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I'm not sure you're entirely correct. A lot of people plan on downsizing their housing when they reach retirement age - Move somewhere smaller because you don't

I'm not sure you're entirely correct. A lot of people plan on downsizing their housing when they reach retirement age - Move somewhere smaller because you don't need to accommodate the kids any more, and further out of an urban center because you don't need to commute any more. This is a net positive - It frees up more valuable real estate in urban centers for working-age citizens to utilize, and extracts capital from the property for retirement-age citizens to finance their retirement. In this way, housing has been a stable and reliable investment for many for some time, and in a way that's beneficial to society as a whole. Quite different to what we're seeing here, an evolving dynamic which also threatens this model and puts people's retirement prospects in peril.

clairity 6y ago
that's a false dichotomy. you can support freeing up urban real estate and retirees downsizing without assuming a house is an investment. for instance, if the economic system acted to stabilize home values neutrally rather than explicitly promoting increasing valuations (through interest rates, and other mechanisms), you could still have those positive dynamics without the negative externalities.
- FooHentai 6y ago
  You're right. Ops position was that housing should not be seen as any kind of investment. My point was that, for retirees, housing is a valid investment vehicle and that dynamic is valuable to society as a whole. But on reflection, I'm thinking in the wrong terms here. I could better view this as housing being an important store of value for retirees, rather than an investment generating financial return for them.
  - clairity 6y ago
    exactly. i'm actually ok with a primary home being a modest investment (like 0-1%/year appreciation over inflation, but not 2+%), i'm unabashedly against naked wealth extraction via the corporatized investment mentality, leaving people homeless, or at the very least broadly overleveraged (a profoundly negative externality). there's also the oft-mentioned japanese view that homes are a depreciating asset, though land values remain quite high, so the asset class is still modestly investible, iirc.
- simonh 6y ago
  It’s not the economic system as such that drives up real estate prices, it’s us the people who want to live in a nicer house. We bid up the prices of real estate in competition with each other. It’s not some external sinister faceless policy monster, it’s the queues of people who line up to view properties for sale - us. I’m a Brit but we have this bad here at the moment. A house next to ours came on the market just last week, it wasn’t even listed inline yet but on day one the estate agent had a long list of people registered with them viewing the property all day and got four offers. It’s those people living in my area competing for property driving up house prices.
  - clairity 6y ago
    there's certainly fashionability, ego, and projection in homebuying that drives up bids, which can raise home prices in a given neighborhood over time, but that's largely because supply is artificially limited by things like regulatory capture and demand is distorted by economic policy promoting price inflation. for instance, low interest rates mean that more house can be bought at a given monthly payment amount (everyone seems to assume more is better), which is the economic basis of that ratcheting you're describing.
jussij 6y ago
What you are describing is 'owning your own home can be a good long term investment' which is generally true. However, that is not really a good description of the property investment the OP was referring to. The OP was describing the situation where one individual owns many properties for the sake of investment. It is that scenario it is the investor demand for properties that is driving up the property price making them unaffordable. What's worse is this situation is self-inflating. As a property investor with a handful of properties, you're in a good position to go to the bank, get a further loan to buy yet another property. That then drives up the property price, which drives up value of your existing property assets, which then allows you to get an additional loan for yet another property. This also means, people without that collateral backing have a much harder time getting their first property and when they do they pay a much higher price. That bubble will continue to grow while interest rates remains low.

clairity 6y ago

that's a false dichotomy. you can support freeing up urban real estate and retirees downsizing without assuming a house is an investment. for instance, if the economic system acted to stabilize home values neutrally rather than explicitly promoting increasing valuations (through interest rates, and other mechanisms), you could still have those positive dynamics without the negative externalities.

FooHentai 6y ago
You're right. Ops position was that housing should not be seen as any kind of investment. My point was that, for retirees, housing is a valid investment vehicle and that dynamic is valuable to society as a whole. But on reflection, I'm thinking in the wrong terms here. I could better view this as housing being an important store of value for retirees, rather than an investment generating financial return for them.
- clairity 6y ago
  exactly. i'm actually ok with a primary home being a modest investment (like 0-1%/year appreciation over inflation, but not 2+%), i'm unabashedly against naked wealth extraction via the corporatized investment mentality, leaving people homeless, or at the very least broadly overleveraged (a profoundly negative externality). there's also the oft-mentioned japanese view that homes are a depreciating asset, though land values remain quite high, so the asset class is still modestly investible, iirc.
simonh 6y ago
It’s not the economic system as such that drives up real estate prices, it’s us the people who want to live in a nicer house. We bid up the prices of real estate in competition with each other. It’s not some external sinister faceless policy monster, it’s the queues of people who line up to view properties for sale - us. I’m a Brit but we have this bad here at the moment. A house next to ours came on the market just last week, it wasn’t even listed inline yet but on day one the estate agent had a long list of people registered with them viewing the property all day and got four offers. It’s those people living in my area competing for property driving up house prices.
- clairity 6y ago
  there's certainly fashionability, ego, and projection in homebuying that drives up bids, which can raise home prices in a given neighborhood over time, but that's largely because supply is artificially limited by things like regulatory capture and demand is distorted by economic policy promoting price inflation. for instance, low interest rates mean that more house can be bought at a given monthly payment amount (everyone seems to assume more is better), which is the economic basis of that ratcheting you're describing.

jussij 6y ago

What you are describing is 'owning your own home can be a good long term investment' which is generally true. However, that is not really a good description of the property investment the OP was referring to. The OP was describing the situation where one individual owns many properties for the sake of investment. It is that scenario it is the investor demand for properties that is driving up the property price making them unaffordable. What's worse is this situation is self-inflating. As a property investor with a handful of properties, you're in a good position to go to the bank, get a further loan to buy yet another property. That then drives up the property price, which drives up value of your existing property assets, which then allows you to get an additional loan for yet another property. This also means, people without that collateral backing have a much harder time getting their first property and when they do they pay a much higher price. That bubble will continue to grow while interest rates remains low.