home ownership?

[Lord of Oop North]

And I've personally seen dozens upon dozens of jobs done by pros, know of colleagues who have done dozens upon dozens of jobs, and driven by thousands more, that were perfectly fine. So what exactly is your point?

I've spent the vast majority of my career customizing high-end residential homes in Toronto, which means working with older homes that have all seen a renovation or two over the years. I honestly can't think of a single place that we tore apart that didn't have obvious problems. And I've worked in a lot of houses. I couldn't even begin to count them all. Maybe the work was done by homeowner, or maybe it was done by a "contractor", but it doesn't really matter. I don't consider fly-by-night contractors, or your handy brother-in-law who calls himself a "contractor" because he does a few side jobs, to be professionals. Maybe you do, but a title does not a professional make. They might as well be "self built", as the people building them and calling themselves professionals are fucking clueless.

I'm not calling into question your skills at all.

In all honesty, I would much rather a newbie completely build a house from scratch than I would renovate an existing house. Renovations are where your knowledge is seriously put to the test, and that's when the difference between an amateur and a professional really starts to shine. People start doing crazy things like eliminating load bearing walls, installing sinks without traps, pinning decks to masonry walls with wood screws, cutting through floor joists without headering them, overloading circuits with poorly installed wiring, underpinning foundations with cement (Yes, just cement! No aggregate! I've seen it!), and other completely and utterly insane things. You would never (ok, very rarely) see a professional contractor do such stupid shit, but homeowners/self-proclaimed "contractors" do this dumbass crap all the time.

I know it's fun and accepted to blame every contractor for every shitty thing out there, because we all cut corners and don't give a fuck and would rather drink beer and fuck your wife, but the vast majority of us build good quality buildings. If something is shitty, it is more than likely because we were told to build it that way. We build from plans, after all. Either that, or it is because some dumbass wop who wears socks n' sandals wants to turn his house into a disney-version of a roman villa, and decided because his nono from calabria was a carpenter, then it must be "in his blood".

[ICE CROW]

I know it's fun and accepted to blame every contractor for every shitty thing out there, because we all cut corners and don't give a fuck and would rather drink beer and fuck your wife, but the vast majority of us build good quality buildings. If something is shitty, it is more than likely because we were told to build it that way. We build from plans, after all. Either that, or it is because some dumbass wop who wears socks n' sandals wants to turn his house into a disney-version of a roman villa, and decided because his nono from calabria was a carpenter, then it must be "in his blood".

Speak on it brother :bowdown:, My sister married into a large family of construction workers, ive worked with them off and on for 13 years. Im no professional, can i answer someone's questions, help them do a reno sure. But i know what i am, im no where near being able to be called a pro. Mean while i have a brother in law, who married into this same large construction family my sister did. He was an Optician, but he saw that his new in laws were making good money in construction and Reno. So this smuck, decides one day out of the blue he's a contractor, quits his job and starts doing piss poor reno's all over the city. Then when he gets in over his head, which was his first job, he goes crying to my inlaws to help him out.

You can watch all the do-it yourself shows you want, but at the end of the day that doesn't mean you have all the knowledge necessary to build or reno a home. I know ive personally helped reno at least a dozen homes over the years, that were nightmares. Not because of bad contractors, but because of ofdo-it yourselfers who just didn't have a clue. And as far as hiring a good contractor, you get what you pay. You need to make check up on them, make sure their legit. Cus yes their are bad ones out there, even guys are straight up criminals. But there so many great contractors, that get a bad rep because people are stupid and hire the shitty ones, without doing any kind of background checks. And assume every contractor is the same.

[naz]

OMG, I just had a brilliant idea. I could volunteer at Habitat for Humanity , get experience with construction while helping others, and then use that experience someday to build my own house.

Have you ever volunteered for HfH? I have. They place you where your skills are. If you have no skills, you'd likely end up painting or being a "helper". With no experience, you won't be designing and building a home like you think.

maybe they had a lot of experienced people here and could do that, but it is wrong to assume that you would gain enough knowledge and experience doing this to build your own home.

I'm guessing, litecheck, that you said that partly in jest, but... yeah, what Lany said. When you volunteer for HFH, you're in a crew of about 20+ unskilled but well-meaning people, who more often than not are just getting in each others' way. There are pros there who know what they're doing and they give out instructions, but mostly they're managing the unskilled volunteers and making sure they don't bump into each other or totally fuck things up royally.

You'd have to volunteer at HFH for y-e-a-r-s before you learn enough to even think about building your own house. And yeah, most of the time you're just painting or picking up debris. Sometimes they let you hammer a few nails in, but the bulk of the work is done by pros who're volunteering their time.

