{"id":555,"date":"2014-04-01T09:33:00","date_gmt":"2014-04-01T09:33:00","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/janetheactuary\/2014\/04\/when-did-we-start-thinking-of-homes-as-investments.html"},"modified":"2014-04-01T09:33:00","modified_gmt":"2014-04-01T09:33:00","slug":"when-did-we-start-thinking-of-homes-as-investments","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/04\/when-did-we-start-thinking-of-homes-as-investments.html","title":{"rendered":"When did we start thinking of homes as investments?"},"content":{"rendered":"\n<\/head>

This was something I was thinking about the other day (another topic that I don\u2019t really have the ability to research, sadly): \u00a0at some point, we lost our way with respect to the way we think about housing. \u00a0We (that is, the Experts) all cheer when home prices go up, and tell us that for most Americans, the equity in their homes is the lion\u2019s share of their wealth (or is it the value of the home, without regard to equity vs. mortgaged amount?), so it\u2019s good, good, good when home prices go up.<\/p>\n

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But homes are not the same as stocks or other investments. \u00a0If the stock market is galloping along, say, at 10% appreciation a year, and I, as a newly minted Adult, want to start investing, I haven\u2019t really lost anything or suffered any harm if I can only buy 10 shares of Google rather than the 100 my father could for the same cost. \u00a0But if I venture into the housing market and can only buy 100 square feet for the same price as my parents paid for 1000 square feet, this is a Bad Thing Indeed.<\/div>\n
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Let\u2019s change our terminology and say that, instead of home price appreciation, we\u2019re looking at \u201chousing inflation\u201d when prices gallop upwards, and \u201cincreased housing affordability\u201d when they dip downwards.<\/div>\n
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Now, my husband and I didn\u2019t suffer from the market crash. \u00a0How much our home is worth relative to what we paid is hard to say, because we put an addition on (well aware that it cost more than the increase in home value, but if you factor in the costs of moving \u2014 the movers themselves, the real estate agent\u2019s commission, the remodeling on the new home, etc. \u2014 it was much closer to a wash anyway) in the meantime, but we bought before the peak and the Chicago area was never as badly overheated as other areas of the country anyway. \u00a0But my sister \u2014 she\u2019s considerably underwater because her part of the country tanked and because she did buy into the \u201cbuy as much house as you can qualify for because prices will only go up\u201d mantra.<\/div>\n
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Interestingly, in Germany, houses are regarded much more as an investment, with individual investors renting out properties much more common than apartment complexes owned by corporations. \u00a0And, even though I said in an earlier post that it\u2019s much more common in Germany for families to live in condos rather than the near-requirement to live in a single-family home, at the same time, it\u2019s also a fairly normal thing for those single-family and duplex homes which do exist to be rented out. \u00a0(And, as a commenter pointed out, it\u2019s much more the norm for a renter to live in a place long-term, and to remodel the kitchen themselves, packing it up upon leaving or even selling it to the next tenant.) \u00a0<\/div>\n
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In The Netherlands, there\u2019s an even more interesting approach: \u00a0if you own a house, you pay tax on the \u201cdeemed rental value\u201d (eigenwoningforfait) of the house. \u00a0The idea is that if I own a house whose rental value is determined to be $20,000 a year, then it\u2019s as if I\u2019m renting the house to myself and earn a notional income of that amount, on which I am taxed, though I think that, in practice, the tax is applied as a flat percentage of the home\u2019s value and isn\u2019t that different from a property tax, which only modestly offsets the deductability of mortgage interest.<\/div>\n
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But wait \u2014 wasn\u2019t I saying that it\u2019s not a good thing to look at houses as investments? \u00a0I suppose the difference is that, if you coldly look at real estate as an investment, which you may or may not choose to live in, then your approach to home-buying (and the government and policy experts\u2019 approach to home-buying trends) is different than in a situation in which we simultaneously promote home ownership at all costs, and home price appreciation at the same time. \u00a0Besides which, we understand that investments have risks \u2014 stock prices can drop, bond rates can go up or down or lose their value entirely, if a company goes bankrupt, and venture capitalists can lose money as fast as they can make it. \u00a0But the government and policymakers seem determined to return us to a time when home prices go up, up, up without end. \n

And \u2014 back to my original question \u2014 I\u2019d be interested in knowing when this shift happened, when we adopted the mindset we have now. \u00a0In the post-war housing boom, for instance, how did home prices and mortgage payments look relative to income? \u00a0After all, Levittown houses were small. \u00a0Was this because the buyers just didn\u2019t dream of anything larger? \u00a0Because they were overstretched as it was? \u00a0Or because they would never dream of going into debt as much as they possibly could?<\/p><\/div>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

This was something I was thinking about the other day (another topic that I don\u2019t really have the ability to research, sadly): \u00a0at some point, we lost our way with respect to the way we think about housing. \u00a0We (that is, the Experts) all cheer when home prices go up, and tell us that for […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-555","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nWhen did we start thinking of homes as investments?<\/title>\n<meta name=\"description\" content=\"This was something I was thinking about the other day (another topic that I don't really have the ability to research, sadly):  at some point, we\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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