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our society is better off with stable home prices.
Then the show "My house is worth what" is gonna sound really stupid.
Host - You purchased our home in 2005 for 500k. You put in 100 for granite and pool. And today your home is worth 505!!!!! That gives you an appreciation of!!!!....wait, hold on a second. No I guess that just makes you a moron.
Reality tends to make a lot of marketing pitches for various products look stupid. This TV show is no exception to that guideline.
our society is better off with stable home prices.
Then the show "My house is worth what" is gonna sound really stupid.
Host - You purchased our home in 2005 for 500k. You put in 100 for granite and pool. And today your home is worth 505!!!!! That gives you an appreciation of!!!!....wait, hold on a second. No I guess that just makes you a moron.
Just as foolish an investment as buying a brand new car. Real estate is truly a bad investment from the point of view of making money. The true value in a given piece of land or whatever is in what can be done with it. For example, I paid $550 an acre for my land. If I sell, that's about what I'll get for it, not a good "investment" is it? But with the fuel and building material it provides (timber and such) and the ability to grow crops or something else on it, makes it a good investment from that point of view. It can provide me with a lot more than $550 can buy otherwise. The true value in a house is as having shelter, not as a traditional investment. And with rather high property taxes in many areas, once you add up what you've paid in taxes, besides just the maintenance and upkeep for a house, that "profit" that doesn't actually take into account inflation starts getting pretty small. If you're going to spend thousands on granite counters, pools, or whatever, do so for a reason other than profit. You won't profit off of it generally.
Those shows are so silly, how do then even determine the "value" of the upgrades. Why in the world would the upgrades add more to the price of the house than the upgrades cost? Is it really that hard to hire someone to do upgrades to your home?
Remember when HGTV was about things like gardening and not housing mania?
I do. Gardening is work though. I guess some people consider hiring someone to update a house/yard and selling these improvements at a profit work too, but it is really just speculation. For many,sweat equity means sweating out a deal done with someone else's money and someone elses sweat.
Flat home values are a good thing. Falling are not unless it is needed to get back to reasonable levels in which case it is beyond more than needed than ever today and last 2 years. And even was to a much lesser extent pre covid. Though rising home values anymore than 2% per year in nominal dollar terms is an even worse things and punishes responsible savers who want to save for full cash purchase harshly as my comments below will show.
Problem is stupid easy lending standards where nothing was learned from financial crisis except lets patch things up so we can continue the same allowing people to use homes as ATM machines with just tighter lending standards.
A slap in the face for responsible savers who want to save to pay cash for a house by living with parents or super frugal living in a cracker box apartment or old run down trailer while they save only to see 30% or more higher prices when they buy.
This did not happen pre 2000. Well it kind of did only because of rampant inflation so it was not only homes but everything because of the 70s and early 80s double digit inflation.
If inflation was very low the whole 50 years from 1950 to 2000, home prices were actually pretty flat with very minimal gains nation wide overall.
Its a shame so many only care about the monthly payment and view their home as an ATM machine in today's world where as before the 90s, people viewed it as a place to live while striving to be rent and mortgage free.
Now a days people only care about flippin monthly payment to the detriment of responsible savers and feel entitled to HELOCs to treat homes as ATM machines.
Sadly this insane bubble will not crash unless they start building surplus of homes again. Yet that seems by design to allow the same crappy predatory lending standards and HELOCs as pre-2008 with just some patching and slight better income verification.
Unfortunately it is more sustainable and it is wrong and I sympathize for people who think like me and I was in this situation 11-13 years ago. Except home prices were flat until they were not and I got my home paid for in cash just in the nick of time thank god.
I could only imagine the terror now for people who think like me.
Even people who only care about flippin monthly payment, higher interest rates and lower home prices both sides win. Even ones who cannot pay cash, they have ability with lower home prices to pay it off sooner and less credit risk to banks with lower mortgage balance. And ones who only care about monthly payment its the same either way. Only ones hurt are those who use HELOCs which I have no sympathy for taking advantage of insane home price appreciation to use home as ATM which is just wrong.
We need to go back to normal interest rates, minimum 20% down no exceptions and HELOCs not at all a thing!! Well we are back to normal interest rates for now but a wee bit too late.
Terrible monetary policy from 2010 to early 2022 has contributed to this mess. Also lack of home building as well.
