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You are forgetting three things that changes a lot for home buyers: * The government lets you deduct your mortgage interest from taxes * The house will appreci

You are forgetting three things that changes a lot for home buyers: * The government lets you deduct your mortgage interest from taxes * The house will appreciate in value over the term of a 30 year loan (almost certainly) * You are paying for your interest and payment in tomorrow's money Also, what am I going to do instead, rent? My rent can go up $50 bucks a year where my mortgage payment is locked in. For most people, home ownership is the safest and best way to build a retirement nest egg and a tangible asset to borrow against in times of trouble.

BlargMcLarg 4y ago
I'd change the perspective. Both you and the GP are right, but all these benefits are used against the consumer, to distract them from other things that are happening. It's a subtle race to the bottom which, when looking at younger generations / lower classes and their incapability to buy, suddenly isn't so subtle anymore. The entire thing also creates a cycle of "house prices must go up!" which further exacerbates the problem, at the cost of those who haven't been able to buy houses. Or worse, it creates a large amount of debt which is begging for a 2007-2008 repeat.
- Qem 4y ago
  Now that people have less children, or no children, and the population tends to age-out and shrink in many countries, I wonder if we'll reach a point where real state prices start to consistently fall every year, reversing the current trend, as people die of old age in large numbers leaving lots of empty properties behind.
  - BlargMcLarg 4y ago
    I hope so, but I also heard enough reasons to not expect this. Many countries are still projecting population increases well until 2030 (sometimes even 2050?). The Netherlands predicts population will continue to rise well until 2070, despite fertility rate fluctuating between 1.5 and 1.7 for five decades now. It's pretty similar to Japan, and Japan has only just started decreasing in population. There's also the cautionary tale of "there is enough housing, just not enough affordable housing", as well as VCs convincing governments to tear down homes in favor of other things, further reducing the number of homes. Then again, there's the darker perspective that lack of medical staff / medicine will significantly lower the lifespan of several generations.
zie 4y ago
> The government lets you deduct your mortgage interest from taxes This is effectively not true anymore. > Also, what am I going to do instead, rent? My rent can go up $50 bucks a year where my mortgage payment is locked in. For most people, home ownership is the safest and best way to build a retirement nest egg and a tangible asset to borrow against in times of trouble. I'm going to push back a touch on this, it's not really true. Mortgage rates don't usually change in the US(because we take 30yr fixed mortgages generally). But housing costs do go up for owners: property taxes, and property maintenance. Generally renting vs owning is mostly a wash, sometimes one is cheaper than the other, just depending on the local housing market. Historically property has a about a 1%/yr real rate of return, so housing basically keeps up with inflation, but not much more. I know recent history makes people think this is not true, but it really is. It seems unwise to think this recent history will continue forever. Equities historically get a 4-6%/yr real return, drastically outperforming the historic returns of real estate. But yes, lots of people tend to not save for retirement, making their houses their de-facto retirement savings. The problem is, they have to live somewhere, making their house value somewhat hard to spend in retirement.
- dont__panic 4y ago
  >> The government lets you deduct your mortgage interest from taxes > > This is effectively not true anymore. Care to explain? Is this because the standard deduction is so high, it's generally not worth itemizing for most people since the Trump tax system adjustment? Genuinely curious; I'm a current renter, hopefully purchasing in the next couple of years. But this is an important part of the buying calculus.
  - ghaff 4y ago
    I assume that's the point they're making. With relatively recent tax law changes, it no longer makes sense for a lot of people to itemize--and if you don't itemize, you don't get a break on your mortgage.
  - niij 4y ago
    They're correct; at least for the short term. A quick search tells me itemized deduction returns are only ~10% of tax returns right now, down from ~26% before the TCJA. So if you're MFJ you'd need ~$25,000 of home interest and other deductions before you'd even break even itemizing. Not counting the hassle of itemizing vs just claiming the standard deduction. But the higher standard deduction is set to expire in just 3 years (2025)[0], which will cut it in half. That may or may not get extended. So you may want to calculate if you'd be in the ~26% of filers who'd benefit from itemizing if it did expire. [0] https://taxfoundation.org/look-ahead-expiring-tax-provisions/ https://taxfoundation.org/look-ahead-expiring-tax-provisions...
dont__panic 4y ago
$50 sounds like an OK amount for rent to increase per month at lease renewal. In the last few years, many of my friends have had rent rise by $200-800/mo in a single renewal. Hell, the apartment I just moved from is renting for $600 more than I paid for it per month! That's more expensive than the house I'm renting right now.

