I did not read—so probably should not comment, but will anyway. In a very quick skimming nothing jumped out at me regarding the aspect of time horizons and particularly wealth transfer to the next generation.
Did I just miss that? If not would adding the idea of inter temporal transfers (inheritance) change any of the conclusions?
[Edit to add] While not about a house, I recently sold a trailer and truck. Given the response I was clearly under market price but as I was really interested starting to “clean up” my possessions I am not crying about the possible opportunity loss there. But was I did give some thought to was: What was a rough estimate of the rental rate on the two for the time I owned them. A very quick and crude calculation in my head came to under $400 a month easily.
That is a little deceptive in that these were not really used daily or even weekly—lots of down time. So (assuming I could even find a place to rent what I had) I might have come about better renting rather than buying. But that is only because I was not using them daily. If the house worked out the same I think I come out miles ahead buying the house in most situation. (Anecdotal to be sure and possible not a good comparison setting)
I don’t know how much it varies by jurisdiction, but in the USA there’s some weirdness in handling of cost basis and capital gains for inheritance of real estate that doesn’t apply to more liquid assets. Effectively, heirs can pay less taxes on the gains from real estate if they inherit rather than buying an appreciated asset.
I think one aspect is that financial assets are merely stores of wealth with potential for growth/returns as well as risks. The house has both of those as well as a direct use value in consuming the housing services. Additionally it offers something of a risk/uncertainty mitigating role. Once paid for the cost of consuming that housing services is pretty low so even if you see a bit hit to your income you still have a stable place to build from.
I think it’s really all the non-pecuniary aspects that get missed when analysis starts relying too strongly on the monetary equivalence point of view; by which I mean we start filtering those aspects out and just don’t see them.
I did not read—so probably should not comment, but will anyway. In a very quick skimming nothing jumped out at me regarding the aspect of time horizons and particularly wealth transfer to the next generation.
Did I just miss that? If not would adding the idea of inter temporal transfers (inheritance) change any of the conclusions?
[Edit to add] While not about a house, I recently sold a trailer and truck. Given the response I was clearly under market price but as I was really interested starting to “clean up” my possessions I am not crying about the possible opportunity loss there. But was I did give some thought to was: What was a rough estimate of the rental rate on the two for the time I owned them. A very quick and crude calculation in my head came to under $400 a month easily.
That is a little deceptive in that these were not really used daily or even weekly—lots of down time. So (assuming I could even find a place to rent what I had) I might have come about better renting rather than buying. But that is only because I was not using them daily. If the house worked out the same I think I come out miles ahead buying the house in most situation. (Anecdotal to be sure and possible not a good comparison setting)
Not sure why home vs financial assets would be better or worse for inheritance. Ultra long term I’d expect old houses to become a bit of a money sink.
I don’t know how much it varies by jurisdiction, but in the USA there’s some weirdness in handling of cost basis and capital gains for inheritance of real estate that doesn’t apply to more liquid assets. Effectively, heirs can pay less taxes on the gains from real estate if they inherit rather than buying an appreciated asset.
I think one aspect is that financial assets are merely stores of wealth with potential for growth/returns as well as risks. The house has both of those as well as a direct use value in consuming the housing services. Additionally it offers something of a risk/uncertainty mitigating role. Once paid for the cost of consuming that housing services is pretty low so even if you see a bit hit to your income you still have a stable place to build from.
I think it’s really all the non-pecuniary aspects that get missed when analysis starts relying too strongly on the monetary equivalence point of view; by which I mean we start filtering those aspects out and just don’t see them.