Housing prices

[pp4me]

We bought our house in 2006 right at the peak of the housing bubble only to see the value drop more than 50% at the lowest point. So I'm glad to see home prices increasing again. After 14 years the appraised value of our home is now only 19k more than we paid for it.

I'm now in the process of refinancing @ 3% and resetting the loan to 30 years making the monthly payment less than half of what I can rent the house for. I could have paid off the mortgage entirely but that doesn't make one bit of sense to me with these interest rates. My lowest rate LTT is 3.5%.

What good does it do you for your house value to increase?

1. It makes my net worth statement look better.
2. It gave me enough equity to allow me to refinance.

1. Yes, but not liquid net worth. And because housing is a necessity of life no matter what that money will always be tied up. Seems like cheaper housing would allow for more liquid assets..which are beneficial. I don't see the benefit to having two million dollars tied up in a place to sleep.

2. Wouldnt it be easier to take a larger equity stake from get go if housing was more reasonable?

Granted, there are affordable areas of the country still. A lot of these complaints I'm making are rectified by moving to a different area of country.

Where did the 2 million dollar house come from? Mine is worth $305k according to recent appraisal. I'll owe about $205k once I close on the refinancing.

Doesn't have to make sense to you. Only to me.

[Kriegsspiel]

For tomfoolery & doodle, you don't have to go from one equivalent house to another; though you could do it, housing markets aren't efficient, but I'd figure most people don't for the reason you already said. You could, though, sell a highly finished house you live in and buy a house that needs work done to it, fix it up, then repeat in a few years. Lots of people do that, my family did it when we were kids. Tax free as well.

[pp4me]

What good does it do you for your house value to increase?

1. It makes my net worth statement look better.
2. It gave me enough equity to allow me to refinance.

There’s a website that sells black market organs. My net worth has tripled in the last decade, merely from the value of my kidneys.

I doubt they would have accepted that on my net worth statement when applying for a new mortgage.

[yankees60]

We bought our house in 2006 right at the peak of the housing bubble only to see the value drop more than 50% at the lowest point. So I'm glad to see home prices increasing again. After 14 years the appraised value of our home is now only 19k more than we paid for it.

I'm now in the process of refinancing @ 3% and resetting the loan to 30 years making the monthly payment less than half of what I can rent the house for. I could have paid off the mortgage entirely but that doesn't make one bit of sense to me with these interest rates. My lowest rate LTT is 3.5%.

What good does it do you for your house value to increase?

1. It makes my net worth statement look better.
2. It gave me enough equity to allow me to refinance.

1. Yes, but not liquid net worth. And because housing is a necessity of life no matter what that money will always be tied up. Seems like cheaper housing would allow for more liquid assets..which are beneficial. I don't see the benefit to having two million dollars tied up in a place to sleep.

2. Wouldnt it be easier to take a larger equity stake from get go if housing was more reasonable?

Granted, there are affordable areas of the country still. A lot of these complaints I'm making are rectified by moving to a different area of country.

Totally subscribe to your philosophy. Bought one of the most inexpensive houses around with no mortgage and all the subsequent savings have gone to my investment portfolio. A cheap house saves in so many ways. And, just read a book yesterday which had the information in it that buying more expensive houses generally does not lead to more overall personal happiness.

Vinny

[yankees60]

What good does it do you for your house value to increase? If you sell it, presumably you'd be buying another house, which would equally have raised in price similarly to your house. Or you'd be renting, which would have also increased due to overall housing market increase.

That's true, but with higher home prices, the absolute dollar difference between a big house and a small house will be larger. So retirees who "downsize" by selling a big house, purchasing a smaller house, and pocketing the difference will tend to benefit more as home prices rise since more money ends up in their pocket after downsizing.

Overall, rapidly rising home prices seem to benefit several groups (e.g., banks, realtors, and existing homeowners who will eventually "downsize") largely at the expense of first-time homebuyers.

