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If idiots want to pour their millions into worthless concrete to inevitably lose everything when the wave of free money from central banks recedes, leaving innu

If idiots want to pour their millions into worthless concrete to inevitably lose everything when the wave of free money from central banks recedes, leaving innumerous almost free homes in the market for everyone to buy - why any sane person should object? Notice that there is no comparable craze on the stock market. P/E has gone somewhat up sure but it's just out of anticipation of record corporate profits in the coming quarters - which is not unjustified given rampant inflation and deficit of everything which everyone is now making tons of money trying to fill. Because smart people never invest in real estate (at least not in residential real estate, especially not in single family, detached houses). In Russia, we have a proverb - "best thing to do about fools is not trying to stop them".

redisman 5y ago
> If idiots want to pour their millions into worthless concrete to inevitably lose everything when the wave of free money from central banks recedes, leaving innumerous almost free homes in the market for everyone to buy - why any sane person should object? Because everything you said is completely wrong and it takes the already extremely tight housing market to an absurd extreme where no ordinary person can purchase lodging to own. It would take a lot more than a monetary policy tightening to crash Vancouver or Toronto housing markets given how many people are moving in every year. Probably something quite cataclysmic
- anovikov 5y ago
  Then again - if people are moving in to already tight place, who is to blame? What are the probable ways of "tackling" it you suggest? Soviet-style "closing" of a place where the Party will decide if you are eligible to buy? This is how they prevented Moscow from overpopulating in the Soviet Union, resulting in doubling the population in the decade once barrier fell with the end of Communism. If anything, it's a source of free money for the residents: sell your current house for millions and move out somewhere cheaper, maybe retiring early as a result. If you don't want to people to move, analyse the reasons that push them to move and see what can be done about it. Real estate prices are just an indicator. It's stupid to "tackle" indicator rather than underlying reason.
  - TheGigaChad 5y ago
    Hang yourself.
TheGigaChad 5y ago
You are dumber than a rock.
skzv 5y ago
What are your primary investments? Do you own any real estate?
- anovikov 5y ago
  I pour pretty much everything into S&P 500 plus have some cash for balancing. Yes i bought a few apartments when i was basically a kid in my early 20s but not in the last 15 years and not planning to ever buy any real estate unless i'll come to be able to do it on a proportion of my income that lets me completely ignore "investment" consequences of such a decision (say <6 months income). Yes commercial real estate is a good thing. There are good rental yields on it. It's not generally a gamble. But entry ticket is high there and every decision is important unless you are billionaire, and even then it looks too similar to stock picking, even worse than that. You need to really understand shit about real estate and research a particular place you want to buy and it's surroundings very well, too easy to make a stupid mistake. Also residential real estate might make sense but not when you buy a house for yourself. Crappy cheap 1-2 bdr apartments to rent out work OK, and they are a lot more liquid too. But it looks too much like "job". Single family house you'd want to live in, clearly "no". It's almost always a bad investment decision.
  - skzv 5y ago
    Thanks for your insight! > Single family house you'd want to live in, clearly "no". It's almost always a bad investment decision. Is this still true, though? Asset management companies - most famously Blackrock - are now pouring billions into acquiring exactly that: single family homes. And with prices growing in the double digit percentages every year across North America, it seems almost guaranteed in every metropolitan area. I can be convinced otherwise, but I'm worried we are returning to a time of renters and land-owners, and I'm not sure I want to be a renter for the rest of my life.
    - anovikov 5y ago
      But we've been there so many times already. People complained on precisely the same 15 years ago, then prices crashed. There can't possibly be a way that (cyclically adjusted, long term) mortgage payment vs income will sustainably rise. Just hang in there and in 3 years we will hear complains about "millions of people who bought houses are now with underwater mortgages because Fed rates are up and thus prices are down, and are being massively foreclosed". Because people are negative. No one will ever complain that "you can make millions by selling your house you bought on the cheap 20 years ago" or that "houses are easy to buy" (10 years ago or will be again 5 year from now). You will only hear complains from gamblers who lost the gamble - bought at the wrong moment of failed to buy at the right moment. But, in the end of the day, both are just gamblers. We have reliable data on inflation-adjusted home prices since 1953. In 1953, median home price was $18K which is $180K inflation adjusted, now it is $314K (https://dqydj.com/historical-home-prices/ https://dqydj.com/historical-home-prices/). Mortgage rate in 1953 was 5% (https://www.jstor.org/stable/41833636 https://www.jstor.org/stable/41833636), now it is 3.01%. Which results in 30-year payment being $1325 vs $966.28 per month or only 37% higher. Now remember that median home size in 1953 was 917 sq ft and it is and it is 2333 sq ft. now., a 2.54x growth, and that real per capita GDP has grown 3.44x since 153, and feels like entire hysteria is completely made up. Which means, average productivity of US worker now buys more than 6x floor space (with mortgage) or about 5x (without mortgage), compared to 1953 which wasn't a time of housing shortage either. We can't be "back to times of renters and landowners" because if that is the case - people can't buy places and have to rent - it would mean that landowners are not making a good return on their investment. Why would they continue to do the same thing? But as for me, i'm fine renting my whole life. A mediocre place is no better than a rental - a nice place takes a fortune to maintain and i'd much rather retire 5 years earlier than do that. Uber rich mostly live in rental condos and penthouses these days (while they may own lots of real estate, just not the kind of it they'd be ok living in).

