5 ms·

As a homeowner I see little benefit for me for the insane value of my home. Do I want to pay more in property taxes? No. If I sell it’s to just buy a different

by ebiggs 2y ago

As a homeowner I see little benefit for me for the insane value of my home. Do I want to pay more in property taxes? No. If I sell it’s to just buy a different insanely priced home. I suppose I’m privileged in that I have other retirement plans so my kids will inherit my home - and that’s good I guess if they ever want to afford a home. Homes being an investment is the wrong mindset for a healthy society. Have cheap homes so you have enough money to invest in something else. I couldn’t care less if the value of my home plummets if all other desirable homes did too. Heck, I’d celebrate it. Seems to me the people who care are those who invest in real estate instead of just want a nice place to live.

qeternity 2y ago
The myth of home equity: most people are implicitly short the housing market for most of their lives.
- s1artibartfast 2y ago
  I think that is exactly the opposite. Most people are long on the housing market. They have borrowed cash to purchase an asset they think will maintain or go up. Renting would be the short position. https://www.investopedia.com/ask/answers/100314/whats-difference-between-long-and-short-position-market.asp https://www.investopedia.com/ask/answers/100314/whats-differ...
  - seanmcdirmid 2y ago
    There are huge transaction costs to buying and selling a home, renting could also be seen as a way to avoid those costs if you aren’t going to stay somewhere. But I rented for cheap in Beijing when housing to buy costs were super high, who wouldn’t rent a $1 million apartment for < $1000/month, buying in that market would have been dumb even without red tape to buy something.
    - s1artibartfast 2y ago
      Sure, I don't think many would disagree. Especially in places with large agent commissions and capital gains taxes
  - qeternity 2y ago
    If a buy a house today for $1m and it goes up 50%, great I've made $500k. But if I really want to buy a $2m house eventually, that house has (probably) also gone up 50% and so it now costs $3m. So when I bought the first home, the second home was $1m more expensive, after appreciation it is now $1.5m more expensive. I said "implicitly" for a reason. (I am well aware of what long and short means, my background is in trading)
    - s1artibartfast 2y ago
      I still dont understand the nuance of how this appreciation relates to shorting, implicitly or otherwise. Does it matter what you think your cash investment would meet or beat the real-estate appreciation?
      - qeternity 2y ago
        Let's say you are an airline. You are selling tickets for the next year. Jet fuel is a major input cost, largely driven by the price of crude oil. If you sell a ticket today for 6 months from now, you are implicitly short the oil market. You haven't actually shorted the market, but if prices increase over the next 6 months, you may end up losing money on the tickets you sold. This is why you see airlines hedging, because they are implicitly short. The same holds true for housing for most people as I explained above. People rarely downsize their homes. Their forward consumption of housing is almost always greater than their current exposure to the housing market. This leaves them implicitly net short.
        s1artibartfast 2y ago
        Thanks for explaining. your are talking about exposure to cost increases relative to your intended purpose. I hold that still depends on what your alternative investment opportunities are. If you buy the $1M house when you actually want the $2M house, you are still locking in 50% of the cost. Thats a good thing if the alternative investments perform poorly, and a bad thing if the alternatives are better.
qp11 2y ago
But you are competing with the National Association of Realtors. One of the largest spenders on lobbying in America - https://www.opensecrets.org/industries?cycle=2022 https://www.opensecrets.org/industries?cycle=2022 The US is a FIRE economy - https://en.wikipedia.org/wiki/FIRE_economy https://en.wikipedia.org/wiki/FIRE_economy https://en.wikipedia.org/wiki/Financialization https://en.wikipedia.org/wiki/Financialization
s1artibartfast 2y ago
Homes are and should always be an investment because they are. They dont have to beat the stock market, but a well maintained home should track inflation at least. They have real and huge replacement costs in materials and labor. If my house burnt down, it would cost $1M to rebuild. Im all for cheap simple houses for those with less money. However, unless they are so cheap as to be disposable, they too will be investments.
- analognoise 2y ago
  Isn’t “so cheap they are disposable” Japan’s approach to homes?
  - s1artibartfast 2y ago
    Only in an exaggerated meme sense. reality is much more complicated. The average Tokyo apartment size is 390 sqft, while the US average is above 2,000 and climbing. Americans could have homes 10% the price, but they would mostly refuse to live in them even if they were sold at cost.
    - Jensson 2y ago
      Why did you compare home size in a city to home size in a country? Average Japan home size is about 1000 square feet, smaller but not that much smaller. https://www.statista.com/statistics/1289345/japan-average-size-dwellings/ https://www.statista.com/statistics/1289345/japan-average-si...
      - s1artibartfast 2y ago
        Because the meme/myth about disposable Japanese housing comes from dense urban environments like Tokyo. It is largely a result of tax policy and construction methods between 1960-1990 where it made sense to gut apartments after they depreciated for tax purposes. In Japan, property tax decreases to zero over time, but resets if you upgrade it. There for people gut and remodel before selling their units so they get the benefit of a higher price, but the buyer pays the taxes.
seanmcdirmid 2y ago
Property taxes in many states are set according to budget, so your home’s value relative to other homes is important, but if all housing prices all fall or rise, the money collected is the same. Homes are considered an investment because people want nice ones in locations that can only support so many (either via artificial or natural restriction). In turns out homes outside of those locations can get really cheap since finding buyers is hard.
Gibbon1 2y ago
There are negative benefits to high housing prices. It's the most illiquid asset type. If you sell it where are you going to live? At the same time high rents drive up the price of goods and services you need to pay for.

