4 ms·

Good. Wages must be forced up. You can’t have a modern economy without a capitalized middle class. Real estate is so ludicrous we need quite a bit of inflation

by api 5y ago

Good. Wages must be forced up. You can’t have a modern economy without a capitalized middle class. Real estate is so ludicrous we need quite a bit of inflation to make it reasonable again. The alternative would be a deflationary crash where real estate crashes and obliterates everyone’s home equity, but that is far more painful to virtually everyone.

aaaaaaaaaaab 5y ago
What prevents landlords from simply soaking up the wage increases then?
- quickthrower2 5y ago
  They might but it may not push up house prices
  - adrianb 5y ago
    How so? If these days a house listed for x gets offers at x+10%, after average wages increase it will receive offers at x+20%. Is there any historical precedent of house prices not rising faster than inflation, absent external factors? I think a major correction of house prices can happen in two ways: - economic catastrophe (everyone's unemployed) / war / natural disaster / ... - we wouldn't want to buy a house anyway in that case; - major increase of interest rates or minimum deposit required - we wouldn't be able to afford the mortgage in that case.
    - quickthrower2 5y ago
      High inflation -> higher internet rates -> lower income multiples for loans + higher rental yields to support interest rates.
- Levitz 5y ago
  What prevents landlords from getting any arbitrary amount of money from their tenants? I think this is a different problem regarding housing.
- eli_gottlieb 5y ago
  Build more housing. A lot more housing. A good portion of it should be publicly owned.
  - aaaaaaaaaaab 5y ago
    Existing owners won't let you do that, as it would depreciate their real estate portfolio.
    - api 5y ago
      They won't in major cities which are all basically real estate cartels, which is why I am bearish on major cities as anything other than office parks for rich people and young professionals without families. Most other things like art, actual innovation, and child rearing are going to migrate to medium sized cities, towns, and the countryside for basic economic reasons. It's already slowly happening.
      - ghaff 5y ago
        > It's already slowly happening. You're basically describing the norm in the US from post-WWII until about 20 years ago. Many large cities that many think of as desirable elite cities today (with real estate prices to match) were losing population into the 1990s. The attractiveness of living in downtowns to mostly college educated young people is mostly a fairly recent phenomenon and there's no guarantees it won't reverse.
        api 5y ago
        I already see it reversing among everyone but those in high income industries. I'm seeing a ton of artists settling in small towns these days. The cost of living is low, allowing you to live on things like Patreon and Etsy and make your art. This kind of radical decentralization is something the original boosters of the Internet in the 90s predicted, but then the great urbanism wave of 2000-2020 happened. But... remember that we tend to over-estimate the effect of technology in the short term and under-estimate it in the long term. The true decentralizing effect of the Internet might just not have been felt yet.
mschuster91 5y ago
> Real estate is so ludicrous we need quite a bit of inflation to make it reasonable again. Alternatively, we could invest in rural areas and other left-behind areas ("flyover states" in the US, Eastern Germany in Germany). Right now, the infrastructure there is flat-out unable to sustain quality modern human life unless you're Amish and fine with travelling on horseback: no high speed internet, no public transport, road and rail infrastructure are crumbling apart, no business opportunities, no education, no entertainment, no access to healthcare. The demand for urban housing is so immense because urban areas are the only places to enjoy modern living. Making rural areas inhabitable again would take away a lot of the pressure. Additionally, we could go and use eminent domain against foreign (especially Chinese) speculators who use Western urban housing solely as a "safeguard" for their wealth against the CCP. The side effect from doing that would be that it increases the pressure inside China against the CCP - when people suddenly have nowhere to hide their assets from the CCP, they will have to demand an end to the CCPs unilateral seizures.
- Pxtl 5y ago
  That sounds like a recipe for suburban housing sprawl, which is what you get in North America when people start moving en masse to a rural area, and it's expensive on infrastructure and unsustainable from a climate perspective.
  - api 5y ago
    I am no longer convinced that urbanism is categorically better for the environment. Here's why. First of all, consider direct energy consumption. A suburban or rural home can probably get >50% of its energy use (including cars if they are EVs) from solar power directly off its own roof and property. This is year round in the sun belt and at least 2/3 of the year elsewhere. Batteries are getting cheap enough that home load leveling or even fully grid-free homes are now approaching middle class affordability. EVs are now 100% practical as replacements for gas cars even in rural areas. I have a 200 mile range Nissan Leaf which was very affordable and would suit me just fine even if I lived way out in the exurbs or countryside, and they're building fast chargers everywhere where I live (Ohio) even along highways in the country. The next generation or two of cars (or a Tesla today) might even drive me to my destination, allowing me to read on the way the way I did in the subway when I lived in the city. Secondly, the vast majority of your land use and probably more than 50% of your energy use is not direct. A huge fraction of your energy use is in the embodied energy of the products that you purchase and their transportation around the global supply chain. An even larger fraction of your land use is in farming and resource extraction to support you and your lifestyle. Where you live changes none of that. A cheeseburger or laptop purchased in the city has exactly the same footprint as a cheeseburger or laptop purchased in the country. In fact, I can see a future where dense cities are actually worse due to being harder to power with renewable energy. To power a dense city you might have to gather a lot of renewable energy from far away, which means more transmission infrastructure and more transmission losses. If we shifted to local farm-to-table eating patterns food in the city may even have more embodied energy due to a longer supply chain to get it there. Then consider that city dwellers eat at restaurants more and restaurants waste a lot more food than cooking at home usually does. (Seriously... look into how much food most restaurants throw away!) Cities are hands-down superior to suburbs and the country in a fossil fuel powered world. In a post-fossil-fuel world it's very debatable. Last but not least, we new urbanists (Gen-X and younger) have discovered that big cities are real estate cartels that make it impossible for the middle class to accumulate wealth. That's already pushing people away. For young people today I would recommend not going to a high cost of living city for any reason other than to level up your career and then leave. Big cities used to be fun centers of art and culture, but that's being driven away by real estate hyperinflation. I'm seeing more and more cool stuff happening in small towns across the country where creatives are settling so they can afford to live without spending >50% of their income on rent.
gilbetron 5y ago
> Real estate is so ludicrous we need quite a bit of inflation to make it reasonable again. Don't house prices usually go up with inflation?

