5 ms·

30 year mortgage is founded partly on the idea that your house will be worth more in the future when you sell it. That you can lock in a lower price now. Numbe

30 year mortgage is founded partly on the idea that your house will be worth more in the future when you sell it. That you can lock in a lower price now. Number cannot always go up. We are at the top of the carbon pulse. Financialization has taken us far from the material baseline of the rock we are flying through space on. Debt will only get us so far. For this and many other reasons, why would you believe a house "as an investment" is a reasonable thing to keep hoping for, especially 30 years from now? If you have even a reasonably stable rental, it's less risk exposure if you can save some money that isn't tied up in a down payment.

Yiin 1mo ago
inflation disagrees with your premise, there is no reason why number can't always go up, there are plenty of countries that prove otherwise.
- graceful6800 1mo ago
  Mathematics agrees with you, there are in fact infinitely many numbers. Physics and reality do not. Once the number gets big enough it loses all practical value. Humans are not really built to reason about very large numbers. At some point you reach Zimbabwean inflation and your currency loses all value because everyone is paid in the trillions. Then you reset your currency back to lower numbers because that's what humans and their systems can handle. So, no, the number cannot always go up. There is a practical ceiling beyond which numbers lose meaning and value.
  - inigyou 1mo ago
    There are some countries where a thousand or a million of their currency is worth a dollar. People just start thinking in thousands or millions. Heck, the dollar is already it. What used to cost a penny now costs ten dollars. We just think in dollars and forget about the pennies.
mono442 1mo ago
Even if the house is worth less, the morgage is eventually paid off. Rent has to be paid forever. I can't even imagine renting when I'm retired and have less money.
- rootsudo 1mo ago
  I can, rent in cheap cost of living location. Why pay 600k+ usd to purchase in m-hcol when instead can live abroad during retirement and pay 1k/month and use the remaining for better living or health care or whatnot?
  - bluGill 1mo ago
    I can sell my house when I'm retired if I choose to do that. I can only save so much money in retirement plans. A house (in the US - other countries have different rules!) is my next best retirement investment because I can live there rent-free after I retire, or I can sell it for more cash. If you are not maxing out your retirement accounts then the house may be a worse investment than adding more to your retirement accounts.
- preg_match 1mo ago
  Realistically mortgages are also forever - very, very few people actually outright own their homes. Because when you sell, which you might be forced to do due to a new job, divorce, etc, you enter another mortgage. Also homes are a bad bad retirement plan. If you're debating paying off your mortgage early, or investing said money in a 401k, 401k is almost always the correct choice, in just about every market. Debt is not a bad thing. Often having more debt means having more cash flow, which means greater investments. That's why companies don't outright buy their real estate, either.
petcat 1mo ago
You're falling for the trap of just thinking of buying a house as an investment. Buying a house can be an investment, but it's also buying a place to live. Even if the home's value merely keeps pace with inflation over 30 years, you've converted a largely fixed housing payment into ownership rather than paying ever-increasing rent indefinitely.
- Carrok 1mo ago
  Along the same lines, you are buying a place. A place that you own and can do whatever you like with. I spent twenty years renting and twenty years of feeling like you can’t hang a picture on the wall, paint a room, upgrade an appliance, or really do anything to improve your surroundings, tends to get tiring.
  - rogerrogerr 1mo ago
    Why can't you hang a picture on the wall? Fixing holes in drywall is super trivial, a good life skill to learn.
    - cauliflower2718 1mo ago
      Painting, too. Not sure how common or uncommon but my landlord explicitly allows painting, as long as it's not a dark color
    - inigyou 1mo ago
      Is there a law saying your landlord has to accept the repair?
      - rogerrogerr 1mo ago
        In most jurisdictions, what you can take out of a deposit is legislated. And it's really not that hard to make an unnoticeable drywall repair.
      - preg_match 1mo ago
        Not sure, but they likely won't know. Too many people ask permission for things. You'd have better luck doing what big corporations have done for decades. You just do the thing, cover it up, and hopefully never have to ask for forgiveness. And if you DO have to ask for forgiveness, well that's still easier than asking for permission!
deleted 1mo ago
[deleted]
Jtarii 1mo ago
Buying a house as an investment is so dumb. Its only an investment if you are renting it out to someone else, otherwise you are just gambling.
- bobson381 1mo ago
