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0 pointsskzv4y ago0 comments

Thanks for your insight!

> Single family house you'd want to live in, clearly "no". It's almost always a bad investment decision.

Is this still true, though? Asset management companies - most famously Blackrock - are now pouring billions into acquiring exactly that: single family homes. And with prices growing in the double digit percentages every year across North America, it seems almost guaranteed in every metropolitan area.

I can be convinced otherwise, but I'm worried we are returning to a time of renters and land-owners, and I'm not sure I want to be a renter for the rest of my life.

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anovikov4y ago· 1 in thread

But we've been there so many times already. People complained on precisely the same 15 years ago, then prices crashed. There can't possibly be a way that (cyclically adjusted, long term) mortgage payment vs income will sustainably rise.

Just hang in there and in 3 years we will hear complains about "millions of people who bought houses are now with underwater mortgages because Fed rates are up and thus prices are down, and are being massively foreclosed". Because people are negative. No one will ever complain that "you can make millions by selling your house you bought on the cheap 20 years ago" or that "houses are easy to buy" (10 years ago or will be again 5 year from now). You will only hear complains from gamblers who lost the gamble - bought at the wrong moment of failed to buy at the right moment. But, in the end of the day, both are just gamblers.

We have reliable data on inflation-adjusted home prices since 1953. In 1953, median home price was $18K which is $180K inflation adjusted, now it is $314K (https://dqydj.com/historical-home-prices/). Mortgage rate in 1953 was 5% (https://www.jstor.org/stable/41833636), now it is 3.01%. Which results in 30-year payment being $1325 vs $966.28 per month or only 37% higher.

Now remember that median home size in 1953 was 917 sq ft and it is and it is 2333 sq ft. now., a 2.54x growth, and that real per capita GDP has grown 3.44x since 153, and feels like entire hysteria is completely made up. Which means, average productivity of US worker now buys more than 6x floor space (with mortgage) or about 5x (without mortgage), compared to 1953 which wasn't a time of housing shortage either.

We can't be "back to times of renters and landowners" because if that is the case - people can't buy places and have to rent - it would mean that landowners are not making a good return on their investment. Why would they continue to do the same thing? But as for me, i'm fine renting my whole life. A mediocre place is no better than a rental - a nice place takes a fortune to maintain and i'd much rather retire 5 years earlier than do that. Uber rich mostly live in rental condos and penthouses these days (while they may own lots of real estate, just not the kind of it they'd be ok living in).

anovikov4y ago

To put things further in perspective, if you put same $18K into S&P 500 in 1953, assuming 30% dividends tax and dividends reinvestment, now you'd have $13.3M, or $23700 per month after-tax dividend income (averaged), which is more than enough to rent any place, in any location. People who are saying that something was wrong with housing prices really need a reality check.

(caveat is that ETFs did not exist till 1975 so it wasn't as easy for a small-time retail investor to put $18K into S&P 500 in 1953, so this is not entirely apples to apples comparison).