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Comment by JMTQp8lwXL | Hacker News Reader

As a millennial renter, part of me wants to see lower home prices, but that also means other people being underwater. It's a tough generational predicament we've placed ourselves in. We want to encourage homeownership, but millennials aren't buying. We want homeownership to be profitable, because for most middle class families, the home is the largest financial asset. It's impossible to make all of these promises to people. If a 2008 repeat occurs again, it will only further reduce personal home ownership and increase institutional ownership.

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I really wish people would stop thinking of their primary home as an investment. It's not. It's a liability. It requires maintenance and upkeep and does not generate revenue.

Unfortunately, since -- as you point out -- a home is nearly always a family's largest expense and often also largest store of value, people distort what it means to them financially and expect their home to appreciate in value well above and beyond inflation.

When you take out a mortgage to buy a home, you shouldn't have any preconceived notions about whether or not you'll be "underwater" at some point in the future. And really, it does not matter one bit if you're underwater. Unless something has also happened to your income stream, you just keep paying it, as you should. The borrowed money doesn't somehow magically become less money just because conditions have changed and your home's market value has dropped. The downside is, of course, that you may not be able to sell the house and move away until you've paid off more of your mortgage. But that's a risk you take when you sign that paperwork up front.

The home-as-investment thing is fairly uncommon in the world and seems to mainly be a US thing. I wish it would die, as it should. It only serves to distort the market, and fuels ever-increasing home prices, which makes it continually harder for the average family to own their own home, further increasing institutional ownership.

Home prices as a multiple of median income have increased in many cities outside of the US: London, Paris, Berlin, Hong Kong, the financialization of housing is likely driving a house-as-investment ethos beyond US borders. Some nations, like Japan, are notable exceptions due to local preferences.

If housing is profitable, in the sense of offering appreciation above the general rate of inflation, then it becomes less affordable to the next buyer, who has to fork over a larger percentage of their lifetime earnings to live there.

It's unfortunate that this appreciation has progressed to the point where nearly all of a family's wealth is tied up in their home, as it is not a risk-free asset to hold.

The way I like to describe it is that people want home values to go up but home prices to go down, and never seem to realize that this is impossible by definition.

> that people want home values to go up but home prices to go down

People want _house_ values to go up, but _home_ prices to go down. And those are two different things.

If it's your home, who cares how other people value it. Lesser price is better.

If it's a house that you don't consider home, then you only want to sell it for what you can.

Personally I think home-owners > house-flippers and that laws should reflect that.

There is no painless way out of this mess. The first option is to inflate housing prices away. A $600k starter home would become reasonable and a loaf of bread would be $8-$10. The second option is to let housing crash and burn. The first option is politically more palatable but pretty hard to do against such powerful deflationary headwinds, so my money is on the second when the boomers dump their real estate.

Anyone who bought at these prices is already underwater. The thing to look at is housing as a multiple of median income. If it looks insane, it is insane.

Given the inflexibility of wages, I question the effectiveness of this potential strategy, but given the problems we face, any possible strategy deserves a thorough review. I certainly agree on the political viability of inflation, since it isn't as perceptible. If someone sells a house 20 years after they bought it for the same nominal value, it doesn't like as much of a loss?

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