Buying A House: C or D?

theres quite a few assumptions there, again admittedly a few of them local/cultural

i think mortgage incorporating a savings/investment product that locks the occupier in to that while (to whatever extent applies with mortgage/rent ratio) covering the housing need monthly payment is an important factor

xps caek

yeah, i have no idea if "because stocks (or whatever) go up in value faster than homes (historically)" is true where you live. it's true in most of the US on decade+ timescales.

One nice side-effect of renting rather than owning rn, is that I'm not freaking out from having my house insurance cancelled because of ever-increasing fire risk. It seems like half of my neighbors are struggling with that.

The investment/savings side of home ownership is entirely dependent on being able to sell it at some point.

― a man often referred to in the news media as the Duke of Saxony (tipsy mothra), Thursday, 6 July 2023 22:17 (fifty seconds ago)

i dont agree with this statement but im gonna have to think about why for a minute

― Ár an broc a mhic (darraghmac), Thursday, 6 July 2023 22:19 (thirty minutes ago) bookmarkflaglink

i. remortgage/liquidity
ii. rent free after mortgage
iii. possibility of renting with or without vacating yourself
iv. the component of the monthly payment that serves as "housing need met" for want of a better definition is passively paying down the debt of the mortgage

i get that for iv especially all sorts of assumptions need to be true but the same can be said for an argument that holds homeownership as inherently risky vs the cost/availability of mortgage financing and the low but reasonably privileged/protected growth in the asset while it also provides a fundamental utility etc etc

xp i'm becoming a capitalist (landlord) right now and am dealing with that too. apparently i have two options. i have never heard of either insurance company. even allowing for the fact that people don't go online to write positive reviews of their insurance company, they both have the worst online reviews of any business i've ever seen.

nb i cant overstate how weird irish property market is tbf and yes when shit like that crashes it crashes hard

but mostly rhat only superfucks you if you have to sell at the wrong time which i may be underplaying as a risk idk

it’s almost as though a sign of middle or upper middle class status is less likely to include home ownership in certain large cities 🤔

meanwhile I think for a certain class of people my age (upwardly mobile, often childless, socially active) it’s been aspirational to shift to renting or downsizing to a condo from a house the last few years, at least in my area. there’s a loss of equity but a lot of the nesting instinct (or a discovery of a lack of the same) during certain world events made people change their minds about where they wanted to live

fwiw I still have a house but I have a love/hate relationship with it because I’m in my little nest and have difficulty motivating myself to get back out there when I’ve got all these little things to do here. but it’s kind of lonely

xp to darragh

i. and iii. are affected by those same factors though (i.e. being able to sell) - if there's market for your house, then the bank is not really gonna want to let you take out a big mortgage on your house. same with trying to rent it out - it's likely you can't sell your house because where you live has become undesirable to live, so renters are probably looking elsewhere.

ii. is definitely true but as I've explained you're not escaping all the other annual costs of owning a home like taxes and insurance.

if there's *no* market i should say

how do taxes work in ireland? there's no equivalent of US property tax in the UK. the tax is on the resident, not the owner. is it the same in ireland?

but mostly rhat only superfucks you if you have to sell at the wrong time which i may be underplaying as a risk idk

― Ár an broc a mhic (darraghmac), Thursday, July 6, 2023 6:58 PM (two minutes ago) bookmarkflaglink

this does happen! if you bought with 20% down in LA around 2006 you likely *could not move* until like 2012, unless you also had significant cash savings. it's happening in NZ right now. i'm slightly worried we're making a mistake not selling up completely in LA tbh.

iii is not necessarily so cut and dried, depending on the factors preventing purchase (locally that would be difficulties in buyers getting mortgages due to bank lending restrictions)

but again im doubtless coloured by that local scenario which also covers next-nothing property taxes, historical high protecrion for homeowners even in significant arrears, rents >>> mortgages etc

xps i think just answered!

xps Right, it's just not a given that you can get money back out of a house, or can get out what you put in. Definitely true that there continues to be value in the house for as long as you live there. But a big part of the argument for home ownership as wealth-building is the idea that once you don't live there any more, either you or your heirs will be able to liquidate it. Which is generally true but can also not be. In the scenario where you never want to move and aren't worried about an estate to bequeath to anyone, you can just live there til you die and if it then falls to pieces, it doesn't really matter. (You see a lot of that in rural parts of the U.S. Houses are kept up until the owner dies, and then they just rot because there's nobody who wants to move there.)

welcome to butte, montana

xxp yeah if rents >>> mortgages and house prices are stable (or rising) then it's basically impossible to come up with an argument for long term renting.

xps re getting stuck absolutely it does happen we had five years of it after our all encompassing property/banking crash but there's at leasts ways to manage that risk (the idea of a property ladder being anathema to yours truly for a start, we're here until we're carted out if possible)

can get out what you put in.