  Agree here. But I'm a doomer/collapsenik - so, the same future coming for "retirement" is the same future coming for "house always appreciates in value". Maybe 1990 -> 2020 was an okay 30 year period, 2026 -> 2056 sure won't be.
  - louthy 1mo ago
    > 2026 -> 2056 sure won't be. You have evidence from the future?
    - inigyou 1mo ago
      Do you? Where's your evidence global temperatures won't plummet 20 degrees tomorrow and reverse climate change? Past observations inform future predictions.
      - louthy 1mo ago
        I don’t have that information, but I’m also not claiming I do. The GP is claiming “1990 -> 2020 was an okay 30 year period, 2026 -> 2056 sure won't be.” The fact that there was Black Wednesday, 9/11, the dot com crash, the Iraq War, a once in a century global financial crisis, Brexit, and a global pandemic… suggests it wasn’t an “ok period” for markets. Yet, somehow, over the period of a mortgage, they all went up. The idea that humans won’t adapt to whatever happens in the next 30 years is ludicrous. There will be short term market instability, just like the events I noted from the previous 30 years, but planning for the apocalypse is mind numbingly stupid. If the apocalypse happens, everyone is in the same boat. If it doesn’t and you didn’t get on the housing ladder early, well, you’ll probably be buying a more expensive house in the future. I’m saying this as someone who waited far too long to get on the ladder when I saw how rapidly prices were ascending in the 2000s (leading up the the GFC). I used the exact language lots of people in this thread are using about prices coming down eventually. But I was wrong. Post the crash I couldn’t buy because deposit demands doubled. It took me out of the market for a long time. Ultimately costing me more when I did buy. The future always seems risky, it’s the nature of the beast.
jsw97 1mo ago
Buying a house isn't just about expected return. It's also about hedging. You need to live somewhere, so you have an implicit liability of a stream of rental costs. The most natural hedge for that is a house. If expected future rental costs go up, your house value goes up. If they go down, your house value goes down. Overall, your risk, in present value terms, is reduced. Of course this doesn't work exactly and you can nitpick this, but I think people should at least look at housing assets as more than "is it going to go up?", and more about long-term risk reduction. (And, just to be clear, this doesn't mean that you should lever up beyond reason to buy a house.)
- bobson381 1mo ago
  Right. This would make it possible and reasonable if you could find a house that is enough, such that you can live in it, expect a reasonably good experience in it for the life of your time in it, and that that mortgage payment, plus all maintenance, insurance, tax, etc. is reasonably comparable to an equivalent rental. Depending on where you are, this is not always the case. Or you need to buy a small place at current rates and prices to make it at all comparable. You have to decide what "enough" is, and that's variable depending on your expected standard of living, etc. I am personally currently lucky enough to be in a good rental situation, which colors my view. Having a landlord that will fix problems and eat incidental appliance/roof/major expenses is a form of insurance paid as rental.
- spacebanana7 1mo ago
  Exactly- owning one home is actually the neutral position. Renters are persistently taking a short position on real estate and landlords/multiple owners are effectively long.
- quadragenarian 1mo ago
  Keep in mind though that by entering into a 20% down mortgage you are effectively levered up 5x against your local real estate market. So it’s not like you’re totally reducing your risk. Luckily for homeowners, home prices only go up since the GFC so this leverage seems like a good position to be in.
louthy 1mo ago
> Number cannot always go up. Yeah, I thought that when I was young too. The housing market can keep going up for much longer than you can hold out. Then, if there ever is a correction, it probably won't drop lower than this point right now. My advice to any young'un thinking they can wait out the market: you can't, buy whatever you can afford as soon as you can and watch inflation reduce that painful monthly outgoing to something more manageable over time. Housing isn't an investment opportunity. It's where you live.
- bluGill 1mo ago
  > My advice to any young'un thinking they can wait out the market: you can't, buy whatever you can afford as soon as you can and watch inflation reduce that painful monthly outgoing to something more manageable over time. I don't think that is quite right. Buy whatever you can afford as soon as life puts you in a position where you can reasonably expect to live in the same place for at least 7 years. You will never perfectly know your future, but predicting 7 years generally isn't too hard, and if you are wrong it is probably close enough to 7 years that you are okay. My first house I had to sell after 10 years (I got a job in a new city) and I lost money on the sale despite the 10 years, but that is an outlier. Most people will see enough value appreciation in less years as to not be out too much if they have to move. 7 is just a good compromise for most people. Don't forget when buying a house that you have to pay for maintenance. Make sure you can afford this somehow. If you have friends/family that can help with that work that can save a ton of money over if you have to hire someone.
