Im bowing out

[BrentD]

Great article

The Homeownership Society Was a Mistake

Real estate should be treated as consumption, not investment.

www.theatlantic.com

I just skimmed through it, and I would not say it is a great article. It makes some good points worth reading, but it also makes a lot of assumptions and evaluations that are pretty limiting. It would not be hard to look at the flip side and see a ton of downsides to renting.

The part that irks me the most about these types of articles which are currently quite fashionable in my opinion, is that they consider finances almost exclusively (and not very fairly). There is a lot to home owning that doesn't compute to just dollars. Owning a home is a lifestyle and a level of freedom that renting can never match. It is hard to put $$s on that. And there are also $$ issues that they did not discuss at all.

YMMV, but articles like this one overstate one side of the equation without giving equal dilligence to the alternative position - that's because the alternative (the "American Dream/home") is so widely discussed and acknowledged as to not be a viable publication to make an author a buck, esp in a glossy like The Atlantic. Gotta buck the trend to sell a story, and this, I think, is one of those, though far from the most egregious example.

I cannot imagine renting again. Nor do I envy anyone's lifestyle that is renting.

 

[Deleted member 28227]

I just skimmed through it, and I would not say it is a great article. It makes some good points worth reading, but it also makes a lot of assumptions and evaluations that are pretty limiting. It would not be hard to look at the flip side and see a ton of downsides to renting.

The part that irks me the most about these types of articles which are currently quite fashionable in my opinion, is that they consider finances almost exclusively (and not very fairly). There is a lot to home owning that doesn't compute to just dollars. Owning a home is a lifestyle and a level of freedom that renting can never match. It is hard to put $$s on that. And there are also $$ issues that they did not discuss at all.

YMMV, but articles like this one overstate one side of the equation without giving equal dilligence to the alternative position - that's because the alternative (the "American Dream/home") is so widely discussed and acknowledged as to not be a viable publication to make an author a buck, esp in a glossy like The Atlantic. Gotta buck the trend to sell a story, and this, I think, is one of those, though far from the most egregious example.

I cannot imagine renting again. Nor do I envy anyone's lifestyle that is renting.

No offense, your comment shows you didn’t read the article.

It’s worth the time to read, it honestly has zero to do with renting versus buying.

The article is about how making homes the single source of savings for many Americans is problematic, and essentially creates a generation pyramid scheme that undermines the middle class.

 

[BrentD]

No offense, your comment shows you didn’t read the article.

It’s worth the time to read, it honestly has zero to do with renting versus buying.

The article is about how making homes the single source of savings for many Americans is problematic, and essentially creates a generation pyramid scheme that undermines the middle class.

Actually, I did read the article and it is really about renting vs buying. Yes, they go on about how the house is not an investment, but they do that implicitly arguing that you should rent at the alternative. And again, they totally miss point that house are far more than just investments. So, to the extent you are going to have one, your opportunities for alternative investments are limiting.

Anyway, it's a very myoptic look at home owning as a strategy for life (vs a strategy for retirement savings).

 

[Deleted member 28227]

Actually, I did read the article and it is really about renting vs buying. Yes, they go on about how the house is not an investment, but they do that implicitly arguing that you should rent at the alternative. And again, they totally miss point that house are far more than just investments. So, to the extent you are going to have one, your opportunities for alternative investments are limiting.

Anyway, it's a very myoptic look at home owning as a strategy for life (vs a strategy for retirement savings).

It literally doesn’t discus renting or profess it’s better…

It’s about using a home as middle income families sole asset and investment vehicle versus a diversified portfolio, and the artificial scarcity of housing we have created to shore up values.

 

[Nick87]

Investment or not I never rented anything in my life until 2 years ago for about 30 months. While we were in between houses. Not for never again.

 

[Deleted member 28227]

“Policy makers should completely abandon trying to preserve or improve property values and instead make their focus a housing market abundant with cheap and diverse housing types able to satisfy the needs of people at every income level and stage of life. As such, people would move between homes as their circumstances necessitate. Housing would stop being scarce and thus its attractiveness as an investment would diminish greatly, for both homeowners and larger entities. The government should encourage and aid low-wealth households to save through diversified index funds as it eliminates the tax benefits that pull people into homeownership regardless of the consequences.”

 

[BigHornRam]

This is the kind of policy government should focus on to make self owned housing more attainable for everyone.

Montana Adds 500+ Apprentices in First Half of 2022

HELENA, Mont. – Governor Greg Gianforte today announced Montana’s Registered Apprenticeship program has added 515 new apprentices and 41 new employer sponsors in the first half of 2022.

news.mt.gov

 

[Deleted member 28227]

Investment or not I never rented anything in my life until 2 years ago for about 30 months. While we were in between houses. Not for never again.

I‘ve never leased a vehicle. Vehicles are a depreciating asset, doesn’t matter if you lease or buy.

