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Comment by dghlsakjg | Hacker News Reader

And arguably, they already extracted the value of that house by having a place to live without having paid for it up front. They didn’t even put up the capital in most cases. In the US they will have been granted a loan that is backstopped, and therefore subsidized by the government. Don’t forget the mortgage interest deduction, that’s a massive homeowner subsidy.

So someone else put up the capital, the government made that capital cheap, and societal demand with artificial scarcity (in most places) pushed up the asset value.

I’m not saying it’s a bad thing, but let’s not pretend that making capital gains on a house in the US is anything like any other available investment.

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They maintained the home and paid taxes on it. Have you ever had a failed septic system? A major water leak? A new roof? There's this whole anger around home ownership you get these days, oftentimes by people who have no experience in the matter.

Yes, mortgages are subsidized by our interest tax deduction system. That part is true. It doesn't turn home ownership into something with no risk, and it certainly doesn't turn it into this subsidized investment. It's a liability, not an investment.

> It's a liability, not an investment.

No it's not.

Just unbelievable gaslighting from the landed class, continuously.

Ohhh no, woe is you, bought a $500k house on 3%, literally lived inside it, but had to repair the septic :(

It’s almost always a liability.

Similar to how cars are liabilities (sure you can have a good eye and turn a profit on some).

House prices might be up 10x from 40 years ago but the SNP500 is up 30x. Houses are not investments. The only utility they have for investing as a “forced savings” mechanism.

“Lower unlevered returns than the hottest stock market in world history” does not make something a liability. Again: astounding gaslighting attempt.

And by the way, you can neither live inside of, nor rent out, your S&P 500 holdings.

Also by the way, you cannot get leverage on the S&P 500 at federally subsidized interest rates.

Gaslighting gaslighting gaslighting.

There’s no leverage in the SNP500. The global market is up like 80x but for a US-centric form it makes more sense to focus on us investments.

There’s almost always leverage in housing. Which worked really poorly for a lot of people in 2008.

It doesn’t matter if you can get housing at say 6% to buy an asset that historically performs poorly. Plenty of people have created rent vs buy calculators. Housing is not a good investment.

Just because wealthy people buy houses doesn’t make it an investment. Wealthy people also buy Ferraris, imagine the cost of those tires compared to a septic tank!

You seem confused about how investments work if you think lack of cheap leverage is a point for S&P500, or that availability of cheap leverage is a point against housing as an investment.

“Global market is up 80x” is literally meaningless without a timeframe.

I’m going to guess that you’re a “real estate investor”/landlord who does okay for themselves, and then complains that you’re just doing okay despite not even having a real job. Besides (gasp!) having to occasionally pay someone to repair your asset – which is actually a distinct job of property management.

But the fact that someone (in fact many people) as unsophisticated as yourself can invest in real estate and avoid destitute poverty is credit to how powerful of an investment vehicle real estate is.

That’s why there’s trillions of dollars in it. You think all these gargantuan real estate firms are doing it for charity? They just love repairing septics? They don’t know they could just open up Robinhood and buy S&P 500?

Of course not. Real estate is one of the largest industries in the country because people can deploy ungodly amounts of capital into it and expect very reasonable risk-adjusted returns across its various cash flow, appreciation, and tax outputs to their portfolio.

Lastly: You've retreated from "real estate is a liability" to "real estate is not currently producing returns above the S&P 500." Completely different claims. Either you're gaslighting people or you're not sophisticated enough to know the difference between them – wrong in either case.

> “Global market is up 80x” is literally meaningless without a timeframe.

Last 40 years.. the same time frame as every other number i’ve been using.

> availability of cheap leverage is a point against housing as an investment.

It is a point against. If housing is your only source of leverage then you get wiped out in an ‘08 event.

> You think all these gargantuan real estate firms are doing it for charity?

No, they’re doing market research and not blindly buying houses. Just like with cars you can identify which ones will go up in value. However the average car just loses money (but you get to use it).

> Lastly: You've retreated from "real estate is a liability"

I haven’t. The comment was “almost always a liability”. The actual stance i had was it’s not an investment. Just because some of the tails do well doesn’t mean the median did well and that’s what you need for investment advice.

The comment was, verbatim, "It's a liability, not an investment." You are incorrect.

Buying a home that appreciates is nothing like buying a car that appreciates. Again, either you are astoundingly unsophisticated or you're lying through your teeth.

Figuring out which of those is true is not relevant to me nor valuable to other readers on this forum. Have a good weekend!

dghlsakjg is not an alternate username of mine.

Can you clarify if this was meant as a personal attack on me, or a complete inability to read?

The claim that "[real estate] is a liability, not an investment" was not made by me. I am refuting it.

