5 ms·

Profitable means we get more and more houses being built.

by xwdv 5y ago

reportingsjr 5y ago
Except due to insane zoning rules and an ever greater push for exurban housing, which is insanely expensive due to the infrastructure required, we are not getting nearly enough housing.
nicoburns 5y ago
The way to make them affordable rather than profitable would be to build many more than are currently being built. As long as the quality is decent, you then drive the prices down through a simple increase in supply. You probably still need some tweaks to disincentivise use of property as a financial vehicle, but you're 70% there just by building more.
- darepublic 5y ago
  Unless something still manipulates the price, as in the diamond market.
BreakfastB0b 5y ago
You would think so. But once again, how can housing continue to be profitable i.e. grow faster than wages, and people still afford to buy houses? Doesn’t it collapse at some point? Isn’t that the joke about only economists think that exponential growth can continue forever? Most of my peers are either completely priced out of the market, or taking on 40yr or interest only loans. It seems like the market is currently a game of chicken of who’s willing to sign away more of their life. An interest only loan is literally admitting you can’t afford this house and the only hope you ever have of paying it off is if it increases in value without you doing anything.
- xxpor 5y ago
  Profitable by owning and sitting on an asset != Profitable for a builder to buy land and build a house. You can have one without the other.
  - BreakfastB0b 5y ago
    Totally agree. The government should have a policy goal of keeping house prices stable relative to inflation. But when multiple generations have locked up most of their wealth into housing, it’s unclear how to untangle the whole mess without collapsing the economy.
    - nickcox 5y ago
      Also without losing votes from the people with property equity (i.e. the majority of the electorate).
- maccard 5y ago
  > Most of my peers are either completely priced out of the market, or taking on 40yr or interest only loans. These interest only are the reason my parents lived in a house 2x what they could afford - they took out an interest only mortgage in 2002, paid less on the mortgage than I was paying in rent for a room in an apartment last year, and sold at a 2.5x gain (to someone in my generation who is now mortgaged to the hilt), and bought a smaller home in cash from the proceeds after retirement. It's insanely unfair that the solution to irresponsible lending to my parents generation is to protect their investments and make sure I can pay back what they won't be able to repay.
- nostrademons 5y ago
  Exponential growth can continue forever if you shrink the universe of things you're measuring and declare the losers out-of-scope. Europe, by the 1500s, was running out of land and resources. So they found a whole new continent, genocided the native inhabitants, and suddenly there's plenty of land & resources to support anyone who comes over to the New World. America by about 1880 was about out of land for westward expansion, so invented steel, concrete, elevators, skyscrapers, trains, and urbanized, making land irrelevant. The industrial revolution had largely run its course by 1914, but then we had 2 world wars that devastated Europe and made America the engine of rebuilding. We got to keep our exponential growth, but a lot of folks just...died. Single-family homes are likely to become a luxury good. Not everyone is going to have them, and prices will keep increasing as they move up the income spectrum. What happens to everyone else depends on whether you believe the world will end in fire (war) or ice (dystopia).
  - BreakfastB0b 5y ago
    Malthusian conditions keep me up at night. Most countries birth rate falls off as they become more developed. There’s estimates that the world population will stabilise around 11 billion. I don’t think there’s any theoretical reason why high quality affordable high density housing is impossible.
    - nostrademons 5y ago
      It won't be SFHs though, and it remains to be seen whether Americans will accept that without conflict. A condo/apartment future is actually pretty likely, and achievable. NYC and most of the non-US world went that way in the 50s, and a lot of Silicon Valley cities (which were previously all suburban sprawl) have been constructing those 4-over-1 condos like crazy over the last 10 years. Even notoriously anti-development SF Peninsula cities have gotten in on it. But that's largely not where the real estate feeding frenzy is - condo prices are up, but nowhere near as much as SFHs. Turns out a large proportion of Millennials still want a detached house with a yard in a good school district, the same thing that the past several generations wanted, but that dream is increasingly unrealistic.
cshokie 5y ago
If homes are a profit-seeking investment then supply and demand would incentivize lower supply. If new houses cannot be built, but the demand is the same or increasing, then prices must rise. The profit motive directly leads some people to fight against new housing.
- jvfujnvxvcd 5y ago
  Quite frankly I don't think any of you in this thread have any idea what you're talking about
  - BreakfastB0b 5y ago
    That’s true! I’m not an economist or a policy expert. I don’t claim to have any answers. I’m just pointing out that profitability and affordability are mutually exclusive goals for housing prices. I leave it to people much smarter than myself to figure out if anything can or should be done.
mixmastamyk 5y ago
Nimbys don’t allow it.
tfehring 5y ago
Profitable to build != profitable to hold.
duped 5y ago
housing is most profitable when there is the least new construction.
kelnos 5y ago
I assume you are saying this to claim that if housing is "merely" affordable, no one will be incentivized to build houses. That's not really how it works. Developers can make a profit when building new housing on vacant land, or on improving existing housing. That does not preclude the resulting housing from being affordable, though. This is an unfortunate overloading of terms, but "profitable" in this sense doesn't mean just the usual "get more money out than you put in". It refers to the practice of land/housing speculation, and buying housing with the intent to hold and then sell at a profit without doing anything meaningful with it.