BlargMcLarg 4y ago

I'd change the perspective. Both you and the GP are right, but all these benefits are used against the consumer, to distract them from other things that are happening. It's a subtle race to the bottom which, when looking at younger generations / lower classes and their incapability to buy, suddenly isn't so subtle anymore. The entire thing also creates a cycle of "house prices must go up!" which further exacerbates the problem, at the cost of those who haven't been able to buy houses. Or worse, it creates a large amount of debt which is begging for a 2007-2008 repeat.

Qem 4y ago
Now that people have less children, or no children, and the population tends to age-out and shrink in many countries, I wonder if we'll reach a point where real state prices start to consistently fall every year, reversing the current trend, as people die of old age in large numbers leaving lots of empty properties behind.
- BlargMcLarg 4y ago
  I hope so, but I also heard enough reasons to not expect this. Many countries are still projecting population increases well until 2030 (sometimes even 2050?). The Netherlands predicts population will continue to rise well until 2070, despite fertility rate fluctuating between 1.5 and 1.7 for five decades now. It's pretty similar to Japan, and Japan has only just started decreasing in population. There's also the cautionary tale of "there is enough housing, just not enough affordable housing", as well as VCs convincing governments to tear down homes in favor of other things, further reducing the number of homes. Then again, there's the darker perspective that lack of medical staff / medicine will significantly lower the lifespan of several generations.

zie 4y ago

> The government lets you deduct your mortgage interest from taxes This is effectively not true anymore. > Also, what am I going to do instead, rent? My rent can go up $50 bucks a year where my mortgage payment is locked in. For most people, home ownership is the safest and best way to build a retirement nest egg and a tangible asset to borrow against in times of trouble. I'm going to push back a touch on this, it's not really true. Mortgage rates don't usually change in the US(because we take 30yr fixed mortgages generally). But housing costs do go up for owners: property taxes, and property maintenance. Generally renting vs owning is mostly a wash, sometimes one is cheaper than the other, just depending on the local housing market. Historically property has a about a 1%/yr real rate of return, so housing basically keeps up with inflation, but not much more. I know recent history makes people think this is not true, but it really is. It seems unwise to think this recent history will continue forever. Equities historically get a 4-6%/yr real return, drastically outperforming the historic returns of real estate. But yes, lots of people tend to not save for retirement, making their houses their de-facto retirement savings. The problem is, they have to live somewhere, making their house value somewhat hard to spend in retirement.

dont__panic 4y ago
>> The government lets you deduct your mortgage interest from taxes > > This is effectively not true anymore. Care to explain? Is this because the standard deduction is so high, it's generally not worth itemizing for most people since the Trump tax system adjustment? Genuinely curious; I'm a current renter, hopefully purchasing in the next couple of years. But this is an important part of the buying calculus.
- ghaff 4y ago
  I assume that's the point they're making. With relatively recent tax law changes, it no longer makes sense for a lot of people to itemize--and if you don't itemize, you don't get a break on your mortgage.
- niij 4y ago
  They're correct; at least for the short term. A quick search tells me itemized deduction returns are only ~10% of tax returns right now, down from ~26% before the TCJA. So if you're MFJ you'd need ~$25,000 of home interest and other deductions before you'd even break even itemizing. Not counting the hassle of itemizing vs just claiming the standard deduction. But the higher standard deduction is set to expire in just 3 years (2025)[0], which will cut it in half. That may or may not get extended. So you may want to calculate if you'd be in the ~26% of filers who'd benefit from itemizing if it did expire. [0] https://taxfoundation.org/look-ahead-expiring-tax-provisions/ https://taxfoundation.org/look-ahead-expiring-tax-provisions...

dont__panic 4y ago

$50 sounds like an OK amount for rent to increase per month at lease renewal. In the last few years, many of my friends have had rent rise by $200-800/mo in a single renewal. Hell, the apartment I just moved from is renting for $600 more than I paid for it per month! That's more expensive than the house I'm renting right now.