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Comment by gspencley | Hacker News Reader

I own two properties, both of which I was lucky enough to be able to afford before the housing crises. Even though I could sell and get a lot more than I paid for either, the fact is that unless I wanted to put that money into something other than a house I'm not going to turn a profit.

I also have two daughters who are young adults and still living at home because they can't afford rent. So even for that reason alone I REALLY don't want expensive housing prices.

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> Even though I could sell and get a lot more than I paid for either, the fact is that unless I wanted to put that money into something other than a house I'm not going to turn a profit.

You’re already profiting simply by having a higher net worth.

How is higher net worth a benefit? Gains in a property are unrealized until sold or mortgaged.

> How is higher net worth a benefit?

The benefit comes from gains being definitively accumulated by percentage. When your owned amount is higher, equal percent gain is greater absolute gain.

> Gains are locked into a property until sold or mortgaged.

This is essentially the equivalent of "Gains are locked into money until spent on goods or services." True. But gains are gains and worth is worth regardless of how many seconds or minutes it takes to spend. The only difference is immediate urgency of conversion within a very narrow time window (it does not take that long to get a mortgage on an owned property that is now worth X percent more than it was yesteryear).

To an accountant you might have a point. To me, if it doesn't have a direct and measurable impact on my quality of life then it's a completely irrelevant factor.

Maybe "profit" was a poor choice of words. But this has turned into an utterly meaningless semantic argument that has nothing to do with the point I was trying to make.

Is feeling secure in retirement not a relevant factor? Is having wealth to do things, even if you don’t exercise that wealth, a completely irrelevant factor? Is leaving generational wealth for your children irrelevant? Let’s say you had to forfeit the houses for some reason (being sued, for example). According to you, owning the houses is an completely irrelevant factor, so I’m safe to assume you would feel totally indifferent to this happening? Somehow, I find it hard to believe that you wouldn’t care about losing your houses. Perhaps it does have some relevance to your life?

> According to you, owning the houses is an completely irrelevant factor

No, they're saying the price of the house is irrelevant. If they bought both houses for $250k, say they're now worth $750k, they're a millionaire and got a million dollars of profit!

Their point is they need two houses for their family and will until they die. If they have two houses still worth $250k or two houses worth $750k it doesn't matter to their quality of life.

This would be true if we lived in a society where value of assetsd you own has no impact on access to and cost of financing, and other advantages, that can be realized without sacrificing the assets, but that is very much not the world we actually live in.

Price is just a proxy for value so there isn’t much of a functional difference between the price being $0 and not having the object.

> To me, if it doesn't have a direct and measurable impact on my quality of life then it's a completely irrelevant factor.

If having more money available to you through conversion doesn't have a direct and measurable impact on your quality of life, that's exclusively because of decisions you make about what to do with it. Assets don't follow you into the afterlife, so, bare minimum, when you get old you can sell it and rent or put a mortgage on it and have a much bigger pile of cash to spend until you die than the person with the less valuable house would.

Or, if you have children and are into such things, you can engage in massive generational wealth transfer and make it so they never have to work a day in their lives to cover rent. There are a lot of people out there who don't get to experience such a wondrous bounty that they didn't do anything to earn but which is an extremely relevant benefit with extremely measurable impacts on quality of life nonetheless.

So sell the extra property and enjoy the money?

The benefit is having that option.

If cognitive dissonance was a hackernews comment.

If only more people understood that. Almost all homeowners think that rising prices is a good thing for them. Try convincing your average homeowner that the whole market going up by 10% makes no difference to them unless they plan on being homeless.

There's something about money that brings out the worst in people, whether that be malice or simply stupidity.

It matters if you enjoy screwing the next generation of first-time homebuyers!

Or unless they’d consider downsizing or renting. House prices going up are generally good for owner-occupants.

For a homeowner that is not interested in selling or refinancing, the price going up itself is not good news. It really only means higher property taxes.

However, home prices are, many times, also a reflection of the local economy and the earning and/or spending power of the locals (or tourists). And usually, higher earning/spending power is better than lower earning/spending power.

You just have to ensure you are in position to grab a portion of that economic activity, which is a better situation to be in than trying to grab a portion of no or little economic activity in a struggling region.

In my city, property taxes are set to raise the needed city budget. If everyone’s property value doubled, the city budget would not double, but rather the tax rate per $1K would drop to raise the same revenue.

Over the long term it would have to double since expense for land flows through government expenses, for example when the government needs to buy land or employees want more pay to afford buying houses.

If the nominal value doubled by virtue of debasement of the currency (inflation), then yes all goods and services would double (including property taxes). If only the value of properties doubled in a city, that would increase but not nearly double the required budget as not nearly every cost the city incurs is pegged to property costs.

As an aside, my property has approximately doubled (in Zillow guesstimate and in assessed value) since we bought it in 2007. Our property taxes over that time went from around $8K to around $12K. An inflation calculator over that period would say that $8K in 2007 is worth $11.7K today, suggesting that property taxes track general inflation much more closely than they follow property values.

So, my property has doubled in nominal value, representing a 36% increase in real dollars, while my property taxes have gone up by only 3% in real terms.

Edit to add: inflation of course massively helps mortgage borrowers. If I bought my house for 100 units of currency, borrowing 80 and the currency change worth such that it now takes 147 units of currency to buy the house (just from inflation effects), then I still owe only the original 80 units of the now less valuable currency (minus principal repaid in the meantime). Inflation just paid off over 30% of my mortgage for me.

>only the value of properties doubled in a city, that would increase but not nearly double the required budget as not nearly every cost the city incurs is pegged to property costs.

Correct, but that is because the current politics are all about shifting the burden to future generations, and one of those ways is vis drastic subsidies to land owners from non land owners via undeservedly low land value taxes.

Perhaps my claim of 1 to 1 relationship between property (land value) tax and land/house price is too strong, but at some point, it will have to go higher and catch up.

If you have a low mortgage rate, borrowing against the increased value of your home to invest is free money

What do you mean? You need to pay pretty stiff interest for a Heloc no?

I am incorrect. rates are indeed very stiff right now

It's not stupidity, it's an economic feedback loop, like auctioning a dollar bill. Once you enter the trap, you are trapped.

house prices evolve from price p0 to price p. The market gains (or loses) p/p0 in that period. If you get a mortgage, you're borrowing money to buy at p0; at any point in time with a price p and total repaid r your total value is given by (deposit + r + p) - p0. You're in negative equity if (deposit + r + p) < p0. You're in the money if p > p0, but note that this isn't multiplying your investment by the market gain. Instead, it's exposing you to the absolute change in price. So suppose (deposit + r) = 40k ; p0 = 145k ; p = 190k. You're in the money for 40k + 190k - 145k = 85k, having invested 40k (roi=2.1). p1/p0 = 1.3 (<2.1), with your leverage (mortgage) having bought you more exposure to house prices. You can then liquify and re-lever back into the housing market, with a larger loan due to you larger deposit (and likely increased income). Historically this has worked very well for people as p has tended to be larger than p0. It does not work well if you end up in negative equity.

This is the reason that "you need housing so why would you want house prices to go up" -> some large fraction of homeowners are levered up to their eyeballs

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