All things being equal I don't think this is true as I don't think the rising house prices (less all the extra costs of a large house) will give you more over investing the savings from buying the smaller house rather than the larger house.

However, things are not equal if you buy the house in an expensive place to live and then plan to move somewhere where it is inexpensive to live. Presumably in the first place, wages are much higher to enable people to buy houses like that and after you take your profit from selling that house and move to the far less expensive place to live it'd be similar to having a ton of cash and then the economy went into deflation. You money ends up buying much more in real terms than it had prior.

Vinny

[Xan]

One other factor: at least in Texas, a primary residence is shielded from almost everything: bankruptcy, lawsuits, you name it. And it doesn't show up on your FAFSA when figuring college financial aid.

So in those ways, it isn't a bad place to stash capital.

[GT]

Depends where you are....

People are fleeing big cities in droves. They're scared of COVID and think they are safer in a house in the suburbs than in a city apartment or neighborhood. Plus they're tired of being faced with COVID lockdowns, mask mandates etc the moment they walk out their front door. The crime spike, riots, and anticipated tax increases may also be a factor. So are super low interest rates. It's all about supply and demand, Doodle. Houses in my mom's neighborhood in NJ are being snapped up in a matter of days, usually with some pretty stiff bidding wars.

No tech I'm still not considering leaving myself. I think taking the long view is the way to go. Eventually this will all be in the rearview mirror and people will come back to the cities. Even if mayors like DeBlasio continue their destructive rampages, the damage won't be permanent. In a way I hope he does so, because it will make it that much more likely that the next mayor will be Republican. It happened before when Rudy Giuliani was elected, and it'll be that much easier this time around because the recipe book for pleasant, safe cities has already been written. There's no need to let things get as far out of hand as they did in the 1970s/early 80s.

People are fleeing big cities in droves. They're scared of COVID and think they are safer in a house in the suburbs than in a city apartment or neighborhood. Plus they're tired of being faced with COVID lockdowns, mask mandates etc the moment they walk out their front door. The crime spike, riots, and anticipated tax increases may also be a factor. So are super low interest rates. It's all about supply and demand, Doodle. Houses in my mom's neighborhood in NJ are being snapped up in a matter of days, usually with some pretty stiff bidding wars.

I can relate to this example - My relative in Dallas TX has watched his home price shoot up as Tech jobs for CA relocate into the Dallas area. Someone from San Fran flush with a 1.2 million home sale has no trouble getting into a bidding war on a 400K home in Dallas.

[Mountaineer]

Depends where you are....

People are fleeing big cities in droves. They're scared of COVID and think they are safer in a house in the suburbs than in a city apartment or neighborhood. Plus they're tired of being faced with COVID lockdowns, mask mandates etc the moment they walk out their front door. The crime spike, riots, and anticipated tax increases may also be a factor. So are super low interest rates. It's all about supply and demand, Doodle. Houses in my mom's neighborhood in NJ are being snapped up in a matter of days, usually with some pretty stiff bidding wars.

No tech I'm still not considering leaving myself. I think taking the long view is the way to go. Eventually this will all be in the rearview mirror and people will come back to the cities. Even if mayors like DeBlasio continue their destructive rampages, the damage won't be permanent. In a way I hope he does so, because it will make it that much more likely that the next mayor will be Republican. It happened before when Rudy Giuliani was elected, and it'll be that much easier this time around because the recipe book for pleasant, safe cities has already been written. There's no need to let things get as far out of hand as they did in the 1970s/early 80s.

People are fleeing big cities in droves. They're scared of COVID and think they are safer in a house in the suburbs than in a city apartment or neighborhood. Plus they're tired of being faced with COVID lockdowns, mask mandates etc the moment they walk out their front door. The crime spike, riots, and anticipated tax increases may also be a factor. So are super low interest rates. It's all about supply and demand, Doodle. Houses in my mom's neighborhood in NJ are being snapped up in a matter of days, usually with some pretty stiff bidding wars.

