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The problem with this logic is that there is literally infinite demand assuming the following premises: 1) Real-estate is a long-term positive return investmen
by r00fus 5y ago
The problem with this logic is that there is literally infinite demand assuming the following premises:
1) Real-estate is a long-term positive return investment
2) The USG will do anything in it's power to keep that premise #1 valid (QE, low/negative interest rates, etc)
3) You can use real-estate equity as part of leverage to buy more real-estate.
4) Foreign investment is allowed, so the system isn't a closed loop
It's a bubble and will keep inflating until it pops.
- matmatmatmat 5y agoAlso, there will always be limited supply. COVID-19 and remote work changed that a little bit, but there's other reasons people want to live close to population centers: Restaurants, entertainment, shopping, schools, and friends, to name a few. Most people will always want to live not very far (but not too close!) to some group of other people.
- epistasis 5y agoAll this is premised on a housing shortage. Without that housing shortage, there is no long-term positive return on investment. There is not infinite demand even when housing is a guaranteed positive investment, because there's limited money and capital. We have let people think that housing is always a positive return investment, instead of a bank account. And to do that, we have limited home building in the in-demand areas. The actual way this is enforced is by home owners restricting development in their neighborhoods, a trend that is likely to continue. Read the prospectus' of the private equity investments in residential housing and you'll see they are saying the same thing.