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Comment by vinyl7 | Hacker News Reader

Wonder if these are the same people as the 33% of home buyers who bought as investments. I too would be worried buying at the peak of a bubble realizing nobody can afford to buy the flip at the extremely inflated prices with mortgage rates increasing. Or that few people can afford to pay rent at the price of inflated mortgage + profit margin

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I don't think this mentions anything about housing or mortgages. I think it's a bit simpler than this. Higher income people currently already have their basic needs met and have a good amount saved up for eventual retirement. When people's current needs are met, they think about the future, the economy affects it. Lower income people are currently struggling to make ends meet. You'd already be worrying about it everyday, the economy getting worse basically feels like noise that you don't have time to add to your worries.

I'm sure we'll find a way to keep inflating housing prices. I'm in my 30s and my entire adult life I've been thinking "no way it can keep going up" and it kept going up.

IMO there’s a pretty simple rule that you can apply. If you’re planning to stay somewhere for at least 7 years, then buy your home. If not, renting gives more peace of mind.

The problem with buying is that it’s a single large transaction that you can’t spread over time. Over time ownership turns a profit, but if the time span is less than seven years, you may end up buying at the peak and having to sell near a bottom.

It's admittedly a small sample range, but if I'd taken this advice when I started buying houses around '09 (never more than 1 at a time, but I've moved just about every two years since then), I'd be at least $250,000 poorer. And I didn't come anywhere near optimizing for profit—it's mostly been happenstance and the fact that houses just keep going up in price, plus an initial bump from coming in right after the housing bubble burst (though house prices around here never got down to where they "should" have been if they'd tracked inflation since the start of the bubble, and only seemed cheap relative to the peak). I also started with one hell of a lot less capital than, say, a FAANG employee ought to be able to save in a couple years. Think, like, $25,000.

("But you could have invested that money instead and the market's gone crazy over that same time span, so maybe you actually lost money, opportunity-cost wise!" sure, but not really, since rent exceeds TCO for houses in my area so I'd have just bled money to that in exchange for no equity whatsoever and probably living somewhere worse)

You started buying at the bottom though.

For another data point, the Manhattan apartment which I'm renting was recently sold. The previous landlord had purchased it in 2016 for $200k higher than the sale price now, over five years later.

I'm renting because I know I'll be moving again within the year. If I had bought a place in NYC when I moved here, I'd have lost a lot more money than I've paid in rent.

The opposite was statistically much more likely to happen. The high transaction costs alone are enough to eat up any "profits". But the risk of buying a dud goes up as you move more frequently. Etc.

Your outcome is pretty close to a best case scenario. And I'm happy for you that things went so swimmingly.

The main question for any investment, ever, should be: you have some amount of money...what will net you the highest return on that money. You can modify this with considerations for risk and diversification, but the name of the game is always opportunity cost.

People stop thinking about opportunity cost when it comes to housing for some reason because they just can't stop thinking of paying rent as "throwing away money," without understanding that you're always throwing away money.

To take a simple example, let's say that you have $500k in cash.

Scenario 1: you pay $50k per year in rent from salary, park that $500k in a $2M investment property that returns $85k in rental returns. In this scenario, your returns are property appreciation and rental income. Your costs are mortgage, property tax, home insurance, home repair, and the rent you pay.

Scenario 2: you pay $0 per year in rent from salary, park that $500k in a $2M property that you live in that returns $0 in rental returns (because you live there). In this scenario, your returns are property appreciation. Your costs are mortgage, property tax, home insurance, home repair.

It's entirely possible, and common, for these scenarios to work out to be exactly the same. If you prioritize the purchase of properties that yield very high rents compared to the property value, it's very common for the numbers to work out in favor of owning investment property. And that can include "throwing away" money on rent.

TL;DR: you're never not renting. Even if you pay $0 in rent, the price you pay is the opportunity cost of not renting your house, and not maximizing returns on the money you've parked in it.

Prices will keep going up while there is more demand than supply, and the supply shortage is mostly political. I advise you and everyone else feeling locked out of the housing market to pressure your representatives to allow more housing to be built.

