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Comment by dxbydt | Hacker News Reader

Wtf?! Yes you are short housing...then u buy one...prices go up... you sell the damn thing...at which point you become short again...but with that extra money you can cover your short and come out ahead in a different market. It isn't like gold in that the prices are fairly constant across markets. If my house in the bay area goes up 30% i sell that and relocate to illinois you can bet i will cover the short and come out ahead since home prices in illinois lag ca by a good 150-200k.

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"If my house in the bay area goes up 30% i sell that and relocate to illinois you can bet i will cover the short and come out ahead since home prices in illinois lag ca by a good 150-200k"

You need to factor in interest paid on your bay area loan to get the full picture. Just because your house value goes up by a certain margin does not come close to meaning you have profited by that much. This is especially important to understand in areas with large home prices in that the cost of holding the asset (interest) is very high especially early into the loan.

Very true, but don't also forget to deduct the cost of renting liveable accommodation from your mortgage costs. Otherwise your comparing the cost of living in a house to the cost of living in a cardboard box.

Actually, you have profited much more. If you put 25% down and your home appreciates by 25% you have doubled your money (net of interest and other costs). Also, newsflash: interest rates are very low these days.

But that last portion "(net of interest and other costs)" is my argument. Interest, property taxes, capital gains taxes, real estate agent fees are all apart of the cost of owning and selling the asset and it usually adds up to quite a bit. Within the first 5 years even with a 3.5% loan you pay around 20% of your mortgage balance just in interest.

But there's a reason home prices lag, generally speaking. Pay also tends to lag. But honestly, the Bay Area is an outlier in the housing market. Imagine moving from Chicago to San Francisco...

As mentioned elsewhere in the thread, you are not short some dollar value but short some "survivalship house value" based upon your own subjective tolerance for what is a "minimally viable living situation."

If you live in the bay area, you may be short the "house value" equivalent of $500k, but living in Illinois you may be short the "house value" equivalent of $250k. Of course the location is part of the "minimally viable" part for certain people, but for others this is a less important part of "viability". Regardless, it's not a dollar value, it's "house living value", and anything beyond that part of the equity in the house you own (for most people: the majority of it) is speculation/investment into the real estate market.

That's true, but not many people are willing to completely relocate themselves to a different part of the country just for a good deal on real estate.

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