alexpotato 1mo ago
"The rule of thumb was: - buy when home prices are 10x rent - sell when home prices are 20x rent" - The Big Short by Micheal Lewis [0] I remember reading this quote and then checking NYC prices and it was a 33x multiple. 0 - https://amzn.to/4cr0tWX https://amzn.to/4cr0tWX
cma256 1mo ago
This is false. Can you cite a source for the idea that the 30-year mortgage was "founded" on the idea of appreciation? The thirty year mortgage was introduced to reduce the housing appreciation requirement the old balloon loan system relied on.
- the_sleaze_ 1mo ago
  I agree. The mortgage was to allow people to eventually OWN THE PROPERTY, not a leveraged investment. It's an interesting development that some (most?) regular people have forgotten that there is a 3rd option, not just rent or loan. You can actually OWN the thing and pay only property tax on it.
  - willmadden 1mo ago
    You don't really own it because of the property tax. Unless you live in Malta or a handful of other countries you are effectively renting from the state.
    - petcat 1mo ago
      If paying property taxes is considered "renting from the state", then I'll be glad to pay the $600 a month in rent in order for the state and my county to maintain the roads, sewers, drains, school district and everything around me that allows me to enjoy my home and participate in society.
      - louthy 1mo ago
        Exactly, a house in the middle of nowhere, with no infrastructure, quickly becomes worthless. If anything, property taxes could be considered ‘maintenance’, which is an inevitable part of ownership. Nobody likes paying for the maintenance work, but you have to, otherwise the house falls down.
        willmadden 1mo ago
        You are claiming infrastructure can only be maintained by a government? That's a ridiculous assertion. Most of the work is outsourced to contractors. They are acting as mediocre project managers, not the masters of inscrutable infrastructure technology. The state has a monopoly on certain types of infrastructure that it ultimately sustains through the threat of repossession. It uses that monopoly to racketeer property owners under the threat of repossessing their property. If what you are claiming is true, then why does Malta have higher property values than countries with property tax? https://www.maltasothebysrealty.com/property-for-sale/in/sliema https://www.maltasothebysrealty.com/property-for-sale/in/sli... I would agree to a property tax if the voting systems worked fairly at a sufficiently granular level, but they don't. They are farces maintained by criminal organizations beyond a certain scale.
andsoitis 1mo ago
> 30 year mortgage is founded partly on the idea that your house will be worth more in the future when you sell it. Another meaningful reason is that it is a hedge against inflation. You pay a fixed amount for housing for 360 months, rather than having to adjust rental payments that will tend to go up over that time frame.
gwbas1c 1mo ago
Inflation is more probable than deflation: Meaning, over 30 years, we're more likely to hit a period of inflation where the value of your house (in dollars) will go up even though the real value (in your earning potential) might stay the same. But, if we hit deflation and a lot of people need to default... Well then we're all in the same boat anyway.
kaydub 1mo ago
> Numbers cannot always go up Isn't that how our monetary system works though? Inflation means the numbers WILL always go up.
- bluGill 1mo ago
  Generally people are indexing the numbers always go up to inflation. Which should be different, but so far numbers still go up anyway.
- Ekaros 1mo ago
  Not all numbers. Some numbers have certainly gone down. Your home might be one of them. So might really bad stock pick too.
gruez 1mo ago
>Number cannot always go up. We are at the top of the carbon pulse. Financialization has taken us far from the material baseline of the rock we are flying through space on. Debt will only get us so far. Why can't it? GDP per capita has been steadily marching up since the dawn of industrialization. You mention carbon but most developed countries have decoupled carbon emissions from their economic growth. https://ourworldindata.org/co2-gdp-decoupling https://ourworldindata.org/co2-gdp-decoupling
- bobson381 1mo ago
  https://en.wikipedia.org/wiki/The_Limits_to_Growth https://en.wikipedia.org/wiki/The_Limits_to_Growth is why. The financial economy sits on a finite store of physical goods, and as a dissipative structure, our high-energy, high-complexity global society acts as a low-friction conduit from stored past energy to high-entropy degraded heat. Number go up until we cannibalize the foundations.
eudamoniac 1mo ago
The number can definitely go up for more than 30 years. There is a lot of wealth out there and the land is not getting any bigger.

