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The fact that it makes more sense financially to borrow a million to buy a house and keep your 500k of savings tied up in the S&P 500 means we're far away from

by mihaic 3y ago

The fact that it makes more sense financially to borrow a million to buy a house and keep your 500k of savings tied up in the S&P 500 means we're far away from a solution. People don't seem to realize that something being a solid investment and it being widely accessible are contradictory terms and that ideal regulation would work towards a balance of these, not over-optimization of either.

anneessens 3y ago
This exactly. It's in the best financial interest of a homeowner to stop as much new construction of homes as possible. Until we move away from the idea that owning a home = wealth, then I don't see how this problem can be significantly fixed.
- cqqxo4zV46cp 3y ago
  In a very short-sighted way, sure. It doesn’t even take that much galaxy-brain thinking to see how housing inequality can be detrimental to one’s finances.
  - anneessens 3y ago
    The short sightedness is the problem. As far as I know, NIMBY is endemic in the USA, precisely because home owners are so worried about lowering the value of their home.
    - mihaic 3y ago
      Exactly. If you stop seeing your house as an investment, and you own it, it doesn't matter if it's value goes down, if it goes along with the market. It even means it's easier for you to trade up. For the poor souls that have decades of interest left to pay on a loan it's a different story, but somehow, someone has to lose something for most people to have decent housing costs.
      - anneessens 3y ago
        Yeah, it's a very difficult situation. Either few people from younger generation will have access to affordable housing and even fewer will own a home, or we cause a lot of misery and hardship like during the 2008 crash, but for even longer. Hard to tell which is the lesser evil.
- fransje26 3y ago
  Funnily enough, the value of a home in Japan decreases over time to converge to a value of 0 over +/- 20 years. That doesn't mean that the land it is built on has 0 value, but it vastly changes the financial dynamics of home-owning, and would also remove the nonsense linked to home = wealth. With the reasonable assumption that the build quality of home in Japan is no worse than in the rest of the "Western world", it really puts the whole real estate financial racket into perspective.
  - anneessens 3y ago
    Interesting. I'm curious, do you know if there is another asset Japanese people have that is very valuable if not their home? Or some sort of investment?
    - fransje26 3y ago
      At the moment, I do not, unfortunately. But that's a topic I definitely intend to further explore when I find the time.
AnthonyMouse 3y ago
> The fact that it makes more sense financially to borrow a million to buy a house and keep your 500k of savings tied up in the S&P 500 means we're far away from a solution. Nah, that would be the case even if housing prices were indefinitely flat, because the bank will give you a loan against an asset with a stable value (house) but not be willing to loan you money at the same interest rate so you can gamble in the stock market. As long as the bank will loan you money against a house for a lower interest rate than your expected returns from the stock market, it will make sense to borrow the money to buy a house instead of taking your own money out of the stock market, for anyone willing to take the risk of the stocks going down.

by mihaic 3y ago

anneessens 3y ago

This exactly. It's in the best financial interest of a homeowner to stop as much new construction of homes as possible. Until we move away from the idea that owning a home = wealth, then I don't see how this problem can be significantly fixed.

cqqxo4zV46cp 3y ago
In a very short-sighted way, sure. It doesn’t even take that much galaxy-brain thinking to see how housing inequality can be detrimental to one’s finances.
- anneessens 3y ago
  The short sightedness is the problem. As far as I know, NIMBY is endemic in the USA, precisely because home owners are so worried about lowering the value of their home.
  - mihaic 3y ago
    Exactly. If you stop seeing your house as an investment, and you own it, it doesn't matter if it's value goes down, if it goes along with the market. It even means it's easier for you to trade up. For the poor souls that have decades of interest left to pay on a loan it's a different story, but somehow, someone has to lose something for most people to have decent housing costs.
    - anneessens 3y ago
      Yeah, it's a very difficult situation. Either few people from younger generation will have access to affordable housing and even fewer will own a home, or we cause a lot of misery and hardship like during the 2008 crash, but for even longer. Hard to tell which is the lesser evil.
fransje26 3y ago
Funnily enough, the value of a home in Japan decreases over time to converge to a value of 0 over +/- 20 years. That doesn't mean that the land it is built on has 0 value, but it vastly changes the financial dynamics of home-owning, and would also remove the nonsense linked to home = wealth. With the reasonable assumption that the build quality of home in Japan is no worse than in the rest of the "Western world", it really puts the whole real estate financial racket into perspective.
- anneessens 3y ago
  Interesting. I'm curious, do you know if there is another asset Japanese people have that is very valuable if not their home? Or some sort of investment?
  - fransje26 3y ago
    At the moment, I do not, unfortunately. But that's a topic I definitely intend to further explore when I find the time.

AnthonyMouse 3y ago

> The fact that it makes more sense financially to borrow a million to buy a house and keep your 500k of savings tied up in the S&P 500 means we're far away from a solution. Nah, that would be the case even if housing prices were indefinitely flat, because the bank will give you a loan against an asset with a stable value (house) but not be willing to loan you money at the same interest rate so you can gamble in the stock market. As long as the bank will loan you money against a house for a lower interest rate than your expected returns from the stock market, it will make sense to borrow the money to buy a house instead of taking your own money out of the stock market, for anyone willing to take the risk of the stocks going down.