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Comment by jacquesm | Hacker News Reader

Does the household debt include the debt to the bank on the house?

I can't stand infographics btw.

From what I gathered it does, which whilst is technically a debt it shouldn't be classified nearly the same as an outstanding balance on a credit card.

That's like treating a fresh steak the same as a can of corned beef. Yes it's beef, but one will last a few hours sat on the counter and the other will last god only knows how long (I've yet to see a can with a best before date).

In general a mortgage is a pro, it's going to cost you but in the long run you've got a good chance of breaking even or even profiting. I know my parents bought their house for 75,000GBP and sold it for 250,000GBP in the space of 15 years, because of their mortgage agreement they were paying low rates for the longest of times.

Right now is the ideal time for mortgages when the banks are offering lower rates, but the house values have little choice but to go up from now, giving you a major boost to your equity at the reevaluation and possibly giving you a rate drop due to the added collateral with no effort.

Edit: It's worth noting that a $1000 mortgage is a shitload better than $1000 in rent.

"house values have little choice but to go up"

[citation needed]

It's a savvier statement than it seems on the surface. Topography, water supply, and especially zoning prevent housing supply from meeting demand in much of the country (hence high prices). Housing is temporarily down because both the economy and the mortgage money supply are readjusting. But for pretty much every place where median house price > (3*median household income), it can handle a lot of economic collapse before housing prices stay down.

"Housing is temporarily down because both the economy and the mortgage money supply are readjusting."

This is flat out wrong.

Enlighten me. And to be more specific, I'm talking about regions where geography and zoning prevent any significant expansion of housing supply.

Edit: It's worth noting that a $1000 mortgage is a shitload better than $1000 in rent.

Not necessarily, as there is a marginal utility involved with owning a home versus renting that this statement does not account for. For instance in a rental there is no lawn maintenance required, no responsibility for repairs or upgrades to either major appliances nor infrastructure, rental incurs decreased liability, and the availability by location and public features is often greater.

I am a home-owner, but the belief that rental payments are a waste of capitol is a myth.

$1000/mortgage is not always better than $1000 in rent.

I have family members who have $1000 mortgages in the middle of the country, and make about $38,000 per year.

Similarly I have friends who have remained in rent-controlled apartments in NYC for LESS than $1000 and make over $150,000 per year.

Also, the renter doesn't pay property taxes (directly, anyway), while the homeowner does.

That depends on the country.

Your edited-in statement is wrong. Though the mortgage appreciates in value, this appreciation is pretty small and is highly unlikely to cover the cost of maintaining a home (which the rent covers).

Mortgages are good if you want to own a house outright. For many people, this is actually an economic disadvantage, because now they have this big expensive asset that demands a lot of attention and is hard to get rid of. Unless you are gonna be there for a decade plus, better to let a property manager worry about it.

In general a mortgage is a pro, it's going to cost you but in the long run you've got a good chance of breaking even or even profiting.

Robert Shiller, the Yale economist who pretty much invented modern techniques for housing market valuations (the Case-Shiller index), analyzed this question in his book Irrational Exuberance. Based on a centuries worth of housing data, he concluded that the return on investment for housing was very low, on the order of 0.4% per year (you could do worse than read http://realestate.yahoo.com/promo/renting-makes-more-financi... ).

Look, if the price to rent ratio in your area is suitably small (taking into account property taxes, transaction fees, insurance) AND if you can commit to being in that area for at least 5 years AND if you have either surplus time or money to spend on maintenance and improvements, then switching from renting to owning might be a good idea. The trouble is that buying a house means buying two goods bundled together: an investment and shelter. Homeowners often sink most of their wealth into the investment part. But housing makes an awful investment for most people: transaction costs are enormous, they can't diversify, and market liquidity tends to be very low just when you need to sell. It would be a disaster if people decided to sink most of their wealth into a single undiversified stock, but people do that all the time with housing.

Many people end up buying a house even though that decision doesn't make sense because we have a cultural expectation that you're not really a serious adult until you've bought a house.

I know my parents bought their house for 75,000GBP and sold it for 250,000GBP in the space of 15 years, because of their mortgage agreement they were paying low rates for the longest of times.

Making major financial decisions based on anecdote rather than data often ends poorly.

It's worth noting that a $1000 mortgage is a shitload better than $1000 in rent.

This is just not true. It depends. If you think you might be moving somewhere else in the next few years to get a better job, than paying rent will probably be much smarter.

Yes, I believe it does.

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