7 ms·

I believe as long as there are people who make much more money than they can invest productively in non-housing they will keeping buying houses and drive prices

• atomical 8y ago
  There are always investment opportunities outside of housing. Just look at Warren Buffett and Charlie Munger.
  • maxxxxx 8y ago
    Why do a lot of the millionaires and billionaires buy overpriced housing in London, Vancouver and other places instead of investing in something else? Speaking about too much money: Companies like Apple sit on hundreds of billions of dollars and don't know what to do with it. Theoretically they should invest it in new profitable products but they don't.
    • nopinsight 8y ago
      Can/do any of these companies with excess cash invest in the housing market perhaps through funds like REIT (for better liquidity than direct purchases)? It looks like a good diversification from bonds if chosen judiciously but there could be regulatory reasons not to do it.
    • crooked-v 8y ago
      > Why do a lot of the millionaires and billionaires buy overpriced housing in London, Vancouver and other places instead of investing in something else? Having a big house is nice. Living in a major city is nice. The combination of the two is very nice, but expensive.
      • PeterisP 8y ago
        The whole point of questioning "millionaires and billionaires buy overpriced housing in London, Vancouver and other places" is that it's not about living there - overwhelmingly, they just buy housing. They don't live in these places, they don't intend to live in these places not even when visiting that city, they either get rented out but often simply stay empty. In the top end housing of e.g. London the prices get set by people for whom it's purely an investment, not about having a fancy home.
    • dawhizkid 8y ago
      Because it can be safer to park their money in countries with strong private land ownership laws than keep it in their own country, even if the home drops in price a bit i.e. Chinese buyers.
      • apatters 8y ago
        I don't understand why this comment was downvoted--my understanding has been that a major component of rising housing prices globally is Chinese investors wanting to move their money out of the Chinese economy and into something they perceive as more stable, less corrupt etc.
        • pessimizer 8y ago
          > Chinese investors wanting to move their money out of the Chinese economy and into something they perceive as more stable, less corrupt etc. That's an extremely favorable reading of the Chinese(Russian, African, South American, etc.) buyers and of the markets they're buying into. These are often, and I would argue largely, the corrupt connected elites who dominate corrupt economies trying to move money out of their countries before losing power, being caught, or before disasters in their local economies cause their investors to attempt to cash out. They are helped by a west that has lost manufacturing capacity and largely survives economically by circular credit scams that need a constant influx of these colonial resources to maintain the illusion of growth. The best thing about real estate is that it never goes to zero; the best thing about western real estate is that your networks of accounts and holding companies will never be seriously investigated, because skimming from and taking commissions from transactions between those things is the only inflow of wealth, source of new investments, and source of political contributions. You can also let your kids live in it while they're going to school in London and NY.
    • mtgx 8y ago
      Worse than that. They sit on hundreds of billions of dollars but still borrow money in the tens of billions thanks to fed's still very low interest rate. If that's not systemic issue I don't know what is.
      • toast0 8y ago
        Sitting on money in foreign accounts and borrowing US dollars to pay dividends was to avoid incuring tax on repatriation. That shouldn't need to happen anymore since taxation on foreign income is no longer deferrable by delaying repatriation. I still expect companies with lots of cash to borrow for some expenses and anyway keep large lines of credit open, but it would be strange to borrow to pay a divident if you already have more than enough cash on hand.
    • a3n 8y ago
      Real estate is an excellent way to launder or park money.
    • loeg 8y ago
      They've already made it — they care about stability more than growth.
      • maxxxxx 8y ago
        But we are told if we just give them enough tax cuts they will invest and "create" jobs.
    • sunstone 8y ago
      The super rich don't really care much about the cost of the house they live in. They just pay what they have to pay to get the house they want. Overall this cost represents a small percentage of their net worth. That's why they don't care if it's over priced or not. Any other house in any other market where they don't personally want to live get's a different assessment.
    • CydeWeys 8y ago
      Some of it is really that they have an unbelievable amount of money and it's hard to spend it. Even really nice cars tend to max out around a million, and if you have billions that's nothing. Hence why you see people spending hundreds of millions on yachts that they rarely use, too. It's a good way to spend (and be seen spending) vast sums of wealth. So too are really luxurious apartments in the world's elite cities.
    • wbl 8y ago
      Where else would they buy? Agglomeration economics are real. No one is going to make Merthyr Tydfil great again.
  • repsilat 8y ago
    Buffett has been candid about not being able to find good investment opportunities lately... Berkshire is sitting on a mountain of dry powder (in short term Treasuries) and iirc has (shockingly for them) considered buybacks or dividends because they say everything is overpriced.
    • deleted 8y ago
      [deleted]
    • atomical 8y ago
      That's completely different. They are waiting for the best possible deals during an economic downtown -- something that they have always done. They will continue to buy stocks.
