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Comment by Sodman | Hacker News Reader

Can you elaborate on point #1? I've always felt if the housing market crashes, I'd just stay in the same house with the same mortgage payment. If I wanted to move in the middle of a recession, my house's depreciation should be relative to whatever new house I'm looking to buy, so is any value truly lost?

Eg if I have a house worth 100k, and there's a recession that values it at 50k, assuming I can stay employed is there a difference to me? If I wanted to upgrade to a house worth 150k, assuming that house is now worth 75k in recession times so if anything I actually have more buying power in that scenario than I would in the pre-recession scenario.

I'll admit that I'm lucky in that I have job security, so that probably changes my options significantly.

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Secure employment is a huge assumption though. It may be true for you, but in general, owning a house reduces your liquidity and mobility. Those are the two things you need most during a downturn and with under-/un-employment.

Right, it's a massive assumption, although luckily one I believe to be true in my particular case.

As far as mobility goes though, I figure networking / "who you know" is always the easiest way to get a job - during or outside of recession. Point being, I don't think for most established folks it's worth relocating geographically, so we're talking about moving to somewhere nearby, at a cheaper monthly cost... Which is significantly harder if you owe more on your mortgage than your house is now worth, I guess.

Moral of the story for me here seems to be "don't buy a house that you can only barely afford", instead of "never buy a house". I'm happy living in a house at half the monthly rate I can afford, at the cost of not living in a mansion during the good times.

In the recession you would sell your $100k house for $50k, but you would still owe the bank the remainder of your mortgage.

The difference would be that if you sell your house for 100k now, you'll have 25k extra after "moving up" to the 75k (previously 150k) house, minus a few years of rent that you might have paid in the meantime.

This is assuming that you put your profit into something that doesn't lose 50% of its value like your house will. The stock market might crash just as badly, or your property value might rise even higher and sitting on (otherwise secure) cash equivalents will lower your real wealth.

So we don't really know, right? I think the only takeaway here is to invest large sums into a single asset class (real estate, or stocks, or cash) if you're playing to win, or diversify among dissimilar asset classes (with your house only being one of several types of investments) if you're playing not to lose.

> I have a house worth 100k, and there's a recession that values it at 50k, assuming I can stay employed is there a difference to me?

You can sell now, get 100k. Buy during recession for 50k. You now have 50k profit.

No house where I would want to live is going to drop 50% in the next recession.

Don't forget transaction costs (average 10% in the USA) and rent (which may or may not be a rounding error).

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