8 ms·

Just because I understand it differently from you doesn't mean I don't understand it. And I should be clear that I'm really lamenting about something bigger, w

Just because I understand it differently from you doesn't mean I don't understand it. And I should be clear that I'm really lamenting about something bigger, which is the tendency for "always defect" strategies to get normalized as "smart" in our collective economy's various prisoners' dilemmas. We suffer collectively because of it. More concretely: right now because of how cheap, bad quality mortgages artificially inflated housing prices around 2008, and again today, and because of the stagnancy of wages, most people I know cannot afford to buy or rent without compromising their well-being significantly. If "cheap" mortgages weren't so rampant, how would property values even have been able to inflate like they did? They wouldn't... it'd be a totally different market. I think home values would be much closer to their physical value, reflecting the state that they're in rather than some abstract, speculative potential value. There would be less incentive for speculators to hold on to them for the sake of "investing" and more reason for people to hold on to them for the sake of living in them. Just where does that money circulate back to? Right now it circulates back to the most wealthy, those who this article is talking about, those who are usurping their feudal lordships right now. Where I live, there is a housing trust that bars people from buying its houses to rent them, and protects houses from bubbles. When people want to sell the houses, they have to sell them through the trust, where the amount they could lose or gain from market fluctuations alone is capped at 25%. If they made improvements on the house, they are able to sell it at a higher value. The houses are significantly less than market value. And are much higher quality than rental properties.

conanbatt 9y ago
> right now because of how cheap, bad quality mortgages artificially inflated housing prices around 2008, and again today, and because of the stagnancy of wages, most people I know cannot afford to buy or rent without compromising their well-being significantly. If "cheap" mortgages weren't so rampant, how would property values even have been able to inflate like they did? They wouldn't... it'd be a totally different market. I think home values would be much closer to their physical value, reflecting the state that they're in rather than some abstract speculative. There would be less incentive for speculators to hold on to them for the sake of "investing" and more reason for people to hold on to them for the sake of living in them. There are several explanations to housing values being high today besides (and probably along) cheap credit. 1) 2008 crisis was devastating to construction and development rates in the U.S. and it hasn't caught up to demographic growth. That alone could cause a mid-long term increase in housing prices that can only subside if development outstrips demo-growth 2) There is a global effect of people moving to cities for jobs. Even if construction kept up, if people moved to the cities where its harder and more expensive to build, you would see wages lagging behind property prices, since the competition for both gets more fiercely concentrated. 3) There is a global effect of chinese money. Cities like vancouver and London are very aware that the influx of asian funds have fueled their local RE markets. Also, the era of cheap credit is ending, and the fed is slowing increasing the rates. They might be risking a crisis if they just jumped the credit a few points up, so this process can also take quite a while. > Where I live, there is a housing trust that bars people from buying its houses to rent them, and protects houses from bubbles. When people want to sell the houses, they have to sell them through the trust, where the amount they could lose or gain from market fluctuations alone is capped at 25%. If they made improvements on the house, they able to sell it at a higher value. The houses are significantly less than market value. And are much higher quality than rental properties. Any restriction of use of a commodity will reduce its value. Naturally, if you only allowed a housing unit to be rented out, it will also be of less value that one that doesn't have that restriction. In terms of housing, that is an equivalent to a price control, so those measures will tend to lower investment and availability, to, finally, in the end, cause higher prices than they would otherwise. Rent control is one classic case of this effect. Moreover, its not a scalable solution, and I'm fairly confident that it will show all the problems of trying to avoid market behavior: it might be hard to get in to the fund, it might end up causing a run in the case of a big down-turn where many people need to sell but the fund has overpromised, etc etc.
- macawfish 9y ago
  > Moreover, its not a scalable solution, and I'm fairly confident that it will show all the problems of trying to avoid market behavior: it might be hard to get in to the fund, it might end up causing a run in the case of a big down-turn where many people need to sell but the fund has overpromised, etc etc. What you're describing sounds exactly like the housing market under the rule of cheap mortgages and speculative investment. People having a hard time getting in, people having a hard time getting out without going bankrupt, these are all exactly what happened in the "free" housing market during the last decade. Anyway I don't understand how this program "avoids" market behavior. In your mind, is the free market somehow incomplete without a rentier class?
  - conanbatt 9y ago
    > What you're describing sounds exactly like the housing market under the rule of cheap mortgages and speculative investment. People having a hard time getting in, people having a hard time getting out without going bankrupt, these are all exactly what happened in the "free" housing market during the last decade. I don't see the same effects you mention. If we talk pre-2008, getting in was too easy. Post-2008, to 2012 the market had a typical rebound curve, those were all good times to jump in. Now its expensive again, which means demand has to subsidize and start balancing out with the supply. In 2009 i used to say argentina RE prices were too high for the population, and that some crash should happen. 2017 and it hasn't happened: its possible house prices as they are now are here to stay for a long time. > Anyway I don't understand how this program "avoids" market behavior. It tries to set its own prices by means of insurance. By making a fund that caps wins and losses, it doesn't prevent them, it just distributes them differently. There is pervasiveness to the concept of "you can't beat the market": it means that if you are, you are absorbing some risk or cost you don't see. i.e.: What if a crisis happened that lowered house prices 40% across the board: 100% of the community wants to sell in the fund, which has capped losses, and then buy property again, to make a neat 15%. Moroever if the market goes up, as soon as the market shows 25% improvement, there is a great incentive to sell, because your gains are capped. So when you are close to that limit, your biggest interest is to sell, specially if property taxes adjust to a standard different from the one the fund uses. Not to mention that you have to pay the people managing this fund one way or another: their labor does not come free. These are all risks and consequences that exist on that management style alone. > In your mind, is the free market somehow incomplete without a rentier class? Not at all. And in this fund case, the fund managers are the rentiers.