Yiin 1mo ago

inflation disagrees with your premise, there is no reason why number can't always go up, there are plenty of countries that prove otherwise.

graceful6800 1mo ago
Mathematics agrees with you, there are in fact infinitely many numbers. Physics and reality do not. Once the number gets big enough it loses all practical value. Humans are not really built to reason about very large numbers. At some point you reach Zimbabwean inflation and your currency loses all value because everyone is paid in the trillions. Then you reset your currency back to lower numbers because that's what humans and their systems can handle. So, no, the number cannot always go up. There is a practical ceiling beyond which numbers lose meaning and value.
- inigyou 1mo ago
  There are some countries where a thousand or a million of their currency is worth a dollar. People just start thinking in thousands or millions. Heck, the dollar is already it. What used to cost a penny now costs ten dollars. We just think in dollars and forget about the pennies.

mono442 1mo ago

Even if the house is worth less, the morgage is eventually paid off. Rent has to be paid forever. I can't even imagine renting when I'm retired and have less money.

rootsudo 1mo ago
I can, rent in cheap cost of living location. Why pay 600k+ usd to purchase in m-hcol when instead can live abroad during retirement and pay 1k/month and use the remaining for better living or health care or whatnot?
- bluGill 1mo ago
  I can sell my house when I'm retired if I choose to do that. I can only save so much money in retirement plans. A house (in the US - other countries have different rules!) is my next best retirement investment because I can live there rent-free after I retire, or I can sell it for more cash. If you are not maxing out your retirement accounts then the house may be a worse investment than adding more to your retirement accounts.
preg_match 1mo ago
Realistically mortgages are also forever - very, very few people actually outright own their homes. Because when you sell, which you might be forced to do due to a new job, divorce, etc, you enter another mortgage. Also homes are a bad bad retirement plan. If you're debating paying off your mortgage early, or investing said money in a 401k, 401k is almost always the correct choice, in just about every market. Debt is not a bad thing. Often having more debt means having more cash flow, which means greater investments. That's why companies don't outright buy their real estate, either.

petcat 1mo ago

You're falling for the trap of just thinking of buying a house as an investment. Buying a house can be an investment, but it's also buying a place to live. Even if the home's value merely keeps pace with inflation over 30 years, you've converted a largely fixed housing payment into ownership rather than paying ever-increasing rent indefinitely.

Carrok 1mo ago
Along the same lines, you are buying a place. A place that you own and can do whatever you like with. I spent twenty years renting and twenty years of feeling like you can’t hang a picture on the wall, paint a room, upgrade an appliance, or really do anything to improve your surroundings, tends to get tiring.
- rogerrogerr 1mo ago
  Why can't you hang a picture on the wall? Fixing holes in drywall is super trivial, a good life skill to learn.
  - cauliflower2718 1mo ago
    Painting, too. Not sure how common or uncommon but my landlord explicitly allows painting, as long as it's not a dark color
  - inigyou 1mo ago
    Is there a law saying your landlord has to accept the repair?
    - rogerrogerr 1mo ago
      In most jurisdictions, what you can take out of a deposit is legislated. And it's really not that hard to make an unnoticeable drywall repair.
    - preg_match 1mo ago
      Not sure, but they likely won't know. Too many people ask permission for things. You'd have better luck doing what big corporations have done for decades. You just do the thing, cover it up, and hopefully never have to ask for forgiveness. And if you DO have to ask for forgiveness, well that's still easier than asking for permission!

deleted 1mo ago

[deleted]

Jtarii 1mo ago

Buying a house as an investment is so dumb. Its only an investment if you are renting it out to someone else, otherwise you are just gambling.

