Some of the smarter among us own homes, because they can delay gratification, and save. That same saving and delayed gratification could be used to put money into a business that benefits others, instead of a home, which benefits basically only them and their close family. Not only do they misallocate that capital, while being the intelligent class that can actually run a successful business, or service, which benefits others. That's just bad thing 1.
Bad thing 2 is that they cop an attitude, and affect legislation which causes their "investment" in owning a home to rise in price. Executed by preventing competition (zoning laws) and being more costly for everyone else to buy, because they demand and fight for it. *Homestead tax exemption, etc. Their choice to own a home makes them want others to have a harder time to get what they themselves have, through the vehicle of higher prices, and tax benefits to the capital class.
Thus intelligent, useful people, become cockblockers. Houses must become more and more unaffordable for everyone else, because they happen to own one. :( How selfish. Sadly, the idea that high house prices screw over more people than they benenfit is undermarketed, and its impossible to teach a man a thing he profits by not understanding... We end up in a world where no young person can afford to own the home they live in. And if you try to build some new supply, the local captured regulatory agency, vetos you. The zoning board of people who already have nice houses, cock blocks you. Not in my backyard!
Stop cock blocking. Stop expecting your future to be paid for by your non productive, benefits only you "asset." Go forth and benefit others at scale if you desire riches.
I'm not sure I can grasp why you're so negative about house ownership and you seem to be rather in some weird ideological cage that doesn't let you see the whole picture. Firstly you have something akin to the broken window fallacy going on: if I buy a house someone else (often a company) gets that cash and can invest it. The money does not disappear, and if I had taken the same loan (which I likely wouldn't have received without the house title as guarantee that the bank gets its money back) to start a company or invest in stocks there's a much higher probability of failure than that my house disappears. So it's a thrifty investment.
In particular as secondly, house ownership means I'll save on rent, rather than to pump money into someone else's pocket I'm accumulating the value. It's a simple calculation that this is in most cases in my benefit if I expect to be in the same spot for 5+ years. Real house value could even decrease over time, the rental costs I'm saving could still make it a good investment.
Thirdly, first house owners are unlikely to try to influence policy just to increase house value. Not sure how you can have such an idea, for most owners this would be unlikely to be worth the time& effort required just to increase house value 1℅ or so. But you can be sure they will fight for their quality of life (think parks, no planes, etc). That coincides with house value but for most average citizens the only (conscious/driving) reason to affect local policy is quality of life.
And lastly I think you're somehow too far from reality if you argue it is in an individual's interest to serve the wider economy. I'm not going to use my money just to benefit an imaginary wider economy - what is the benefit then for me? Why be rich if life sucks (and why risk all my money just to start a company if I have already a good income & life?) Do I live just to nudge Gdp up by 0.00001℅ over my lifetime? Or do I want a healthy life, a garden for my kids to play, etc.
Buying a house is a very rational decision and I"m not sure what you can see as selfish (in particular considering point 1). Your argument really is somewhat absurd and I find it hard to believe you make all your life decisions or buying decisions with such an approach (leasing your laptop? Living in a polygamous commune as keeping an attractive partner to yourself would keep potential value from the rest of humanity?).
I want more people to own homes. I want more houses contructed. I want lower house prices. I want more home owners. Please do not conflate my distates for homeowners greed for a distate in home builders. Home building is great. Home owning is passing the buck around.
Are you really saving by owning a home vs renting? Your equity could be invested elsewhere plus you are spending money on maintenance, which you don't fully recoup when you sell. You are locking up equity in a non diversified asset. There are non financial benefits of home ownership, but I'm not sure it makes financial sense
How could I invest the equity elsewhere, other than the down payment? I have a monthly payment for housing either way, and with rent it will be larger unless the local market is crashing.
> plus you are spending money on maintenance, which you don't fully recoup when you sell
Owners and renters both pay maintenance and taxes. The difference is that owners pay those bills directly and renters pay them indirectly. The idea that owners pay things renters don't is a fallacy.
