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Home ownership in the US has traditional been viewed as a means toward upward mobility and a good investment. And it's certainly billed as such by the real esta

Home ownership in the US has traditional been viewed as a means toward upward mobility and a good investment. And it's certainly billed as such by the real estate industry. "Why throw your money away on rent!" When you buy a car, or most other consumer goods, for that matter, you don't view it as an investment that you will be able to sell at a higher cost in the future How many mortgage lenders do you think cautioned homebuyers against buying real estate they qualified for? Both parties entering into that agreement must assume some risk. Homebuyers may loose a home they are unable to pay for, plus anything already paid. Banks get to keep payments already made and the collateral they agreed upon when foreclosure occurs.

Domenic_S 12y ago
People have unreasonable expectations of what an investment is though, just browse /r/personalfinance or /r/investing. If you need liquidity, real estate is not for you. For a tiny period of time that's a rounding error in the history of real estate ownership, yes you could buy a house and see a 100% value increase in a year. But going in expecting that isn't investment, it's speculation (see: bitcoin's run up and crash). The value in real estate - in any true investment - is over the long term. I'm talking decades, not years and certainly not months. For a primary residence it's worth it just to keep your housing payment steady. Your $3k mortgage payment is going to be $3k today, tomorrow, and forever until you pay it off. What's $3k in rent today going to be in 30 years? Nobody could say for sure, but I'd bet everything I own it'll be more than $3k. But as with any investment vehicle, you have to choose what's right for your risk profile and your liquidity needs. Don't invest in a startup if you need your capital back in 2 months, and don't buy a house if you need to liquidate it in a year. Every vehicle has tradeoffs, and each vehicle can be mis-used and end up costing the investor dearly. > How many mortgage lenders do you think cautioned homebuyers against buying real estate they qualified for? Effectively 0, and I can't see a reason it should be otherwise. Does a car dealer caution you about buying too expensive of a car? Does the Apple store encourage you to buy the smallest iPod? Salesmen are not (usually) your fiduciary, and every single person involved in a real estate transaction is a salesperson. Nobody's looking out for you except for you. > Homebuyers may loose a home they are unable to pay for Sure, that happens, and I feel bad for people in that situation. What I've heard a lot of though is from people who could pay, but won't because they feel like it's a bad deal now (see: this thread).
- toomuchtodo 12y ago
  > What's $3k in rent today going to be in 30 years? Nobody could say for sure, but I'd bet everything I own it'll be more than $3k. I don't believe this is the case. Population growth has stopped in the US, and as baby boomers die off you're going to see a glut of housing inventory pushing prices down. > Effectively 0, and I can't see a reason it should be otherwise. Does a car dealer caution you about buying too expensive of a car? Does the Apple store encourage you to buy the smallest iPod? Salesmen are not (usually) your fiduciary, and every single person involved in a real estate transaction is a salesperson. Nobody's looking out for you except for you. Small quibble. The real estate agent/broker advising you is required to act as your fiduciary, as is your attorney. I'm able to provide legal citations if necessary. > Sure, that happens, and I feel bad for people in that situation. What I've heard a lot of though is from people who could pay, but won't because they feel like it's a bad deal now (see: this thread). Selection bias. For every person you talk to on Hacker News who made a financial decision to walk away, I'd wager there are hundreds of people who lost their home due to a legitimate financial hardship. This can be observed through both the unemployment rate during the crisis [1] (and several years after) as well as people trying to get onto disability due to them no longer having skills to earn a living wage. [1] http://i.imgur.com/tf7EZYu.png http://i.imgur.com/tf7EZYu.png [2] http://apps.npr.org/unfit-for-work/ http://apps.npr.org/unfit-for-work/ | http://i.imgur.com/y69r2BU.gif http://i.imgur.com/y69r2BU.gif
  - Domenic_S 12y ago
    > I don't believe this is the case. Population growth has stopped in the US, and as baby boomers die off you're going to see a glut of housing inventory pushing prices down. Two words: immigrants and inflation. I think I'm going to see a $100k minimum wage in my lifetime just from inflation. > The real estate agent/broker advising you is required to act as your fiduciary Of course, as far as trying to get the best deal and informing you of property condition and so forth. In context I clearly meant financial fiduciary [edit: I see even that could be mis-read, so in more words: your realtor has no duty to tell you what you can and can't afford]. RE agents take great pains to know only what your prequal number is to make sure they stay far away from the possibility of financial fiduciary duty. > Selection bias. Perhaps. Whether or not their home was underwater, someone hit by unemployment's probably going to end up in that position anyway. Obviously it was all connected; regardless, those instances are not very interesting. As I said elsewhere in the thread, the cases where people are indeed able to pay yet still walk away are interesting to me.

