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Comment by dahfizz | Hacker News Reader

> The only thing people use that valuable asset is to then sell it and buy a bigger house.

No? They sell that valuable asset and move into a smaller house, netting them a huge chunk of cash and rent-free living. Its called "downsizing".

This enables retirement for people who otherwise would not be able to.

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This also works if all houses are 50% cheaper... you pay 50% less to buy it, sell it for 50% less, buy a cheaper house at 50% less, and since you paid less for the initial buy, you have money leftover still.

But if you don't own a house now, you're basically fucked with the current housing prices.

> also works if all houses are 50% cheaper... you pay 50% less to buy it, sell it for 50% less, buy a cheaper house at 50% less

If you’ve paid off your mortgage.

But the cash you get out is also decreased by 50%.

Instead of selling at 400k and buying at 200k, netting 200k, you sell at 200k and buy at 100k, netting 100k.

Obviously housing prices need to come down in the long term. But OP has a point - we need to account for the fact that doing so will destroy any sort of wealth the current middle class has managed to build.

Policy makers often need to consider whether something is a 'net good' or 'net bad'. I would find it hard to believe that the current run-up of housing is a 'net good' in anything other than the extremely short term.

There are always anecdotes and dreamed up scenarios that enter the argument, and while those are interesting on a personal level, shouldn't really be the basis of policy.

Sure, and I said as much in my comment. Housing prices need to fall. But policy makers concerned with the "net good" would make a bare minimum effort to account for the millions of people they would harm with their policy.

Something like allowing people to deduct their home's depreciation on their taxes would go a long way in actually getting policy support and passed.

Try to allow for a little nuance sometimes.

Yes, but initial buying price is lower too, so since you've bought at eg. 200k instead of 400k, you have 200k left over that you didn't spend on buying the first house, so in the end, you're 300k up. (if you saved that money of course, if not, that's your problem).

You're missing the point: people who currently own a house get fucked. An entire generation or two of people will be locked out of retirement if housing prices significantly fall.

This needs to be accounted for. A majority of Americans own a home, so you're not going to get meaningful change in this area if it hurts most people.

> This also works if all houses are 50% cheaper...

Not for people who already bought houses it doesn’t.

> But if you don't own a house now, you're basically fucked with the current housing prices.

No, if you do own a house now, you are fucked with a 50% drop in value, and 65.9% of American households do. (OTOH, if you are currently a renter, you aren’t “fucked” if you keep renting.)

If you own it, you still have a place to live, and you'll probably need a place to live until you die, so on paper, you have less, but a house is not really a liquid asset.

On the other hand, if you want to buy instead of rent, you're currently basically fucked.

Housing should not be an investment.

> If you own it, you still have a place to live, and you'll probably need a place to live until you die

If you bought it recently, you'll probably be massively underwater (and, since your plan isn't just a one-time cut to let people on the ride, but also attacking the dynamics driving value increases) permanently so, and fucked if you ever need to move, or to get other credit.

If you are close to selling and downsizing, and its your main asset as it almost invariably is, your life savings was just deliberately cut in half.

> Housing should not be an investment.

Maybe in some idealized vision; in the real world that exists right now it is, and its heavily relied on by the middle to top, by income, end of the proletariat and maybe the bottom end of the petit bourgeoisie, which as targets for class warfare go is a pretty odd choice. And trying to attack this (regardless of arguable steady-state merits) while handwaving the transition issues is simply that—class warfare against that group.

Exactly, I never said it was a good thing that housing is an investment, only that that is the current state of affairs, and to alter that would have ramifications that would cause huge problems. Best thing we can do is stabilize what we currently have and figure a way forward that doesn't worsen the problem, but we cannot go back.

Many people have mortgages on their home, being underwater on a mortgage (i.e. the LTV spikes because you are now borrowing more than the home is worth) would set off a bank/debt crisis, that is what I meant by catastrophic.

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