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Comment by Aurornis | Hacker News Reader

Don't be too sure about that 10% increase in value. Online estimates are generally not great and may simply be guessing from past momentum.

Even if it really did increase 10%, you'd be giving up a lot of that difference in all of the various costs involved with selling a house and moving, even if you could cut agent costs to $0.

I have some friends who became real estate agents and thought they'd use their position to flip houses while being their own agents to save on costs. They're learning the hard way that even when you're not paying agent fees, buying, selling, and holding homes is expensive.

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Most people don't understand opportunity cost or time-value of money.

How good an investment is it after you remove the realtor fees, closing fees, HOA, taxes, repair and compare it to a steady 7% on average on the SP500?

At a minimum your house MUST go up 10% over a couple years to get even.

The key point here is leveraging, given that an average US mortgage is 6.5x to 20x.

And that leverage is broadly available to most people, supported (and funded) by government policies.

And it is a non-callable loan, unlike borrowing $300k from your brokerage to invest in VOO. And many states require it to be a non recourse loan. And due to the backing of the federal government, it offers a 30 year fixed rate. The public subsidies are insane.

Non-callable, can be refinanced at buyer's discretion, broadly standardized so there's a competitive mortgage originator/refinancing market, and can be borrowed against by using that same market (HELOC or home equity loan)

There's a lot of mortgage features that make it attractive to "I'm not an Accredited Investor" types.

The interest is also deducted from the borrower's AGI. USA being nearly the only country that subsidizes loan interest.

https://www.stlouisfed.org/open-vault/2018/may/why-economist...

https://www.economist.com/finance-and-economics/2017/02/02/w...

https://www.economist.com/free-exchange/2010/09/13/dont-defe...

https://www.economist.com/briefing/2015/05/16/a-senseless-su...

https://fivethirtyeight.com/features/the-tax-deductions-econ...

I don't know about you, but I would have to significantly upsize before the mortgage payments exceeded the standard deduction my wife and I receive as a couple. In my market, the mortgage deduction is effectively dead.

It is dead for 90% of American tax filers since 2017 TCJA. But those juicy standard deductions end at the end of 2025 too, so could be only a few more years before the mortgage interest tax deduction is in play again for many.

Interesting. On the one hand I think it would be political suicide for pols to fail to extend the standard deduction, but on the other hand I think we're going to require substantially higher taxes in the near future to avoid financial repression, currency devaluation(no, not Weimar Republic levels...) and inflation. Should be interesting...

The petrodollar and the dollar's globalization seem like the tipping points.

If either of those substantially changes, the US budget to inflation link becomes very different, because there won't be external sinks to soak up extra dollars.

Globalization will change on glacial timescales. And the alternatives don't look great: Euro (economic concerns), yen (economic concerns), yuan (economic and political concerns), ruble (economic and political and sanctions concerns), rupee (maybe if SE Asia gets its economic integration in order), naira (would need scale from other major African economies)

Oil being sunset is going to be fascinating macroeconomically, as a huge part of the US' world economic power flows through Saudi Arabia.

You bring a good point, but leveraging is absolutely required to make housing an even close to acceptable investment.

All the recurring and one time fees take away from the leverage.

Playing with the buy or rent calculator from the NYT shows you how leverage is an absolute necessity:

https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

> leverage is an absolute necessity

Yes, in more ways than one. To juice returns, sure. But the main reason people lever into real estate is because they don't have the cash to buy. So most homebuyers enter into a favorable high-leverage asset whose gains are given preferred tax treatment.

Discussing residential RE as if leverage is optional is not useful.

Sure, but discussing it as a "juicy" investment that returns 5x the upside because you are leveraged 5x is also a false narrative that doesn't include all the fees and costs.

Not to mention risks!

Real estate, at least the land aspect of real estate, should never be an investment. It leads to misallocatiom of resources and rentierism.

The only aspect of "investment" should come from proper maintenance of structures, and replacing structures with greater density as soon as the land values justify it.