There's entire shows dedicated to why DIY isn't always a good idea.

There's a reason people like LooP get payed so much money. It's because what they do takes skills and knowledge not everyone has the ability or time or whatever to acquire.

Specialization. It's the cornerstone of civilization.

It's natural that I'm in agreement with whatever LooN says in this matter, but I'll reiterate that building a house, while difficult enough, is one thing. Designing is something else. And that's something that every one and their mother thinks they can do. Just like LooN, I can tell you dozens of stories of people who took it upon themselves to buy a $40 version of 3D Home Architect software (or downloaded SketchUp), took it upon themselves to design their house, and ended up with.... monstrosities. Or at best, mediocre copies of some "style" or another.

That's not to say there aren't hideous architect-designed houses too. But designing your own house is 99% guaranteed to to be a fuck-up, in my book.

[felice]

So, in example 1, you have no cash, limited mobility, and an opportunity cost; while in example 2, you have cash and mobility.

Of course you could always remortgage the house if you needed cash quick after 30 years.

[TerraPrime]

bunch of stuff

You really didn't read past the initial numbers, did you? Because everything you said had already been addressed.

[Iskaral Pust]

Home ownership is not a good investment. Aside from the bubble, it did not provide a long term return above the level of inflation. However, it is a very good system of forced savings so that people have prepaid a large part of their living costs before they retire. It also has some community value by creating a vested interest in the community.

By the way, most homes depreciate during the retirement years because the owners tend to not maintain them as well and often let the decor age too much. Even aside from that I'm surprised that houses are so often portrayed as non-depreciating assets. They clearly age and need more maintenance and updating as they age. This is one reason why a newer, smaller house might have the same price as an older, larger house.

The big downside in home-ownership is illiquidity. Home ownership works best for a long term holding. If you move once or more per decade, and sometimes the modern labor market requires that, then the frictional cost of buying and selling make it uneconomic.

The relative cost of owning vs. renting depends on local supply and demand. In general though, people under-estimate the cost of owning because they do not factor in

- the pre-cost of saving a 20% down payment,

- the opportunity cost of not investing that down payment elsewhere,

- the liquidity premium for committing that down payment to a long-term lock-up,

- the transaction costs involved in exiting/moving/trading-up,

- the long-term undiversified location risk -- just ask home-owners in Detroit

- the commitment to uncertain future (large) maintenance costs, e.g. roof replacement

- the reduced flexibility for career opportunities

Investors face similar issues when considering private real estate investments and they generally do a better job of measuring a fair price to reflect this factors.

The cost of housing has definitely increased over the past ~80 years as mortgages/financing became more available, but so did the size and quality of housing. People are paying a lot more, but also getting a lot more house. But there was also a shift in the rationale for the pricing basis: people shifted from "what does it cost to build this" to "I'm buying a lifelong asset, therefore it's ok if it takes decades to pay it off". The GI Bill and the new suburbs of relatively large individual homes was a big catalyst in the growth of house prices. Most of the increase in house prices in that ~80 years went to landowners, existing home-owners and suppliers of luxury fittings because profit margins in construction and basic supplies did not expand all that much. Banks collected fees on larger mortgages too, but that is a much smaller and less direct share of the increase in home prices

[Former Lord of Winterfell]

No FLOW.

Yes, Shryke. The purpose and effect of the GSE's was to endure that lenders had an essentailly never-ending pile of money to lend for homes. You can say that's not what "had" to happen, but that argument reveals a poor understanding of how banks work, because that's what did happen.

Firstly, Fannie and Freddie will buy up housing loans, which frees up that money. It does not force that freed money to be put back into housing.

It doesn't legally require it, but it (intentionally and successfully) created a tremendous incentive for them to do that. Take money, write a loan, collect processing fees, sell the loan to Fannie. Then you've got more money to lend, so you can collect more processing fees, then sell that loan, etc. The GSE's acted as an accelerator where instead of just making one loan, and sitting on it to collect the interest as profit, banks could keep writing new loans and make money on the processing fees rather than the loan itself. A bank could essentially keep relending the same money over and over, and collect batches of processing fees, without having to wait out the normal term of a loan.

You can say it wasn't "forced", but that's a distinction without a difference. It deliberately created econonmic incentives for lenders to do exactly that, and not surprisingly, that's what they did.

Where have you been? Freddie and Fannie only buy some loans. Not the shitty ones. We know this because that's what the evidence shows: http://graphics8.nyt...an2-blog480.jpg

Why have they required over $250B in taxpayer money? And please name the "second-place" securitizer, and provide the dollar value of the bad loans the government bought from them.