I can relate to this example - My relative in Dallas TX has watched his home price shoot up as Tech jobs for CA relocate into the Dallas area. Someone from San Fran flush with a 1.2 million home sale has no trouble getting into a bidding war on a 400K home in Dallas.

Ditto in this area. In my DE neighborhood alone, houses are reportedly selling rapidly for tens of thousands more than the asking price due to bidding wars. I have a realtor friend in Chester County PA who says droves of people are moving from Philly and NYC to the area; it's a sellers market on this end.

[Tortoise]

I suspect another Covid-related factor that's been driving home prices higher this year has been the sharp reduction in a lot of discretionary spending (especially on expensive vacations) causing a corresponding spike in savings.

That extra cash is burning a hole in people's pockets, motivating a lot of them to finally buy their first home, or an investment property, or a vacation home.

And a lot of existing homeowners are using the extra cash (and time at home) to do more renovations. I spoke with a roofer the other day, and he told me that this year has been the busiest one in his company's 80-year history. They're drowning in customers right now.

[pp4me]

I suspect another Covid-related factor that's been driving home prices higher this year has been the sharp reduction in a lot of discretionary spending (especially on expensive vacations) causing a corresponding spike in savings.

That extra cash is burning a hole in people's pockets, motivating a lot of them to finally buy their first home, or an investment property, or a vacation home.

And a lot of existing homeowners are using the extra cash (and time at home) to do more renovations. I spoke with a roofer the other day, and he told me that this year has been the busiest one in his company's 80-year history. They're drowning in customers right now.

When our refrigerator gave out back in June one of the salesmen told me they were seeing higher demand for appliances than they had ever seen before. I suspect this had a lot to do with the stimulus checks but also people spending their vacation money on something else. We've been doing that ourselves. We had been planning for a long time to take our first trip to Europe this year but once that was out of the question we spent it on cocooning in our house instead.

[doodle]

Screenshot_20201014-171522.png (333.04 KiB) Viewed 4608 times

[Kriegsspiel]

Keep in mind, if housing prices drop, they drop for people who can outbid younger, less wealthy people too.

[doodle]

Yeah, true. I'd advocate for higher taxes on second property, no mortgage interest deduction, and full capital gains on sale. Housing is a basic necessity and shouldn't be encouraged as speculative investment for wealthy....but then again I'm a communist I guess. Besides not a big fan of landlords...or any lords for that matter..

[Kriegsspiel]

Housing is a basic necessity and shouldn't be encouraged as speculative investment for wealthy.... Besides not a big fan of landlords...or any lords for that matter..

There are positives and negative aspects of it, I agree. But you shouldn't conflate a rich Chinese dude buying a few condos in SF or Miami that he never lives in to a small-time landlord who operates a couple rentals. Or even to a big landlord operating an apartment complex. I have no bad feelings at all for any landlords I've had, I actually really appreciate that they do what they do, so that I didn't have to try to buy a property (or do any maintenance/repairs) in all the various places I've lived in. It's basically retarded to hate landlords since they provide such a useful service.

but then again I'm a communist I guess.

Seems that way, yea.

[yankees60]

Screenshot_20201014-171522.png

100% agree!!!!

Every time either the stock market goes down or house prices comes down there's an emphasis of how much wealth is lost. Never on that it makes it more affordable or a buying opportunity for the young.

VInny

[yankees60]

Keep in mind, if housing prices drop, they drop for people who can outbid younger, less wealthy people too.

True. But they may not be interested in buying lower-end starter houses that now someone young can finally afford. Overall, I'd consider it a good thing for the young.

Vinny

[yankees60]

Yeah, true. I'd advocate for higher taxes on second property, no mortgage interest deduction, and full capital gains on sale. Housing is a basic necessity and shouldn't be encouraged as speculative investment for wealthy....but then again I'm a communist I guess. Besides not a big fan of landlords...or any lords for that matter..

It's all a way of backdoor lowering tax rates on the more wealthy in society.

