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Comment by Victerius | Hacker News Reader

> condos don't see similar appreciation, get hit harder in downturns and are one of the last types of properties to recover in value afterwards.

This is fine. I don't buy a condo with the hope of recouping my money. I buy a condo to have a roof over my head. I couldn't care less if my condo loses 80% of its value. It would lower my property tax bill in fact. I don't expect a ROI > 0 for the furniture either.

For my retirement, I contribute to a 401k and a Roth IRA.

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If all you want is a roof over your head, why not rent? It's less risky. You may well find yourself caring if your condo loses 80% of its value if you need to sell it and you can't repay the loan.

Because rent would hurt you really bad when you're pensioner.

Old-age poverty is indeed a policy problem, but housing policy isn't really the way to address it. (Meanwhile you look at places like the Villages in Florida, where you are required to own a car because nothing is within walking distance, no social club, no grocery story, no physician, there's going to be a huge amount of pain in the future.)

The alternative is to tie up a significant amount of money into a home. In Germany, ~12% of the purchase price is lost to fees. A lot more is lost to interest. Some more is lost to things that are normally included in your rent. Oh and you need to pay for maintenance. You need to take care of maintenance.

To illustrate my point, most German landlords fail to beat inflation. Some 20% are losing money.

The homeowners I know chose a slightly worse location, because they couldn't afford to buy in the places where they actually want to live. Since a mortgage is a 30 year affair, they bought more than they currently need. They end up paying more and getting less (for now). Inflation and rising rents will work in their favour eventually, but it's far enough in the future to make me question the move.

I meant to write about buying a home in Germany (I write about adulting in Germany), and the conclusions from my extensive research are the following:

- Buying a home is not a financial decision, it's a lifestyle decision

- Everyone who writes about buying a home has a financial incentive to recommend buying a home

- Home ownership is also throwing a lot of money away: closing fees, taxes, interests, maintenance, opportunity cost...

I'm not so sure that buying is always a bad decision. I live in Berlin, and see where you are coming from. Germany has strong tenant protection laws, and you generally don't get much or any freedom when buying an apartment in a building. You can't change the layout as you'd like, for example, due to load-bearing walls.

However, in terms of building equity (not to become a small-time landlord), buying an apartment is a safe bet - the housing market has been in a bull market for a long time, and the last few years have been especially good. I suspect we're closer to a long-term top than many think, but that's another matter. Even if the market crashes, your house remains yours and keeps providing shelter. On top of that, selling is tax-advantaged whereas stocks aren't.

A part of your payments will indeed build equity, but over 30 years of payments, most of it won't (see previous comment).

If the market crashes, your house will not remain yours if you can't afford making payments. If things go south, I see unavoidable payments and illiquid assets as a liability, not an asset.

Selling is indeed tax-advantaged after a few years though. That's a good point.

The main pro for me is that it's a hedge against rent prices and inflation. However that's assuming that housing prices are reasonable, and that there are no better investments.

> Home ownership is also throwing a lot of money away

It doesn't matter how much overhead it has in a vacuum. What matters is how much goes to overhead when compared to renting, which is the only other choice (other than being homeless).

>It's less risky.

depending on your local housing market, it could be much more risky. where i live, for the last few years renting has carried the real possibility of being unable to find a place to live, for any amount of money, when your lease ends.

the big upside to a condo is that nobody is going to kick you out.

The building could collapse, be condemned, there could be any number of natural disasters. You can end up in a situation where you owe a lot of money on the mortgage, interest rates move up, and the value drops, so now you can’t move.

If something major fails with the building, a repair bill could be so large that you have to take out another mortgage to pay for it, no matter your current financial situation.

Plenty of significant problems with condos that can force you to be kicked out.

Most of all, incentives are misaligned. Condos are designed to be marketed and sold. I’ve lived in several high end condos, as well as high end apartment buildings, and the apartment buildings always were built better and didn’t have weird custom made shit breaking.

SFHs burn down, are destroyed by floods or landslides. Termites may lead to hidden damage that leads to thousands of dollars in repair bills. On and on... All of the risks you list for condo owners exist for homeowners as well. A diligent homeowner may have more control over preventing/limiting some issues but sometimes stuff happens. As far as I know it is impossible to insure against every threat to ones home (landslides for instance) at any price.

Is it always less risky? What happens when the price of apartments triples or quadruples over the years but your income stagnates or even goes down? You’d better have rent control, which is generally a bad economic policy overall, and you’d better love your apartment because you will be stuck there. When I lived in SF, many of my older neighbors were in this situation.

If you own and can afford your fixed-rate mortgage, you are much less likely to be in this situation, or worse, homeless.

Regulating big rent increases for existing tenants isn't a bad economic policy if you compensate through other means ( e.g. you ensure there's a path to homeownership for those tenants, so they don't stay forever, and that new housing stock for affordable rent is added frequently).

In France there's a maximum amount you can increase a tenant's rent with, defined yearly based on market prices. Combined with one of the most popular investment vehicles, which is a buy new ( thus incentivising construction) to rent (at defined affordable prices) programme which gets you tax breaks for 10 years, and after that most people usually sell. Alongside that cities are mandated by law to have a certain percentage of "social"(affordable) housing available, so when private construction adds housing stock, cities have to add on top of it. That helps keep renting affordable while also making sure new construction appears.

Renting is very risky, and also more expensive than a condo that loses value.

The US has almost no tenant protections except for a few urban areas that passed municipal laws. I would prefer to rent if it provided almost as much protection as homeowning, and if it weren't so financially disincentivized in the US.

IMHO we need to eliminate the capital gains exemptions for homes, and also add on local capital gains taxes in addition to federal, to disincentivize real estate speculation.

If property values skyrocket the landlord can (will) sell the building and kick you out.

> If all you want is a roof over your head, why not rent? It's less risky.

Renting is far more risky. You never know when and how much it will increase every year.

If you buy something (condo, or house) you now know what your "rent" will be for the next 30 years, it's never going up.

Property tax is based on the municipality's budget. If your assessed value goes down, your property tax rate would go up while your final bill would remain relatively the same.

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