The Housing Investment Paradox

[Sapphireho]

My house in Idaho i bought 3 years ago has more than doubled in price. Not good unless I'm selling. My property tax has also more than doubled.

[Irace86.2.0]

Originally Posted by Dadhawk

Tell that to all the folks that lost their homes, or were stuck far upside down in a house during the last real estate bubble. You are ignoring risk, but I've gone around this enough to know I will not convince you otherwise.

I do believe you are skewed by a west coast market though. I paid $240,000 for my 4 bedroom 2800 sqft house in 1995. It is now worth right at twice that, and it's value had never really grown by 10% a year despite it's location in one of the most in demand Atlanta suburbs.

I don't consider it an investment though, never considered a house that, but I bought stability, and I'm good with that. Never would have gotten that renting.

Those people were over-extending themselves trying to flip homes and to use houses as investments, which is the very mentality problem I am discussing, but taken to more of an extreme, yet it isn’t far off from the norm of today with people jacking their rents, maximizing home prices, people in bidding wars willing to spend astronomical prices because they believe they have the safety net of an aggressively appreciating home, etc. These people had huge interest ARM loans and not low-interest, fixed-rate mortgages. Furthermore, the recession and housing bust had home values plummet, so much so, that the whole economy suffered and people lost their jobs. It doesn’t matter if everyone put down 20%, if they couldn’t afford the house because they had no income, or weren’t willing to pay for a high interest mortgage, or for paying for a mortgage that was double the value of the home, then they defaulted, often intensionally.

Putting 20% down isn’t a guarantee that a person can escape from under the property without being under water, nor is it the case that someone who puts 3.5% down is inherently doing so with high risk. Maybe they have assets in the form of a 401k or vehicles or whatever that they can liquidate, but they would rather not liquidate those to buy with 20% down, yet if they wait for the 20% in another five years of savings, they can’t catch up to the growth.

Your home has grown at 3%, which is about the rate of inflation. Maybe the area isn’t the norm for the country or for the Atlanta area. I was explaining more about a mentality that exists, and it exists everywhere not just the west coast, and a concept that is taught and believed that a home with indefinitely appreciate and that it builds wealth, while also suggesting that such mentality is part of the driving force for unsustainable growth in home values.

[Sapphireho]

Originally Posted by Irace86.2.0

Those people were over-extending themselves trying to flip homes and to use houses as investments, which is the very mentality problem I am discussing, but taken to more of an extreme, yet it isn’t far off from the norm of today with people jacking their rents, maximizing home prices, people in bidding wars willing to spend astronomical prices because they believe they have the safety net of an aggressively appreciating home, etc. These people had huge interest ARM loans and not low-interest, fixed-rate mortgages. Furthermore, the recession and housing bust had home values plummet, so much so, that the whole economy suffered and people lost their jobs. It doesn’t matter if everyone put down 20%, if they couldn’t afford the house because they had no income, or weren’t willing to pay for a high interest mortgage, or for paying for a mortgage that was double the value of the home, then they defaulted, often intensionally.

Putting 20% down isn’t a guarantee that a person can escape from under the property without being under water, nor is it the case that someone who puts 3.5% down is inherently doing so with high risk. Maybe they have assets in the form of a 401k or vehicles or whatever that they can liquidate, but they would rather not liquidate those to buy with 20% down, yet if they wait for the 20% in another five years of savings, they can’t catch up to the growth.

Your home has grown at 3%, which is about the rate of inflation. Maybe the area isn’t the norm for the country or for the Atlanta area. I was explaining more about a mentality that exists, and it exists everywhere not just the west coast, and a concept that is taught and believed that a home with indefinitely appreciate and that it builds wealth, while also suggesting that such mentality is part of the driving force for unsustainable growth in home values.

You sound like the guys that predicted the 2008 crash. Values went down a bunch. Then, a couple years later, prices went back up. Crazy back up. Your "unsustainable" comment has proven untrue so far in history. It crashes, then comes back stronger. God isn't making any more land, but many more people .

I don't know the point of this thread.

[Sapphireho]

Anyone with a tiny bit of financial sense, and the money to buy into the market can make a bunch of money in real estate.

[soundman98]

Eventually the market has to plateau though, doesn't it? Wages aren't going up, but every other expense is. Or is everyone just going to rent in 10 years except for the top 5%?

[humfrz]

Originally Posted by Lantanafrs2

Things go up and then go down

Then sometimes the thing goes down and never goes back up -

[humfrz]

Originally Posted by Sapphireho

Anyone with a tiny bit of financial sense, and the money to buy into the market can make a bunch of money in real estate.

[Irace86.2.0]

Originally Posted by Sapphireho

You sound like the guys that predicted the 2008 crash. Values went down a bunch. Then, a couple years later, prices went back up. Crazy back up. Your "unsustainable" comment has proven untrue so far in history. It crashes, then comes back stronger. God isn't making any more land, but many more people .

I don't know the point of this thread.

This can’t go on forever…





https://wolfstreet.com/2019/07/12/ch...d-major-metro/


It’s a problem in many places too.

[Captain Snooze]

.

[cjd]

Originally Posted by Sapphireho

My parents bought their house in 1965 for 19k. Worth 2.8 million now. Location, location, location.

There are cases where it works out... And those are the poster child for people who think it should be an investment. Timing is everything, and it should be rare.
The only way it can be an investment is if it becomes unattainable for all but the rich. Much like California now.
That is not a good thing for the economy at large. Just for the rich.

[Sapphireho]

Nope, not good at all.

[Sapphireho]

Originally Posted by Irace86.2.0

This can’t go on forever…

People have been saying that my entire life.

[weederr33]

I can do this all day.

[NoHaveMSG]

Originally Posted by cjd

The only way it can be an investment is if it becomes unattainable for all but the rich. Much like California now.
That is not a good thing for the economy at large. Just for the rich.

Not really true. I’ve bought two houses in the last 12 years, one for 70k and for 90k. I rented one and lived in the other. Remodeled and sold both and came out with significant amount of profit. All on an average single income. It can be done but is getting much much harder and the numbers are a lot bigger. I payed under market for my current house but it needs a ton of work. I imagine when I go to sell this one I will come out well ahead too.




Since the 08’ recession rental agencies have been buying foreclosed houses. Companies with nothing to do with the rental or home market have opened investment property divisions. The problem is states like OR have maximum year increase caps, and as businesses do,
they are going to raise it the max they can every year and have been for years.