4 ms·

> If we all worked 3 days a week it would be enough to pay the rent. If we all worked 7 days a week it would be enough to pay the rent. This is wrong. The reas

by dlss 10y ago

> If we all worked 3 days a week it would be enough to pay the rent. If we all worked 7 days a week it would be enough to pay the rent. This is wrong. The reason rent is going up is because there's more demand than supply. Reducing the amount of money everyone has by a constant factor (in this case 3/5) will not change the supply/demand imbalance, so it won't solve the problem. Put another way: the reason rent is so high is to prevent some people from being able to purchase the product. There's not enough of it to go around. You're basically blaming the best known system for allocating scarce goods for the fact that scarce goods exist. If you look at countries that try to act on the above notion, you'll find that high prices are replaced with impossibly long lines. And shortages. This is because reducing the price will only increase the demand for that good. A better world view would be: if the baby boomers hadn't all had kids at the same time, we wouldn't be experiencing housing shortages. This theory (though incomplete) at least puts demand increases front and center. You could also blame cities for not allowing/supporting the construction of new housing. That theory (though incomplete) at least puts the supply shortages front and center.

branchless 10y ago
Rents are set by wages, prices by credit. http://i.imgur.com/oWxV1po.jpg http://i.imgur.com/oWxV1po.jpg People live in one home, whether we work 3 or 7 days. You are confusing cheaper products garnering more demand with a flat need. This is why we should tax land: the supply is constant. Demand is up due to financialization of housing by the banks and greedy landlords are their foot soldiers. Edit can submit no more due to the usual HN censorship so this last edit for the guy below: You are just talking across me with no regard to my point at all. The graph is from the ft and the y axis is linear, it's from 2012 with no cutoff due to a change in trend. I'm not saying don't compete, my earlier post stated that when we all work more or smarter in aggregate the banks take the gains and we all end up running to stand still. That was my point.
- dlss 10y ago
  > Rents are set by wages, prices by credit. NO. Prices are set by supply and demand. No one is being forced to take out a loan, and if they could buy a given home with a lower loan, they would. Hence the loan is only enabling demand. You could say the same thing about employment, or inheritance, or tax breaks. The only reason prices change is because supply or demand changes. You are basically saying that you'd like everyone to just accept their lot in life, and not compete with you for your current house. And in exchange you'll not compete with those in houses you'd prefer. And you're blaming the banks because they're helping those who don't agree that you deserve the hose more than they do. When supply is scarce, prices go up. The value of the good does not go up. What is that extra price doing? That's you bribing the owner of the good to sell to you, and not to some other guy. You're paying to make the price so high that the next guy in line would rather live somewhere else, share a room, or go homeless. > http://i.imgur.com/oWxV1po.jpg http://i.imgur.com/oWxV1po.jpg The image, though interesting looking, is missing context. What units is the Y-axis in, and why does the X-axis only go to (what I assume is) 2012? > People live in one home, whether we work 3 or 7 days. People aren't born with homes. If you lost yours, someone would move in. Where do you think this other person is currently living? Why do you deserve your home more than they do? How should homes be allocated if not by whoever is willing and able to pay the most? Who will make new homes in this new system of yours? (an especially worrying problem since I think you suggested all the construction workers only need to work 3 days per week, and housing is already scarce)
  - candiodari 10y ago
    > Hence the loan is only enabling demand. > The only reason prices change is because supply or demand changes. We are living in year 16 of the era of government pushing loan prices lower than the market would set them. 8th year since they've been pushing the loan pricing down VERY hard (ie. essentially to the zero bound, where you're only paying for the (also artificially lowered) risk of the banks, admin (ie. people employed to check payment and tax and ...) and a small profit margin for the banks). While of course it is not really known how high the market would set loan prices, it seems the long term average is 4%. Since we've been below that for a while, let's call it 6%. Add the 3%-4% of risk, admin, tax and bank profit and mortgage rates should be somewhere between 8% and 10%, if you have really good credit. What would house prices be with 9% interest rates instead of 3% ? That's quite normal a rate for mortgages, long term. My back of the envelope calculation says that they'd be, with the same monthly payment, a bit more than double what they should be, in market prices. Prices should be 60% less, or put it another way houses are 120% overvalued. At a very optimistic 7% (the long term average), house prices would be about 45% less, or they're 75% overvalued. (example calculation: with 3% mortgage payment, a 4000$ monthly payment will get you 1.12 million dollars, at 9% it will get you 0.52 million dollars, or a little less than half. At 7% it will get you 0.8 million dollars, or 45% less) Hence I strongly disagree with your notion that house prices are determined by supply and demand. House princes are as high as the government can get them, and damn the consequences.
    - dlss 10y ago
      I mean, in some sense you're right. The literal USD figure is determined that way. However, if you doubled the number of dollars in circulation, and so "doubled the cost" of every home... you've also changed nothing in terms of real cost to consumers. As you say, they're still working just as many hours on the job, still giving the same percentage of their labor to the lender, and they still end up with a house at the end of ~xx years. If the banks weren't giving the same risk adjusted rates to everyone, you can at least make the argument now that you've got two consumers (the bank is essentially donating money for the purchase to the buyer). But I don't see where that gets us here.

