In theory, capitalism could fail completely. In theory, governments could stop inflating their currencies. I sure wouldn't bet that way though.
Strongly disagree with this. Buy the house you need, and only if you intend to stay there at least 5 years.
On the one hand I acknowledge the US tax code and housing policy encourages home ownership, but on the other, you're completely discounting the utility costs, maintenance / reno drag, and transaction costs that come with owning more home than you need.
While I was moving every year or so for new opportunities, I happily rented. When I moved to a local tech hub where I felt I could put down roots? I happily bought, but I only bought what I needed.
I saw a lot of classmates buy a home prematurely, and effectively be 'stuck' looking for work in the same small job market their whole career, where moving really helped mine.
You should really look at real estate one of two ways when buying.
Either you're buying a home and you live there. Its unwise to treat that in the same vein as index funds. While its definitely an asset, the mindset of living vs investing in something isn't the same, and I recommend not conflating the two.
On the other hand, if you buy real estate as an investment you should remove any thoughts about it being a living space for you and/or your family. At that point, it should be seen as something you'll rent out to others (primarily the best way I currently have found to turn a profit on investing in real estate) or doing more speculative house flipping ventures, home builds etc.
I don't really think this blanket advice is the best advice. I do think its important to own your home - simply because of how society is structured, it heavily favors home owners, plus rent is simply lining someone else's pocket, where as eventually owning a home free and clear removes a major liability from you life. To simply buy the 'biggest you can reasonably afford' could land one in a bad place
I personally think it should be one or the other - you either are buying real estate as an investment vehicle (to flip, rent, speculatively build etc) or buying it to live in, but in which point you don't treat it as a primary store of wealth - but unfortunately home ownership in the US is structured that if you buy and live in a home, you inevitably end up with it being treated as both a store of wealth and a home in which you live, and you're constantly tugging between the two things which have very different considerations.
I think a land value tax and liberal zoning laws would go a long way to fixing some of this, but is another discussion entirely
I think this would be fine if the government was willing to eat some cost of mortgage adjustments. The biggest problem with price decreases in what I believe to be in the way you mean - that existing home owners see their values drop - is one the mortgage is underwater you have an upside down situation for both the owner and the bank.
One way to offset this is if the government eats the difference in some way. I don't exactly know how this would be structured, but if this were to be the case, I imagine it would go a long way to getting more people on board with housing reform.
It shouldn't have ever been treated like a store of wealth to begin with. You're either the homeowner or the landlord, this middle path of being both your own homeowner and effectively treating it as a store of wealth - there by in a sense making you your own landlord if you will - is the problem.
I see the situation as this: The middle and upper-middle class have become invested in a perpetuating a system that ultimately will strangle them or their descendants.
Wealth begets wealth, power begets power. It might be a law of nature that things like to polarize. Likely we'll see a return of society consisting of two groups: rich and powerful, poor and powerless.
Most older engineers I meet seem to associate with the mindset and politics of billionaires and multi-millionaires, and see themselves almost in the same club sometimes. I guess making a lot of money does that to people. Add to that the truth expressed by Steinbeck about the USA "The poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."
I think we have a problem where housing and stocks must continue to make return on investment. Housing prices must keep raising, hurting the next generation. Young people increasingly don't have the luxury of job stability to buy a home. Companies must keep increasing profit, leading to offshoring, outsourcing, stricter working conditions. And now middle class government jobs must be cut and privatized so that capitalists can make profit on providing a service. All the while the top percent owns and increasing share of the wealth pie.
I felt I needed to reply because while what you are saying is the way things are, I wish it didn't have to be that way.
I have some thoughts on this. Not because owning a home is a bad idea, but because you should really factor what you're buying and why. None of this is to say your premise is incorrect, but merely there should be more nuance when thinking about this.
Buying a place you want to live in is fundamentally different than buying an investment vehicle.
I currently rent an apartment, but also own multiple investment properties. Why? Because it makes more sense for my situation, where I myself may need to move more often and therefore some aspects of being in a home that isn't turning profit into my pocket are undesirable, where as buying a house where I am going to live has a very different set of checkboxes, namely between economic issues in the macro and personal health stuff where myself or my wife have to travel a bunch, we're regionally limited and have determined we may or may not want to live in our current metro long term.
That said, I absolutely did buy one of the properties with the future intent of living there myself, I simply am delaying that to make money on the property rather than letting it sit empty. I'm easily a few years away from permanently moving into it myself, but in the advent I decide to live elsewhere long term than where I am right now, I at least have the income stream.
and absolutely, the regulations (and there by, the law) favors home owners every time. Renters get screwed in this I even tell this to young renters who rent from me. You simply can't get a break on the ever growing rise of rent vs a fixed rate mortgage, but you gotta understand what you're buying and why, and don't conflate the difference between a home and an investment vehicle, as many people do.