Domenic_S 12y ago

People have unreasonable expectations of what an investment is though, just browse /r/personalfinance or /r/investing. If you need liquidity, real estate is not for you. For a tiny period of time that's a rounding error in the history of real estate ownership, yes you could buy a house and see a 100% value increase in a year. But going in expecting that isn't investment, it's speculation (see: bitcoin's run up and crash). The value in real estate - in any true investment - is over the long term. I'm talking decades, not years and certainly not months. For a primary residence it's worth it just to keep your housing payment steady. Your $3k mortgage payment is going to be $3k today, tomorrow, and forever until you pay it off. What's $3k in rent today going to be in 30 years? Nobody could say for sure, but I'd bet everything I own it'll be more than $3k. But as with any investment vehicle, you have to choose what's right for your risk profile and your liquidity needs. Don't invest in a startup if you need your capital back in 2 months, and don't buy a house if you need to liquidate it in a year. Every vehicle has tradeoffs, and each vehicle can be mis-used and end up costing the investor dearly. > How many mortgage lenders do you think cautioned homebuyers against buying real estate they qualified for? Effectively 0, and I can't see a reason it should be otherwise. Does a car dealer caution you about buying too expensive of a car? Does the Apple store encourage you to buy the smallest iPod? Salesmen are not (usually) your fiduciary, and every single person involved in a real estate transaction is a salesperson. Nobody's looking out for you except for you. > Homebuyers may loose a home they are unable to pay for Sure, that happens, and I feel bad for people in that situation. What I've heard a lot of though is from people who could pay, but won't because they feel like it's a bad deal now (see: this thread).

toomuchtodo 12y ago
> What's $3k in rent today going to be in 30 years? Nobody could say for sure, but I'd bet everything I own it'll be more than $3k. I don't believe this is the case. Population growth has stopped in the US, and as baby boomers die off you're going to see a glut of housing inventory pushing prices down. > Effectively 0, and I can't see a reason it should be otherwise. Does a car dealer caution you about buying too expensive of a car? Does the Apple store encourage you to buy the smallest iPod? Salesmen are not (usually) your fiduciary, and every single person involved in a real estate transaction is a salesperson. Nobody's looking out for you except for you. Small quibble. The real estate agent/broker advising you is required to act as your fiduciary, as is your attorney. I'm able to provide legal citations if necessary. > Sure, that happens, and I feel bad for people in that situation. What I've heard a lot of though is from people who could pay, but won't because they feel like it's a bad deal now (see: this thread). Selection bias. For every person you talk to on Hacker News who made a financial decision to walk away, I'd wager there are hundreds of people who lost their home due to a legitimate financial hardship. This can be observed through both the unemployment rate during the crisis [1] (and several years after) as well as people trying to get onto disability due to them no longer having skills to earn a living wage. [1] http://i.imgur.com/tf7EZYu.png http://i.imgur.com/tf7EZYu.png [2] http://apps.npr.org/unfit-for-work/ http://apps.npr.org/unfit-for-work/ | http://i.imgur.com/y69r2BU.gif http://i.imgur.com/y69r2BU.gif
- Domenic_S 12y ago
  > I don't believe this is the case. Population growth has stopped in the US, and as baby boomers die off you're going to see a glut of housing inventory pushing prices down. Two words: immigrants and inflation. I think I'm going to see a $100k minimum wage in my lifetime just from inflation. > The real estate agent/broker advising you is required to act as your fiduciary Of course, as far as trying to get the best deal and informing you of property condition and so forth. In context I clearly meant financial fiduciary [edit: I see even that could be mis-read, so in more words: your realtor has no duty to tell you what you can and can't afford]. RE agents take great pains to know only what your prequal number is to make sure they stay far away from the possibility of financial fiduciary duty. > Selection bias. Perhaps. Whether or not their home was underwater, someone hit by unemployment's probably going to end up in that position anyway. Obviously it was all connected; regardless, those instances are not very interesting. As I said elsewhere in the thread, the cases where people are indeed able to pay yet still walk away are interesting to me.