*less* the component that wouldve constituted rent in the equivalent circumstance over the period is i guess the only arm id have in the air here

my views may be colored because my parents bought in 2006 - they topped the market, in a bad way. their house lost 1/3 of its value in the crash and has literally only now returned to where it was pre-2007, thanks to the current housing crunch. that's almost 20 years.

all that said, as might be evidenced by how i've been posting, i am seriously thinking about buying. somewhere. at the end of the day, i do agree with darragh and budo jeru. there is a certain, incalculable benefit to owning a home that can't be put into financial terms. knowing that you can finally erect a shrine to ned raggett in your bedroom without worrying about your security deposit being withheld - priceless!

i wonder also to what extent the personal history skews the weighing up giving all the moving uncertain net present value opportunity cost etc parts but we moved house growing up like i buy shoes now and i gotta say lads "when renting you can always just move" shruggery aint, imo, it

the housing market is rarely left subject to the invisible hand such that a disaster for yr individual homeowner/occupier spells out an equivalent benefit to yr opportunistic genteel housesitter if you get me

xp re personal history!

worse fates befall homes with raggett shrines if i recall my seventies vhs horror correctly

I rented until I was 45 — it suited my peripatetic lifestyle, I moved every few years, lived in different cities, etc. I was somewhat resistant to buying at the time that my wife really pushed it — but now as a homeowner for nearly nine years, I see a whole lot of advantages, for sure. I agree that there is a great sense of assurance about it being your own place — along with yes the hassles of maintenance and so forth. But we've made it really feel like our place in a way I never quite did in any of my rentals, even though I was very fond of some of them. Also of course it helped that we bought in 2014, which in retrospect was a very good time to buy. So I definitely don't discourage it in any way. I just think that the "best investment you'll ever make" hype gets overblown.

their house lost 1/3 of its value in the crash and has literally only now returned to where it was pre-2007, thanks to the current housing crunch. that's almost 20 years.

i absolutely dont want to minimise this, firstly

im trying, i guess, to see how id feel if my house was still worth 'only' x in 2035', at which stage the debt ratio on it is < 50% and ive lived in it the whole time for an unchanging monthly amount- and in my specific circumstance that sounds good to me (im not seeking a year on year asset increase as 'value' is i guess where im setting my own stall here?)

(known graph guy caek will overlay here a line chart of:

interest rates
house prices
rents
wages

over time and simply tap the sign that says "ireland isnt a real economy, remember", im thinking)

yeah to be clear they have definitely not regretted buying it, have gotten 20 years of use out of it, etc. etc.

but i know it did weigh on my mom, who's very risk-averse - knowing that the place you live in is 'underwater', would have to take a loss if we had to sell in an emergency, etc. etc.

knowing that you can finally erect a shrine to ned raggett in your bedroom without worrying about your security deposit being withheld - priceless!

Now I'm curious how destructive to the property such an ofrenda to Ned might be! Also a very specific benefit to home ownership I hadn't innately considered before

yeah i get it

ofc another factor not brought in is there are times in yr life where the cheapest monthly option is simply the biggest factor to be weighed up

xp sorry my post timing game sucks tonight

If you don’t plan to sell or move and you’re confident you’ll never be forced to move by e.g. healthcare costs or climate change, then granted it doesn’t matter what your house is worth.

their house lost 1/3 of its value in the crash and has literally only now returned to where it was pre-2007, thanks to the current housing crunch. that's almost 20 years.

OH HI DERE

otoh our payments have remained almost the same or possibly even gone down slightly, it was $1140 WITHOUT taxes/insurance in 2003 and $1400 with everything now

I feel for your parents, 龜, and I’m glad they’ve been happy enough there to feel it’s home, despite worries

I had the absolutely bizarre experience of dating someone who bought a condo in like, 2006ish and it seemed bad but I wasn’t invested in the relationship yet, then I was, and then I wasn’t. I think she took an absolute bath when she sold it in 2009.

Meanwhile, I had a brief respite and bought my place post-crash when the federal subsidy was fully in effect, just an instant $8k (iirc) from the government. I think I overpaid a tiny bit and don’t really care now.
It was a fixer-upper and if anyone wants to know about HVAC, roof (complete re-sheathing, some frugal people never reroofed and just threw more shingles on for 80 years) and building a whole new garage, hit me up. I still need a kitchen remodel but I think I’m now appraised at 80% higher than what I bought this for

But it’s still regional because I’ve got like, a house under $230k and presumably my lot alone would be that in San Francisco or w/e

Given the current housing crisis in Australia it is crazy to see the debate. Thankful to be one of the few mid-20yo’s to own a home but I have many friends who would find it bizarre to see people debating whether owning a home is a good thing. Someone otm earlier about how this is really a completely different conversation based upon the variables of country/regulations/historical economic reality of real estate as wealth building. I have some younger siblings I am worried will never be able to buy what I was able to get as a first home in their life, or at least a decade or so later. Though yes units/condos are still in range of accessibility for first home buyers. You just better hope you are in a committed partnership with two full time incomes to make it happen. I am constantly angling my friends to get into the market as soon as they can. For my region of the world, it’s really been a no lose and the security is invaluable

his does happen! if you bought with 20% down in LA around 2006 you likely *could not move* until like 2012, unless you also had significant cash savings.