There needs to be incentives for builders building more affordable 1000-1200 square feet starter homes for $150K to $175K price range.
Anyways I am so relieved I got my home and have never had any debt in my life and have owned it for 10 years and 2.5 months now paid for in cash. Thank god.
Last edited by Wolverine607; 08-05-2023 at 09:40 AM..
Stable and predictable appreciation in housing values over time is best. For the vast majority of the middle class, the largest asset they own is their primary residence. You don't want your biggest asset to be falling in value (and since inflation is a thing, flat is falling in value).
It's the wild swings in asset prices (whether they be stocks or houses or bonds or gold bars or whatever) that cause people to act irrationally.
Stable and predictable appreciation in housing values over time is best. For the vast majority of the middle class, the largest asset they own is their primary residence. You don't want your biggest asset to be falling in value (and since inflation is a thing, flat is falling in value).
It's the wild swings in asset prices (whether they be stocks or houses or bonds or gold bars or whatever) that cause people to act irrationally.
Falling not good, but flat is good for sure.
If only they could have stayed flat at 2013-2014 levels or better yet 2012-2013 levels only going up by inflation and not an iota more.
And stop with the well the middle class its their most valuable asset so it has to go up blah blah blah. Its a place to live and call your own while striving to be rent and mortgage free ASAP, not an ATM machine so the value should not have any impact on rational thinking people in terms of it moving wit the value of the whole national housing price trends. Different matter all together if your neighbored falls but most others do not. But the whole country's falling or flat than whats the big deal.
Upside down you say, well no HELOCs allowed and minimum 20% down mortgages required no less regardless and there will be no upside down people.
And stop the comparison to stocks investments. Oh yeah people own stocks because they have pride on the piece of paper and want to own a company. No they own them in hopes of making money, Or some who have high positions in jobs are required to own their company stock.
If only they could have stayed flat at 2013-2014 levels or better yet 2012-2013 levels only going up by inflation and not an iota more.
And stop with the well the middle class its their most valuable asset so it has to go up blah blah blah. Its a place to live and call your own while striving to be rent and mortgage free ASAP, not an ATM machine so the value should not have any impact on rational thinking people in terms of it moving wit the value of the whole national housing price trends. Different matter all together if your neighbored falls but most others do not. But the whole country's falling or flat than whats the big deal.
Feel free to sell your own home at whatever price you bought it for plus inflation, and not a penny more.
Housing prices have been flat or declining in Japan for the past 30 years. Are the Japanese any wealthier today than they were 30 years ago?
Newsflash, they aren't. Their GDP per capita also fell 20% over that same period. On top of that, they don't even have an asset to trade in in their old age when they retire.
Quote:
Originally Posted by Wolverine607
Upside down you say, well no HELOCs allowed and minimum 20% down mortgages required no less regardless and there will be no upside down people.
People are perfectly capable of not taking out HELOCs on their own homes without government interference.
Quote:
Originally Posted by Wolverine607
And stop the comparison to stocks investments. Oh yeah people own stocks because they have pride on the piece of paper and want to own a company. No they own them in hopes of making money, Or some who have high positions in jobs are required to own their company stock.
Tell me you're economically illiterate without telling me you're economically illiterate. Real estate is an asset class, just like stocks, bonds, gold bars, or cash. People own homes to live in because 1) it's cheaper than renting over time, and/or 2) because they think the asset will appreciate at a rate greater than inflation plus the cost of capital plus some risk premium. People own homes to rent out because they think the capital appreciation plus net operating income from renting the house out will exceed the rate of inflation + cost of capital + some risk premium. In other words, people own houses because they think they will come out financially ahead vs. the alternative. In other words, make money.
If houses didn't appreciate, rent would become more expensive to make up for the lack of capital appreciation.
Last edited by albert648; 08-08-2023 at 04:38 PM..
Feel free to sell your own home at whatever price you bought it for plus inflation, and not a penny more.
Housing prices have been flat or declining in Japan for the past 30 years. Are the Japanese any wealthier today than they were 30 years ago?
Newsflash, they aren't. Their GDP per capita also fell 20% over that same period. On top of that, they don't even have an asset to trade in in their old age when they retire.
People are perfectly capable of not taking out HELOCs on their own homes without government interference.