I'd support all you state.

Vinny

[yankees60]

Housing is a basic necessity and shouldn't be encouraged as speculative investment for wealthy.... Besides not a big fan of landlords...or any lords for that matter..

There are positives and negative aspects of it, I agree. But you shouldn't conflate a rich Chinese dude buying a few condos in SF or Miami that he never lives in to a small-time landlord who operates a couple rentals. Or even to a big landlord operating an apartment complex. I have no bad feelings at all for any landlords I've had, I actually really appreciate that they do what they do, so that I didn't have to try to buy a property (or do any maintenance/repairs) in all the various places I've lived in. It's basically retarded to hate landlords since they provide such a useful service.

but then again I'm a communist I guess.

Seems that way, yea.

I read it that Doodle was only referring to taxation on personal residences, not rental property. I support him on his proposals for the former. I'd continue to support full regular business deductions for all rental property expenses. Except that I might be in favor of interest expenses not being deducted by anyone, either personal or business.

Vinny

[doodle]

Housing is a basic necessity and shouldn't be encouraged as speculative investment for wealthy.... Besides not a big fan of landlords...or any lords for that matter..

There are positives and negative aspects of it, I agree. But you shouldn't conflate a rich Chinese dude buying a few condos in SF or Miami that he never lives in to a small-time landlord who operates a couple rentals. Or even to a big landlord operating an apartment complex. I have no bad feelings at all for any landlords I've had, I actually really appreciate that they do what they do, so that I didn't have to try to buy a property (or do any maintenance/repairs) in all the various places I've lived in. It's basically retarded to hate landlords since they provide such a useful service.

but then again I'm a communist I guess.

Seems that way, yea.

I read it that Doodle was only referring to taxation on personal residences, not rental property. I support him on his proposals for the former. I'd continue to support full regular business deductions for all rental property expenses. Except that I might be in favor of interest expenses not being deducted by anyone, either personal or business.

Vinny

Yes, these tax proposals don't affect rental properties anyways. Frankly, I don't think it's fair that homeowners (who are generally wealthier anyways) get tax benefits with mortgage interest deduction while renters get nothing.. That is really a government subsidy to a certain elite class...same with the tax free capital gains. I can turn a blind eye to these policies pertaining to first property, but not to second, third, fourth etc.

As far as landlords, I agree they provide a useful function but my experience is that many just slowly allow their buildings to degrade lowering the quality of neighborhoods and housing stock. I have had a few small landlords that owned one building complex that really took pride in their property and maintaied it well. The majority were absentee slumlords. I have a similar distaste for flippers and I say this as someone who has flipped houses and has worked on projects for other flippers There are so many moments during a flip where one can bury issues that should be addressed and would be addressed if the property wasn't just going to be offloaded. A flipper is incentivized to get in and out as fast as possible while trying to minimize big expenses. I have seen a lot of things that should have been addressed just covered up in order to avoid the cost of doing things right and eating into profit .

[yankees60]

Housing is a basic necessity and shouldn't be encouraged as speculative investment for wealthy.... Besides not a big fan of landlords...or any lords for that matter..

There are positives and negative aspects of it, I agree. But you shouldn't conflate a rich Chinese dude buying a few condos in SF or Miami that he never lives in to a small-time landlord who operates a couple rentals. Or even to a big landlord operating an apartment complex. I have no bad feelings at all for any landlords I've had, I actually really appreciate that they do what they do, so that I didn't have to try to buy a property (or do any maintenance/repairs) in all the various places I've lived in. It's basically retarded to hate landlords since they provide such a useful service.

but then again I'm a communist I guess.

Seems that way, yea.

I read it that Doodle was only referring to taxation on personal residences, not rental property. I support him on his proposals for the former. I'd continue to support full regular business deductions for all rental property expenses. Except that I might be in favor of interest expenses not being deducted by anyone, either personal or business.

