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> Assets that don't appreciate in value can be demolished and replaced with assets that do appreciate in value It's more complicated than that. An asset isn't

> Assets that don't appreciate in value can be demolished and replaced with assets that do appreciate in value It's more complicated than that. An asset isn't necessarily an investment. E.g. cars, merchandise, foodstuff etc. People need somewhere to live, so they'll keep building houses and people will keep buying them and living in them, even if the "smart money" is chasing higher returns. Now in the purest sense, someone with a family home could sell it and buy shares. Let's ignore leverage and say they fully own the home. That might be a smart thing to do. But there are other factors at play including tax, and including emotion and the practicalities of renting vs. owning. If you rent maybe you can get evicted more easily.

CryptoPunk 8y ago
>>An asset isn't necessarily an investment. E.g. cars, merchandise, foodstuff etc. People need somewhere to live, so they'll keep building houses and people will keep buying them and living in them, even if the "smart money" is chasing higher returns. Yes, people will still build houses, but you eliminate a vast number of more optimal arrangements by taking profit-motivated housing development out of the picture, and that results in less abundance of housing. Efficiency returns from specialization/division-of-labor, that is enabled by trade, is as close to an economic law as there is. And separating consumption of and investment into housing is a form specialization/division-of-labor. Many cities that have penalized or restricted profit motivated housing development have seen very serious negative repercussions for housing affordability. The assumption that long-held economic principles do not apply in a particular industry or sector is a very common one and almost always wrong.
bildung 8y ago
> An asset isn't necessarily an investment. E.g. cars, merchandise, foodstuff etc. Aren't those examples consumables, not assets? I always assumed assets are by definition things you invest in, not things you consume, but maybe I'm lost in translation here...
- zemo 8y ago
  An asset is just anything that has value that can be bought and sold. Those are all depreciating assets, but they're assets nonetheless. Are you thinking of securities?
zemo 8y ago
I said "can be", not "spontaneously cease to exist due to their non-appreciation". Homes don't explode the moment they stop appreciating in value. > An asset isn't necessarily an investment. E.g. cars, merchandise, foodstuff etc. um sure but the topic at hand is the rate of return on real estate assets, not "how to invest your money". Cars are a depreciating asset, and so what? That is not the topic being discussed. > People need somewhere to live ... Sure but again I don't know what about this statement is revelatory. Yes everyone needs shelter, we take that as axiomatic. > so they'll keep building houses ok but here's the thing: you actually can't take that for granted. Most people don't build their house, they buy one that already exists. The vast majority of people engage in real estate trade, not real estate construction. Real estate development is performed by a comparatively small number of actors, and they do it expressly for the purposes of profit. Yes, a majority of housing is owned for the purposes of residence, but that does not imply that a majority of real estate development is pursued for the purposes of occupancy by the person funding its development. People will only build houses for themselves if it's cheaper than buying on that already exists (or if they have some sort of requirements that can't be fulfilled by housing on the market, but again, the number of people hiring architects to design houses for them to live in is comparatively small).

CryptoPunk 8y ago

>>An asset isn't necessarily an investment. E.g. cars, merchandise, foodstuff etc. People need somewhere to live, so they'll keep building houses and people will keep buying them and living in them, even if the "smart money" is chasing higher returns. Yes, people will still build houses, but you eliminate a vast number of more optimal arrangements by taking profit-motivated housing development out of the picture, and that results in less abundance of housing. Efficiency returns from specialization/division-of-labor, that is enabled by trade, is as close to an economic law as there is. And separating consumption of and investment into housing is a form specialization/division-of-labor. Many cities that have penalized or restricted profit motivated housing development have seen very serious negative repercussions for housing affordability. The assumption that long-held economic principles do not apply in a particular industry or sector is a very common one and almost always wrong.

bildung 8y ago

> An asset isn't necessarily an investment. E.g. cars, merchandise, foodstuff etc. Aren't those examples consumables, not assets? I always assumed assets are by definition things you invest in, not things you consume, but maybe I'm lost in translation here...

zemo 8y ago
An asset is just anything that has value that can be bought and sold. Those are all depreciating assets, but they're assets nonetheless. Are you thinking of securities?

zemo 8y ago

I said "can be", not "spontaneously cease to exist due to their non-appreciation". Homes don't explode the moment they stop appreciating in value. > An asset isn't necessarily an investment. E.g. cars, merchandise, foodstuff etc. um sure but the topic at hand is the rate of return on real estate assets, not "how to invest your money". Cars are a depreciating asset, and so what? That is not the topic being discussed. > People need somewhere to live ... Sure but again I don't know what about this statement is revelatory. Yes everyone needs shelter, we take that as axiomatic. > so they'll keep building houses ok but here's the thing: you actually can't take that for granted. Most people don't build their house, they buy one that already exists. The vast majority of people engage in real estate trade, not real estate construction. Real estate development is performed by a comparatively small number of actors, and they do it expressly for the purposes of profit. Yes, a majority of housing is owned for the purposes of residence, but that does not imply that a majority of real estate development is pursued for the purposes of occupancy by the person funding its development. People will only build houses for themselves if it's cheaper than buying on that already exists (or if they have some sort of requirements that can't be fulfilled by housing on the market, but again, the number of people hiring architects to design houses for them to live in is comparatively small).