For that matter 500K homes and 3 percent interest rates are a thing of historical fiction.

And insurance, repairs, taxes are at an all time high. One day when you get older and you and your parents purchase your first home together, it'll start to make more sense what's being said here. It's not a good investment. If you want an investment stick to your brokerage account.

Historical fiction? Is that a euphemism for "a real thing that happened just a few years ago?" Yeah, it almost certainly won't happen again. But part of that is because – surprise surprise – the thousands-year history of land is that it appreciates in value. Anything that was worth $500k in 2021 will be worth vastly more today, and will almost certainly be worth vastly more in another 10 years.

Periods of cheap money like ZIRP, because land is such a reliable investment, tends to pile into higher land values.

I appreciate the condescension, but I made more than a million dollars in real estate before 30 years old (with no inheritance, trust, or "gifts" to get me started). Also have made significant money in public equity markets and in private venture. Each product type has a role, which is why there are huge amounts of money in each one.

That's wild that someone who is literally 'the gentry' (as in you don't have to work for a living anymore) is blaming random homeowners for being a 'landed class.' Something is off here in how you've calibrated your political perspective.

I own real estate and none of it is anything other than a place for me to live. Nothing is an investment, only a cost. And if I lose my job I have to sell or rent something out. For a loss - interest rates are brutal. Taxes are enormous, and maintenance is through the roof. I'm luckily not in a state like Florida where insurance is the biggest eater.

Historical as in 2.5 percent interest rates are finished forever.

Summary - none of this stuff is evidence of a landed gentry image you're assuming. The alternative is renting - meaning the rent goes up every year.

I see now the issue with your perspective - you're in the privileged class punching down, somehow conflating different types of home ownership, the family wanting to own their own shelter -- and the Duke of Westminster.

No, my calibration is quite simple: a landowner doesn't create, and therefore doesn't earn, and therefore shouldn't keep the appreciation of land values. But there is virtually nothing more certain than appreciation in land values.

That's as true of the Duke of Westminster as it is for you, or me, or anyone else. The fact you think there needs to be a "calibration" that makes the exact same behavior legitimate for one party and illegitimate for another is pretty insane.

The portion of my wealth gained through land value appreciation is absolutely unearned. Same with yours, same with the Duke's, same with an individual homeowner.

Housing specifically (the building) is a liability -- it deprecates, it needs maintaining, just like a car. You pay that and you get utility out of it.

The land its on tends not to be a liability, it increases in value through no work on the owners side. Rarely it will decrease in immediate value, but that's very rare.

Yes, this is correct. However, the 99.999% scenario in the US is that when you buy a house, you are buying the land underneath it. The land is an almost-certainly appreciating asset while the house is depreciating. The land, however, is a growing component of every purchase's factors.

I have replaced my septic. Repaired a roof. Dealt with flooding. I own a home. I have plenty of experience with homeownership. I recognize that maintenance exists and have never said otherwise. You have made assumptions about me to load up an ad hominem attack against a straw man argument. Nothing I said was angry at homeowners. Just pointing out that making 500k on a home isn’t the result of savvy financial moves exclusively, and more a foreseeable outcome of government policy at all levels.

I’m not saying that homeownership is a slam dunk. If you go back and reread, what I’m pushing back on is that the mere act of purchasing and holding a house counts as doing something worthy of a return.

My point is that homeownership, in the US especially, is so heavily favored as an investment vehicle that you perhaps should not act as if you inherently deserve the gains for having “done something”.

As you say: it’s a liability, not an investment (although, I would say it’s entirely possible to be both, and trillions of dollars of smart money agrees)). But it is a liability that has limited downside because of government policy. Because of this, it actually makes a pretty good investment as well. We would do well to recognize where those gains come from (artificially low mortgage rates, and often artificially high scarcity).

>My point is that homeownership, in the US especially, is so heavily favored as an investment vehicle that you perhaps should not act as if you inherently deserve the gains for having “done something”.

By whom? Private equity buying out land in Georgia? Political pundits? Blogs you read? I've heard that too, and it's only true in specific times in history - like since the financial crisis and then covid, where prices only went up.

There's nothing today to suggest that people are eating 6.5 percent interest rates or even staying put out of any calculated investment return. People buy because they're forming a household, they are sick of rents going up, or they want stability. The rest is rhetoric.

There's an entire category of investments called REITs that invest exclusively in real estate. There's a subcategory of REITs that invest in residential real estate that verifiably hold trillions worth of residential housing. There are also PE firms that specialize in residential real estate holding an unknown amount of assets.

Besides all that, owning rental properties and investment properties for individuals is incredibly popular.

Are you really trying to claim that it is a myth that people buy houses for investment purposes? I can't continue a conversation with someone so incredibly out of touch with reality.

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