See, you’re conflating land ownership and tenancy here.
mostly because tax implications and managing a property both make the returns lower than REITs on average.
There is of course a reason to own a place
In practice I don’t find people’s reasoning for owning very convincing. It feels like people buy houses because it’s just the thing you do and the reasons are mostly post hoc. People don’t customize their houses all that much, to the degree they do it doesn’t get them very good returns on well being per dollar spent, and they pay larger well being costs from the aforementioned commute and career inflexibility problems. I can definitely imagine stumbling into a really good ownership deal, but I don’t expect it and don’t waste time looking. I can definitely sympathize with the inclination. Every once in a while I look around on zillow on what I could theoretically afford, which is a fun exercise. Fortunately the thing doing this reinforces for me is that housing is getting cheaper for me relative to my portfolio over time. So whatever I can afford now I can do even better in the future (and as a smaller proportion of net worth, which makes it more attractive hedge wise). Of course, the fact that that *will always hold true* at any given instant means I’ll likely never buy. But that’s fine. Changing my mind in the future is cheaper than changing my mind now.
People don’t customize their houses all that much, to the degree they do it doesn’t get them very good returns on well being per dollar spent, and they pay larger well being costs from the aforementioned commute and career inflexibility problems.
I feel conflicting desires here, to point out that this sometimes happens, and to worry that this is justifying a bias instead of correcting it. For example, I switched from ‘wanting to rent’ to ‘wanting to buy’ when I realized that I would benefit a lot from having an Endless Pool in my house, and that this wasn’t compatible with renting (unless I could find a place that already had one, or whose owner wanted one, or so on). But also that this convinced me doesn’t mean that most people who are convinced are correctly convinced. It might be better for me to do whatever ‘looking seriously at the price differential’ and deciding to invest in the policy of walking to the local pool more instead; but I think actually money isn’t the main thing here. (Like, for a while I thought it was better to be in Austin than in the Bay because a software engineer would earn about $10k/yr more all things considered, and then after thinking about it realized that I was happy paying $10k/yr to be in the Bay instead.)
closely examining aversion to other forms of exercise might be the move, but in general I agree, there can be large gains (well being and productivity) from idiosyncratic amenities. I do much better when I can walk to the woods for instance, which winds up heavily informing my ‘fuck big cities’ attitude.
I also think this class of argument can easily cut the other way. Many wind up with golden handcuffs needing to maintain cash flow to build equity in their nest egg whereas their counterfactual selves might be retired and traveling the world.
Agree with most of what you said
mostly because tax implications and managing a property both make the returns lower than REITs on average.
In practice I don’t find people’s reasoning for owning very convincing. It feels like people buy houses because it’s just the thing you do and the reasons are mostly post hoc. People don’t customize their houses all that much, to the degree they do it doesn’t get them very good returns on well being per dollar spent, and they pay larger well being costs from the aforementioned commute and career inflexibility problems. I can definitely imagine stumbling into a really good ownership deal, but I don’t expect it and don’t waste time looking. I can definitely sympathize with the inclination. Every once in a while I look around on zillow on what I could theoretically afford, which is a fun exercise. Fortunately the thing doing this reinforces for me is that housing is getting cheaper for me relative to my portfolio over time. So whatever I can afford now I can do even better in the future (and as a smaller proportion of net worth, which makes it more attractive hedge wise). Of course, the fact that that *will always hold true* at any given instant means I’ll likely never buy. But that’s fine. Changing my mind in the future is cheaper than changing my mind now.
I feel conflicting desires here, to point out that this sometimes happens, and to worry that this is justifying a bias instead of correcting it. For example, I switched from ‘wanting to rent’ to ‘wanting to buy’ when I realized that I would benefit a lot from having an Endless Pool in my house, and that this wasn’t compatible with renting (unless I could find a place that already had one, or whose owner wanted one, or so on). But also that this convinced me doesn’t mean that most people who are convinced are correctly convinced. It might be better for me to do whatever ‘looking seriously at the price differential’ and deciding to invest in the policy of walking to the local pool more instead; but I think actually money isn’t the main thing here. (Like, for a while I thought it was better to be in Austin than in the Bay because a software engineer would earn about $10k/yr more all things considered, and then after thinking about it realized that I was happy paying $10k/yr to be in the Bay instead.)
closely examining aversion to other forms of exercise might be the move, but in general I agree, there can be large gains (well being and productivity) from idiosyncratic amenities. I do much better when I can walk to the woods for instance, which winds up heavily informing my ‘fuck big cities’ attitude.
I also think this class of argument can easily cut the other way. Many wind up with golden handcuffs needing to maintain cash flow to build equity in their nest egg whereas their counterfactual selves might be retired and traveling the world.