Hey Conservatives... can you get behind this? [Home Affordable Refinancing Program]

[Bosstone]

@smiling_bandit

Just ordinary human greed writ large.

That’s about the only thing we agree on. The only question is whose greed we’re talking about.

Houses are not investments; they tend to lose value over the long run, barring some unusual exceptions.

You are the first person who’s ever, ever said this about houses in general.

[Trom]

@Bosstone

…
You are the first person who’s ever, ever said this about houses in general.

From here:

“Houses always increase in value in the long run.”

FALSE. The value of a house is constant. It just sits there. You get shelter, but you have to pay property tax and maintenance and the loss of alternative uses of capital. A house is a dead asset. The price of a house rises with salary inflation, but house prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.

For example, prices in the Netherlands are about the same as they were 350 years ago, in terms of how many years of work it takes to buy a house. Warren Buffett and Charles Schwab have both pointed out that houses don’t increase in intrinsic value. Unless there’s a bubble or a crash, house prices simply reflect current salaries and interest rates. Consider a 100 year old house. Its value in sheltering you is exactly the same as it was 100 years ago. It did not increase in value at all. It did not spontaneously get bigger, or renovate itself. Quite the opposite - the house drained cash from its owners for 100 years of maintenance, taxes, and insurance - costs that never go away. The price of the house went up about as much as salaries went up, which is about the same as the number of dollars printed by the Federal Reserve went up.

[Bosstone]

Fair enough. I figured that was going to bite me.

You can argue that it at least matches inflation, as noted by that last quoted sentence. But that’s tenuous.