9 ms·

What is considered a house has changed significantly, our expectation have grown both in size and amenities. Additionally, land use restrictions and migration h

What is considered a house has changed significantly, our expectation have grown both in size and amenities. Additionally, land use restrictions and migration have caused disproportionate demand in certain areas drastically increasing the cost.

crdoconnor 11y ago
This is wrong. The drastic increase in land prices has been driven by untaxing land (e.g. prop 13), allowing the stream of rents derived from land monopolization to be privatized. That, combined with rock bottom interest rates (driving down mortgage requirements) and opening property markets to wealthy foreigners has driven up the cost of property in coastal cities precipitously. If interest rates and property taxes were jacked up, property prices would fall once again just as precipitously as they rose.
- vostok 11y ago
  I agree with most of your comment. I never understood the idea behind prop 13. A naive interpretation seems to be that it lowers taxes on the one item where dead weight loss is very low. This is in addition to the argument that it's a plain handout to the rentier class. >That, combined with rock bottom interest rates (driving down mortgage requirements) Do changes in interest rates affect underwriting requirements? I have to admit that I don't know anything about mortgages, but they always looked like volatility products to me. I do agree that the fall in interest rates has caused property prices to increase. This seems to be related to the fall in return on capital so it's unclear to me how rates might be "jacked up" and why that might be desirable.
  - crdoconnor 11y ago
    >A naive interpretation seems to be that it lowers taxes on the one item where dead weight loss is very low. The deadweight loss of a land tax is zero until it's raised above the unimproved rental yield of the land. Lowering it is purely a mechanism for moving money into the pockets of land owners. A land tax is more efficient than a property tax, but a higher property tax approximates a land tax sufficiently that the deadweight loss is minimal. >Do changes in interest rates affect underwriting requirements? Yes, since with lower interest rates you can afford a more expensive property since your monthly repayments will be lower. That in turn pushes up the value of housing as people take out bigger and bigger mortgages to try and keep up with rising prices.
  - gozur88 11y ago
    You can't understand prop 13 without understanding the environment in which it was passed. The price of houses was shooting up 20-30% a year, and people who had owned their houses for decades were being forced to sell because they couldn't pay the taxes. The idea that somehow a higher property tax will keep prices under control is not borne out by experience.
    - vkou 11y ago
      Why on earth were property taxes rising along with the price of housing? Instead of collecting a flat percentage of the home value, the cities/state could have just divided the taxes they were going to collect across all properties, proportionate to their value. Just because there's a property value boom doesn't mean that the regional budgets should expand by 20% year over year...
      - gozur88 11y ago
        Where I lived pre-prop 13 taxes were based purely on the assessed value of the house. If the assessed value doubled in five years, so did the taxes. And there was no cap on tax rates. I don't know if it was a state-level thing or if tax districts all did their own calculations back then.
    - eli_gottlieb 11y ago
      > You can't understand prop 13 without understanding the environment in which it was passed. The price of houses was shooting up 20-30% a year, and people who had owned their houses for decades were being forced to sell because they couldn't pay the taxes. Is that very different from the present day, in which there is very little property tax?
      - gozur88 11y ago
        That's my point. It wasn't different, so people who say getting rid of prop 13 will somehow cause house prices to fall are probably wrong.
