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Comment by turbinerneiter | Hacker News Reader

The problem is that it gets harder and harder for normal people to own anything (build up wealth), while building wealth is the best retirement startegy there is.

I myself, for example, live in a city where owning the place I live in is just barely getting in reach for me, although I am in the top 30% income bracket of my country. I therefore have to put my savings into the stock market, which is at an all time high. Maybe even a bubble.

It is frustrating to see any income gain that I make being absorbed by the housing market. I work hard while others get unspeakably rich just by owning stuff.

Simply put, the balance is off.

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The problem is that it gets harder and harder for normal people to own anything ( build up wealth), while building wealth is the best retirement startegy there is.

This is the problem in a nutshell! It’s impossible for houses to continue to be great “wealth building” vehicles and for them be affordable. Politicians have prioritized the former and that’s how we got where we are.

If we want affordable housing for people to live in they can’t also be the universal investment vehicle. Those two objectives are in direct contradiction.

Marx's analysis is as relevant today as ever. The expansion of capital seeking ever-increasing sources of surplus value has left most of us as nothing more than serfs subject to the whims of landlords.

It's not very difficult to criticize capitalism. Figuring out a solution is a much harder problem.

I've often wondered, with enough knowledge to actually know, what would happen if renting housing was made illegal. I imagine prices would drop precipitously, maybe to a point where everyone can buy?

>The problem is that it gets harder and harder for normal people to own anything

One of the reasons is that people insist on living and working in some of the wealthiest and most expensive cities in the world.

I live a cheap town and my commute to work in the 2nd biggest city in my country is just 25 minutes.

Mainly that's because that's where the jobs are. (Remote isn't a 100% solution, either.)

The jobs are where the international investors are and they prefer big cities over small unknown towns.

Perhaps people’s perception of the risk of living in a smaller town is sufficient to merit the risks of higher land prices in some of the wealthiest and most expensive cities in the worlds. Namely the risk of losing your source of income in a small town and the increased probability of higher income/access to opportunities in major cities.

Of course, it is a pendulum, and it is possible people’s perception swings too far towards the small town and the big city and back and forth.

You are assuming that it is possible to live cheaply within 25 minutes of a big city in The Netherlands. That's not the case.

But the Netherlands is small enough that the unaffordable prices in the big cities has pushed most people to the rest of the country basically increasing prices everywhere.

> The problem is that it gets harder and harder for normal people to own anything (build up wealth),

In the US, it is easier than ever. Open a free account online at a number of brokerages, and buy some broad market low cost equity index ETF.

The problem is government subsidies for real estate. Get rid of federal taxpayer guaranteed mortgages (Fannie Mae, Freddie Mac, ginnie mae). Get rid of 1031 exchanges. Let the markets set the interest rate and do its own risk calculations.

See similar price distortions due to federal taxpayer guaranteed student loans.

All of this is unlikely, however, since the US and many other societies have baked in burgeoning economic growth for decades to come in their previous decades’ spending. Therefore, to avoid defaulting on these assumptions, the societies will keep inflating currency to keep the ruse going as long as possible.

Even my low-risk Vanguard ETFs have gone up like 30% in a year. That seems insane to me.

I would expect that. Politically, everyone is aligned with ensuring equity prices go up. And so everything possible will be done to accomplish it.

I am 100% equities for any funds I do not need in the next few years. Index fund ETFs are the real TIPS, Treasury Inflation-Protected Securities.

It's just that most people would prefer owning a house over owning stocks.

Because when the economy tanks and you lose your job, you have to sell your stocks at the low point to make rent. When you own your house, losing your job still sucks, but at least you still have a home. Thats also the reason why the low interest rates, although nice for homebuyers, also aren't a great levy of the situation: I have to pay back the credit for my house over 40 years, I have the same risk of losing everything in a downturn. You can't make the credit payment and are forced to sell your home at the market low.

Maybe I'm just traumatized. When I left school, 2008 economy crash was in full swing, two years after leaving Uni and in my first job, Corona happened.

On the topic of price distortions through government influenced loan rates: I think what you say makes sense.

I do not understand your comment, as it started off sounding like there was a downside of renting vs owning, but then later on in the paragraph, you say that the risks of not being able to pay rent and not being able to pay a mortgage result in the same consequences during an economic downturn.

> Because when the economy tanks and you lose your job, you have to sell your stocks at the low point to make rent.

You should have an emergency fund so that you do not have to sell at the low point. I try to keep at least 24 months of expenses.

In the US, the government also offers a federal taxpayer subsidy in the form of lending people money with no money down or 5% down or some ridiculous scheme advertised as helping lower income people. On the contrary, this simply increases home prices and over leverages them since they will barely make monthly payments and any hiccup will derail them.

I do think renting has a downside compared to owning, but that due to the high prices and resulting very long timespans of paying back credits, buying is getting riskier.

Owning has lower risk than renting, but you have to buy to own and when you can't buy outright, then there is a phase where you are still exposed to a risk of losing your home.

And keeping 24 months of expense is a good idea, but if I want to buy a house, I want to put down as much as possible. 24 months of expenses is about 80% of my savings. And the majority of people do not have any kind of savings at all.

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