bobson381 1mo ago
Agree here. But I'm a doomer/collapsenik - so, the same future coming for "retirement" is the same future coming for "house always appreciates in value". Maybe 1990 -> 2020 was an okay 30 year period, 2026 -> 2056 sure won't be.
- louthy 1mo ago
  > 2026 -> 2056 sure won't be. You have evidence from the future?
  - inigyou 1mo ago
    Do you? Where's your evidence global temperatures won't plummet 20 degrees tomorrow and reverse climate change? Past observations inform future predictions.
    - louthy 1mo ago
      I don’t have that information, but I’m also not claiming I do. The GP is claiming “1990 -> 2020 was an okay 30 year period, 2026 -> 2056 sure won't be.” The fact that there was Black Wednesday, 9/11, the dot com crash, the Iraq War, a once in a century global financial crisis, Brexit, and a global pandemic… suggests it wasn’t an “ok period” for markets. Yet, somehow, over the period of a mortgage, they all went up. The idea that humans won’t adapt to whatever happens in the next 30 years is ludicrous. There will be short term market instability, just like the events I noted from the previous 30 years, but planning for the apocalypse is mind numbingly stupid. If the apocalypse happens, everyone is in the same boat. If it doesn’t and you didn’t get on the housing ladder early, well, you’ll probably be buying a more expensive house in the future. I’m saying this as someone who waited far too long to get on the ladder when I saw how rapidly prices were ascending in the 2000s (leading up the the GFC). I used the exact language lots of people in this thread are using about prices coming down eventually. But I was wrong. Post the crash I couldn’t buy because deposit demands doubled. It took me out of the market for a long time. Ultimately costing me more when I did buy. The future always seems risky, it’s the nature of the beast.

jsw97 1mo ago

Buying a house isn't just about expected return. It's also about hedging. You need to live somewhere, so you have an implicit liability of a stream of rental costs. The most natural hedge for that is a house. If expected future rental costs go up, your house value goes up. If they go down, your house value goes down. Overall, your risk, in present value terms, is reduced. Of course this doesn't work exactly and you can nitpick this, but I think people should at least look at housing assets as more than "is it going to go up?", and more about long-term risk reduction. (And, just to be clear, this doesn't mean that you should lever up beyond reason to buy a house.)

bobson381 1mo ago
Right. This would make it possible and reasonable if you could find a house that is enough, such that you can live in it, expect a reasonably good experience in it for the life of your time in it, and that that mortgage payment, plus all maintenance, insurance, tax, etc. is reasonably comparable to an equivalent rental. Depending on where you are, this is not always the case. Or you need to buy a small place at current rates and prices to make it at all comparable. You have to decide what "enough" is, and that's variable depending on your expected standard of living, etc. I am personally currently lucky enough to be in a good rental situation, which colors my view. Having a landlord that will fix problems and eat incidental appliance/roof/major expenses is a form of insurance paid as rental.
spacebanana7 1mo ago
Exactly- owning one home is actually the neutral position. Renters are persistently taking a short position on real estate and landlords/multiple owners are effectively long.
quadragenarian 1mo ago
Keep in mind though that by entering into a 20% down mortgage you are effectively levered up 5x against your local real estate market. So it’s not like you’re totally reducing your risk. Luckily for homeowners, home prices only go up since the GFC so this leverage seems like a good position to be in.

louthy 1mo ago

> Number cannot always go up. Yeah, I thought that when I was young too. The housing market can keep going up for much longer than you can hold out. Then, if there ever is a correction, it probably won't drop lower than this point right now. My advice to any young'un thinking they can wait out the market: you can't, buy whatever you can afford as soon as you can and watch inflation reduce that painful monthly outgoing to something more manageable over time. Housing isn't an investment opportunity. It's where you live.

bluGill 1mo ago
> My advice to any young'un thinking they can wait out the market: you can't, buy whatever you can afford as soon as you can and watch inflation reduce that painful monthly outgoing to something more manageable over time. I don't think that is quite right. Buy whatever you can afford as soon as life puts you in a position where you can reasonably expect to live in the same place for at least 7 years. You will never perfectly know your future, but predicting 7 years generally isn't too hard, and if you are wrong it is probably close enough to 7 years that you are okay. My first house I had to sell after 10 years (I got a job in a new city) and I lost money on the sale despite the 10 years, but that is an outlier. Most people will see enough value appreciation in less years as to not be out too much if they have to move. 7 is just a good compromise for most people. Don't forget when buying a house that you have to pay for maintenance. Make sure you can afford this somehow. If you have friends/family that can help with that work that can save a ton of money over if you have to hire someone.

