re: Home Prices start to drop due to rates, lack of sells, and more inventory!

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You are limited to $10k total in deductions of interest or taxes.

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Not quite. State and Local taxes (SALT) is limited to $10K.

Mortgage interest is limited depending on date the mortgage originated at $1 million principal OR $750K.

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deducting personal business expenses

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What is this?

Sales, not sells.

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The chart you posted shows that existing home prices have inflated faster than the general price level, but it's still inflation

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No.
It's price appreciation, and there is a difference.

In the case of property, the principle of scarcity applies. As our realtor put it when we were weighing investing in a beach place vs other locations, "No one's making more beachfront. This property will do well over time." He was right.

Now if you buy a place in the suburbs of a dying or relatively stagnant community, your price performance will likely be similarly stagnant.

The issue with homes is they're often transactionally leveraged. Selling a $300K place in 10yrs for $360K after costs appears to be a 20% gain, but it isn't. Assuming 20% down on the initial purchase, it is actually a 100% ROI.

(Yes, there are numerous monthly expenses along the way, but you'd have paid those and then some had you rented)

Now, as with anything, that same home ownership leverage works the other way if home value falls.

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Oh good. Luckily Americans don't look at housing as an investment that will grow over time.

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Its not and shouldnt be looked at it that way

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This is overly simplistic.

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It is no more difficult than that. Basic 2+2=4.

Renting has no path to generating personal wealth, homeownership does have a path to personal wealth.

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No.
It's price appreciation, and there is a difference.

In the case of property, the principle of scarcity applies. As our realtor put it when we were weighing investing in a beach place vs other locations, "No one's making more beachfront. This property will do well over time." He was right.

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It's inflation. Read the last three paragraphs again. If your beachfront home value appreciates, so do all the similarly valued beachfront homes. You pay costs to live there and you don't receive income from the home while you live in it. You can sell it later but the proceeds will only buy you one equivalent home. You can downgrade to a cheaper area or home when you sell it, but that's like receiving no incomes from the widget factory, paying overhead the entire time, and then selling it to buy a smaller widget factory and calling the price difference a profit.

Making a positive return from leverage is a different matter. Any profit from using leverage to speculate on the future rate of inflation, either in housing or across all prices, is profit from speculation and risk. It can work for individuals, but not for an entire population. If inflation rises faster than the interest rates charged on debt, borrowers are making a profit by using leverage, but lenders (namely, savers) are losing an equal amount of purchasing power. The demand for borrowing will rise faster, which means either the money supply must rise faster (more inflation, fewer savers) or interest rates must rise to compensate lenders and eliminate borrowers' profit from inflation speculation.

That's the problem our entire economy faces, not just the housing sector. As leverage in the US economy increased over multiple decades, the federal reserve has kept interest rates artificially low by increasing the money supply to reduce borrowing costs. The cost of those low rates is borne by savers/depositors. The advantage has been gained by borrowers and levered speculators. This is bound to fail because the fed hasn't actually reduced the downside of leverage, they've transferred it to savers and lenders, and to the federal reserve itself. What your realtor was telling you was that he thought mortgage rates were too low to restrain future inflation/compensate savers. He was right, they've been too low for too long, but either that will end or the US dollar will end.

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Oh good. Luckily Americans don't look at housing as an investment that will grow over time.

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Why do you hate free markets?

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If you buy a house, maintain it and live in it for 10 years, or 50, you still only have one house. And you also have paid maintenance, taxes, etc. over the years which, along with financing, were the costs of living in your house. You could sell it, but an identical well maintained house in the same neighborhood would cost about the same amount, so you still only have one house and you haven't recouped the costs you paid to live in your previous house. There was no ROI, because it wasn't an investment.

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This is true in most instances. If you own a home, take into account all of your expenses on your home.

Homeowners insurance, maintenance costs, property taxes (especially in some states), costs of renovations. That shite adds up to a lot of money.

We bought our current home in Lafayette in 2010 for $193k (3BR, 2BA, 2,250 sqf) and immediately spent another $30k on renovations. Since then we put new windows and sliding glass doors, another $14k, a new A/C system for $12k, new roof which our share was about $3k thanks to insurance picking up the majority of it, new flooring another $20k, painted the exterior bricks another $3.5k, That’s $82,500 at least that we’ve spent on maintenance and improvements we’ve made in the previous 15 years. Add in at least $30k in insurance premiums and probably another $20-25k in property taxes and we’d probably lose money if we sold now.

I’d have to get at least $325k to break even now. That’s not a great “investment.”

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I’d have to get at least $325k to break even now. That’s not a great “investment.”

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Now add what you would have spent on rent for a similar place during that time, renters insurance, any additional storage you may have needed, etc to what your house would sell for.