In the UK we have another problem - land banking.

Housing developers are sitting on huge swathes of land that have planning permission (every council has a housing development plan), but by building slower, and with no real penalties for not using the land (LVT or similar) they can pad their profit margins by trickling properties onto the market.

> I advise you and everyone else feeling locked out of the housing market to pressure your representatives to allow more housing to be built.

I'm currently building a house and the problem is getting people to come out and do the damn work. Not sure what complaining to a politician is going to do about this. Even white collar workers are hard to get. I went through three architects.

There are plenty of housing developments going up. Just not a large enough pool of people to work in them.

>mostly political

Mostly, not entirely. Furthermore, this housing crunch has been decades in the making, not something that's suddenly happened, as evidenced by prices spiraling out of control. It's no surprise that trying to build a new home during a worldwide labor and supply chain crunch is especially difficult.

Complaining to a politician may not provide immediate relief now, but in the long term if supply was able to meet demand, prices should stabilize.

The best time to plant a tree was 20 years ago, the second best time is today.

Most of the country never (in recent times) had a housing shortage before now. So it might be a political issue for the people who live in a handful of coastal cities, but this isn't a political issue in most states.

I have years worth of zillow pricing emails in my inbox, if I go back to '18, YoY price increases were like <1% in most zip codes and 2-3% in the nicer ones. Recent emails have prices going up 20%+ all over town.

I'm in the coast, so I won't pretend to fully understand the markets elsewhere, however, it should be noted that ~50% of the U.S. population lives near the coast, or a constraining border limiting expansion.

For a very very large portion of the population it's land use and zoning rules that are constraining supply and causing everyone else to pay more than they otherwise would.

At the same time because of supply and demand, even when more and more apartments are being built I would expect single family homes to still go for top of market rates and be in very high demand forever. The supply we are adding into most built out areas is just apartment stock mostly optimized for the recent college grad vs a family with children (e.g. mostly 1 or 2 bedrooms, and a pool/hottub area clearly optimized for people drinking alcohol than kids playing), because these areas are built out by definition and there isn't available land to add any more greenfield single family home stock to the local inventory. That single family home stock imo will always be constrained in cities and will never get cheaper. Apartments and condos might see their costs not swell so much, but not ever detached homes imo.

Detached homes are a very specific type of housing well suited to specific needs. The problem [In the U.S.] has been that suburbian-style has been prescribed, with little flexibility to accommodate other needs. Lawns, backyards/front yards, and setbacks are great if that's what one desires and is willing to pay for.

However, not everyone wants that, yet is forced to pay for it through zoning rules requiring them. Tall multi-storey townhomes are a great middleground that reduces land costs and retain many of the benefits of SFHs, yet are literally illegal to build in much of the US.

A ton of land in competitive markets is being wasted through zoning, to many people's [And the climate's] detriment.

For my family, and probably many like mine, our concern is watching our savings evaporate. I lived through 08, so I remember massive recessions. But things are different when you're just starting out and watching your modest "retirement" account fall, than they are when you have a significant life that you've built. I know pragmatically that the markets will rebound, but it's still jarring to see your net worth move so dramatically in a matter of weeks.

I'm also not very concerned about housing. Even though I definitely overpaid, living through 08 gave me the mentality that houses are places you live, not investments you make.

Is there a consensus that flipping is rampant these days?

I follow a couple of markets pretty closely and hardly see any houses that are bought and sold within a short time.

Prices are too high and there are too few foreclosures. Pros with a bunch of money in the bank and inside info can still do it, but the days of being able to snag a foreclosure that's scaring everyone off because it needs some drywall work and paint and maybe a little flooring but is basically fine, and is sitting on a totally ordinary public real estate listing for weeks or months so you know you can lowball and they'll probably accept, are long gone. That situation only lasted (around here, anyway) until maybe 2012 or 2013.

Buying at the bubble only hurts short term flippers. If you bought at the peak of the last bubble in 2007 in markets actually worth buying in, you would have probably seen yourself back in the money in a few years and have been making money hand over fist on your investment since.

Hmm. You sound bitter.

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