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Those are edge cases and they can go both ways. Inheritance for their children to buy a house with? Even with inheritance, it can be zero sum. You inherit a hou

by netcan 12y ago

Those are edge cases and they can go both ways. Inheritance for their children to buy a house with? Even with inheritance, it can be zero sum. You inherit a house which you use to clear a mortgage or buy your own house. You still have one house. Unless the houses multiply there is nor real addition of wealth. Some people do accumulate capital in their houses and downsize. But even in cases where it happens, they might have been better of with cheaper housing costs all their lives enabling savings amounting to more capital at retirement. Homeowners might end up on either side of this equation. Rapid growth periods place earlier buyers in a better relative place to later buyers. But I think the upside is over valued by home owners while the downside is undervalued. Much of the upside is in fact access to capital. It's interesting how foreign the idea that lower prices make us wealthier is when it comes to housing.

mattmanser 12y ago
Edge cases? That's the entire middle class you just called an edge case. You might be able to do the math, they can't. All they know is that they bought for £150k, sold for £175k, woohoo, they made £25k. Doesn't matter their new house was even more expensive. Also the baby boomers cashed out big on their houses before the recession, so their children irrationally believe that's what's going to happen to them. All your other (pretty good) points now look slightly ridiculous by association because you're so out of touch with normal people.
- netcan 12y ago
  I meant that instances where homeowners really win or lose significantly from rising house prices are edge cases. They exist and are common. But, they go both ways. I believe that the mentality you are describing is generated by the system moreso than it generates the system. If people expected their £150k house in Norwich to be worth £125k in 10 years, the whole psychology would change. people would see houses as what they are. Things that cost money. Things you live in. *I also think that all the mortgage encouragement is counterproductive. If 10 year loans were the norm, house prices would be lower. Own-to-let would require higher returns (7-9%) over a lower purchase cost, but housing as an overall cost to the people in the country would be lower.
aidenn0 12y ago
Yes, they would have been better off with cheaper housing costs all their lives, but we are talking about people who have already purchased. If housing prices dropped to one half their current value, a large fraction of the owner-occupiers in this country would be bankrupt.
- netcan 12y ago
  They would owe more than they own. But if you buy a house with a mortgage and the price goes down, you still owe exactly the same amount of money. Same monthly payments. Same house. Nothing changes unless you sell it.. and don't immediately buy another.
  - muzz 12y ago
    In that case, the owner would have every incentive to "strategically default"

by netcan 12y ago

mattmanser 12y ago

Edge cases? That's the entire middle class you just called an edge case. You might be able to do the math, they can't. All they know is that they bought for £150k, sold for £175k, woohoo, they made £25k. Doesn't matter their new house was even more expensive. Also the baby boomers cashed out big on their houses before the recession, so their children irrationally believe that's what's going to happen to them. All your other (pretty good) points now look slightly ridiculous by association because you're so out of touch with normal people.

netcan 12y ago
I meant that instances where homeowners really win or lose significantly from rising house prices are edge cases. They exist and are common. But, they go both ways. I believe that the mentality you are describing is generated by the system moreso than it generates the system. If people expected their £150k house in Norwich to be worth £125k in 10 years, the whole psychology would change. people would see houses as what they are. Things that cost money. Things you live in. *I also think that all the mortgage encouragement is counterproductive. If 10 year loans were the norm, house prices would be lower. Own-to-let would require higher returns (7-9%) over a lower purchase cost, but housing as an overall cost to the people in the country would be lower.

aidenn0 12y ago

Yes, they would have been better off with cheaper housing costs all their lives, but we are talking about people who have already purchased. If housing prices dropped to one half their current value, a large fraction of the owner-occupiers in this country would be bankrupt.

netcan 12y ago
They would owe more than they own. But if you buy a house with a mortgage and the price goes down, you still owe exactly the same amount of money. Same monthly payments. Same house. Nothing changes unless you sell it.. and don't immediately buy another.
- muzz 12y ago
  In that case, the owner would have every incentive to "strategically default"