redisman 5y ago

> If idiots want to pour their millions into worthless concrete to inevitably lose everything when the wave of free money from central banks recedes, leaving innumerous almost free homes in the market for everyone to buy - why any sane person should object? Because everything you said is completely wrong and it takes the already extremely tight housing market to an absurd extreme where no ordinary person can purchase lodging to own. It would take a lot more than a monetary policy tightening to crash Vancouver or Toronto housing markets given how many people are moving in every year. Probably something quite cataclysmic

anovikov 5y ago
Then again - if people are moving in to already tight place, who is to blame? What are the probable ways of "tackling" it you suggest? Soviet-style "closing" of a place where the Party will decide if you are eligible to buy? This is how they prevented Moscow from overpopulating in the Soviet Union, resulting in doubling the population in the decade once barrier fell with the end of Communism. If anything, it's a source of free money for the residents: sell your current house for millions and move out somewhere cheaper, maybe retiring early as a result. If you don't want to people to move, analyse the reasons that push them to move and see what can be done about it. Real estate prices are just an indicator. It's stupid to "tackle" indicator rather than underlying reason.
- TheGigaChad 5y ago
  Hang yourself.

TheGigaChad 5y ago

You are dumber than a rock.

skzv 5y ago

What are your primary investments? Do you own any real estate?

anovikov 5y ago
I pour pretty much everything into S&P 500 plus have some cash for balancing. Yes i bought a few apartments when i was basically a kid in my early 20s but not in the last 15 years and not planning to ever buy any real estate unless i'll come to be able to do it on a proportion of my income that lets me completely ignore "investment" consequences of such a decision (say <6 months income). Yes commercial real estate is a good thing. There are good rental yields on it. It's not generally a gamble. But entry ticket is high there and every decision is important unless you are billionaire, and even then it looks too similar to stock picking, even worse than that. You need to really understand shit about real estate and research a particular place you want to buy and it's surroundings very well, too easy to make a stupid mistake. Also residential real estate might make sense but not when you buy a house for yourself. Crappy cheap 1-2 bdr apartments to rent out work OK, and they are a lot more liquid too. But it looks too much like "job". Single family house you'd want to live in, clearly "no". It's almost always a bad investment decision.
- skzv 5y ago
  Thanks for your insight! > Single family house you'd want to live in, clearly "no". It's almost always a bad investment decision. Is this still true, though? Asset management companies - most famously Blackrock - are now pouring billions into acquiring exactly that: single family homes. And with prices growing in the double digit percentages every year across North America, it seems almost guaranteed in every metropolitan area. I can be convinced otherwise, but I'm worried we are returning to a time of renters and land-owners, and I'm not sure I want to be a renter for the rest of my life.
  - anovikov 5y ago
    But we've been there so many times already. People complained on precisely the same 15 years ago, then prices crashed. There can't possibly be a way that (cyclically adjusted, long term) mortgage payment vs income will sustainably rise. Just hang in there and in 3 years we will hear complains about "millions of people who bought houses are now with underwater mortgages because Fed rates are up and thus prices are down, and are being massively foreclosed". Because people are negative. No one will ever complain that "you can make millions by selling your house you bought on the cheap 20 years ago" or that "houses are easy to buy" (10 years ago or will be again 5 year from now). You will only hear complains from gamblers who lost the gamble - bought at the wrong moment of failed to buy at the right moment. But, in the end of the day, both are just gamblers. We have reliable data on inflation-adjusted home prices since 1953. In 1953, median home price was $18K which is $180K inflation adjusted, now it is $314K (https://dqydj.com/historical-home-prices/ https://dqydj.com/historical-home-prices/). Mortgage rate in 1953 was 5% (https://www.jstor.org/stable/41833636 https://www.jstor.org/stable/41833636), now it is 3.01%. Which results in 30-year payment being $1325 vs $966.28 per month or only 37% higher. Now remember that median home size in 1953 was 917 sq ft and it is and it is 2333 sq ft. now., a 2.54x growth, and that real per capita GDP has grown 3.44x since 153, and feels like entire hysteria is completely made up. Which means, average productivity of US worker now buys more than 6x floor space (with mortgage) or about 5x (without mortgage), compared to 1953 which wasn't a time of housing shortage either. We can't be "back to times of renters and landowners" because if that is the case - people can't buy places and have to rent - it would mean that landowners are not making a good return on their investment. Why would they continue to do the same thing? But as for me, i'm fine renting my whole life. A mediocre place is no better than a rental - a nice place takes a fortune to maintain and i'd much rather retire 5 years earlier than do that. Uber rich mostly live in rental condos and penthouses these days (while they may own lots of real estate, just not the kind of it they'd be ok living in).