Profitable means we get more and more houses being built.

by xwdv 5y ago

Profitable means we get more and more houses being built.

Except due to insane zoning rules and an ever greater push for exurban housing, which is insanely expensive due to the infrastructure required, we are not getting nearly enough housing.

nicoburns 5y ago

The way to make them affordable rather than profitable would be to build many more than are currently being built. As long as the quality is decent, you then drive the prices down through a simple increase in supply. You probably still need some tweaks to disincentivise use of property as a financial vehicle, but you're 70% there just by building more.

darepublic 5y ago
Unless something still manipulates the price, as in the diamond market.

BreakfastB0b 5y ago

You would think so. But once again, how can housing continue to be profitable i.e. grow faster than wages, and people still afford to buy houses? Doesn’t it collapse at some point? Isn’t that the joke about only economists think that exponential growth can continue forever? Most of my peers are either completely priced out of the market, or taking on 40yr or interest only loans. It seems like the market is currently a game of chicken of who’s willing to sign away more of their life. An interest only loan is literally admitting you can’t afford this house and the only hope you ever have of paying it off is if it increases in value without you doing anything.

xxpor 5y ago
Profitable by owning and sitting on an asset != Profitable for a builder to buy land and build a house. You can have one without the other.
- BreakfastB0b 5y ago
  Totally agree. The government should have a policy goal of keeping house prices stable relative to inflation. But when multiple generations have locked up most of their wealth into housing, it’s unclear how to untangle the whole mess without collapsing the economy.
  - nickcox 5y ago
    Also without losing votes from the people with property equity (i.e. the majority of the electorate).
maccard 5y ago
> Most of my peers are either completely priced out of the market, or taking on 40yr or interest only loans. These interest only are the reason my parents lived in a house 2x what they could afford - they took out an interest only mortgage in 2002, paid less on the mortgage than I was paying in rent for a room in an apartment last year, and sold at a 2.5x gain (to someone in my generation who is now mortgaged to the hilt), and bought a smaller home in cash from the proceeds after retirement. It's insanely unfair that the solution to irresponsible lending to my parents generation is to protect their investments and make sure I can pay back what they won't be able to repay.
nostrademons 5y ago
Exponential growth can continue forever if you shrink the universe of things you're measuring and declare the losers out-of-scope. Europe, by the 1500s, was running out of land and resources. So they found a whole new continent, genocided the native inhabitants, and suddenly there's plenty of land & resources to support anyone who comes over to the New World. America by about 1880 was about out of land for westward expansion, so invented steel, concrete, elevators, skyscrapers, trains, and urbanized, making land irrelevant. The industrial revolution had largely run its course by 1914, but then we had 2 world wars that devastated Europe and made America the engine of rebuilding. We got to keep our exponential growth, but a lot of folks just...died. Single-family homes are likely to become a luxury good. Not everyone is going to have them, and prices will keep increasing as they move up the income spectrum. What happens to everyone else depends on whether you believe the world will end in fire (war) or ice (dystopia).
- BreakfastB0b 5y ago
  Malthusian conditions keep me up at night. Most countries birth rate falls off as they become more developed. There’s estimates that the world population will stabilise around 11 billion. I don’t think there’s any theoretical reason why high quality affordable high density housing is impossible.
  - nostrademons 5y ago
    It won't be SFHs though, and it remains to be seen whether Americans will accept that without conflict. A condo/apartment future is actually pretty likely, and achievable. NYC and most of the non-US world went that way in the 50s, and a lot of Silicon Valley cities (which were previously all suburban sprawl) have been constructing those 4-over-1 condos like crazy over the last 10 years. Even notoriously anti-development SF Peninsula cities have gotten in on it. But that's largely not where the real estate feeding frenzy is - condo prices are up, but nowhere near as much as SFHs. Turns out a large proportion of Millennials still want a detached house with a yard in a good school district, the same thing that the past several generations wanted, but that dream is increasingly unrealistic.

cshokie 5y ago

If homes are a profit-seeking investment then supply and demand would incentivize lower supply. If new houses cannot be built, but the demand is the same or increasing, then prices must rise. The profit motive directly leads some people to fight against new housing.

jvfujnvxvcd 5y ago
Quite frankly I don't think any of you in this thread have any idea what you're talking about
- BreakfastB0b 5y ago
  That’s true! I’m not an economist or a policy expert. I don’t claim to have any answers. I’m just pointing out that profitability and affordability are mutually exclusive goals for housing prices. I leave it to people much smarter than myself to figure out if anything can or should be done.

mixmastamyk 5y ago

Nimbys don’t allow it.

tfehring 5y ago

Profitable to build != profitable to hold.

duped 5y ago

housing is most profitable when there is the least new construction.

kelnos 5y ago

I assume you are saying this to claim that if housing is "merely" affordable, no one will be incentivized to build houses. That's not really how it works. Developers can make a profit when building new housing on vacant land, or on improving existing housing. That does not preclude the resulting housing from being affordable, though. This is an unfortunate overloading of terms, but "profitable" in this sense doesn't mean just the usual "get more money out than you put in". It refers to the practice of land/housing speculation, and buying housing with the intent to hold and then sell at a profit without doing anything meaningful with it.