GSE only drove up the price of housing by increasing demand. That's not a bubble.

Yes it is. Artificial increases in demand create bubbles.

You haven't been arguing that. Not even in this post right here.

Actually, I was arguing exactly that. Maybe you just weren't paying attention. Someone mentioned that there needed to be a lot more regulation, and I said one way to avoid the need for at least some of that regulation was to eliminate the GSE's. Now to make that argument, you've got to see if they played any role in the last crisis, but assigning blame wasn't the underlying point. The underlying point was to eliminate the GSE's so as to eliminate artificial government stimulation of the housing market, drive prices down to a more natural level, and actually make housing more affordable with less need for regulation.

So if you're on board with eliminating them, then the "why" doesn't matter.

[Shryke]

Yes, Shryke. The purpose and effect of the GSE's was to endure that lenders had an essentailly never-ending pile of money to lend for homes. You can say that's not what "had" to happen, but that argument reveals a poor understanding of how banks work, because that's what did happen.

It doesn't legally require it, but it (intentionally and successfully) created a tremendous incentive for them to do that. Take money, write a loan, collect processing fees, sell the loan to Fannie. Then you've got more money to lend, so you can collect more processing fees, then sell that loan, etc. The GSE's acted as an accelerator where instead of just making one loan, and sitting on it to collect the interest as profit, banks could keep writing new loans and make money on the processing fees rather than the loan itself. A bank could essentially keep relending the same money over and over, and collect batches of processing fees, without having to wait out the normal term of a loan.

You can say it wasn't "forced", but that's a distinction without a difference. It deliberately created econonmic incentives for lenders to do exactly that, and not surprisingly, that's what they did.

No, it's a HUGE distinction FLOW. Because Fannie and Freddie didn't buy the really bad loans. Someone else did. Fannie and Freddie did not create that incentive because bad loans can't be sold to them. Fannie/Freddie only encouraged lending that wasn't crap because those were the only kinds of loans they'd buy. Fannie and Freddie don't let you free up liquidity if you make shit loans.

If you eliminate the private market for mortgages and just haves "Banks" and "The Government", then banks wouldn't be making shitty loans because all that does is tie up your money in a risky investment which is the exact opposite of what they want, as even you have stated.

So why did they make those loans? Cause they could sell them to someone else. There is no other reason they would make those loans. Fannie and Freddie won't buy them, so you can't free up that money that way. They can only do so if someone else would buy them.

This is very simple FLOW. Your own reasoning leads here. Buying loans helps banks free up capital, which encourages them to make those loans. But Fannie and Freddie won't buy those bad loans so they can't be encouraging them.

Why have they required over $250B in taxpayer money? And please name the "second-place" securitizer, and provide the dollar value of the bad loans the government bought from them.

Probably because towards the end of the bubble, Fannie and Freddie did buy some non-conforming loans. Of course, those loans still aren't performing nearly as bad as the ones held by private entities.

Yes it is. Artificial increases in demand create bubbles.

What definition of "artificial" and "bubble" are you using here? Like, seriously, what's an "artificial increase in demand"? Is it demand created by robots?

An increase in demand raises prices. That's ... like middle school economics.

Actually, I was arguing exactly that. Maybe you just weren't paying attention. Someone mentioned that there needed to be a lot more regulation, and I said one way to avoid the need for at least some of that regulation was to eliminate the GSE's. Now to make that argument, you've got to see if they played any role in the last crisis, but assigning blame wasn't the underlying point. The underlying point was to eliminate the GSE's so as to eliminate artificial government stimulation of the housing market, drive prices down to a more natural level, and actually make housing more affordable with less need for regulation.

So if you're on board with eliminating them, then the "why" doesn't matter.

Without the GSE, loans become harder and housing becomes less affordable because less people can afford it.

Also, the facts do matter. Blaming Fannie and Freddie for the crisis is still completely wrong.

[Betara]

Why, land is the only thing in the world worth workin' for, worth fightin' for, worth dyin' for, because it's the only thing that lasts.

They aren't making any more of it!

[felice]

Yeah, and then it's still a losing investment (because your bank won't lend you more than it's worth, so you're still out the $130k)...and you don't own it anymore.

It's still a much less bad investment than renting, because what the house is worth is much more than the cash you can earn. Remortgaging the house for $229,134 (or even 50% of that) is a far better situation than having $84,912 and no house.

Home ownership is not a good investment.

It's only not a good investment if there's a better option... (and sleeping under bridges doesn't count as better; for a start, it will make holding on to a decent job tricky)

If you move once or more per decade, and sometimes the modern labor market requires that, then the frictional cost of buying and selling make it uneconomic.

