Comment by lewis500 | Hacker News Reader

Comment by lewis500 | Hacker News Reader

"The inland cities, with more land available to allow expansion, experienced the most overbuilding, the most aggressive lenders, the highest levels of speculators looking to get rich quick by flipping houses, and so perhaps it’s not that surprising that when the housing market turned south, they also experienced the highest default rates."

This is a pretty strong theory: more land ==> all these things, including overbuilding. What is "overbuilding" even supposed to mean? "Over" relative to what?

These studies indicate that the problem is slow permitting and high regulation in places that do have lots of land: http://blogs.wsj.com/moneybeat/2014/02/27/why-las-vegas-got-...

Texas and Atlanta have lots of land around them, but they did not have nearly the default problem of vegas and florida and california because they built a lot very quickly, so prices never rose dramatically.

In short, there was not overbuilding. There was underbuilding, and building that happened too late.

I don't understand why everyone thinks that higher home prices are automatically good? High home prices only benefit real estate brokers, banks, local government, and a few landowners that got in early.

Very few of my peers <30 yrs old (or older) are able to afford homes.

Rising prices seem good superficially because a lot of people own houses and that means everyone is getting rich! The harm on people who don't already own a house is harder to see.

> Rising prices seem good superficially because a lot of people own houses and that means everyone is getting rich!

But this only helps people who own multiple houses, or don't plan to live in one. If you need a house, the gain you get from selling your existing house after appreciation is necessarily offset by the loss you take buying an appreciated replacement house.

You can't get rich, or benefit at all, from a nominal appreciation in the "price" of something you can't sell.

Sure you can benefit! You can take out a home equity line of credit and cross your fingers that it doesn't come back to bite you.

An outstanding loan secured by something that you can't lose makes your situation worse, not better. Taking out a line of credit is not fundamentally different from selling the security. :p

Plus the extra money helps you when you buy a bigger house! Never mind that anything you'll likely buy is appreciating too.

A reasonable concept is that late in life you will either move to a smaller house or move to a cheaper area or rent thereafter (or get a reverse mortgage or other financial instrument that allows you to lose some equity and still live in "your" house).

It's not as dire as you make out. That said, it's not as awesome as a lot of people seem to think.

When you downsize in retirement, you certainly can. Plenty of people plan to move to florida or other retirement towns when they're older. These places tend to be cheaper to buy houses in; off the beaten path, not near jobs, not good schools, etc - Things retirees don't care about, but youngsters do, that are major effects on housing prices. They can finance this by investing in that they live in in their youth, then selling. If you buy a house at $400,000, and it appreciates 10% over the next 10 years, it is now worth $440,000. You sell it, and move to a house that would have cost you $100,000... but that has appreciated at the same rate, now costing $110,000. You've 'made' $30k, despite appreciation.

Is it just me or does making $30k in 10 years sound absolutely terrible? That's $3k a year ...

There are so many cheaper ways to make an extra $3k per year. You could, for instance, spend 5 hours a week baby sitting for $12/hour.

In the UK (I have no experience of this type of finance anywhere else), interest rates improve as your loan to value percentage decreases. If the house increases in value by the time you come to re-mortgage, you're likely to get a better deal.

Again, this doesn't help people who are trying to buy for the first time.

Higher prices aren't good by themselves, what's supposed to be good is continuous appreciation. If we knew for a fact that home values would always go up relative to inflation, the sticker price of a home wouldn't matter all that much; as long as you could get:

* a loan with a long enough lifetime (so the payments are feasible) * a loan with a low enough interest rate (so the increased value of your home equity isn't overtaken by the amount you give to the bank) * some nice government subsidies in the form of the mortgage interest deduction

then at pretty much any point over the life of the loan you can sell the property and come out ahead, even if you never finished paying it off. Of course, if the crucial assumption that home prices always go up turns out to be faulty, anyone who bet on this strategy might be left with a home that's worth less than a loan they can't afford.

Disclaimer: I think I understand the concepts here but I'm no expert. Apologies if my choice of words and/or logic are completely wrong.

    >Texas and Atlanta have lots of land around them, but they did not have nearly the default problem of vegas and florida and california because they built a lot very quickly, so prices never rose dramatically.

I can't speak for Atlanta, but it's not just "lots of land" in Texas that spared it. Texas had limits on HELOCs[1] that spared it of most of the carnage.

[1] http://www.washingtonpost.com/wp-dyn/content/article/2010/04...

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