Ownership and home value

[danaeris]

OK, so...

imagine that, just like there are rental units out there that are for low-income people, there were homes (condos, townhomes, or houses) that had a price that was set for low-income people.

The catch? When you sell it someday, you have to sell it to someone who is in the low-income category. Only in the event that you could not find a buyer at the low-income price after a year of trying would you be allowed to sell it to someone in a higher income bracket for a market price.

If you were a qualifying low-income individual/family, would you consider this worthwhile?

I will put my own thoughts in the comments.

Comments

[danaeris.livejournal.com]

So I'm thinking, the definition of low-income changes primarily with inflation. Whereas the market value of property changes with supply and demand, and as the area around the property gets developed and the land's value increases. That's why a house is viewed as a good investment -- the value will increase faster than inflation, unless you have bad luck and the market crashes.

If I bought one of these homes, it seems to me that the investment advantage would disappear. It seems to me that a low-income individual would do better investing their downpayment and renting, speaking from a purely monetary point of view.

So, the only advantage would be:
-that you could do whatever you want with the home -- but any money you spend on improving it could be wasted, since the value you sell it at might not reflect the work you put into it
-the emotional value of owning

If my analysis is correct, it seems to me that buying one of these homes is foolish.

[90pointmetaphor.livejournal.com]

It seems to me that it would depend on how the system is setup. How is the increase in value (if any) from the time you buy until you sell determined? How are improvements accounted for? (and so forth)

[nathanjw]

Habitat for Humanity homes are often sold this way, with the low-income criteria written into the deed restriction.

And over the long term, housing values in an area do track inflation; there are short term gains and losses, but looking at the trend over the last hundred years or so, you can see that the right long-term bet is for housing to do whatever takes it closer to the trend of just tracking inflation.

[danaeris.livejournal.com]

So do you think of a home as a good investment?

Yes.

[pieman.livejournal.com]

Because for most people it is enforced saving and investing of money for the long term.

To achieve the same (or better) results financially from renting you would have to simulate the costs of owning a home, including all of those additional hidden costs and fees, and be investing that - very wisely. Not using it for any other purpose.

Because houses do track inflation and market pressures they are a guarantee. But, to manage that guarantee you have to put the monies into them outside of the mortgage and taxes. If you don't keep your home up its value will lessen and you may not be able to sell it at all...hence its value is 0.

A big part of the problem I see with that proposal is the timeline in which you have to find a new buyer. Many people are not in a situation that they can wait a year to sell...the new job opening, or family responsibility is _now_ not a year from now.

[nathanjw]

Historically? It's an OK investment and a pretty good inflation hedge. Right now, at least in the US? Absolutely not. We're so far off from the normal track that the only place to go is down; I figure it'll be at least five years before putting money in a house makes financial sense.

pieman points out the value of enforced savings, and there is something to that at the psychological level, but at the strictly rational financial level, it's often wrong.

[secretsoflife.livejournal.com]

i think it's worth pointing out that when nathanw says that housing prices reflect inflation, it's to within 1% over 50% years, as in, they track inflation very, very closely.

anyone telling you otherwise is trying to make money flipping houses :p

[evergrey.livejournal.com]

Hell yes I would!

[evergrey.livejournal.com]

But I don't want a house as an "investment" for reselling, I want a house that I can own and live in.

[dmaze]

That sort of thing is exactly the way most affordable housing seems to work in the United States. I've been sitting in on some meetings of the Brookline Housing Advisory Board near Boston and they're very big on trying to get developers to include deed-restricted affordable units in various developments. Generally the way these seem to work is that, to actually get one initially, there's a lottery run by the town, and to qualify your income can't be more than 80% of median.

[enf.livejournal.com]

These things do exist, and are known as BMR, for "below market rate."

I don't think they are necessarily a terrible investment, because they still get the same mortgage interest deduction as any other property, and if the market in general goes up in value, so do these. But you would have to count on getting only moderate returns instead of being able to get much more than you paid by doing the right renovation or choosing the right moment to sell.

[marahsk.livejournal.com]

It really depends on why you want to buy.

Buying a house isn't really a good investment in the sense of buying in order to sell at a profit. The two advantages to buying are being able to do what you want in your space (which is limited if you are in an HOA, and even more limited if you are in a condo), and having your payments become equity for you instead of for your landlord.

Bottom line, I would buy if I planned to live there long-term, but not if I thought I'd be moving.