6 ms·

> You need a mortgage because you don't have $400,000 in cash sitting around. And a large part of why housing costs $400,000 in the first place is due to the a

> You need a mortgage because you don't have $400,000 in cash sitting around. And a large part of why housing costs $400,000 in the first place is due to the availability of mortgages. Mortgages gave themselves a reason to exist.

ghiculescu 11y ago
No, it's because a house is 400,000 times more valuable than a can of coke.
- innguest 11y ago
  The banks really succeeded in convincing you that that's the price of a house, but that only says something about you, not about the real price of a house. A 500 sq ft monolithic dome house costs around $30k. It fulfills all the roles of a normal house, but better, safer, and cheaper. Now tell me how I'm wrong because "furniture doesn't fit in curved walls" and how that justifies the $370k discretionary increase in how much you want to help banks prey on homeowners and earn more interest.
  - dragonwriter 11y ago
    > Now tell me how I'm wrong because "furniture doesn't fit in curved walls" Well, yeah, if you are going to have a house that small -- 500 sq. ft. -- optimal shape is a pretty big concern. > and how that justifies the $370k discretionary increase Well, much of the increase is going to be land price. Even a 500 sq. ft. dome home anywhere more typical home prices for reasonably moderately sized homes are around $400,000 is going to be a lot more than $30k just of the land it sits on.
    - sdenton4 11y ago
      Eh, I lived in a 400sq foot dome for four years. Always with a room-mate, sometimes with two. It was great. The bit of space between the couch and the wall just becomes some oddly-shaped storage space. Sometimes people would carve their own dome-fitting bookshelves in the wood shop. There were fourteen of these domes, run as a cooperative, on three acres of land. The loans on building them were paid off in full by the early eighties, and I believe there was about a decade where no one paid rent. But eventually it was decided that a nest egg should be built up for upkeep and so on; by the time I was there, it was running about a third of market rent, and these days (due to some additional pressure to modernize) the rents are up to about 2/3 market. Cooperative ownership is fantastic, and a great cure for the ails of capitalism. But they tend to not get a lot of investment for exactly the same reason: capital isn't interested in investing in non-capitalist spaces. But it's certainly possible to band together with some friends to get an initial down-payment+loan. Then you incorporate the cooperative, and essentially 'sell' the house to the new cooperative, so that the 'rent' you pay to your new co-op pays off the bank loans. Once the loans are paid off, the cooperative becomes an autonomous creature, self-sustaining as long as there are people happy to live with other people and decide how the place will be run, rather than dealing with a landlord...
      - rlonstein 11y ago
        > Cooperative ownership is fantastic, and a great cure > for the ails of capitalism. +$0.02. I served several years on a housing co-op board for a 156 unit urban high-rise (including as treasurer) and cooperative ownership is itself not a cure all, only the composition of the "ownership" is different. The shareholders (tenants) pool their investment, true, and then go on to create a corporate structure, elect a board, draw up rules and enforce them, assign duties, levy fees and payments, hire staff, contract, etc. It's a fairly ordinary corporation in most respects. The co-op is the landlord and it's quite a business to run even when things are going well and everyone pulls in the same direction and individuals don't cause each other trouble. When things go wrong (as they always do) or shareholders disagree (as they always do) or people behave badly (as they always do), it's exceedingly challenging and because it's a mix of personal and business there are some tough decisions and terrible hard feelings. I agree capital tends to avoid housing co-ops because they smell funny and act differently and the laws around them are a mess. As a result, it's harder to assess the risk for a co-op than other businesses and more complicated to borrow, contract, etc.
        sdenton4 11y ago
        It's totally possible to do at smaller scale; I've known of some micro co-ops of just one or two houses that have been quite successful. The smaller scale minimizes certain kinds of headaches..
- kriro 11y ago
  That's only true for a marginal can of coke. If you have nothing else to drink and are about to die a lone can of coke becomes much more valuable than the house. Diamond/water paradox
  - jsprogrammer 11y ago
    Until you drink the coke and a blizzard comes. Also, there's no paradox. Also, high diamond costs are due to marketing.
coderzach 11y ago
Not really. Land, Materials, and a team of carpenters/electricians/roofers/hvac/painters for 3-6 months ends up at around 400k. It's not really that crazy. If you paid them all programmer salaries, you'd never get a house for under 1mm.
- innguest 11y ago
  A monolithic concrete dome that is energy-efficient, fire-proof, tornado-proof and earthquake-proof costs around $30k. But it's not your money so you don't care that the banks are subsidizing incredibly complex, unreliable, weak, stucco-wall houses that due to their unnecessary complexity, naturally end up costing several times more than a better, simpler house.
  - vonmoltke 11y ago
    > A monolithic concrete dome that is energy-efficient, fire-proof, tornado-proof and earthquake-proof costs around $30k. For a space smaller than a typical studio apartment. The Monolithic Dome Institute[1] quotes domes at $125/sf (including walls) for a "regular" finish. Your $30,000 dome would have a footprint of 250 sf. My house would cost at least $287,500 to replace with a dome; in contrast, it would cost about $150,000 to replace it with another wood-framed house. Concrete block costs would depend heavily on how complex the floor plan is, but would still be cheaper than a monolithic dome. [1] http://www.monolithic.org/forms/the-residential-evaluator http://www.monolithic.org/forms/the-residential-evaluator
- Spivak 11y ago
  The problem is that you have to take into account that those values are biased because mortgages exist. The value of a home is exactly what a person is willing and able to pay for it. If mortgages never existed then people would value housing much less because it's no longer $x monthly, it's the whole thing up front. You're right that a portion comes from material cost but the cost inflates to fit the budget of the expected buyer. Without mortgages the typical suburban house would be built so that a middle-class person could afford it. From this you can argue that mortgages are a good thing because they allow a person with less wealth to get more/better houses by leveraging future income, but the trade-off is that buyer takes on more risk, there are no low cost homes in good neighborhoods which could be reasonably bought outright, and people are more dependent on their credit rating.
jameshart 11y ago
People who can afford 400k mortgages expect to earn, over their lifetime, more than 400k. They just haven't earned it /yet/. The willingness of people to pay them over 400k for a lifetime of labor is what makes houses worth that much, not the willingness of banks to lend them that money today.
- random_6hm9v 11y ago
  Actually, when I hire people I don't recommend them mortgaging their life, regardless of what I might think about affording or not to pay for their services either now or in an immediate future. In a surrounding changing world, instead of gaining leverage to better cope with its changing nature, people instead take mortgages! And guess what - they don't do it in their most clear minds. They always do this life-changing decision dreaming. That is what makes things overpriced and unaffordable without a mortgage.

