater than the management fees on a similar investment. In addition you have to deal with multiple government agencies (health dept, municipal tax dept) if you want to continue to live in or sell your house. Much of the new houses I see being built are prefab hardeeboard which will look atrocious well before the mortgage is paid off. We should really just get 3D printed high-density concrete houses down and be done with it. This is a solvable problem but everyone with the 1.2mm loan will freak out when you can get a better quality apartment that won’t rot for 200k.

usaar333 7y ago

Agreed in general, but there are some advantages. > It's taxed every year, regardless of whether you actually earn any money on it (aka: sell it) Property tax is generally lower than your imputed rent. In the US at least, there is a huge advantage of being shielded from capital gains taxes (up to $500k if married) > Returns are relatively low, roughly in-line with inflation This is market dependent. SF Bay is something like 5.4% nominally over the past 30 years, which crushes inflation. Housing prices in the Bay Area in fact imply heavy future price appreciation. [1] Also, the high leverage position (which you point out cuts both ways) does drive expected returns above inflation. Especially with, in the US, interest being somewhat tax deductible. Also strongest advantage of owning a house over renting is the stability you get. My rent can always go up, potentially above my ability to pay; my ownership costs (esp. in CA with prop 13 limiting property tax rise) only barely goes up. (and far less than inflation) [1] https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-the-bay-area-right-now-9eff37da8d6 https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...

the_gastropod 7y ago
> This is market dependent. SF Bay is something like 5.4% nominally over the past 30 years, which crushes inflation. Housing prices in the Bay Area in fact imply heavy future price appreciation. [1] Yes, but this is cherry-picking. In the US as a whole, RE typically matches the inflation rate. Some physical and temporal locations over- (or under-) perform. But in aggregate, that's the reality. There's no way of knowing ahead of time which market will out-perform. Investing in Bay Area real-estate today very well could continue to out-pace inflation. But that seems as big a risk as dumping $1M into Tesla stock today.
dpc_pw 7y ago
> Also strongest advantage of owning a house over renting is the stability you get. From: https://www.zillow.com/homedetails/3203-Benton-St-Santa-Clara-CA-95051/19597537_zpid/ https://www.zillow.com/homedetails/3203-Benton-St-Santa-Clar... Neighborhood home value 95051 home values have fallen 8.3 % over the past 12 months. One-year prediction Zillow predicts the home values in 95051 will fall 9% in the next year. http://www.stock-market-crash.net/wp-content/uploads/2012/06/Japan-Real-Estate-Prices.jpg http://www.stock-market-crash.net/wp-content/uploads/2012/06...
- toast0 7y ago
  Do you have rent trends? Did they follow the housing trends, or did they just keep going up (either one sometimes happens, I'm not in the market anymore).
  - dpc_pw 7y ago
    From what I can tell, they are roughly flat since around 2016. Example: https://www.zillow.com/homedetails/1174-Pomeroy-Ave-Santa-Clara-CA-95051/19596535_zpid/ https://www.zillow.com/homedetails/1174-Pomeroy-Ave-Santa-Cl... . Depends on what and where, of course. And AFAIK, generally rents are lagging behind house prices and are more sticky. If you're a prospective buyer and houses are loosing and are projected to loose hundreds of thousands of dollars each year, that's pretty big incentive to stick around in your rental and wait.

maxsilver 7y ago

> - Returns are relatively low, roughly in-line with inflation I wish. The problem with housing is that the returns are not low, they're reasonably high and really safe. You can buy a property in basically any city, sit on it for 5-30 years, and be guaranteed to beat inflation by at least a small margin -- often a wide one. Sometimes this is true, even if you never maintain the place, even if you level the existing structure, and it's just an empty grass lot. I wish housing was not a good investment. If housing could depreciate the way a car does, that alone would solve like 40% all problems in the housing market today.

the_gastropod 7y ago
The Case-Shiller Index [1] has increased ~3.4% annually since 1900. The general rate of inflation over that same period has been about 2.9%, leaving you with a ~0.5% rate of return. Savings accounts tend to have significantly better returns. Even if you account for the effects of leverage. Note: this doesn't include maintenance costs, taxes, buy/selling fees, inspections, or anything else. So all-in, RE very likely under-performs inflation. [1] https://en.wikipedia.org/wiki/Case–Shiller_index#/media/File:Case–Shiller_Index.svg https://en.wikipedia.org/wiki/Case–Shiller_index#/media/File... ETA: I wonder why this is such a common belief? Is it because most HN (myself included) readers live in booming real-estate markets like NYC and SF? Those markets have done very well in the past 10 years. But remember: places like Detroit, Atlanta, Chicago, and Cleveland also exist.
- SubuSS 7y ago
  How come you count inflation for house and not for savings? :) As others point out, houses can be easily setup in and around the metros to give a steady 3% return not including appreciation. Considering dense living is the future and the house will materially remain through a market downturn, why wouldn't you diversify your portfolio with a few?
  - the_gastropod 7y ago
    If you have enough money to buy a few metropolitan homes to add "diversification" to your portfolio (you know, well north of a $10 Million net worth), you're not at risk of feeling any sort of pain from major market downturns. FWIW, broad-market index funds hold REITS, which give you a market-weighted chunk of the RE market. No need to "diversify" into RE. Doing so only skews your portfolio to be overweight in RE.

rayhendricks 7y ago

It’s a terrible investment for many. However the government has made a holy war against tiny houses/high density and anything which costs less than 500k, because tax revenue and vested interests. I’d say that upkeep and taxes on a house will be much greater than the management fees on a similar investment. In addition you have to deal with multiple government agencies (health dept, municipal tax dept) if you want to continue to live in or sell your house. Much of the new houses I see being built are prefab hardeeboard which will look atrocious well before the mortgage is paid off. We should really just get 3D printed high-density concrete houses down and be done with it. This is a solvable problem but everyone with the 1.2mm loan will freak out when you can get a better quality apartment that won’t rot for 200k.