4 ms·

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

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.
- usaar333 7y ago
  If I'm planning to live in a home forever, the short term price fluctuations of it are hardly relevant - it does nothing but inform me about the past (I got a great deal or bad deal when I bought.. in hindsight). They are relevant to a renter.
  - dpc_pw 7y ago
    "Short term fluctuations" can last decades. https://fred.stlouisfed.org/series/QJPN628BIS https://fred.stlouisfed.org/series/QJPN628BIS And "forever" often turns into couple of years because of health problems, job opportunities, personal events, and so and so. The only reason why houses cost as much as they do is historically low mortgage rates https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate-chart https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate... . And if this (mean reverting) trend is to revert any time soon... I don't know what actually is going to happen. And maybe FED will eventually decide to hyperinflate the crashing credit bubble which would be great for people with big mortgages. But people that live in oblivion thinking that's the safest investment ever, are completely clueless. But maybe they'll be lucky. :)

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.
usaar333 7y ago
If I'm planning to live in a home forever, the short term price fluctuations of it are hardly relevant - it does nothing but inform me about the past (I got a great deal or bad deal when I bought.. in hindsight). They are relevant to a renter.
- dpc_pw 7y ago
  "Short term fluctuations" can last decades. https://fred.stlouisfed.org/series/QJPN628BIS https://fred.stlouisfed.org/series/QJPN628BIS And "forever" often turns into couple of years because of health problems, job opportunities, personal events, and so and so. The only reason why houses cost as much as they do is historically low mortgage rates https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate-chart https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate... . And if this (mean reverting) trend is to revert any time soon... I don't know what actually is going to happen. And maybe FED will eventually decide to hyperinflate the crashing credit bubble which would be great for people with big mortgages. But people that live in oblivion thinking that's the safest investment ever, are completely clueless. But maybe they'll be lucky. :)