A house is a depreciating thing you can live in, and is expensive! Once you correctly account for ALL the expenses (not just mortgage, insurance, and property tax!) you discover that renting may be advantageous.
But they do often go up in value over time (ignoring maintenance keeping them together) and sometimes beat inflation (especially when leveraged).
That way, when you retire, your nest egg can go further because you only have to pay the property taxes, and when you die, you can pass the value along to your heirs and build generational wealth.
Houses are not index funds; ideally they should only appreciate at the rate of inflation. But they are absolutely long-term builders of generational wealth through the equity in the home. Heirs can sell them and then invest the proceeds, or live in them themselves without a mortgage.
Housing where it is "affordable" (read: median salary can afford a house) is a great way to get a leg up on the pile - though remember that the average age of a person RECEIVING and inheritance is 60.
But in places were buying a house is $2m but renting the same one is $3k a month, it's hard to ever make the numbers work.
Where I live, what renting currently gets you is an enormous discount compared to the cost of a mortgage and the opportunity cost of parking your cash into a downpayment. Renting and investing downpayment level money is literally a better deal than buying a house.
Why do I care if I'm "paying someone else's mortgage"? The interest payments to the bank aren't building me equity either! It's all money, going one way or another, equity is just more money, and sometimes buying a house means more money goes out than in compared to renting, even if it's more intuitively satisfying.
This helped us tremendously. Rental income while not game changing when you own only 1-2 properties, does help build up your assets. It also allows you to offset some expenses as business expenses, which is nice.
There is overhead of course, and we pay a property management company to do things on our behalf and they get a small percent of the rent every month, but overall it taught us a ton and we did it without incurring significant additional expenses thankfully.
Now we are up to our 6th rental property and things are going smooth so far.
This is building true wealth via real estate in my opinion. Assuming we keep going, we'll likely own 12+ properties eventually, which we will sell down the road many years from now likely for significant upside, all the while having steady income coming in from them until we sell.
And since you're usually in one or two properties to start, if your first one is the tenant from hell in a downmarket, you're going to feel it.
The best thing you can do is structuring everything through a corporation. This also allows some additional avenues when considering financing too. It also gives you the liability shield in case things go sideways.
There's overhead here though, for sure, and plenty of ways to go about it the wrong way, many footguns exist. Its not stress free.
If you want truly passive investments, index funds are the way to go. Which is why I think buying a home for living should fundamentally have different criteria
Nothing else will let you take a government-protected 30 year fixed rate loan at rates barely above what the US government itself pays, that you can pay off anytime and cannot be called, leveraged to 80% or more.
And then the loans are often non-recourse, and the asset protected in bankruptcy.
https://johntreed.com/collections/real-estate-investment/pro... has even more ways that the government is fighting hard to force you to accept leveraged appreciation.
A lot of people find their first house too small and buy a larger house later. IMHO, most people have an idea of how many children they'd like to have and some idea of when. I think the idea of the advice is not to buy a small house that fits your needs as a single person and wait until you have a family to buy a larger house that fits your needs as a family, but to just buy the big house?
a) If you buy your first one big, maybe it will be big enough and you won't need to switch. That saves transaction costs, and keeps you price anchored to your first purchase. If your house is in a state with something like Prop 13 that effectively anchors property tax to purchase price, buying the final house earlier can save you a significant amount of property tax over the years.
b) I think house prices rise faster on larger homes than smaller homes (especially condos and things). If that's the case, buying a right size house first then a new right size house later if your needs grow means you'll have a larger gap to cross over time.
c) probably something about house prices always going up, it's implied in a lot of arguments (and it works except when it doesn't ...)
On the actual whole, they haven't. In the last few years, salary increases did for the time period of 2020-2023 (as far as I am aware that is what we have data for around this assertion) but generally they have not.
IMO, a better measure is how well have salary increases kept up with gains in productivity, and when you look at that its truly abysmal.
For example, I might be a member of a guild that keeps my salary nice and high while having the negative effect of keeping the productivity of the guild constant, which would be bad for society, but good for me.
Also, we are mostly software developers here, and dev salaries certainly have kept up with inflation.
I was saying this in reference to how much we get paid. As a reflection of value / worth. Compared to the value generated, our salaries are relatively small, and its hard to argue otherwise when you look at productivity gains.
If you want to capture more of those gains, being invested in index funds is a good step in that direction.
>Also, we are mostly software developers here, and dev salaries certainly have kept up with inflation.
Even if this is true - and I don't know that it is so broadly true that it can be accepted as the median circumstance of HN users - that situation won't last forever, and more importantly salary is not controlled by you its controlled by another entity.
The entire premise of the conversation is convert your salary - something you may depend on but isn't something you have sole control over - into things that you do have more control over (index funds) or effectively sole control over (real estate investments most commonly).
This allows you to decouple your wealth from any single entity, which is the central goal.
also the US tax code heavily favors owners. Income tax can be > 30% but capital gains tax is < 20%