ghiculescu 11y ago

No, it's because a house is 400,000 times more valuable than a can of coke.

innguest 11y ago
The banks really succeeded in convincing you that that's the price of a house, but that only says something about you, not about the real price of a house. A 500 sq ft monolithic dome house costs around $30k. It fulfills all the roles of a normal house, but better, safer, and cheaper. Now tell me how I'm wrong because "furniture doesn't fit in curved walls" and how that justifies the $370k discretionary increase in how much you want to help banks prey on homeowners and earn more interest.
- dragonwriter 11y ago
  > Now tell me how I'm wrong because "furniture doesn't fit in curved walls" Well, yeah, if you are going to have a house that small -- 500 sq. ft. -- optimal shape is a pretty big concern. > and how that justifies the $370k discretionary increase Well, much of the increase is going to be land price. Even a 500 sq. ft. dome home anywhere more typical home prices for reasonably moderately sized homes are around $400,000 is going to be a lot more than $30k just of the land it sits on.
  - sdenton4 11y ago
    Eh, I lived in a 400sq foot dome for four years. Always with a room-mate, sometimes with two. It was great. The bit of space between the couch and the wall just becomes some oddly-shaped storage space. Sometimes people would carve their own dome-fitting bookshelves in the wood shop. There were fourteen of these domes, run as a cooperative, on three acres of land. The loans on building them were paid off in full by the early eighties, and I believe there was about a decade where no one paid rent. But eventually it was decided that a nest egg should be built up for upkeep and so on; by the time I was there, it was running about a third of market rent, and these days (due to some additional pressure to modernize) the rents are up to about 2/3 market. Cooperative ownership is fantastic, and a great cure for the ails of capitalism. But they tend to not get a lot of investment for exactly the same reason: capital isn't interested in investing in non-capitalist spaces. But it's certainly possible to band together with some friends to get an initial down-payment+loan. Then you incorporate the cooperative, and essentially 'sell' the house to the new cooperative, so that the 'rent' you pay to your new co-op pays off the bank loans. Once the loans are paid off, the cooperative becomes an autonomous creature, self-sustaining as long as there are people happy to live with other people and decide how the place will be run, rather than dealing with a landlord...
    - rlonstein 11y ago
      > Cooperative ownership is fantastic, and a great cure > for the ails of capitalism. +$0.02. I served several years on a housing co-op board for a 156 unit urban high-rise (including as treasurer) and cooperative ownership is itself not a cure all, only the composition of the "ownership" is different. The shareholders (tenants) pool their investment, true, and then go on to create a corporate structure, elect a board, draw up rules and enforce them, assign duties, levy fees and payments, hire staff, contract, etc. It's a fairly ordinary corporation in most respects. The co-op is the landlord and it's quite a business to run even when things are going well and everyone pulls in the same direction and individuals don't cause each other trouble. When things go wrong (as they always do) or shareholders disagree (as they always do) or people behave badly (as they always do), it's exceedingly challenging and because it's a mix of personal and business there are some tough decisions and terrible hard feelings. I agree capital tends to avoid housing co-ops because they smell funny and act differently and the laws around them are a mess. As a result, it's harder to assess the risk for a co-op than other businesses and more complicated to borrow, contract, etc.
      - sdenton4 11y ago
        It's totally possible to do at smaller scale; I've known of some micro co-ops of just one or two houses that have been quite successful. The smaller scale minimizes certain kinds of headaches..
kriro 11y ago
That's only true for a marginal can of coke. If you have nothing else to drink and are about to die a lone can of coke becomes much more valuable than the house. Diamond/water paradox
- jsprogrammer 11y ago
  Until you drink the coke and a blizzard comes. Also, there's no paradox. Also, high diamond costs are due to marketing.