The renters often pay less maintenance than the owners. It's true that they pay some of it - but not all. The idea that the owners can pass along full maintenance costs in the form of rent is also a fallacy Yes, the downpayment. The downpayment could be invested in a diversified basket of assets instead.
> The renters often pay less maintenance than the owners. It's true that they pay some of it - but not all. The idea that the owners can pass along full maintenance costs in the form of rent is also a fallacy.
If that was the case the landlord would be taking a loss on the property, since rent is the only appreciable form of revenue the landlord gets for the property. How do you think the landlord can avoid passing on the full cost of maintenance and still make money? Don't forget that the landlord still has to pay some amount of maintenance even when the property is unoccupied.
> Yes, the downpayment. The downpayment could be invested in a diversified basket of assets instead.
So it really depends on how much the down payment is then, and how much the down payment reduces the cost of housing. You can't make a blanket statement either way.
Landlords fight like hell to avoid doing maintenance. Why do you think that is, if they could simply pass along full cost to the renters? The reality is, maintenance is something they take a partial loss on
They fight like hell to avoid doing maintenance for the same reason any low-margin business avoids doing anything that isn't absolutely necessary: to protect their slim profit margins. They are not taking a "loss" on maintenance; maintenance is one of many costs of doing business and one slummier landlords try to minimize as much as they can get away with.
There is no fallacy here. For all maintenance done, either the renters cover the costs of the maintenance or the landlord loses money on the property. Trying to avoid performing the maintenance in the first place doesn't change that.
my point is that the renters do not fully cover the cost of maintenance for landlords, only partially. Landlords cannot raise rent by the amount equal to the maintenance they have to perform, the rent hikes in a market are a function of supply/demand of renters. Otherwise, rents would rise in places with old houses, independent of peoples desire to live in those places and that obviously doesn't happen
I believe the calculations aren't quite correct. The return on the S&P is higher than the return on housing in a typical market. That's the whole point of the parent article. Consider a typical market like Chicago area. Prices still haven't recovered from the housing bust
If you look at historic trends, the housing burst and the drop and raise in home prices was specifically atypical -- you can pretty clearly see it on a graph. This abnormal behavior is why we have specifically given a name for it and why you and I both know exactly which housing burst we're talking about, otherwise it would just be the normal background trend.
The normal background trend is for home prices to rise at about the rate of inflation. We don't really have a special name for this other than "appreciating asset".
no, you are thinking about it wrong. housing as a whole rises at the rate of inflation. The particular house you purchase can easily rise not at the rate of inflation but less, due to depreciation and idiosyncratic factors. If you want to invest in housing, then buy reits or invest in private real estate funds. That doesn't have to involve buying a house. As to the bust, it is only atypical if you think about housing in isolation. If you think about it as just one of many assets trading in the economy, then you will realize that busts in asset prices occur all the time, so it's not some sort of one off that can never happen.
agree. home ownership is about creating wealth for yourself instead of making the landlord rich. There are many millennials who are living with their parents instead of pissing away money every month for rent, and then using the saved money from their job to buy a home, achieving financial independence. With renting, you're never are able to achieve independence, since you're constantly draining money, and the rate of rent, especially since 2011, has far, far exceed inflation.
Bad thing 2 is that they cop an attitude, and affect legislation which causes their "investment" in owning a home to rise in price. Executed by preventing competition (zoning laws) and being more costly for everyone else to buy, because they demand and fight for it. *Homestead tax exemption, etc. Their choice to own a home makes them want others to have a harder time to get what they themselves have, through the vehicle of higher prices, and tax benefits to the capital class.
Thus intelligent, useful people, become cockblockers. Houses must become more and more unaffordable for everyone else, because they happen to own one. :( How selfish. Sadly, the idea that high house prices screw over more people than they benenfit is undermarketed, and its impossible to teach a man a thing he profits by not understanding... We end up in a world where no young person can afford to own the home they live in. And if you try to build some new supply, the local captured regulatory agency, vetos you. The zoning board of people who already have nice houses, cock blocks you. Not in my backyard!
Stop cock blocking. Stop expecting your future to be paid for by your non productive, benefits only you "asset." Go forth and benefit others at scale if you desire riches.