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Prices can go up but rent doesn't have to. Price to rent ratios are huge in California because speculative demand far outstrips actual demand. Most landlords a
by rcpt 5y ago
Prices can go up but rent doesn't have to.
Price to rent ratios are huge in California because speculative demand far outstrips actual demand. Most landlords are cash flow negative and own only so they can bet on equity wins.
- rufus_foreman 5y ago>> Most landlords are cash flow negative and own only so they can bet on equity wins That's the "Ponzi financing" phase of Minsky's financial instability cycle. It typically does not end well.
- rcpt 5y agoInteresting. What's a good source on this? California really does feel like 80s Japan sometimes but I can't say exactly why
- rufus_foreman 5y agoThere's an Economist summary from 2016 at https://www.economist.com/schools-brief/2016/07/30/minskys-moment https://www.economist.com/schools-brief/2016/07/30/minskys-m.... The depressing part of his theory is that in his view, stability causes instability. If something is growing predictably, people start increasing their use of leverage until even a decline in the rate of growth will cause a crash.
- rcpt 5y agoHey thanks