- yummyfajitas 11y ago
  Land prices are skyrocketing in NY, CA, London, Mumbai, Delhi, Beijing and Singapore, among many other places. I didn't know that prop 13 applied in Beijing - I thought that was a CA law. I also didn't know that India and China changed their laws and allowed foreigners to buy land. Blame the foreigners! Trump 2016! Or if you happen to live in Maharashtra, yay MNS! Mumbai for Marathis! (For those unfamiliar, Trump is an American politician who believes Americans are lazy, greedy and stupid, and can't compete economically without violent thugs hindering the competition. MNS is a party that holds these same beliefs about Marathis.)
  - crdoconnor 11y ago
    None of those cities had particularly high land taxes in the first place. CA is simply where property taxes are the most ridiculously low (thanks to prop 13). Low interest rates has yield chasers looking for investments all over the globe. Additionally, most countries lowered their interest rates in response to the US doing so in order to prevent a sudden and sharp increase in their currencies via the carry trade.
    - yummyfajitas 11y ago
      NJ has property taxes 3x CA and has experienced a similar rise in prices. https://wallethub.com/edu/states-with-the-highest-and-lowest-property-taxes/11585/ https://wallethub.com/edu/states-with-the-highest-and-lowest... What evidence do you have that some change in property taxes (e.g. Prop 13) has occurred simultaneously and globally and is somehow related to skyrocketing land prices?
      - crdoconnor 11y ago
        Should I mention interest rates a third time? I presume you realize that New Jersey has the same interest rates as everywhere else in the US?
        yummyfajitas 11y ago
        I didn't disagree with you that low interest rates spur investment (including investment in land). It was the blaming foreigners and prop 13 that I was taking issue with.
- ArkyBeagle 11y ago
  Most likely. But we don't know. For all we know, what's driving property prices is out-of-area investment. It almost certainly isn't rising wages.
amelius 11y ago
> What is considered a house has changed significantly Houses have been relatively unchanged compared to other things like cars and computers. In fact, most people want little more than just a roof.
- frgewut 11y ago
  Underfloor heating, LED lighting, solar heaters, PV on the roof, heat pumps etc.
  - amelius 11y ago
    These are luxuries most people cannot afford.
    - deleted 11y ago
      [deleted]
  - Grishnakh 11y ago
    A lot of this is nothing new. Solar heaters were around in the 70s (though not that common), heat pumps have been around since the 70s, LED lighting has almost nothing to do with house construction (you just screw in an LED bulb now instead of a CF bulb or incandescent bulb, the Edison socket remains the same), and I don't think underfloor heating is all that common (nor is it new, they've had that since the 70s too). PV on the roof has nothing to do with house construction either; it's equally easy to add it to a new house as an old one. Heat pumps are really the only thing here which have a big effect on the design and construction of a house, because of the need for ducting, which really, really old houses usually don't have. But if your house is 40 years old or less, it was probably built with ducting for a central heating system of some kind, so putting in a heat pump isn't a big deal. Even on an old house, it's not that hard to retrofit one if you put the ducting in the attic. Face it, house construction really hasn't changed much in a century, and definitely not since the 1950s. We're (in the US) still using 2x4 lumber assembled on-site, making walls with gypsum board, etc. Even "manufactured houses" use most of the same techniques and materials.
imtringued 11y ago
In reality manufacturing costs of houses became cheaper. Prefabricated buildings are nowadays pretty popular in europe and can be built in a very short time.
- kuschku 11y ago
  Even brick & mortar houses became cheaper. Our 140m² house in a suburb of a German 300k city was only 180k€ right after the start of the financial crisis.