alexpotato 1mo ago

"The rule of thumb was: - buy when home prices are 10x rent - sell when home prices are 20x rent" - The Big Short by Micheal Lewis [0] I remember reading this quote and then checking NYC prices and it was a 33x multiple. 0 - https://amzn.to/4cr0tWX https://amzn.to/4cr0tWX

cma256 1mo ago

This is false. Can you cite a source for the idea that the 30-year mortgage was "founded" on the idea of appreciation? The thirty year mortgage was introduced to reduce the housing appreciation requirement the old balloon loan system relied on.

the_sleaze_ 1mo ago
I agree. The mortgage was to allow people to eventually OWN THE PROPERTY, not a leveraged investment. It's an interesting development that some (most?) regular people have forgotten that there is a 3rd option, not just rent or loan. You can actually OWN the thing and pay only property tax on it.
- willmadden 1mo ago
  You don't really own it because of the property tax. Unless you live in Malta or a handful of other countries you are effectively renting from the state.
  - petcat 1mo ago
    If paying property taxes is considered "renting from the state", then I'll be glad to pay the $600 a month in rent in order for the state and my county to maintain the roads, sewers, drains, school district and everything around me that allows me to enjoy my home and participate in society.
    - louthy 1mo ago
      Exactly, a house in the middle of nowhere, with no infrastructure, quickly becomes worthless. If anything, property taxes could be considered ‘maintenance’, which is an inevitable part of ownership. Nobody likes paying for the maintenance work, but you have to, otherwise the house falls down.
      - willmadden 1mo ago
        You are claiming infrastructure can only be maintained by a government? That's a ridiculous assertion. Most of the work is outsourced to contractors. They are acting as mediocre project managers, not the masters of inscrutable infrastructure technology. The state has a monopoly on certain types of infrastructure that it ultimately sustains through the threat of repossession. It uses that monopoly to racketeer property owners under the threat of repossessing their property. If what you are claiming is true, then why does Malta have higher property values than countries with property tax? https://www.maltasothebysrealty.com/property-for-sale/in/sliema https://www.maltasothebysrealty.com/property-for-sale/in/sli... I would agree to a property tax if the voting systems worked fairly at a sufficiently granular level, but they don't. They are farces maintained by criminal organizations beyond a certain scale.

andsoitis 1mo ago

> 30 year mortgage is founded partly on the idea that your house will be worth more in the future when you sell it. Another meaningful reason is that it is a hedge against inflation. You pay a fixed amount for housing for 360 months, rather than having to adjust rental payments that will tend to go up over that time frame.

gwbas1c 1mo ago

Inflation is more probable than deflation: Meaning, over 30 years, we're more likely to hit a period of inflation where the value of your house (in dollars) will go up even though the real value (in your earning potential) might stay the same. But, if we hit deflation and a lot of people need to default... Well then we're all in the same boat anyway.

kaydub 1mo ago

> Numbers cannot always go up Isn't that how our monetary system works though? Inflation means the numbers WILL always go up.

bluGill 1mo ago
Generally people are indexing the numbers always go up to inflation. Which should be different, but so far numbers still go up anyway.
Ekaros 1mo ago
Not all numbers. Some numbers have certainly gone down. Your home might be one of them. So might really bad stock pick too.

gruez 1mo ago

>Number cannot always go up. We are at the top of the carbon pulse. Financialization has taken us far from the material baseline of the rock we are flying through space on. Debt will only get us so far. Why can't it? GDP per capita has been steadily marching up since the dawn of industrialization. You mention carbon but most developed countries have decoupled carbon emissions from their economic growth. https://ourworldindata.org/co2-gdp-decoupling https://ourworldindata.org/co2-gdp-decoupling

bobson381 1mo ago
https://en.wikipedia.org/wiki/The_Limits_to_Growth https://en.wikipedia.org/wiki/The_Limits_to_Growth is why. The financial economy sits on a finite store of physical goods, and as a dissipative structure, our high-energy, high-complexity global society acts as a low-friction conduit from stored past energy to high-entropy degraded heat. Number go up until we cannibalize the foundations.

eudamoniac 1mo ago

The number can definitely go up for more than 30 years. There is a lot of wealth out there and the land is not getting any bigger.