Comments on: The Housing Price Myth http://themoderatevoice.com/43595/the-housing-price-myth/ An Internet hub with domestic and international news, analysis, original reporting, and popular features from the left, center, indies, centrists, moderates, and right Wed, 30 May 2012 13:23:26 +0000 hourly 1 http://wordpress.org/?v=3.1.2 By: adelinesdad http://themoderatevoice.com/43595/the-housing-price-myth/comment-page-1/#comment-205987 adelinesdad Wed, 19 Aug 2009 04:30:37 +0000 http://themoderatevoice.com/43595/the-housing-price-myth/#comment-205987 You're right. The downturn in the housing market isn't anything out of the ordinary as far as investment goes. The problem, however, is that Americans were sold the myth that renting is "throwing your money away" and that buying a house was the key to achieving the American dream. If you look at it as an investment, however, you realize that buying a home is like investing in a highly leveraged and badly diversified portfolio. Not only are you investing in just one sector of the economy (real estate), but you are investing in just one house. That's like taking out a $300,000 loan and using the money to buy just one stock. If that stock goes down even 30%, you're in trouble.<br><br>This is just one more example of how the good intentions of public policy often have unintended consequences. I'm written more about this issue here: <a href="http://sovereignmind.wordpress.com/2009/02/06/the-housing-crisis-rethinking-rent-vs-buy/" rel="nofollow">http://sovereignmind.wordpress.com/2009/02/06/t...</a><br><br>Unfortunately it seems we haven't learned our lesson. What is the government's response to the housing crisis? Give first-time home buyers a big fat tax credit. You're right. The downturn in the housing market isn't anything out of the ordinary as far as investment goes. The problem, however, is that Americans were sold the myth that renting is “throwing your money away” and that buying a house was the key to achieving the American dream. If you look at it as an investment, however, you realize that buying a home is like investing in a highly leveraged and badly diversified portfolio. Not only are you investing in just one sector of the economy (real estate), but you are investing in just one house. That's like taking out a $300,000 loan and using the money to buy just one stock. If that stock goes down even 30%, you're in trouble.

This is just one more example of how the good intentions of public policy often have unintended consequences. I'm written more about this issue here: http://sovereignmind.wordpress.com/2009/02/06/t…

Unfortunately it seems we haven't learned our lesson. What is the government's response to the housing crisis? Give first-time home buyers a big fat tax credit.

]]> By: mikkel http://themoderatevoice.com/43595/the-housing-price-myth/comment-page-1/#comment-205921 mikkel Wed, 19 Aug 2009 00:19:16 +0000 http://themoderatevoice.com/43595/the-housing-price-myth/#comment-205921 It is unclear what "myth" you are referring to. If you are talking about people that bought back 10 years ago, then yes, they are in fine shape. If you're talking about disparity across regions, again that adds a lot of detail. However, the mortgage problem is still far larger than <a href="http://www.nakedcapitalism.com/2009/08/guest-post-frank-veneroso-on-mortgage.html" rel="nofollow">commonly appreciated.</a> Indeed, if prices decrease as much as anticipated over the next two years, then the nation in aggregate will have negative equity on homes that have mortgages!! The nation in general may get close to zero (10-20%) equity for all homes, including the <a href="http://www.calculatedriskblog.com/2009/06/households-with-mortgages-approximately.html" rel="nofollow">31.6% of houses without mortgages.</a><br><br>These are mind boggling statistics.<br><br>In general over large periods of time housing tends to track inflation perfectly, as shown by Shiller. It is unclear what “myth” you are referring to. If you are talking about people that bought back 10 years ago, then yes, they are in fine shape. If you're talking about disparity across regions, again that adds a lot of detail. However, the mortgage problem is still far larger than commonly appreciated. Indeed, if prices decrease as much as anticipated over the next two years, then the nation in aggregate will have negative equity on homes that have mortgages!! The nation in general may get close to zero (10-20%) equity for all homes, including the 31.6% of houses without mortgages.

These are mind boggling statistics.

In general over large periods of time housing tends to track inflation perfectly, as shown by Shiller.

]]>