I think you would agree it would be problematic if we decided to make vehicles an investment scheme and automakers dramatically scaled down production so that scarcity caused your car or truck to go up in value every year.

Vehicles are apples to oranges with regards to housing but, that’s what the author is trying to convey.

It’s about scarcity, affordability, and people saving for retirement.

 

[Deleted member 28227]

This is the kind of policy government should focus on to make self owned housing more attainable for everyone.

Montana Adds 500+ Apprentices in First Half of 2022

HELENA, Mont. – Governor Greg Gianforte today announced Montana’s Registered Apprenticeship program has added 515 new apprentices and 41 new employer sponsors in the first half of 2022.

news.mt.gov

Totally agree, I think anyone who looks at that policy and says “oh no, more houses, that’s going to drive down the value of my house” is deeply problematic.

 

[BigHornRam]

Totally agree, I think anyone who looks at that policy and says “oh no, more houses, that’s going to drive down the value of my house” is deeply problematic.

You also need more skilled tradesmen to work on existing housing, especially if power tools isn't your thing.

 

[Deleted member 28227]

You also need more skilled tradesmen to work on existing housing, especially if power tools isn't your thing.

Tradesmen, lawn care companies… all of it

 

[Letthemgrow]

It’s about using a home as middle income families sole asset and investment vehicle versus a diversified portfolio

So, you're saying that someone actually gets paid to to tell people that?

 

[Nick87]

I‘ve never leased a vehicle. Vehicles are a depreciating asset, doesn’t matter if you lease or buy.

I think you would agree it would be problematic if we decide to make vehicles and investment scheme and automakers dramatically scaled down production so that scarcity caused your car or truck to go up in value every year.

Vehicles are apples to oranges with regards to housing but, that’s what the author is trying to convey.

It’s about scarcity, affordability, and people saving for retirement.

I get what your saying my pointbwas even if I cane out ahead financially renting its not for me, cant handle it.

 

[Deleted member 28227]

I get what you’re saying my pointbwas even if I cane out ahead financially renting its not for me, cant handle it.

Yeah in this context it’s not renting is better it’s instead of putting 20% down instead put down 15% and take that 5% difference and put it into a 401k, or instead of a 15 year go 30 and put the difference into a retirement account.

Buying is definitely the best bet, it just shouldn’t be thought of as your “retirement savings”.

 

[Treeshark]

Good article, wllm- thank you for posting. I found this graph particularly interesting:

 

[Pucky Freak]

Great article

The Homeownership Society Was a Mistake

Real estate should be treated as consumption, not investment.

www.theatlantic.com

There are a few good points, but I heartily disagree with well over 50% of the article content.

On one hand there are government messages and government programs promoting homeownership, and on the other hand is the potential homeowner making their own homeownership decisions.

In regards to the latter, there is a very strong case for homeownership being the preferred option in terms of overall financial benefit if you can swing it.

There are many things I CAN do, but choose not to: dip into home equity, buy more house than I can afford, keep a mortgage for decades, overspend on furnishing, buy in a poor location, etc. It is no one's responsibility but my own to make wise decisions in this regard. Just because some homebuyers do the opposite and cannot stay in their homes does not mean there is a problem with the goal of homeownership. It means there are persons making poor decisions. The author of the article seems to infer that just because the messaging is problematic, or that sketchy homeownership programs exist, we are beholden to them.

 

[AlaskaHunter]

There are a few good points, but I heartily disagree with well over 50% of the article content.

On one hand there are government messages and government programs promoting homeownership, and on the other hand is the potential homeowner making their own homeownership decisions.

In regards to the latter, there is a very strong case for homeownership being the preferred option in terms of overall financial benefit if you can swing it.

There are many things I CAN do, but choose not to: dip into home equity, buy more house than I can afford, keep a mortgage for decades, overspend on furnishing, buy in a poor location, etc. It is no one's responsibility but my own to make wise decisions in this regard. Just because some homebuyers do the opposite and cannot stay in their homes does not mean there is a problem with the goal of homeownership. It means there are persons making poor decisions. The author of the article seems to infer that just because the messaging is problematic, or that sketchy homeownership programs exist, we are beholden to them.

The article does not talk about taxes. There is zero capital gains tax on $500,000 of a home. And historic low interest rates (3% until recently). Also there are so many other lifestyle benefits that come with owning a home that would be difficult renting: animals, gardening, woodworking, home projects, etc.

 

[Deleted member 28227]

There are a few good points, but I heartily disagree with well over 50% of the article content.

On one hand there are government messages and government programs promoting homeownership, and on the other hand is the potential homeowner making their own homeownership decisions.

In regards to the latter, there is a very strong case for homeownership being the preferred option in terms of overall financial benefit if you can swing it.