Vinny

Yes, these tax proposals don't affect rental properties anyways. Frankly, I don't think it's fair that homeowners (who are generally wealthier anyways) get tax benefits with mortgage interest deduction while renters get nothing.. That is really a government subsidy to a certain elite class...same with the tax free capital gains. I can turn a blind eye to these policies pertaining to first property, but not to second, third, fourth etc.

As far as landlords, I agree they provide a useful function but my experience is that many just slowly allow their buildings to degrade lowering the quality of neighborhoods and housing stock. I have had a few small landlords that owned one building complex that really took pride in their property and maintaied it well. The majority were absentee slumlords. I have a similar distaste for flippers and I say this as someone who has flipped houses and has worked on projects for other flippers There are so many moments during a flip where one can bury issues that should be addressed and would be addressed if the property wasn't just going to be offloaded. A flipper is incentivized to get in and out as fast as possible while trying to minimize big expenses. I have seen a lot of things that should have been addressed just covered up in order to avoid the cost of doing things right and eating into profit .

After I wrote what I wrote I glanced back at what you'd written and saw you'd only been referring to second homes. I missed that the first time around. My comments stand regarding all personal residences whether first or second.

I don't think you get the capital gain exclusion on a second home. I think it had to be your primary home for so many years out of the prior five? But it's been a long time since I studied all the housing taxation rules. Not an issue for me so I don't concern myself with knowing the details.

Also, cannot comment on what you've seen regarding landlords as I've not observed that much of it where I live. Where I live it's all homeowners and no renters (although my house had been rented prior to me buying it).

Vinny

[Kriegsspiel]

To be clear, I wasn't really disagreeing with what you said about taxes. It's obvious that in the US, our tax code incentivizes real estate, which can be good and bad. Real estate usually comprises most of the wealth that most people have. I can't find it, but Charles Hugh Smith had a good graph that showed what types of assets rich people own vs what not-rich people own, and of course real estate is the biggest asset class that most people own. So maybe it's more accurate to say that it's a backdoor way of lowering taxes for most people, especially the non-rich?

[yankees60]

To be clear, I wasn't really disagreeing with what you said about taxes. It's obvious that in the US, our tax code incentivizes real estate, which can be good and bad. Real estate usually comprises most of the wealth that most people have. I can't find it, but Charles Hugh Smith had a good graph that showed what types of assets rich people own vs what not-rich people own, and of course real estate is the biggest asset class that most people own. So maybe it's more accurate to say that it's a backdoor way of lowering taxes for most people, especially the non-rich?

The real estate lobby tells us that our tax laws regarding personal residences promote home ownership. But for decades I've been reading that our country has no higher rate of home ownership than Canada which does NOT have similar tax deductions for personal residences. Maybe, Smith1776 can either confirm or update us or both?

Vinny

[Tortoise]

I can turn a blind eye to these [homeowner tax benefit] policies pertaining to first property, but not to second, third, fourth etc.

+1

Homeowner tax benefits were originally intended as a way of incentivizing home ownership among Americans. I don't think they were intended as a way of incentivizing additional real estate investment among American homeowners.

[yankees60]

I can turn a blind eye to these [homeowner tax benefit] policies pertaining to first property, but not to second, third, fourth etc.

+1

Homeowner tax benefits were originally intended as a way of incentivizing home ownership among Americans. I don't think they were intended as a way of incentivizing additional real estate investment among American homeowners.

Until just now I had thought the same as you. But after doing a quick Bing search, I came across this:

The History of the Mortgage Interest Deduction

https://taxfoundation.org/history-mortg ... -deduction

If this is true, then what each of us has believed at least for the interest portion is not true. I do still believe that it is true that the real estate lobby has always lobbied strongly to keep these homeowner tax benefits in place, fallaciously arguing that it increases home ownership. What it actually does it, perhaps, allows those who cannot afford to own a home to subsidize those who do own homes and have mortgages on those homes.

Vinny

[Tortoise]

Very interesting article, thanks Vinny.