"The variable delta between rent and purchase price/mortgage cost doesn't break the premise that purchasing a house is a hedge against future requirements."
But it does break the premise "but so does the cost of shelter." There is an advantage to sell while it's a seller's market and rent, while doing the opposite while it's a buyer's market. That's leverage that breaks this premise.
"You might do better renting but you don't have the future right to occupy that house at any cost."
This thinking is one of the key reasons why it's possible to systematically make money off of real estate. It's pervasive crowd-think, at least in the more impacted markets. It seems sound and logical, but it's fear based and irrational. There is clearly an upwards trend in real estate, yes that is true. But there are peaks and valleys along that mean.
"Steve Keen (http://www.debtdeflation.com/blogs/) describes investment in assets where the profit won't cover the interest as 'Ponzi' investment as you are hoping to pay it off from rising asset prices and points out that these are unsustainable in the long term, someone is going to get caught out. "
Yes, that's speculative action at work - as I mentioned in my original post with actual examples toward the end with my theory of how to detect the switchover. It's fun to talk about and how to solve it but it doesn't change that it actually occurs. The recent housing bubble exacerbated it but it is a phenomena of active markets during boom/bust cycles.
> But it does break the premise "but so does the cost of shelter." There is an advantage to sell while it's a seller's market and rent, while doing the opposite while it's a buyer's market. That's leverage that breaks this premise.
Hedged is never optimal but it should never be disastrous either.
You can often profit from unhedged speculation. If you can successfully predict the market you have nothing to gain from hedging. That you can do it profitably and possibly reliably doesn't make it hedged.
>> "You might do better renting but you don't have the future right to occupy that house at any cost."
> This thinking is one of the key reasons why it's so easy to make money off of real estate. It seems sound and logical, but it's fear based and irrational.
This thinking may be based on fear and suboptimal in terms of dollar wealth outcome but that doesn't necessarily make it irrational (stability and security have real value to some people) but you are right that it creates opportunities for those seeking profit.
The Steve Keen / Ponzi finance comment was in agreement with you.
But it does break the premise "but so does the cost of shelter." There is an advantage to sell while it's a seller's market and rent, while doing the opposite while it's a buyer's market. That's leverage that breaks this premise.
"You might do better renting but you don't have the future right to occupy that house at any cost."
This thinking is one of the key reasons why it's possible to systematically make money off of real estate. It's pervasive crowd-think, at least in the more impacted markets. It seems sound and logical, but it's fear based and irrational. There is clearly an upwards trend in real estate, yes that is true. But there are peaks and valleys along that mean.
"Steve Keen (http://www.debtdeflation.com/blogs/) describes investment in assets where the profit won't cover the interest as 'Ponzi' investment as you are hoping to pay it off from rising asset prices and points out that these are unsustainable in the long term, someone is going to get caught out. "
Yes, that's speculative action at work - as I mentioned in my original post with actual examples toward the end with my theory of how to detect the switchover. It's fun to talk about and how to solve it but it doesn't change that it actually occurs. The recent housing bubble exacerbated it but it is a phenomena of active markets during boom/bust cycles.