Comment by ToucanLoucan
6 hours ago
> I think that's true but in some cases it's also about making home ownership, in the sense of having a home you can't lose short of a destructive disaster, even possible. In a lot of cities property taxes are enough to get in the way of secure housing for, e.g., disabled people. It seems reasonable to want owning the house you live in to be a possibility for planning to eventually live on a fixed or low income.
It seems to be equally straightforward an answer to just not expect homes to function as an investment.
I do not now nor have I ever understood why people expect homes to rise in value. If you live in an area for 20 years, and you enjoy that area, and it serves you well, and educates your kids, and the crime is low, and all that good stuff: why are you then owed money? Why is that a fair expectation? Like I could see it if you made the house bigger, or otherwise improved it? Maybe you put in a new shed, or a nice brick backyard area with a kitchen, sure. House being worth more makes complete sense. But if you just buy a house, and live in it, and maintain it over the years, and then go to sell it: why is it reasonable for you to expect money back out of that?
You've already received what you paid for: a place to live.
Like I just don't see how people go like "My house needs to sell for more than I bought it for years from now" and then complain about the housing market being out of control and houses being expensive. Of course they are. Each time a house changes hands by this logic, it must necessarily be worth more than it was before. So every subsequent buyer of that home is effectively required to tithe to the previous owner for... some fucking reason, that nobody has ever adequately explained to me.
>why are you then owed money? Why is that a fair expectation?
Essentially everybody in the US is continually trying to make their fortune by picking a winner instead of adding productivity and value.
Have your house appreciate.
Pick the right stocks.
Invest in the right company.
Become a landlord in the right neighborhoods.
Everyone wants to be a genius speculator instead of doing work.
I mean, agreed. And I don't think you can disentangle that from the fact that working is less beneficial to workers than it's ever been.
Not only do they want the value of the house to go up, but they don't want anything around them to change. No new 5-story condo complex on that one corner. My neighbor shouldn't add a second floor and block my view.
I think it’s worth pointing out that you and your neighbors actually do have a voice in local government. You don’t just have to sit there and take it. NIMBYs have realized this and actually show up to be counted. You can too.
"No change" is usually the much stronger behavioral driver than "increased property value."
"Don't turn this into Manhattan" is such a common refrain yet turning it into Manhattan would wildly increase their land value.
I’d expect property values to go up (or have gone up) as population rises; less space per person. I bet we could also put together some geometric argument about proximity to things like cities. But it’s the weekend, so let’s just halfheartedly gesture at the potential for rigor.
Anyway, nowadays population is barely increasing so I guess property values… maybe they’ll keep pace with inflation (for whatever reason)?
Another possibility is that property values tend to go up and down as some areas become more fashionable. Maybe, for whatever reason, there’s a selection bias where we tend to associate ourselves the trajectory of people who lived in those fashionable areas instead of the unfashionable ones?
> Why are you then owed money? Why is that a fair expectation?
Because getting the mortgage to buy the house involves parting with a large sum of money, after which some part of the mortgage payment goes towards something called principal. If it just goes towards interest, it may as well be rent.
Not to mention that when you try to sell the thing, there's some expectation by one or more third parties of some percentage of it.
Makes no sense to me. You take a loan to buy something you cannot otherwise afford, then you pay back the loan. Bank wants % on the loan, this is legal, therefore you pay back more than you borrowed. The amount gets split into two buckest, "interest" and "principal", presumably because of size and length of the loan, but arguably mostly to let the bank do various shenanigans that lead to them making more money on it.
Nothing in this gives any good reason for one to expect homes to appreciate in value, other than that some buyers want it to, and I haven't heard any good reason why those buyers shouldn't just be told, "no". If these people then decide not to get mortgages, due to it not being an investment, then all the better for everyone else, who want a home to live in.
But at the same time most people do the bare minimum to maintain their house, so the quality of the property continually decreases. I don't drive a car for 20 years and then expect to make a profit on selling it.
Your analogy might be applicable to the sale of an RV.
4 replies →
My theory is that the "house" consists of two things: the land and the building.
The land goes up in value when other people spend money. More retail is constructed nearby, transportation is improved, schools improve, jobs are created, etc. My land captures some of that value even though I paid nothing. That to me explains some of the fairness of property tax: the owner should contribute to the government services, such as schools and police, that help make the land appreciate in the first place.
Then there's the building. It's a wood box that sits out in the rain and rots. Water soaks in from the outside and pipes burst on the inside. Termites eat it and insects and vermin invade. Carpet and walls slowly degrade. HVAC systems wear out. Appliances break. Concrete breaks apart. Even on the land portion, plants die and need maintenance. (Trees are the only thing on a property that get better with time.) This building needs constant maintenance and I'm always spending money and time on it.
So I figure the land might go up slowly in value over time. I figure I'm lucky if the building appreciates at all after I consider the money I sink into it.
On paper my house is worth a lot more than when I bought it. But I don't know how much of that is nominal price change due to inflation.
Is “inflation” not a valid answer? Or at least component of an answer?
You can restate all mentions of "value" in the parent post to "real value", and there entire point still holds: why should people expect the real value of a home to increase over time?
It's an answer to why the number is bigger but not to why the house is worth more. It is common to say "I want my house to appreciate in value" and inflation doesn't mean it's appreciating in value, it just means the number is bigger than it was before. That's not the same thing.
PP literally says “I just don't see how people go like "My house needs to sell for more than I bought it for years from now"” That is basically not understanding why people expect the number to be bigger.
> that nobody has ever adequately explained to me.
Jesus it’s not rocket surgery. People want to live in a nice area, as more people show up and want to live in a nice area prices rise with rising demand accordingly. For the counter example, there are very large houses basically for free in Detroit. No one wants them.
> For the counter example, there are very large houses basically for free in Detroit. No one wants them.
Is that true, or do they actually come with large tax liabilities?