Tell me you're economically illiterate without telling me you're economically illiterate. Real estate is an asset class, just like stocks, bonds, gold bars, or cash. People own homes to live in because 1) it's cheaper than renting over time, and/or 2) because they think the asset will appreciate at a rate greater than inflation plus the cost of capital plus some risk premium. People own homes to rent out because they think the capital appreciation plus net operating income from renting the house out will exceed the rate of inflation + cost of capital + some risk premium. In other words, people own houses because they think they will come out financially ahead vs. the alternative. In other words, make money.
If houses didn't appreciate, rent would become more expensive to make up for the lack of capital appreciation.
People did well in the early to mid 1990s with flat to very minor at best increases home prices. Also in the 50s and 60s with good economic growth and low unemployment rates
Lets not compare to Japan where the whole economy has been stagnant for more than 3 decades.
A home is a place to live while saving money by having no rent or mortgage. Its not a place to buy because it appreciates in value.
I do not care at all what the value of my home does because you know what I live in it while having no rent nor mortgage!! I did not buy it to enjoy appreciation in value which does nothing for me!!
I only rushed to buy it because prices were going up not because I wanted to enjoy the appreciation, but rather so I would not be priced out and have to pay more money by waiting when prices started to go up fast. I had barely enough money and decided to pull the trigger rather than wait 6 months to 1 year and my savings by eaten away by the extra cost to buy a house nullifying them. And that is just wrong the ZIRP policy made me rush in panic to get in in the nick of time before my full cash purchasing power was reduced to buy a house.
Fast home price Appreciation more than inflation is a very bad thing bottom line!!! A home is a place to live you can call your own while having no rent or mortgage, not some asset you should count on appreciating fast.
People did well in the early to mid 1990s with flat to very minor at best increases home prices. Also in the 50s and 60s with good economic growth and low unemployment rates
Um no, they didn't.
Quote:
Originally Posted by Wolverine607
Lets not compare to Japan where the whole economy has been stagnant for more than 3 decades.
Japan is relevant here. The only plausible scenario in which you will have falling asset prices is protracted Japan-like deflation.
Quote:
Originally Posted by Wolverine607
A home is a place to live while saving money by having no rent or mortgage. Its not a place to buy because it appreciates in value.
That how YOU define a home. For sensible people who understand economics, the rent yield on residential housing is extremely low. Not much higher than a savings account, despite all of the risks involved. What makes you think a landlord will accept that kind of return if there was no capital appreciation?
If houses didn't appreciate, the risk premium that used to be covered by the appreciating value of the underlying asset (the house) would be coming out of YOUR pocket. You have to live somewhere while you come up with the capital to own.
Quote:
Originally Posted by Wolverine607
I do not care at all what the value of my home does because you know what I live in it while having no rent nor mortgage!! I did not buy it to enjoy appreciation in value which does nothing for me!!
Good for you. For the vast majority of American households, their primary residence is a large part of their net worth and sure as hell does a lot for them.
Quote:
Originally Posted by Wolverine607
I only rushed to buy it because prices were going up not because I wanted to enjoy the appreciation, but rather so I would not be priced out and have to pay more money by waiting when prices started to go up fast. I had barely enough money and decided to pull the trigger rather than wait 6 months to 1 year and my savings by eaten away by the extra cost to buy a house nullifying them. And that is just wrong the ZIRP policy made me rush in panic to get in in the nick of time before my full cash purchasing power was reduced to buy a house.
In other words, you wanted to own your own appreciating asset instead of paying for someone else's appreciating asset. So you want only your house to appreciate and no one else's. Got it.
Quote:
Originally Posted by Wolverine607
Fast home price Appreciation more than inflation is a very bad thing bottom line!!! A home is a place to live you can call your own while having no rent or mortgage, not some asset you should count on appreciating fast.
Who the hell are you to define for all 100 million+ households what a home should mean for them?
Last edited by albert648; 08-10-2023 at 04:49 PM..
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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If you buy your first house and stay there until you die, flat or falling prices makes sense. For the rest of us, the ever-increasing values are what enables us to move up as our needs change. Our first house was $50k in 1978, for just the two of us the 2BR 1 BA was fine for 6 years. When expecting our second child we were able to sell it for $105k and move up to a larger, newer 3 BR. for $132k. Then when we decided to move to another state sold that one for $190k and paid the same amount for a 5 BR 3 BA her in Washington that's now worth $1.6 million. Retiring later this year we will be able to pay cash for a smaller house in a less expensive part of the state, no more house payment.
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