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0 pointsderleth12y ago0 comments

> the "house is an investment" crowd

They are. What people neglect to mention is that some investments, houses included, fail to pan out, and leave you worse off than you were before. Simply assuming that a mortgage builds useful equity is financially illiterate: If houses were a sure thing, everyone and every institution would buy them.

The really insidious idea is the idea that buying a house is what a mature, responsible person does, and that you can't be a mature, responsible person unless you're paying down a mortgage. This is marginally less potentially harmful to your future happiness than the idea that mature, responsible people smoke five packs of cigarettes a day.

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6 comments · 3 top-level

dllthomas12y ago· 2 in thread

> If houses were a sure thing, everyone and every institution would buy them.

We give tax breaks to individuals owning their own home that we don't give to institutions or individuals owning homes to rent. It's conceivable that this makes the difference between "sure thing" and a loss.

This isn't at all to say that buying a house is a guaranteed win - look at it carefully before making any sort of major decision like that - but there's not an automatic theoretical refutation.

parasubvert12y ago

Note that most countries do not provide tax breaks to homeowners, this is a uniquely US phenomenon.

There are many cases where renting makes more sense, but the factors are multiple: taxes, interest rates, up front equity, property values, closing costs, rental market, etc.

dllthomas12y ago

> Note that most countries do not provide tax breaks to homeowners, this is a uniquely US phenomenon.

I was certainly aware it wasn't universal - I should probably have called that out more clearly.

> There are many cases where renting makes more sense, but the factors are multiple: taxes, interest rates, up front equity, property values, closing costs, rental market, etc.

Right, that's pretty much exactly my position.

wazoox12y ago· 1 in thread

To make your argument clearer: if you buy a house and don't bring a significant amount of your own money to the deal (let's say 20 to 30% of the whole), as during the first years of the mortgage you're mostly paying interest and almost no capital, you're actually throwing your money down the drain in exactly the same way as you'd do paying a rent, BUT with the added responsibilities coming with the mortgage on one hand, and owning the house on the other hand.

protomyth12y ago

Nicely stated (wish I had done a better job of it). That's basically the trap. Some people can do that and a house makes sense. People like to own.

A lot of people bought a house and fell into the trap you describe. A lot of those people didn't have good job mobility in the local area[1].

1) I would love to see a study from about 2000 to now on all the folks that defaulted and what their down payment was combined with the job outlook for their profession.

300bps12y ago

Investment houses are an investment. Your primary residence is not an investment.

Case in point: I lost over $100k on my previous primary residence. I couldn't write that off on my taxes because it wasn't an investment. If it were an investment property, I could've.

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