• JumpCrisscross 8y ago
  From the data I’ve reviewed, this is generationally biased. Older people like buying houses. Younger people, when one restricts the population to those who can afford it, don’t show as strong of a bias.
  • netheril96 8y ago
    Maybe because the young people are facing a higher housing prices, and they don't believe that it could raise for the same amount in the future.
    • isostatic 8y ago
      Maybe Young people are more mobile. The security of buying a house is beneficial when you’ve got kids at school. When you don’t mind where you live as long as there WiFi and transport renting is beneficial, you can move across country on a whim.
      • ido 8y ago
        Well, young & old in this context roughly translates to millennials & baby boomers. It is the former that are more likely to have kids in school, not the latter.
      • closeparen 8y ago
        If you require public transit, there are only a handful of places you can live, each with unique and volatile conditions that make owning especially attractive. It’s suburban sprawl which is almost perfectly fungible nationwide.
        • toast0 8y ago
          Depending on the type of transit, owning near the stop is only attractive until the transit operator eliminates your stop or your route.
      • coldtea 8y ago
• tlb 8y ago
  There's no such thing as "more than you can invest". Investment in public stocks scales very well -- $100B is no problem. Directly owning real estate, on the other hand, doesn't scale that well. You need to hire property managers, and deal with municipal tax and assessments for each property. If you own several properties, you have to deal with hurricanes and earthquakes and fires and local zoning officials more often than you'd like.
  • iamgopal 8y ago
    So people who are working under this public stock company will buy more house. Stock is not a physical investment, but indirectly converted to such.
    • thaumasiotes 8y ago
      That's... extremely indirect. When you buy a public stock, there is no flow of money from you to the company. That's stock they already sold to someone else, a long time ago.
  • ixacto 8y ago
    Owning raw realestate requres management, like any other business. but there are REIT. I'd much, much rather have 5 million in a vanguard REIT than Seattle/SF realestate...
    • tehlike 8y ago
      Taking loan on a reit isa different issue, however.
      • kokey 8y ago
        It would be similar if they allowed people to use their ownership of stocks and index funds to use as leverage to borrow funds to buy more stocks. They could borrow based on the risk ratings of stocks, and everyone knows it's a fact that index funds are the safest investment out there so the risk on that should be close to 0 and allow the biggest leverage. I'm going to stop right there, I'm starting to frighten myself.
• bradleyjg 8y ago
  I don’t think this is a great explanation. If this was driven by income inequality and investment dollars looking for investments we would expect the individual home ownership rate to fall as large investment funds bought up homes as investments. Instead the homeownership rate has been climbing for the last 2.5 years. I believe the better explanation is the Federal government. Both in the form of extraordinary easy monetary policy and in the form of extraordinarily generous mortgage lending terms in its role as far and away the largest owner/guarantor of residential mortgages.
  • zanny 8y ago
    The thing is the property bubble is predominantly in cities. And those properties are much more rarely mortgaged - its kind of an all or nothing deal if you can outright buy a multi-million dollar condo or not, banks are much less willing to mortgage one. And there the prices are only going up due to NIMBYism about building for density. There is sea change in our cultural dynamics that is following in the wake of widespread adoption of technology and the Internet - we aren't isolating ourselves on quarter acre copy pasted plots an hour long commute by car from the office, we want to live in 500 square feet of space a few miles by bike or one station away from our office. We marry less, we have less kids, but there is absolutely nobody building anything for this demographic. In an even more broader context we should be incentivizing people to live as close to peak urbanization because its the optimization of the cost to house and maintain people. People are cheaper for all of society and for nature abroad if they live closer in denser housing with more public infrastructure to support them than to have them living in repeated stick and glue mcmansions on HOA mandated lawns that require a thousand liters of water a year to keep green in the midwest. We are literally doing the opposite of what we should, and its going to cost economic growth for our entire lives in all likelihood.
    • Latteland 8y ago
      My experience in Seattle is different. Almost every house or condo in the east side or Seattle is a million plus, and it's really common to put 500k toward one, and pay a substantial mortgage (more than half a mil). So these can be lost with reduction in value combined with a short term mortgage that needs to refinanced, like happened in 2008. If you are a software engineering with 5-10 years experience and a family looking for a house you are in this game probably. These people have a good job but they don't need and often don't have money to cover the rest of their house. I agree with the comment about lack of density in housing leads to these prices (cause people keep freaking moving here). And the point about not much housing being built for people leaving in smaller apartments like 500 sq ft in the dense area applies here. There seems to be mostly refurbished old housing in that range. I guess developers don't think there's a market for that (single person?) or they can't make money or both. I think we need all these kinds of housing (higher density, also smaller places closer to work and transit). People don't priotize transit enough in purchases I think, but of course you can only buy what's built in condos.