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In the USA you can't out save the housing market unless your making 10x+ the median salary. A lesson I've repeatedly learned. I worked for a number of bootstrap

In the USA you can't out save the housing market unless your making 10x+ the median salary. A lesson I've repeatedly learned. I worked for a number of bootstrapped startups, and purchased houses far under what I could have borrowed based on my salary because I always wanted to have a good solid year+ of runway should I face an unexpected layoff during a downturn. That has turned out to be some of the worst financial decisions I ever made. While my contemporaries were buying house for 4-5x+ their salary and over time those houses doubled, tripped in value, my house also doubled and tripped in value, but now the difference between the houses I could have purchased and the ones I did, are now in the millions of dollars (aka I have to find 2+ million to upgrade to a house only slightly better than the one I own). Meaning if I want to move up in the housing market to a house I could have purchased a couple years back for just a slightly higher percentage of my income is basically out of reach. So a lot of people complain about what it takes to get their foot in the door, but the spread between houses has massively widened as well. Just 10 years ago 1.5 million would have gotten a house in the top couple percent, now that number is probably closer to 7-9 million. So even if your salary doubled or tripped, unless you purchased at the max of your previous salary its like starting all over in the housing market. (and just to make this post longer, this is largely the result of interest free money, a few years back I realized that steady state interest one pays should always be just slightly higher than inflation. Anytime the inflation != interest rates happens it throws things out of wack. AKA while people are complaining about the current rates, if inflation is 8-9% the fed should have immediately reacted with 7-8% rates, which would have massively hammered the system, but apparently no one at us fed/etc has really studied control systems enough to understand that adjusting rates every couple months will never result in a stable system, especially if they fail to react to changes strongly. Their current strategy entirely assumes that inflation/etc slowly rises or falls.).

WalterBright 4y ago
On the other hand, the people who bought in the aughts were caught underwater with the 2008 crash in home prices. When using leverage to make investments, the lever always works both ways. I could easily have been a billionaire today if I'd made different moves (like buying all the MSFT or AMZN I could when they went public). I know a billionaire who did just that - he borrowed every penny he could and put it into MSFT at the IPO. Of course, I was also urged to buy bitcoin when it was $500. I didn't. Shrug.
- StillBored 4y ago
  Where i live (Austin TX), I would have upgraded to a bigger house from my first if they had actually gone down in value. That was actually my plan and part of the reason I bought a cheap house in ~2005. But, the federal government stepped in too soon and made it clear to the banks that they were going to support the market. So outside of a few obviously overspeculated markets a lot of places just stopped going up in value, they never went down or if they did it was single digits. I placed multiple offers on foreclosed houses (as did a few other people I know) none of us got them because the banks refused to sell them for less than the previous mortgage amount. They let houses sit vacant for 2-3 years until the market was basically recovered in ~2011. One of the ones I bid on, was listed for X, I bid that, was the only bidder and 6 months later the bank counter offered for X + 25%. So, individuals got screwed on both sides, the people who lost their house, and the "savers" who were denied the deals they were waiting for. (edit: Just to add to this, basically in auction terms the banks all set a hidden reserve price equal to the previous max while simultaneously listing them for far less than the reserve. It create an optical illusion of the housing market being cheap and full of unsold houses, while people who were actually underwater felt trapped because they would have to take a hit selling the house, and people trying to buy houses couldn't actually buy any without buying the "overpriced" ones being sold by actual individuals. A few people got lucky and bought at below market rates from individuals who had owned them long enough to be able to afford to sell at these lower prices, but those were pretty competitive even during the slowest part of the market. I was regularly outbid (I think it was something like 12 times), despite bidding over listing on them.)
- abawany 4y ago
  But remember that for everyone whom you remember for doing the correct thing, there are probably dozens more who did the opposite, such as borrowing every penny they could to put into pets.com or some 'stable'coin. Success is generally hard unless luck intervenes.
  - WalterBright 4y ago
    Of course. I wasn't willing to take anywhere near the risk they were, and so I don't begrudge them their profits.
matheusmoreira 4y ago
The federal reserve is screwed no matter what they do. Reduce interest rates? Lending increases so much the value of money is inflated away to nothing. Increase interest rates? The music stops playing, the borrowing stops, the economy grinds to a halt and enters a recession.

WalterBright 4y ago

On the other hand, the people who bought in the aughts were caught underwater with the 2008 crash in home prices. When using leverage to make investments, the lever always works both ways. I could easily have been a billionaire today if I'd made different moves (like buying all the MSFT or AMZN I could when they went public). I know a billionaire who did just that - he borrowed every penny he could and put it into MSFT at the IPO. Of course, I was also urged to buy bitcoin when it was $500. I didn't. Shrug.

StillBored 4y ago
Where i live (Austin TX), I would have upgraded to a bigger house from my first if they had actually gone down in value. That was actually my plan and part of the reason I bought a cheap house in ~2005. But, the federal government stepped in too soon and made it clear to the banks that they were going to support the market. So outside of a few obviously overspeculated markets a lot of places just stopped going up in value, they never went down or if they did it was single digits. I placed multiple offers on foreclosed houses (as did a few other people I know) none of us got them because the banks refused to sell them for less than the previous mortgage amount. They let houses sit vacant for 2-3 years until the market was basically recovered in ~2011. One of the ones I bid on, was listed for X, I bid that, was the only bidder and 6 months later the bank counter offered for X + 25%. So, individuals got screwed on both sides, the people who lost their house, and the "savers" who were denied the deals they were waiting for. (edit: Just to add to this, basically in auction terms the banks all set a hidden reserve price equal to the previous max while simultaneously listing them for far less than the reserve. It create an optical illusion of the housing market being cheap and full of unsold houses, while people who were actually underwater felt trapped because they would have to take a hit selling the house, and people trying to buy houses couldn't actually buy any without buying the "overpriced" ones being sold by actual individuals. A few people got lucky and bought at below market rates from individuals who had owned them long enough to be able to afford to sell at these lower prices, but those were pretty competitive even during the slowest part of the market. I was regularly outbid (I think it was something like 12 times), despite bidding over listing on them.)
abawany 4y ago
But remember that for everyone whom you remember for doing the correct thing, there are probably dozens more who did the opposite, such as borrowing every penny they could to put into pets.com or some 'stable'coin. Success is generally hard unless luck intervenes.
- WalterBright 4y ago
  Of course. I wasn't willing to take anywhere near the risk they were, and so I don't begrudge them their profits.

matheusmoreira 4y ago

The federal reserve is screwed no matter what they do. Reduce interest rates? Lending increases so much the value of money is inflated away to nothing. Increase interest rates? The music stops playing, the borrowing stops, the economy grinds to a halt and enters a recession.