Moving between different rental properties is a cost too, though (especially if you have a lot of books!), and I expect the average renter moves a lot more frequently than the average owner.

The relative cost of owning vs. renting depends on local supply and demand. In general though, people under-estimate the cost of owning because they do not factor in

- the pre-cost of saving a 20% down payment,

Good point - that does appear to be missing from TerraPrime's calculations. Reinvesting the 10% deposit he suggested isn't enough to match the value of the house, though, and a 20% deposit would reduce the cost of the house.

[Filippa Eilhart]

Moving between different rental properties is a cost too, though (especially if you have a lot of books!), and I expect the average renter moves a lot more frequently than the average owner.

yeah, I have to move for the third time in the past 6 years - don't think that would happened if I owned my place!

- the commitment to uncertain future (large) maintenance costs, e.g. roof replacement

unless you have to pay it anyway even if you're renting. Renters over here do (in the form of a repair fund).

[Mlle. Zabzie]

So it seems like a lot of this is market dependent. In my market (i) there are strong renter protections (it's really, really hard to evict someone); (ii) landlords are responsible for repairs (and if you install a fixture, most landlords end up owning those, so it's always better to have the landlord install - read your lease carefully); (iii) the rental market moves very quickly (you look for a place no more than 2 weeks before you want to move in), (iv) the buying market is overpriced in comparison (really, it is) and (v) though rent control basically doesn't exist anymore, there is rent stabilization, which limits the amount that a landlord can raise rent at the end of any rental period. Also, it's a city of transients in a lot of ways, which is why the supply of rental apartments is so high in comparison to owned units. It seems like it is quite different elsewhere.

[Iskaral Pust]

It's only not a good investment if there's a better option... (and sleeping under bridges doesn't count as better; for a start, it will make holding on to a decent job tricky)

Pointless hyperbole. I did not question the value for providing stable shelter, I questioned it's value as an investment, i.e. bought with an expectation of appreciation above inflation. And there are rental alternatives to home ownership in most places.

Moving between different rental properties is a cost too, though (especially if you have a lot of books!), and I expect the average renter moves a lot more frequently than the average owner.

Moving between rental properties has a fraction of the cost. In the US, realtors take 6%+ from the sale price, plus the other costs to stage the house and the application for a new mortgage, which usually at least 1% of principal in "points".

That all adds up to 1-2 years of rent-equivalent. So if you buy a house and move within 5 years, you effectively pay 6-7 years of rent-equivalent for 5 years of home-ownership. That's before you include any of the additional costs of home maintenance.

[Tormund Ukrainesbane]

It's always fun when Isk comes in on your side in a debate. It's like being in grade school and having an older brother in high school.

[IheartTesla]

The intangibles are also job security and the prospect of being foreclosed when you lose your job (say) and can't make the next mortgage payment. It is of course a known unknown, but there should be some risk assessment of losing all that investment. I mean, if I was living on savings without an income the first thing that would go would be payments on the house. When I am renting....well, all I risk is being evicted.

So what kind of risk factor should I put down for job security? Choices are infinite from 0-1.

[CloudFlare]

So what kind of risk factor should I put down for job security? Choices are infinite from 0-1.

That depends on your job. If you're with the federal government, you've essentially got 0 risk of being laid off. State, county and city governments would be increasingly risky.

Are you in an unstable field or an unstable company?

If you lose your job, how quickly could you find a comparable one in your area?

[Swordfish]

The intangibles are also job security and the prospect of being foreclosed when you lose your job (say) and can't make the next mortgage payment. It is of course a known unknown, but there should be some risk assessment of losing all that investment. I mean, if I was living on savings without an income the first thing that would go would be payments on the house.

Traditionally, that's the exact opposite of how that situation played out. People would keep paying the mortgage until the bitter end.

[Shryke]

Traditionally, that's the exact opposite of how that situation played out. People would keep paying the mortgage until the bitter end.

Isn't that one of the things that bit the people buying and trading mortgages in the ass? That their traditional models no longer worked?

[Tormund Ukrainesbane]

Isn't that one of the things that bit the people buying and trading mortgages in the ass? That their traditional models no longer worked?

Their traditional models included houses never going down in value, which was obvious tomfoolery to anyone paying attention, but they got away with it so I guess they're the smart ones eh?

[CloudFlare]

Isn't that one of the things that bit the people buying and trading mortgages in the ass? That their traditional models no longer worked?

I would say it bit the banks and the end holders of the mortgage in the ass harder; originators and traders were able to exit the markets easier. Ken Lewis, former CEO of BAC, was shocked, shocked that when it came down to brass tacks, people would make their car payments and credit card bills first.