conanbatt 9y ago

> right now because of how cheap, bad quality mortgages artificially inflated housing prices around 2008, and again today, and because of the stagnancy of wages, most people I know cannot afford to buy or rent without compromising their well-being significantly. If "cheap" mortgages weren't so rampant, how would property values even have been able to inflate like they did? They wouldn't... it'd be a totally different market. I think home values would be much closer to their physical value, reflecting the state that they're in rather than some abstract speculative. There would be less incentive for speculators to hold on to them for the sake of "investing" and more reason for people to hold on to them for the sake of living in them. There are several explanations to housing values being high today besides (and probably along) cheap credit. 1) 2008 crisis was devastating to construction and development rates in the U.S. and it hasn't caught up to demographic growth. That alone could cause a mid-long term increase in housing prices that can only subside if development outstrips demo-growth 2) There is a global effect of people moving to cities for jobs. Even if construction kept up, if people moved to the cities where its harder and more expensive to build, you would see wages lagging behind property prices, since the competition for both gets more fiercely concentrated. 3) There is a global effect of chinese money. Cities like vancouver and London are very aware that the influx of asian funds have fueled their local RE markets. Also, the era of cheap credit is ending, and the fed is slowing increasing the rates. They might be risking a crisis if they just jumped the credit a few points up, so this process can also take quite a while. > Where I live, there is a housing trust that bars people from buying its houses to rent them, and protects houses from bubbles. When people want to sell the houses, they have to sell them through the trust, where the amount they could lose or gain from market fluctuations alone is capped at 25%. If they made improvements on the house, they able to sell it at a higher value. The houses are significantly less than market value. And are much higher quality than rental properties. Any restriction of use of a commodity will reduce its value. Naturally, if you only allowed a housing unit to be rented out, it will also be of less value that one that doesn't have that restriction. In terms of housing, that is an equivalent to a price control, so those measures will tend to lower investment and availability, to, finally, in the end, cause higher prices than they would otherwise. Rent control is one classic case of this effect. Moreover, its not a scalable solution, and I'm fairly confident that it will show all the problems of trying to avoid market behavior: it might be hard to get in to the fund, it might end up causing a run in the case of a big down-turn where many people need to sell but the fund has overpromised, etc etc.

macawfish 9y ago
> Moreover, its not a scalable solution, and I'm fairly confident that it will show all the problems of trying to avoid market behavior: it might be hard to get in to the fund, it might end up causing a run in the case of a big down-turn where many people need to sell but the fund has overpromised, etc etc. What you're describing sounds exactly like the housing market under the rule of cheap mortgages and speculative investment. People having a hard time getting in, people having a hard time getting out without going bankrupt, these are all exactly what happened in the "free" housing market during the last decade. Anyway I don't understand how this program "avoids" market behavior. In your mind, is the free market somehow incomplete without a rentier class?
- conanbatt 9y ago
  > What you're describing sounds exactly like the housing market under the rule of cheap mortgages and speculative investment. People having a hard time getting in, people having a hard time getting out without going bankrupt, these are all exactly what happened in the "free" housing market during the last decade. I don't see the same effects you mention. If we talk pre-2008, getting in was too easy. Post-2008, to 2012 the market had a typical rebound curve, those were all good times to jump in. Now its expensive again, which means demand has to subsidize and start balancing out with the supply. In 2009 i used to say argentina RE prices were too high for the population, and that some crash should happen. 2017 and it hasn't happened: its possible house prices as they are now are here to stay for a long time. > Anyway I don't understand how this program "avoids" market behavior. It tries to set its own prices by means of insurance. By making a fund that caps wins and losses, it doesn't prevent them, it just distributes them differently. There is pervasiveness to the concept of "you can't beat the market": it means that if you are, you are absorbing some risk or cost you don't see. i.e.: What if a crisis happened that lowered house prices 40% across the board: 100% of the community wants to sell in the fund, which has capped losses, and then buy property again, to make a neat 15%. Moroever if the market goes up, as soon as the market shows 25% improvement, there is a great incentive to sell, because your gains are capped. So when you are close to that limit, your biggest interest is to sell, specially if property taxes adjust to a standard different from the one the fund uses. Not to mention that you have to pay the people managing this fund one way or another: their labor does not come free. These are all risks and consequences that exist on that management style alone. > In your mind, is the free market somehow incomplete without a rentier class? Not at all. And in this fund case, the fund managers are the rentiers.