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Comment by Spyro7 | Hacker News Reader

pstack, my situation is similar to yours.

I think that the difference between us and the people that they are referring to in that article is that we consider a house to be a place to live and not merely a medium-term investment.

I think that the thing that really lead to the housing market bust was that a ton of people started buying houses just to sit on them for a few years and then sell for a profit. The speculation fed on itself until it became unsustainable, then it fell apart. It is just a shame that this had an impact on regular long-term homeowners as well.

So, yeah, if you're dumb enough then so am I.

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I thought that was what they were referring to, also, but they keep referring to the rent versus ownership ratio as well as the maintenance work issue. I think they're talking about actual homeowners buying homes to live in, because of the way they keep basing it on that. Though I guess they could be using those to draw a basis for why nobody will buy the houses an investor is stockpiling?

They refer to the rent-ownership ratio and the maintenance work, but they also implicitly dismiss the longer-term argument for owning a house. They keep talking about the costs of home ownership with no talk of the benefits that can result from owning vs renting - painting a picture that home ownership is a really dumb thing to do.

To me, by not discussing the long-term benefits of home ownership they are looking at the issue all wrong. Their analysis is focused only on the short to medium term and the valuation of the house itself.

They are discussing homes in a similar way to how one would look at any investment - ignoring that a home should be considered differently because of the non-monetary values that come along with home ownership.

Of course, a home is an investment and it can provide capital gains, but there are other, not easily quantifiable, benefits to home ownership that make it attractive. To ignore these benefits is to miss the picture completely.

A home may or may not be an investment - investing in a property for investment gains and buying a home as a place to live are not necessarily, and nor should they be, the same thing. Most people don't ever see the distinction.

The article focuses on the bad things, sure, but there are already a ton of articles written out there about why "renting is stupid, buying (mortgaging) you can't lose!)

I rented for a long time. Proudly. People told me I was throwing my money away. I ignored them, I liked the simplicity and mobility. And the savings.

Then one day I bought (not mortgaged) a home. I bought it not primarily as an investment but as a home, for my family. Some day I'll probably sell it and move on to something bigger, but whether that means I take a loss, a gain, or whatever isn't the point - the benefit is that, for now, I don't have to worry about dealing with landlords, and my expenses on a monthly basis are lower, so if I lose my job or otherwise come into financial hardship, my home won't be on the line (and no I'm not ignoring taxes and other stuff - I'm well aware of my local obligations where I live)

All that said - speaking vaguely of the "benefits" of home ownership doesn't communicate much - perhaps you can elaborate on what you see as those benefits? I know what mine are - but it's subjective.

And to re-iterate - many people get mixed up when deciding whether to mortgage a home - they can't or don't find a way to properly evaluate the financial benefits and risks -vs- the "soft" lifestyle benefits and risks - two very different things.

Thank you, this is a very good comment.

"I know what mine are - but it's subjective."

Well, see... That's the thing... I spoke vaguely because the benefits themselves are ambiguous, subjective. They are hard to quantify because their intrinsic value varies based on who you ask.

However, just because they are not easily quantifiable does not mean that they have no value. You are right. It is easy for me to sit over here and criticize them for not discussing something that was probably outside the scope of their article.

With that said though, it may be possible - one day - for someone to figure out some way of approximating these things (no landlords, lower fixed monthly costs, more control over your own property) and giving them some type of monetary value.

One thing that could be done is to look at the difference between rent and ownership prices and build an econometric model in an attempt to tease some numbers out of it. Maybe someone has already tried it, but I am not certain. There would be some selection bias though - the kind of people that own homes are probably not exactly the same as those that rent apartments. I'm not sure how to deal with that...

Just something to think about, I have taken some classes in Urban economics and all of these professors talk about how incredibly stupid it is to own a house. Then, over the course of the semester, I would realize that they owned houses myself. When I ask them why, none of them has a decent answer.

Maybe the answer is something really sort-of fuzzy. It seems to me that people tend to buy a house when they want to lay down "roots" in a place, but then that wouldn't explain why so many people just rent for a long time despite not needing the mobility.

There are probably hundreds of factors that creep into the decision to own vs to rent. I guess being aware of this is why I feel repulsed at articles claiming to compare the two but not even trying to factor in the preference-related factors and how they cloud this type of analysis.

Disclaimer: I am an economist-in-training at this point in time. My thesis involves an application of a hedonic pricing model. Too much work with hedonics and you may become delirious - believing that everything can be quantified if you just tinker with the model long enough...

Thanks for the good response in turn....

I think a very core issue when discussing this is the fact that the majority of people aren't buying a home - they are mortgaging it. Borrowing money, and the additional costs that entails, have become the accepted norm for people to purchase a house. I do realize this is realistically the only way many people may be able to ever "own" a house - but if you spend the rest of your life paying it off, do you ever really own it for practical purposes?

The primary issue for me is that, in current society (talking us/ca here) - paying a financial institution an arm and a leg for the privilege of having them lend you enough money to "buy" a home as the standard way of doing this is the root of the problem - change our financial habits as a society to reduce this need in a few generations and things will change.

5% is a small amount to pay for that type of money. A good entrepreneur can make much more than 5% off of their own cash reserves.

"Maybe the answer is something really sort-of fuzzy. It seems to me that people tend to buy a house when they want to lay down "roots" in a place, but then that wouldn't explain why so many people just rent for a long time despite not needing the mobility."

Wouldn't this come down to the risk appetite of renters vs. homeowners? Perhaps long-term renters overestimate the risks/trouble of homeowning and overvalue their mobility. In a sense, renters may be willing to pay a perceived premium (i.e. "you're throwing your money away") because they feel that they are safer. This feeling would only be reinforced if they've had favourable historical renting experiences.

I can't help drawing an analogy to buying insurance; you hope nothing bad happens, but buy insurance anyway.

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