by dlss 10y ago

branchless 10y ago

Rents are set by wages, prices by credit. http://i.imgur.com/oWxV1po.jpg http://i.imgur.com/oWxV1po.jpg People live in one home, whether we work 3 or 7 days. You are confusing cheaper products garnering more demand with a flat need. This is why we should tax land: the supply is constant. Demand is up due to financialization of housing by the banks and greedy landlords are their foot soldiers. Edit can submit no more due to the usual HN censorship so this last edit for the guy below: You are just talking across me with no regard to my point at all. The graph is from the ft and the y axis is linear, it's from 2012 with no cutoff due to a change in trend. I'm not saying don't compete, my earlier post stated that when we all work more or smarter in aggregate the banks take the gains and we all end up running to stand still. That was my point.

dlss 10y ago
> Rents are set by wages, prices by credit. NO. Prices are set by supply and demand. No one is being forced to take out a loan, and if they could buy a given home with a lower loan, they would. Hence the loan is only enabling demand. You could say the same thing about employment, or inheritance, or tax breaks. The only reason prices change is because supply or demand changes. You are basically saying that you'd like everyone to just accept their lot in life, and not compete with you for your current house. And in exchange you'll not compete with those in houses you'd prefer. And you're blaming the banks because they're helping those who don't agree that you deserve the hose more than they do. When supply is scarce, prices go up. The value of the good does not go up. What is that extra price doing? That's you bribing the owner of the good to sell to you, and not to some other guy. You're paying to make the price so high that the next guy in line would rather live somewhere else, share a room, or go homeless. > http://i.imgur.com/oWxV1po.jpg http://i.imgur.com/oWxV1po.jpg The image, though interesting looking, is missing context. What units is the Y-axis in, and why does the X-axis only go to (what I assume is) 2012? > People live in one home, whether we work 3 or 7 days. People aren't born with homes. If you lost yours, someone would move in. Where do you think this other person is currently living? Why do you deserve your home more than they do? How should homes be allocated if not by whoever is willing and able to pay the most? Who will make new homes in this new system of yours? (an especially worrying problem since I think you suggested all the construction workers only need to work 3 days per week, and housing is already scarce)
- candiodari 10y ago
  > Hence the loan is only enabling demand. > The only reason prices change is because supply or demand changes. We are living in year 16 of the era of government pushing loan prices lower than the market would set them. 8th year since they've been pushing the loan pricing down VERY hard (ie. essentially to the zero bound, where you're only paying for the (also artificially lowered) risk of the banks, admin (ie. people employed to check payment and tax and ...) and a small profit margin for the banks). While of course it is not really known how high the market would set loan prices, it seems the long term average is 4%. Since we've been below that for a while, let's call it 6%. Add the 3%-4% of risk, admin, tax and bank profit and mortgage rates should be somewhere between 8% and 10%, if you have really good credit. What would house prices be with 9% interest rates instead of 3% ? That's quite normal a rate for mortgages, long term. My back of the envelope calculation says that they'd be, with the same monthly payment, a bit more than double what they should be, in market prices. Prices should be 60% less, or put it another way houses are 120% overvalued. At a very optimistic 7% (the long term average), house prices would be about 45% less, or they're 75% overvalued. (example calculation: with 3% mortgage payment, a 4000$ monthly payment will get you 1.12 million dollars, at 9% it will get you 0.52 million dollars, or a little less than half. At 7% it will get you 0.8 million dollars, or 45% less) Hence I strongly disagree with your notion that house prices are determined by supply and demand. House princes are as high as the government can get them, and damn the consequences.
  - dlss 10y ago
    I mean, in some sense you're right. The literal USD figure is determined that way. However, if you doubled the number of dollars in circulation, and so "doubled the cost" of every home... you've also changed nothing in terms of real cost to consumers. As you say, they're still working just as many hours on the job, still giving the same percentage of their labor to the lender, and they still end up with a house at the end of ~xx years. If the banks weren't giving the same risk adjusted rates to everyone, you can at least make the argument now that you've got two consumers (the bank is essentially donating money for the purchase to the buyer). But I don't see where that gets us here.