How housing became the world’s biggest asset class

Re:How housing became the world’s biggest asset class by the_gastropod on Wednesday January 22, 2020 @02:14PM (#22120923)

Whoa, there! Not so fast. In addition to things like home insurance, maintenance, etc, there's opportunity cost on the (I'm guessing?) 20% down payment. If GP had invested that 20% in a broad-market index fund over the past 7 years, I suspect it'd have grown a hell of a lot more than $100k.

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Re:How housing became the world’s biggest asset class by maxsilver on Wednesday January 22, 2020 @02:16PM (#22120949)

If that was an option, sure absolutely. I've never met a person who could actually afford a 20% downpayment recently (5% downpayments are common here in Michigan, for real humans buying houses in the past decade or so).

But yes, if you are wealthy enough to afford a 20% downpayment on a house, you are wealthy enough to potentially have opportunity costs from other investments at your disposal. Agreed.

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Re:How housing became the world’s biggest asset class by codegeek on Wednesday January 22, 2020 @07:33PM (#22123639)

I actually put 20% down 7 years ago on the house and I can tell you that if I had invested that downpayment purely in index funds, I would have a lot more cash today. So again, housing was not a good investment from an economic perspective. I bought it for my children but I look at it as a major expense and not investment.

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Re:How housing became the world’s biggest asset class by chii on Wednesday January 22, 2020 @11:00PM (#22124731)

if you were less risk adverse, it's possible to pull equity out of your house and have that reinvested in stocks, and continue paying the mortgage (and may be work out a way to make it tax efficient, like debt recycling). Then as long as the stock market out-performs the debt cost (which is likely), you win out ahead by quite a bit more.

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Re:How housing became the world’s biggest asset class by codegeek on Thursday January 23, 2020 @11:30AM (#22128861)

How would you pull equity out of the house other than doing things like HELOC ? HELOCs have huge interest and doesn't make sense to take that money and reinvest unless you know how to play the risky games like options trading etc.

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Re:How housing became the world’s biggest asset class by chii on Thursday January 23, 2020 @09:39PM (#22134891)

with a variable mortgage loan, a bank usually has a product called an offset account. When you pay back the principle, this offset account grows. It acts like a line of credit, and the max size is the value of the loan.

So essentially, it is a HELOC. But it's at the same rate as your home loan, which is usually quite a lot lower than the margin rate if you borrowed to buy shares. Of course, this offset loan cannot go higher than the equity you've already paid back, so unlike a margin loan (which can go up to 10x!?).

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Re:How housing became the world’s biggest asset class by chiefalchemist on Wednesday January 22, 2020 @06:08PM (#22123060)

The irony of the lower down payment? It increases demand; which obviously increases price.

So they are able to afford what they normally can't afford because of the tool (i.e., lower down payment) which helped make homes unaffordable.

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