crdoconnor 11y ago

This is wrong. The drastic increase in land prices has been driven by untaxing land (e.g. prop 13), allowing the stream of rents derived from land monopolization to be privatized. That, combined with rock bottom interest rates (driving down mortgage requirements) and opening property markets to wealthy foreigners has driven up the cost of property in coastal cities precipitously. If interest rates and property taxes were jacked up, property prices would fall once again just as precipitously as they rose.

vostok 11y ago
I agree with most of your comment. I never understood the idea behind prop 13. A naive interpretation seems to be that it lowers taxes on the one item where dead weight loss is very low. This is in addition to the argument that it's a plain handout to the rentier class. >That, combined with rock bottom interest rates (driving down mortgage requirements) Do changes in interest rates affect underwriting requirements? I have to admit that I don't know anything about mortgages, but they always looked like volatility products to me. I do agree that the fall in interest rates has caused property prices to increase. This seems to be related to the fall in return on capital so it's unclear to me how rates might be "jacked up" and why that might be desirable.
- crdoconnor 11y ago
  >A naive interpretation seems to be that it lowers taxes on the one item where dead weight loss is very low. The deadweight loss of a land tax is zero until it's raised above the unimproved rental yield of the land. Lowering it is purely a mechanism for moving money into the pockets of land owners. A land tax is more efficient than a property tax, but a higher property tax approximates a land tax sufficiently that the deadweight loss is minimal. >Do changes in interest rates affect underwriting requirements? Yes, since with lower interest rates you can afford a more expensive property since your monthly repayments will be lower. That in turn pushes up the value of housing as people take out bigger and bigger mortgages to try and keep up with rising prices.
- gozur88 11y ago
  You can't understand prop 13 without understanding the environment in which it was passed. The price of houses was shooting up 20-30% a year, and people who had owned their houses for decades were being forced to sell because they couldn't pay the taxes. The idea that somehow a higher property tax will keep prices under control is not borne out by experience.
  - vkou 11y ago
    Why on earth were property taxes rising along with the price of housing? Instead of collecting a flat percentage of the home value, the cities/state could have just divided the taxes they were going to collect across all properties, proportionate to their value. Just because there's a property value boom doesn't mean that the regional budgets should expand by 20% year over year...
    - gozur88 11y ago
      Where I lived pre-prop 13 taxes were based purely on the assessed value of the house. If the assessed value doubled in five years, so did the taxes. And there was no cap on tax rates. I don't know if it was a state-level thing or if tax districts all did their own calculations back then.
  - eli_gottlieb 11y ago
    > You can't understand prop 13 without understanding the environment in which it was passed. The price of houses was shooting up 20-30% a year, and people who had owned their houses for decades were being forced to sell because they couldn't pay the taxes. Is that very different from the present day, in which there is very little property tax?
    - gozur88 11y ago
      That's my point. It wasn't different, so people who say getting rid of prop 13 will somehow cause house prices to fall are probably wrong.
yummyfajitas 11y ago
Land prices are skyrocketing in NY, CA, London, Mumbai, Delhi, Beijing and Singapore, among many other places. I didn't know that prop 13 applied in Beijing - I thought that was a CA law. I also didn't know that India and China changed their laws and allowed foreigners to buy land. Blame the foreigners! Trump 2016! Or if you happen to live in Maharashtra, yay MNS! Mumbai for Marathis! (For those unfamiliar, Trump is an American politician who believes Americans are lazy, greedy and stupid, and can't compete economically without violent thugs hindering the competition. MNS is a party that holds these same beliefs about Marathis.)
- crdoconnor 11y ago
  None of those cities had particularly high land taxes in the first place. CA is simply where property taxes are the most ridiculously low (thanks to prop 13). Low interest rates has yield chasers looking for investments all over the globe. Additionally, most countries lowered their interest rates in response to the US doing so in order to prevent a sudden and sharp increase in their currencies via the carry trade.
  - yummyfajitas 11y ago
    NJ has property taxes 3x CA and has experienced a similar rise in prices. https://wallethub.com/edu/states-with-the-highest-and-lowest-property-taxes/11585/ https://wallethub.com/edu/states-with-the-highest-and-lowest... What evidence do you have that some change in property taxes (e.g. Prop 13) has occurred simultaneously and globally and is somehow related to skyrocketing land prices?
    - crdoconnor 11y ago
      Should I mention interest rates a third time? I presume you realize that New Jersey has the same interest rates as everywhere else in the US?
      - yummyfajitas 11y ago
        I didn't disagree with you that low interest rates spur investment (including investment in land). It was the blaming foreigners and prop 13 that I was taking issue with.
ArkyBeagle 11y ago
Most likely. But we don't know. For all we know, what's driving property prices is out-of-area investment. It almost certainly isn't rising wages.

amelius 11y ago

> What is considered a house has changed significantly Houses have been relatively unchanged compared to other things like cars and computers. In fact, most people want little more than just a roof.

frgewut 11y ago
Underfloor heating, LED lighting, solar heaters, PV on the roof, heat pumps etc.
- amelius 11y ago
  These are luxuries most people cannot afford.
  - deleted 11y ago
    [deleted]
- Grishnakh 11y ago
  A lot of this is nothing new. Solar heaters were around in the 70s (though not that common), heat pumps have been around since the 70s, LED lighting has almost nothing to do with house construction (you just screw in an LED bulb now instead of a CF bulb or incandescent bulb, the Edison socket remains the same), and I don't think underfloor heating is all that common (nor is it new, they've had that since the 70s too). PV on the roof has nothing to do with house construction either; it's equally easy to add it to a new house as an old one. Heat pumps are really the only thing here which have a big effect on the design and construction of a house, because of the need for ducting, which really, really old houses usually don't have. But if your house is 40 years old or less, it was probably built with ducting for a central heating system of some kind, so putting in a heat pump isn't a big deal. Even on an old house, it's not that hard to retrofit one if you put the ducting in the attic. Face it, house construction really hasn't changed much in a century, and definitely not since the 1950s. We're (in the US) still using 2x4 lumber assembled on-site, making walls with gypsum board, etc. Even "manufactured houses" use most of the same techniques and materials.

imtringued 11y ago

In reality manufacturing costs of houses became cheaper. Prefabricated buildings are nowadays pretty popular in europe and can be built in a very short time.

kuschku 11y ago
Even brick & mortar houses became cheaper. Our 140m² house in a suburb of a German 300k city was only 180k€ right after the start of the financial crisis.