Home ownership as investment has been a generational disaster

Typically there's much less tax involved when investing in real estate. Here (Australia) there's both no tax on the imputed rent or price appreciation if it's your own home.

On the other hand, if you need housing (and who doesn't!), it's not a bad deal to pay for a house and "only" end up realizing (at a later sale) a couple percent of gains. Frankly I consider that a great deal! I wish I could buy a car and sell it 10 years later for higher than the purchase price. Or furniture. Or computers. Anything non-consumable, really.

Also probably important to consider that most people who buy homes cannot do so without a mortgage. So you're not even really comparing it to whatever else you might do with that money (well, aside from the down payment); it's just a pure expense. Sure, unless you have an interest-only loan, you're also putting principal into it every month (which you could put in the S&P instead), but that's sometimes better than giving a similar amount to a landlord, depending on housing economics in your area.

I don't know of any other consumable where I have to effectively repurchase it every few decades or I lose it.

For instance, looking at buying a typical home in my market, one would have to pay around $2k in taxes and insurance per month. That's 2/3 of my current rent, and doesn't include maintenance. That's after the mortgage is paid off. That's on a $1.5M house. That $1.5M would earn you $82,500/year in risk free interest right now, or $6,875/mo. That's nearly enough to rent an equivalent house even after you've paid the income taxes.

We shouldn't even have to think in terms of "breaking even" because housing should't be an investing tool. It's a shelter and a home.

Unfortunately, making "good investments" is necessary to stay above water in this precarious society, and our society is so fucking heartless that houses are one of the best investments a person can make. It's both bleak and absurd.

>Don't be too sure about that 10% increase in value.

Not disagreeing, but zillow and redfin both track their estimate accuracy: https://www.redfin.com/redfin-estimate https://www.zillow.com/z/zestimate/

I've always found these accuracy claims fascinating. They both claim <5% error in my metro area, yet when I'm house hunting it's rare for me to find listings where both sites agree within 5%.

I always check both sites when I'm looking at houses (basically every day) and the pattern holds: They can't really agree within 5%.

Technically they could both be correct if the sale price lands neatly between the two estimates, but some of these historical estimate graphs are also swinging more than 5% per month, too. I think there might be some fuzzy math going on somewhere.

If Zillow was good enough at estimating home prices, they would not have shuttered their home buying/selling business after experiencing hundreds of millions in losses.

https://www.nytimes.com/2021/11/02/business/zillow-q3-earnin...

>Zillow, facing big losses, quits flipping houses and will lay off a quarter of its staff.

>The real estate website had been relying on its algorithm that estimates home values to buy and resell homes. That part of its business lost about $420 million in three months.

Bad take.

Zillow is great at estimating home values and related figures.

They're NOT great at estimating those values in the future.

That is a good point, but I have seen it play out over the years. When prices were going up, you can see the house price estimates lag as the most recently sold homes would sell for a higher price and all the other ones in the neighborhood take a while to update. This was late 2010s to 2022.

Then once the prices started coming down, the opposite. I am looking at multiple homes right now, with multiple markdowns, and yet all the other homes around them have the same estimated Zillow price as many months ago, which the currently listed for homes obviously did not sell at. This is mid 2022 to now.

That wasn’t the problem. If Zillow undervalued or correctly valued your house you would never sell to them, and if Zillow overvalued your house you would always sell to them. The valuations could be extremely accurate overall and it would still be a terrible business plan because of adverse selection.

They tracked their estimate accuracy all the way to the bank.

I’m basing the price off of the sale values of neighbouring builds. I bought mine for 949, the most recent builds sell for around 1.05M, though the most recent was 1.1M. Nothing has changed and they were all built at the same time.

Mine is the only one of 36 with a view of trees rather than road or other homes, so I perceive that as higher value too. That wouldn’t be evident until I sell it of course, but I find recent prices for these homes kind of insane. This change occurred before anyone even set foot in them; I’m just packing to move this week.

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