coderzach 11y ago

Not really. Land, Materials, and a team of carpenters/electricians/roofers/hvac/painters for 3-6 months ends up at around 400k. It's not really that crazy. If you paid them all programmer salaries, you'd never get a house for under 1mm.

innguest 11y ago
A monolithic concrete dome that is energy-efficient, fire-proof, tornado-proof and earthquake-proof costs around $30k. But it's not your money so you don't care that the banks are subsidizing incredibly complex, unreliable, weak, stucco-wall houses that due to their unnecessary complexity, naturally end up costing several times more than a better, simpler house.
- vonmoltke 11y ago
  > A monolithic concrete dome that is energy-efficient, fire-proof, tornado-proof and earthquake-proof costs around $30k. For a space smaller than a typical studio apartment. The Monolithic Dome Institute[1] quotes domes at $125/sf (including walls) for a "regular" finish. Your $30,000 dome would have a footprint of 250 sf. My house would cost at least $287,500 to replace with a dome; in contrast, it would cost about $150,000 to replace it with another wood-framed house. Concrete block costs would depend heavily on how complex the floor plan is, but would still be cheaper than a monolithic dome. [1] http://www.monolithic.org/forms/the-residential-evaluator http://www.monolithic.org/forms/the-residential-evaluator
Spivak 11y ago
The problem is that you have to take into account that those values are biased because mortgages exist. The value of a home is exactly what a person is willing and able to pay for it. If mortgages never existed then people would value housing much less because it's no longer $x monthly, it's the whole thing up front. You're right that a portion comes from material cost but the cost inflates to fit the budget of the expected buyer. Without mortgages the typical suburban house would be built so that a middle-class person could afford it. From this you can argue that mortgages are a good thing because they allow a person with less wealth to get more/better houses by leveraging future income, but the trade-off is that buyer takes on more risk, there are no low cost homes in good neighborhoods which could be reasonably bought outright, and people are more dependent on their credit rating.

jameshart 11y ago

People who can afford 400k mortgages expect to earn, over their lifetime, more than 400k. They just haven't earned it /yet/. The willingness of people to pay them over 400k for a lifetime of labor is what makes houses worth that much, not the willingness of banks to lend them that money today.

random_6hm9v 11y ago
Actually, when I hire people I don't recommend them mortgaging their life, regardless of what I might think about affording or not to pay for their services either now or in an immediate future. In a surrounding changing world, instead of gaining leverage to better cope with its changing nature, people instead take mortgages! And guess what - they don't do it in their most clear minds. They always do this life-changing decision dreaming. That is what makes things overpriced and unaffordable without a mortgage.