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Comment by jstanley | Hacker News Reader

> We could sell our house and pocket the difference and nothing was lost financially.

This is a fallacy. You're born "short housing", because you need somewhere to live. Owning a house is just cancelling out your natural short position. If you sell the house, you're short again. You might make a "profit" on the house if the market went up, but that just means you'll be buying another house in the new more expensive market.

If you want to upsize, you're actually better off if the market goes down, because then to get a house that is X% more expensive requires less additional capital.

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> you're actually better off if the market goes down

Only in a perfectly spherical house market. In my limited experience (non-US market), your assumptions are poor. Opinion:

1: You often can't get a mortgage on the same terms so you often can't find equality between selling a home and buying a home.

2: When the market is down, turnover can reduce drastically so your choices for a house can be severely restricted.

3: when the market is down, prices are sometimes driven by unwilling sellers and bargain hunters. A desirable home may sell at a reasonable price but an average home might not.

The market is often down when interest rates are up and you can't get a mortgage on terms that suit you.

> You're born "short housing"

You are short the "minimum" necessary which is a lot smaller than a whole house. You are not short 1.0 houses. Maybe short 1.0 rooms. And it really depends on who else you are tightly linked with (family or partner).

> 1. You often can't get a mortgage on the same terms so you often can't find equality between selling a home and buying a home.

When interest rates fall the value of the asset goes up and the cost of borrowing the same amount of money has gone down

I don't look at the housing market like that - causes and effects are not obvious.

Firstly, people can afford to pay $x for mortgage interest. The "cost" of borrowing remains constant because incomes don't change. As mortgage interest rates decrease, $x doesn't change. Instead people can borrow more (for the same amount spent on interest) and they bid more. So house prices go up.

If I can take the profit on one and roll it into buying down the disposable income needed to afford a loan on another - which I can do in a falling interest rate environment - there should be not only a point of equilibrium for my relative purchasing power but also theoretically there will exist a point in which simply owning an appreciating asset would have been enough to have parity with whatever my overall purchasing power was, minus the asset. It’s the same function with the same saddle point.

Unfortunately there's an information gap. However good your point might be, I reckon I don't understand what you are trying to say. I do appreciate your effort to respond.

Okay, on rereading: one problem is that I have never heard of "buying down" because I think the concept doesn't exist in the New Zealand market. The US market for mortgages is extremely different from most countries. I wrote my comments generic enough to cover both (I hoped).

Buying down is not a neutral option: I presume it is making a bet on the future of interest rates. So I'm not sure your logic follows. If we want to make interest rate bets then there's lots of different worms we can eat.

The information gap remains!

> If you sell the house, you're short again. You might make a "profit" on the house if the market went up, but that just means you'll be buying another house in the new more expensive market.

As someone who doesn’t own a home and dreams of buying one, I really don’t believe this take. Anyone who bought a home in the late 2000s post-crash is now living in a much nicer place while spending the same.

I don’t think I’ll get an opportunity to see such a massive increase to quality of life by doing practically nothing. Housing prices won’t go down any time soon, so now I have to spend way more with much poorer ROI prospects.

> If you sell the house, you’re short again

Unless we aren’t short again. 10% is the median year over year growth. What if it was 20%? Is that more realistic than her doubling her income in the same time period? I think that we could only be short if rent increases at the same rate that the property appreciated? Maybe I’m completely cooked / fried - it’s pretty late - and I’d be happy to be wrong - as my version of reality I’m seeing feels pretty destitute as it is

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