by ebiggs 2y ago

qeternity 2y ago

The myth of home equity: most people are implicitly short the housing market for most of their lives.

s1artibartfast 2y ago
I think that is exactly the opposite. Most people are long on the housing market. They have borrowed cash to purchase an asset they think will maintain or go up. Renting would be the short position. https://www.investopedia.com/ask/answers/100314/whats-difference-between-long-and-short-position-market.asp https://www.investopedia.com/ask/answers/100314/whats-differ...
- seanmcdirmid 2y ago
  There are huge transaction costs to buying and selling a home, renting could also be seen as a way to avoid those costs if you aren’t going to stay somewhere. But I rented for cheap in Beijing when housing to buy costs were super high, who wouldn’t rent a $1 million apartment for < $1000/month, buying in that market would have been dumb even without red tape to buy something.
  - s1artibartfast 2y ago
    Sure, I don't think many would disagree. Especially in places with large agent commissions and capital gains taxes
- qeternity 2y ago
  If a buy a house today for $1m and it goes up 50%, great I've made $500k. But if I really want to buy a $2m house eventually, that house has (probably) also gone up 50% and so it now costs $3m. So when I bought the first home, the second home was $1m more expensive, after appreciation it is now $1.5m more expensive. I said "implicitly" for a reason. (I am well aware of what long and short means, my background is in trading)
  - s1artibartfast 2y ago
    I still dont understand the nuance of how this appreciation relates to shorting, implicitly or otherwise. Does it matter what you think your cash investment would meet or beat the real-estate appreciation?
    - qeternity 2y ago
      Let's say you are an airline. You are selling tickets for the next year. Jet fuel is a major input cost, largely driven by the price of crude oil. If you sell a ticket today for 6 months from now, you are implicitly short the oil market. You haven't actually shorted the market, but if prices increase over the next 6 months, you may end up losing money on the tickets you sold. This is why you see airlines hedging, because they are implicitly short. The same holds true for housing for most people as I explained above. People rarely downsize their homes. Their forward consumption of housing is almost always greater than their current exposure to the housing market. This leaves them implicitly net short.
      - s1artibartfast 2y ago
        Thanks for explaining. your are talking about exposure to cost increases relative to your intended purpose. I hold that still depends on what your alternative investment opportunities are. If you buy the $1M house when you actually want the $2M house, you are still locking in 50% of the cost. Thats a good thing if the alternative investments perform poorly, and a bad thing if the alternatives are better.

qp11 2y ago

But you are competing with the National Association of Realtors. One of the largest spenders on lobbying in America - https://www.opensecrets.org/industries?cycle=2022 https://www.opensecrets.org/industries?cycle=2022 The US is a FIRE economy - https://en.wikipedia.org/wiki/FIRE_economy https://en.wikipedia.org/wiki/FIRE_economy https://en.wikipedia.org/wiki/Financialization https://en.wikipedia.org/wiki/Financialization

s1artibartfast 2y ago

Homes are and should always be an investment because they are. They dont have to beat the stock market, but a well maintained home should track inflation at least. They have real and huge replacement costs in materials and labor. If my house burnt down, it would cost $1M to rebuild. Im all for cheap simple houses for those with less money. However, unless they are so cheap as to be disposable, they too will be investments.

analognoise 2y ago
Isn’t “so cheap they are disposable” Japan’s approach to homes?
- s1artibartfast 2y ago
  Only in an exaggerated meme sense. reality is much more complicated. The average Tokyo apartment size is 390 sqft, while the US average is above 2,000 and climbing. Americans could have homes 10% the price, but they would mostly refuse to live in them even if they were sold at cost.
  - Jensson 2y ago
    Why did you compare home size in a city to home size in a country? Average Japan home size is about 1000 square feet, smaller but not that much smaller. https://www.statista.com/statistics/1289345/japan-average-size-dwellings/ https://www.statista.com/statistics/1289345/japan-average-si...
    - s1artibartfast 2y ago
      Because the meme/myth about disposable Japanese housing comes from dense urban environments like Tokyo. It is largely a result of tax policy and construction methods between 1960-1990 where it made sense to gut apartments after they depreciated for tax purposes. In Japan, property tax decreases to zero over time, but resets if you upgrade it. There for people gut and remodel before selling their units so they get the benefit of a higher price, but the buyer pays the taxes.

seanmcdirmid 2y ago

Property taxes in many states are set according to budget, so your home’s value relative to other homes is important, but if all housing prices all fall or rise, the money collected is the same. Homes are considered an investment because people want nice ones in locations that can only support so many (either via artificial or natural restriction). In turns out homes outside of those locations can get really cheap since finding buyers is hard.

Gibbon1 2y ago

There are negative benefits to high housing prices. It's the most illiquid asset type. If you sell it where are you going to live? At the same time high rents drive up the price of goods and services you need to pay for.