We are all born with a short position on housing https://twitter.com/ctbeiser/status/1110810350109089792 …
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Explain the last part please. What is the 5x long leverage on the house in this scenario?
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Leveraged means taking debt to acquire the asset. 5x+ refers to the ratio of the capital you have in the asset vs. it’s value— most people put 20% (1/5th) or less in down payments. Long because most people don’t buy/sell houses often— and typical loan term is 15 or 30 years.
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Housing is different than other kinds of needs, which are about physical transformations. Housing is not about any kind of transformation of physical objects. It is the fact that you yourself must exist in a physical substrate which is located somewhere.
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1. Buy house in expensive city with good job and big mortgage 2. Work and pay debt for a couple of decades 3. Hope the market doesn't crash 4. Sell house with $x00k profit, quit job, buy cheap rural house, grow vegetables and live frugally
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If you are happy to live in that house forever them it seems true that you're neutral on housing? Of course you're now short a 30-year fixed-income security instead (i.e. you're in debt) but you knew that.
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I think the issue with the metaphor is more that you can in principle cover your housing short with a tent in the woods; the vast majority of your housing spending is either employment expense (to live close enough to jobs), consumption, or investment, not "covering your short".
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A short position means you expect prices to drop, right? So we are born... expecting housing prices to drop...? Is this an American thing?