3 ms·

I mostly agree but I have to quibble just a little: American real estate is still insane. The housing crash was really just a small dip on what seems to be an

by api 11y ago

I mostly agree but I have to quibble just a little: American real estate is still insane. The housing crash was really just a small dip on what seems to be an unrelenting hyperinflation in real estate. When government policies deliberately encourage insanity -- as many policies both in the USA and abroad (such as in China) do for real estate -- then the economy can remain insane much longer than you can remain solvent. It might remain insane so long that the entire rest of the economy reorganizes around the insanity, institutionalizing it into a permanent state of affairs. I'm a bit concerned that this is going to happen with housing... that we'll end up with a future where most things are very cheap but real estate is so insane that some huge fraction of everyone's earnings just goes into paying rent or paying off a 60 year mega-mega-jumbo mortgage. Everyone will just accept that a starter home starts at $2.5 million. As far as China goes: why can't its government just keep artificially re-adjusting the economy so that it can never fall for as long as its government exists? I don't see why there's a hard upper bound to Keynes-on-meth economic policy, and China in turn is so huge that this could distort the entire world economy. As this article hints it's probably one of the factors driving real estate nuts. The only thing I can see that could stop this is if other large nations and blocs like the EU decide that China's exporting of domestic economic insanity is hurting them and decide to start some kind of trade or currency war. But that's unlikely since the entire world is completely dependent on Chinese manufacturing power.

seanmcdirmid 11y ago
You are totally right. You need to look at supply and demand in the states, many markets are distorted by a lot of baby boomers ready to leave the market and speculation from abroad. I think our future might be Switzerland, where that house will cost you $1 million, but it isn't going to go up or down very much. Adjustments work when they are small, but if you keep adjusting, eventually your house of cards will implode. You'll either crash hard or print more money, perhaps crashing even harder. The US has done OK in making adjustments, because they just need to nudge it this way or another. China has meddled much more deeply in the economy, creating a lot more risk for a hard crash in the near future.
- api 11y ago
  It makes more sense in Switzerland because it's small. America is huge. There is no land shortage outside of a few urban areas. It makes some sense in San Francisco, but crazy property prices (when compared to wages) are a largely national phenomenon.
  - seanmcdirmid 11y ago
    Switzerland has a lot of open space also...it isn't so dense. The key point is stability: housing prices really shouldn't fluctuate much outside of abnormal conditions. So even if they are high, as long as they are stable, then you at least feel ok about taking that loan out if you can. The problem is that many see real estate as an investment and an opportunity to get rent. That does nothing for the economy, and at least property taxes work against that (Swiss takes that to the next level with a rental tax, even if you don't rent your house).

by api 11y ago

seanmcdirmid 11y ago

You are totally right. You need to look at supply and demand in the states, many markets are distorted by a lot of baby boomers ready to leave the market and speculation from abroad. I think our future might be Switzerland, where that house will cost you $1 million, but it isn't going to go up or down very much. Adjustments work when they are small, but if you keep adjusting, eventually your house of cards will implode. You'll either crash hard or print more money, perhaps crashing even harder. The US has done OK in making adjustments, because they just need to nudge it this way or another. China has meddled much more deeply in the economy, creating a lot more risk for a hard crash in the near future.

api 11y ago
It makes more sense in Switzerland because it's small. America is huge. There is no land shortage outside of a few urban areas. It makes some sense in San Francisco, but crazy property prices (when compared to wages) are a largely national phenomenon.
- seanmcdirmid 11y ago
  Switzerland has a lot of open space also...it isn't so dense. The key point is stability: housing prices really shouldn't fluctuate much outside of abnormal conditions. So even if they are high, as long as they are stable, then you at least feel ok about taking that loan out if you can. The problem is that many see real estate as an investment and an opportunity to get rent. That does nothing for the economy, and at least property taxes work against that (Swiss takes that to the next level with a rental tax, even if you don't rent your house).