undefined | Better HN

0 pointssedachv9y ago0 comments

> One extreme downside of thinking of your home as an investment vehicle is how poorly it is diversified. It is almost exactly directly correlated to the local job market...and to macro trends like the MBS issues we saw in 2008.

This is what I cannot understand about people who advocate buying homes in the United States for small-time investors - how can you not see this? How does it make any sense to divert almost all of your cash flow into a single, massively leveraged, illiquid investment? Miss a few payments on your mortgage and you are totally wiped out (and without a place to live!). At least stocks can bounce back and maybe you can get 30% back on bad bonds. And no one is stopping you from holding cash or TIPS.

If you are wealthy and a house is a small part of your portfolio the impact of the possible downsides is qualitatively different, but as a small-time investor tying up most of my wealth into home ownership on the hope that "house prices always go up" (which really means treating the future generation as suckers that will pay inflated prices for your home) and that the risk of mortgage default does not exist does not make sense to me.

0 comments

hash-set9y ago

I don't think most Americans buy houses as investments. There are other reasons: You usually find yourself in a better neighborhood with fewer hassles if you buy vs. rent.

Stocks and bonds aren't any better anymore--the bottom could drop out again anytime and leave you with half or less of what you previously had.

We're in a crap storm of epic proportions in this country, but we avoid the reality of it.

tptacek9y ago

My experience and intuition suggests that the opposite is true, and that you'll generally end up in nicer places and in better neighborhoods if you rent. Looking at current house rental listings in Oak Park, I see several in nicer neighborhoods that are less than my rent; in other words: I believe I pay a premium to to own here.

That was my experience in Ann Arbor as well.

cmdrfred9y ago

This isn't the case in most of New Jersey or Pennsylvania. Cost to rent a crappy 2 bedroom apartment (with the people below blowing smoke up into your bedroom) is the same as a 3 bedroom house, property taxes, and insurance. It really is location, location, location as they say.

1 more reply

j / k navigate · click thread line to collapse