7 ms·

The article is clickbaity and somewhat self-contradictory. For example: > To finance their lifestyles, higher-income households are more likely to put expenses

by ptero 4y ago

The article is clickbaity and somewhat self-contradictory. For example: > To finance their lifestyles, higher-income households are more likely to put expenses on credit cards -- but also more likely to be able to pay off their balance in full. This means using cards as a convenience or optimizing for cashback (miles, status, ...) and not "to finance their lifestyles". On the subject -- I am constantly surprised by the "you must buy as much house as you can afford, and then some" mentality in the US (I did not grow up here). I know several families, with 2 good professional incomes who loaded up on expensive housing to an extent that if either of them gets a noticeable pay cut they will be screwed. While there is still cheaper, smaller houses in the same town with the same school that they can handle on a single income (and invest or travel on the second; or just take it easy). So I am not particularly surprised that a high income family can dig themselves a financial hole. My 2c.

renewiltord 4y ago
It's the logical play. A 5x leveraged investment that is constrained by politics to move upwards? Stupid move not to play.
- ptero 4y ago
  The problem with leveraged investments is that if it goes down you can get wiped out. If you have $100 and buy one share at $100, which goes to $50, then to $150 you end up with a $50 profit. Buy 2 shares at 2x leverage instead and you can, after a margin call, end up with $0. The house also brings in the need to pay taxes and do repairs. And if one is constrained financially they are tempted to defer necessary repairs or go the DIY path without the right skills, which is often disastrous.
  - renewiltord 4y ago
    Right, but that's a problem for my BTC-USDT perpetuals. For housing, political force can be brought to bear. After all, you don't get margin called on a house. It's a non-recourse loan usually. So if you can't pay, you walk away and the bank forecloses. And usually, you can pay, it's just a question of it being worth it. And it's worth it because you can force politicians to make it worth it by taxing society to backstop your property value.
    - ptero 4y ago
      Yes, but you can be stuck with the house for a very long time, all the while paying the taxes and repairs. And selling a house is a BIG hassle (plus a payment of 2-5% to the realtor). If you change your work (or your work changes you) and need to move, you may have to sell into a weak market and lose a lot of money. A good neighborhood can become bad, motown-style, etc. Foreclosings are a thing, especially in recessions. If you walk from a loan, you lose your principal (and get a lifestyle penalty: future loans, future jobs, etc.). This is not nearly in the same league as selling a stock you no longer like. > For housing, political force can be brought to bear. Sorry, by whom? By a large group, maybe; after a few years of lobbying. By a homeowner hit with an unlucky spell -- forget it.
      - renewiltord 4y ago
        Sure, if you rate flexibility highly, you don't want this financial instrument, but you are insulated from total society risk since you can ensure that you take money out of anyone's pocket to keep your housing instrument strong. It's probably the safest instrument one could use and definitely the safest instrument with leverage. But we don't have to discuss. We can each take our bets to the market and see what manifests best.
      - renewiltord 4y ago
        To be clear, I think your points on the lock-in are sound and the sales 'tax' effectively of a realtor etc.
Rebelgecko 4y ago
Keep in mind that the survey was done by a company whose business model is short term loans. The last time one of these Lending Club surveys was posted here I dug into their methodology and some parts of it seemed designed to produce a certain result. For example the "living paycheck to paycheck" bucket is self-reported. Like 95% of the people in that group also said said that they aren't struggling to pay their bills and/or that they'd be able to handle an emergency expense without taking on any debt (like by putting it on a credit card and paying it off on time)
yes_really 4y ago
A big part of that is because houses are seen as an investment rather than a utility. They are also hugely subsidized by the government.

by ptero 4y ago

renewiltord 4y ago

It's the logical play. A 5x leveraged investment that is constrained by politics to move upwards? Stupid move not to play.

ptero 4y ago
The problem with leveraged investments is that if it goes down you can get wiped out. If you have $100 and buy one share at $100, which goes to $50, then to $150 you end up with a $50 profit. Buy 2 shares at 2x leverage instead and you can, after a margin call, end up with $0. The house also brings in the need to pay taxes and do repairs. And if one is constrained financially they are tempted to defer necessary repairs or go the DIY path without the right skills, which is often disastrous.
- renewiltord 4y ago
  Right, but that's a problem for my BTC-USDT perpetuals. For housing, political force can be brought to bear. After all, you don't get margin called on a house. It's a non-recourse loan usually. So if you can't pay, you walk away and the bank forecloses. And usually, you can pay, it's just a question of it being worth it. And it's worth it because you can force politicians to make it worth it by taxing society to backstop your property value.
  - ptero 4y ago
    Yes, but you can be stuck with the house for a very long time, all the while paying the taxes and repairs. And selling a house is a BIG hassle (plus a payment of 2-5% to the realtor). If you change your work (or your work changes you) and need to move, you may have to sell into a weak market and lose a lot of money. A good neighborhood can become bad, motown-style, etc. Foreclosings are a thing, especially in recessions. If you walk from a loan, you lose your principal (and get a lifestyle penalty: future loans, future jobs, etc.). This is not nearly in the same league as selling a stock you no longer like. > For housing, political force can be brought to bear. Sorry, by whom? By a large group, maybe; after a few years of lobbying. By a homeowner hit with an unlucky spell -- forget it.
    - renewiltord 4y ago
      Sure, if you rate flexibility highly, you don't want this financial instrument, but you are insulated from total society risk since you can ensure that you take money out of anyone's pocket to keep your housing instrument strong. It's probably the safest instrument one could use and definitely the safest instrument with leverage. But we don't have to discuss. We can each take our bets to the market and see what manifests best.
    - renewiltord 4y ago
      To be clear, I think your points on the lock-in are sound and the sales 'tax' effectively of a realtor etc.

Rebelgecko 4y ago

Keep in mind that the survey was done by a company whose business model is short term loans. The last time one of these Lending Club surveys was posted here I dug into their methodology and some parts of it seemed designed to produce a certain result. For example the "living paycheck to paycheck" bucket is self-reported. Like 95% of the people in that group also said said that they aren't struggling to pay their bills and/or that they'd be able to handle an emergency expense without taking on any debt (like by putting it on a credit card and paying it off on time)

yes_really 4y ago

A big part of that is because houses are seen as an investment rather than a utility. They are also hugely subsidized by the government.