There are many things I CAN do, but choose not to: dip into home equity, buy more house than I can afford, keep a mortgage for decades, overspend on furnishing, buy in a poor location, etc. It is no one's responsibility but my own to make wise decisions in this regard. Just because some homebuyers do the opposite and cannot stay in their homes does not mean there is a problem with the goal of homeownership. It means there are persons making poor decisions. The author of the article seems to infer that just because the messaging is problematic, or that sketchy homeownership programs exist, we are beholden to them.

Real estate should be treated as consumption, not investment.

It's a bit interesting that folks are injecting their own preconceived feelings about homeownership into the article, and missing the point entirely. Above is the subtitle of the article and the authors argument.

"I don’t know if you should buy a house. Nor am I inclined to give you personal financial advice. But I do think you should be wary of the mythos that accompanies the American institution of homeownership, and of a political environment that touts its advantages while ignoring its many drawbacks."

Right off the bat the author is saying this isn't about renting versus buying, it's about unpacking and reexamining the idea of homes as an investment.

@BrentD and @AlaskaHunter both mention intangibles benefits of home ownership as important. That's irrelevant, to the thesis, a consumable good can have those benefits. Vehicles are consumable goods, we have pages and pages of threads talking about the intangibles benefits of various types of cars and trucks. There is no argument that homes and trucks don't have lifestyle benefits, they absolutely do.

This paper is also not about renting versus buying. It touches on renting, simply because the benefits to homeownership are most often discussed when folks are extoling why homeownership is so much better than renting. These are the myths to debunk.

Homeownership is a guarantee against a lost job(1), against rising rents(2), against a medical emergency(3). It is a promise to your children that you can pay for college or a wedding(4) or that you can help them one day join you in the vaunted halls of the ownership society(5).

I'm not going to rehash all of them, I think the author does a decent job of poking some holes and demonstrating why these ideas aren't universally true.

The central argument here is that our society has tried to turn homes into investments, not the colloquial meaning i.e. a worthwhile expenditure of time/money (which homes assuredly are), but the fiscal definition; the process of committing money explicitly for the creation of profit. (@SAJ-99 has also made this argument repeatedly.)

Just because some homebuyers do the opposite and cannot stay in their homes does not mean there is a problem with the goal of homeownership.

Isn't Dave Ramsey always arguing that credit cards are evil because people can't trust themselves with their own money

The author is agreeing with you, homes shouldn't be seen as a piggy bank. They shouldn't be viewed as an investment portfolio where one periodically harvest the gains. That view, homes as an investment portfolio, is the problem, not ownership itself. I think some folks are missing that point a bit because they are saying... "wait duh".

So if "duh" then what is the point. The first point, there are way better ways to invest, for instance a Roth 401K/403B/IRA is far better, after 5 years your principle can be withdrawn with zero penalty, gains aren't subject to tax not just your first 250k (@AlaskaHunter 500 is married filing jointly, and remember only applies if that house was your primary residence for 2 of the last 5 years, doesn't count for second homes), and more importantly you don't have to liquidate your home and therefore move to have access to your money or alternatively pay interest on the money via a home equity loan.

The second point, and the central thrust of this entire thread, affordability. Because homes have been turned into investment vehicles there is incentive to keep demand high and therefore supply low. Folks "portfolios" crater if the value of their home declines, to even be an "investment" in the first place it has to beat inflation. Home prices have beat inflation in lots of areas and this means that home ownership by design will be more and more difficult for each successive generation. Basically what we were discussing here. The authors argument is that this value increase isn't natural it's a product of policy, the policy is to keep housing as expensive as possible.

I agree with the author this is a bizarre paradox of America

"in a statement last year lamenting how “inflation hurts Americans pocketbooks,” President Joe Biden also noted that “home values are up” as a proof point that the economic recovery was well under way. "

So as the author pointed out...inflation is bad, well except the inflation of most folks #1 expenditure... that's good?


TLDR: homes as investments are problematic because people are crappy at calculating their actual ROR because they lie to themselves about how much they "invested", by trying to "make fetch happen" we've hosed people at the bottom of the economic spectrum and made it difficult for each successive generation to stay in the middle class.

 

[BigHornRam]

Good article, wllm- thank you for posting. I found this graph particularly interesting:

View attachment 257536

When you are wealthy, you don't have to concern yourself with appreciation of the 5 million dollar graduation gift apartment you bought for your daughter. Duh!

Inside Jennifer Gates' NYC home as Bill Gates slashes price on pregnant daughter's apartment

Jennifer Gates, who is reportedly having a baby girl, has likely grown out of the home that overlooks Central Park

meaww.com

 

[BigHornRam]

TLDR: homes as investments are problematic because people are crappy at calculating their actual ROR because they lie to themselves about how much they "invested", by trying to "make fetch happen" we've hosed people at the bottom of the economic spectrum and made it difficult for each successive generation to stay in the middle class.

Hard to believe a boomer wrote this almost 40 years ago.