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> If you’re going to make a claim this bold and this counter to the prevailing narrative What do you see as the prevailing narrative? The one I see is homeowne
by 9rx 2y ago
> If you’re going to make a claim this bold and this counter to the prevailing narrative
What do you see as the prevailing narrative? The one I see is homeownership itself, which suggests that homeownership has been seen as being hotly desirable. I strongly suspect we wouldn't have a homeownership narrative to speak of if ownership was unwanted. When something becomes unusually desirable like homeownership has, it is not unexpected to see an uptick in participation around it; in this case owning a home. Much of the urban age has been marked with the majority of the population being renters. Everyone wanting to own a home with such furor is historically unusual.
I expect homeownership has become so desirable as it has become seen as a way to build wealth. While, historically, housing only kept pace with inflation at best, real home values have risen by unfathomable amounts in the last decade or two. Which, again, attracts people willing to risk it all for a chance at some of that wealth opportunity. It would be unusual if said generational group had comparatively lower ownership rates given the "FOMO" aspect. People run away when prices are falling, not when they are rising.
Given the market we've watched, the extraordinary claim would be that Gen-Z has lower ownership rates compared to previous generations at the same age.
- jasonkester 2y agoWell said. I remember making a spreadsheet in maybe 1995 laying out the math to compare the real costs and expected gains from buying vs. renting. It mathed out about even. I decided to go with renting instead of buying, with the logic that the S&P didn’t need me to buy it a new roof every 15 years or to work in its garden every weekend. It worked nicely too, growing the money that would otherwise have gone into mortgages and property tax, letting me take some of it out recently and buy a house with cash. I don’t see much of this attitude in my younger friends now. But living cheap and saving does actually work.
- FooBarBizBazz 2y agoA 20% down mortgage is a 5x levered bet. Plus you can roll capital gains into new real estate. The S&P 500 cannot offer these advantages.
- abduhl 2y agoWith the proper mix of retirement accounts, options, and futures contracts it can. It can offer even more leverage if you want.
- kasey_junk 2y agoThe bigger win is the government subsidies and tax breaks. You need very little on hand cash to get a very low interest rate. Much lower than asset loans at equivalent levels of wealth.
- pitpatagain 2y agoThere is little tax break for home ownership currently with the SALT cap + high standard deduction. You get some break if you have a large enough mortgage or high enough interest rate but it has been very nerfed.
- FooBarBizBazz 2y agoI know SALT went away, but there's still 1031 exchanges, which mean that "capital gains" can be tax free, which is a big deal in an inflationary environment. So long as the government keeps printing money (which it will), there's a de-facto wealth tax that only real estate avoids.
- FooBarBizBazz 2y agoA retirement account is a ship in a bottle. You can't put much into it. The only way to make it huge is to take huge risks inside and have them work out. Which isn't a plan. And -- options? The most leverage I can think of reasonably getting would be LEAPS (calls) and rolling them. But, even with LEAPS, you have limited timing flexibility, and are forced to realize more gains/losses. There's nothing on par with a house. They're almost $1M everywhere now. You can't get that much into a retirement account when you're young.
- 2y ago
- george_w_kush 2y agoThe claim isn’t that homeownership is undesirable to Gen Z, but that a lower percentage of Gen Z owns homes compared to previous generations regardless of the specific reason. I think in this case the most likely cause is the increase in prices is causing houses to be unaffordable to Gen Z, despite their desire to own houses.
- 9rx 2y agoThere may be some temporal confusion here. Gen-Z rates of homeownership has stalled out over the past year or so. Prices are no longer rising like they once were, with fears over impending decline, so the desire is not what it once was. It may be fair to say that the narrative has shifted to "too expensive", but as they loaded up early when prices were rising at unprecedented rates there is a big head start at play. They don't have to buy any more homes for a while to maintain the lead.