It really is a timing thing. My house nearly doubled in value a year after I bought it. Australia is crazy

Data point: where I live, my mortgage payment is significantly less than what rent would be, but I am not (alas) a hipster.

We considered selling in 2021 but the conclusion was: can't move because there's nothing we can afford that is better than what we have. Even though we would have profited on the sale, we'd be buying right back into the same market.

Nowadays we would have that same uphill climb, with the added disincentive of higher interest rates.

some frugal people never reroofed and just threw more shingles on for 80 years

When we renovated our bathroom including installing a skylight, we found out that our roof had four layers of shingles when the contractor who installed the bathroom and skylight "installed" the flashing on the skylight by weaving it into the four layers of shingles instead of sealing it to the roof decking, so that the first solid rain after the bathroom was painted we had water dripping through the high-hat above the shower and we ended up having to strip all four layers and getting a new roof just to properly install the skylight.

^^^
Hidden cost avoided by renting.

“For my region of the world, it’s really been a no lose and the security is invaluable”

Depends on your definition of region I guess https://www.nytimes.com/2023/06/19/business/new-zealand-housing-prices.html

we get it, you have decided that renting is better for you

Mod could you retitle this thread to “buying a house: classic”?

Having a scour through realestate.co.nz of the suburb in that article, you see some similar trends of what is happening around me in QLD: sold 2015: $253k to then sold 2023 $580k.
(https://www.realestate.co.nz/property/446-raikes-avenue-te-awamutu-waipa-waikato/n4x0d3q2c).

The issue is people buying at the peek in 2021 for 600k Who have then had their property price go down by 50-100k with a growing interest rate.

Who knows if in 2040 the 530k house will be 1m? But my inclination is that it (sadly) will be. I know next to nothing about investing and the home i bought is my only experience at it. But I think an over 2x increase on 250k in 8 years is nothing to scoff at?

I appreciate the argument caek. There is always a time in life where renting is a good choice, even if that time is just when one is saving for a house. My view is that if you are the “settling down” type though, buying and paying off a house is always a good idea if you can get the timing/location right.

Also to note, there is no mention in that article of people “losing money” in having to sell. Just that they had to sell 100k under what they were hoping (i.e. damn we’re only getting a 150k profit from this property/250k profit). Which is a good thing for the world? Obviously there will be some that have lost and some that will lose money, but overall I think (as a home owner) the stabilisation of housing prices is a good thing for the world. Whole article stinks of crocodile tears at the fact we can’t keep robbing future generations ability to have permanent secure housing for the benefit of our own gross profits

the point of linking that article was not to cry about paper millionaires making a profit of 500k instead of 400k. it's a bad article. i linked it to show that house prices sometimes go down, including right now. "it's really been a no lose" is very easy to say in the past tense (especially if you're in your mid-20s!), but is not necessarily true in the future for a person deciding whether to buy or rent today.

Fair point, but at least for my region of the world (and I would suggest most the western world), the overwhelming majority of those who own properties have benefited from it? Not everyone, not every location, not every time frame, but from a broad view of the past 100 years, it seems hard to argue that renting is “overall” a better idea than buying. Nothing against your situation, I am sure you have dotted your i’s and crossed your t’s to work out that this is the best situation for you right now, and should be thankful that you have the choice between the two options unlike so many young people! All the best to you

yeah i think the overall point is that real estate - putting aside the use value you get from it by living in it - is an asset subject to market forces, and that it can be a risk like any other asset class. in america, real estate prices mostly go up but just ask someone from detroit, anywhere in the rust belt, whether that's always the case.

taking a step back, though - housing, like healthcare, should be a universal right, and should be provided by the government. the US, being the US, gestures vaguely in this direction by propping up the housing market via the 30-year mortgage and being a willing buyer of mortgage securities, but obviously it is nowhere near sufficient and the real estate market has grown extremely distorted in certain areas of the country as a result, not to mention creation of an preference for energy-inefficient single family homes in the suburbs over more sustainable, dense, energy-efficient urban housing.

taking a further step back, maybe property rights should be abolished entirely, capitalism dismantled and the US government overthrown? just throwing it out there.

that's a good idea, but i also like the other suggestion in this thread which is to pay your mortgage off in full.

Fair point, but at least for my region of the world (and I would suggest most the western world), the overwhelming majority of those who own properties have benefited from it? Not everyone, not every location, not every time frame, but from a broad view of the past 100 years, it seems hard to argue that renting is “overall” a better idea than buying.

i mean yes, property ownership is beneficial! when there is enough property to go around, it is good for everyone. when there isn't, you see rentier capitalism set in. we may be lucky enough to see the creation of a new feudalism in our lifetimes - i trust that sounds appealing?

Bit of a change in discussion. I was responding to whether mortgaging vs. renting is beneficial to the individual making that decision. Is the current housing system beneficial to the majority? No. For those in the means to make that decision, yes. Should things change (i.e. at the bare minimum, stabilisation of housing prices through raising interests rates a la NZ)? As I have previously said, yes.