4 ms·

So you're saying that a house is not a good investment? That despite a trend in increasing property values over the long term, as we have seen in the data since

So you're saying that a house is not a good investment? That despite a trend in increasing property values over the long term, as we have seen in the data since .. the beginning of cities, that a price correction is coming where homes will return to ... prehistoric levels? I don't see it. Instead look at a sample of home prices in the last twenty years in the Bay Area for example, and graph it against the value of a sample of cars bought in 2000. I suppose it's no surprise that tax laws everywhere do not classify homes as durable goods that depreciate in value.

JMTQp8lwXL 7y ago
Housing returns are so location dependent it's hard to generalize if housing is a "good investment". Historically, buying in the SFBA clearly netted a good return, but what about Flint, Michigan? On the whole, re-invested dividends in an S&P index fund would have better returns than nearly all housing markets -- about 11% annually. The math is more nuanced, since homes mortgages require interest payments, but also offer leverage (only ~20% down payment).
trianglesphere 7y ago
It's the distinction between the building and the land. Buildings usually depreciate over time, but the land appreciates. In the bay area, the value of the land is significantly more than the building which is why so many people tear down houses and rebuild. Where land is cheaper people don't tear down and rebuild houses that have more life in them when they buy a house. Residences are mainly exempted from depreciation, but commercial real estate is allowed to be depreciated because buildings do have a useful life.
- njarboe 7y ago
  Although recently in the Bay Area construction costs have skyrocketed so much that in the last 5 years my home replacement cost (for insurance) has about doubled causing the land value to actually drop.
unishark 7y ago
I think the point of the argument is that this trend is abnormal, and the increases we see are the result of (decades of) govt policies distorting the housing market.

JMTQp8lwXL 7y ago

Housing returns are so location dependent it's hard to generalize if housing is a "good investment". Historically, buying in the SFBA clearly netted a good return, but what about Flint, Michigan? On the whole, re-invested dividends in an S&P index fund would have better returns than nearly all housing markets -- about 11% annually. The math is more nuanced, since homes mortgages require interest payments, but also offer leverage (only ~20% down payment).

trianglesphere 7y ago

It's the distinction between the building and the land. Buildings usually depreciate over time, but the land appreciates. In the bay area, the value of the land is significantly more than the building which is why so many people tear down houses and rebuild. Where land is cheaper people don't tear down and rebuild houses that have more life in them when they buy a house. Residences are mainly exempted from depreciation, but commercial real estate is allowed to be depreciated because buildings do have a useful life.

njarboe 7y ago
Although recently in the Bay Area construction costs have skyrocketed so much that in the last 5 years my home replacement cost (for insurance) has about doubled causing the land value to actually drop.

unishark 7y ago

I think the point of the argument is that this trend is abnormal, and the increases we see are the result of (decades of) govt policies distorting the housing market.