by api 5y ago

aaaaaaaaaaab 5y ago

What prevents landlords from simply soaking up the wage increases then?

quickthrower2 5y ago
They might but it may not push up house prices
- adrianb 5y ago
  How so? If these days a house listed for x gets offers at x+10%, after average wages increase it will receive offers at x+20%. Is there any historical precedent of house prices not rising faster than inflation, absent external factors? I think a major correction of house prices can happen in two ways: - economic catastrophe (everyone's unemployed) / war / natural disaster / ... - we wouldn't want to buy a house anyway in that case; - major increase of interest rates or minimum deposit required - we wouldn't be able to afford the mortgage in that case.
  - quickthrower2 5y ago
    High inflation -> higher internet rates -> lower income multiples for loans + higher rental yields to support interest rates.
Levitz 5y ago
What prevents landlords from getting any arbitrary amount of money from their tenants? I think this is a different problem regarding housing.
eli_gottlieb 5y ago
Build more housing. A lot more housing. A good portion of it should be publicly owned.
- aaaaaaaaaaab 5y ago
  Existing owners won't let you do that, as it would depreciate their real estate portfolio.
  - api 5y ago
    They won't in major cities which are all basically real estate cartels, which is why I am bearish on major cities as anything other than office parks for rich people and young professionals without families. Most other things like art, actual innovation, and child rearing are going to migrate to medium sized cities, towns, and the countryside for basic economic reasons. It's already slowly happening.
    - ghaff 5y ago
      > It's already slowly happening. You're basically describing the norm in the US from post-WWII until about 20 years ago. Many large cities that many think of as desirable elite cities today (with real estate prices to match) were losing population into the 1990s. The attractiveness of living in downtowns to mostly college educated young people is mostly a fairly recent phenomenon and there's no guarantees it won't reverse.
      - api 5y ago
        I already see it reversing among everyone but those in high income industries. I'm seeing a ton of artists settling in small towns these days. The cost of living is low, allowing you to live on things like Patreon and Etsy and make your art. This kind of radical decentralization is something the original boosters of the Internet in the 90s predicted, but then the great urbanism wave of 2000-2020 happened. But... remember that we tend to over-estimate the effect of technology in the short term and under-estimate it in the long term. The true decentralizing effect of the Internet might just not have been felt yet.

mschuster91 5y ago

> Real estate is so ludicrous we need quite a bit of inflation to make it reasonable again. Alternatively, we could invest in rural areas and other left-behind areas ("flyover states" in the US, Eastern Germany in Germany). Right now, the infrastructure there is flat-out unable to sustain quality modern human life unless you're Amish and fine with travelling on horseback: no high speed internet, no public transport, road and rail infrastructure are crumbling apart, no business opportunities, no education, no entertainment, no access to healthcare. The demand for urban housing is so immense because urban areas are the only places to enjoy modern living. Making rural areas inhabitable again would take away a lot of the pressure. Additionally, we could go and use eminent domain against foreign (especially Chinese) speculators who use Western urban housing solely as a "safeguard" for their wealth against the CCP. The side effect from doing that would be that it increases the pressure inside China against the CCP - when people suddenly have nowhere to hide their assets from the CCP, they will have to demand an end to the CCPs unilateral seizures.

Pxtl 5y ago
That sounds like a recipe for suburban housing sprawl, which is what you get in North America when people start moving en masse to a rural area, and it's expensive on infrastructure and unsustainable from a climate perspective.
- api 5y ago
  I am no longer convinced that urbanism is categorically better for the environment. Here's why. First of all, consider direct energy consumption. A suburban or rural home can probably get >50% of its energy use (including cars if they are EVs) from solar power directly off its own roof and property. This is year round in the sun belt and at least 2/3 of the year elsewhere. Batteries are getting cheap enough that home load leveling or even fully grid-free homes are now approaching middle class affordability. EVs are now 100% practical as replacements for gas cars even in rural areas. I have a 200 mile range Nissan Leaf which was very affordable and would suit me just fine even if I lived way out in the exurbs or countryside, and they're building fast chargers everywhere where I live (Ohio) even along highways in the country. The next generation or two of cars (or a Tesla today) might even drive me to my destination, allowing me to read on the way the way I did in the subway when I lived in the city. Secondly, the vast majority of your land use and probably more than 50% of your energy use is not direct. A huge fraction of your energy use is in the embodied energy of the products that you purchase and their transportation around the global supply chain. An even larger fraction of your land use is in farming and resource extraction to support you and your lifestyle. Where you live changes none of that. A cheeseburger or laptop purchased in the city has exactly the same footprint as a cheeseburger or laptop purchased in the country. In fact, I can see a future where dense cities are actually worse due to being harder to power with renewable energy. To power a dense city you might have to gather a lot of renewable energy from far away, which means more transmission infrastructure and more transmission losses. If we shifted to local farm-to-table eating patterns food in the city may even have more embodied energy due to a longer supply chain to get it there. Then consider that city dwellers eat at restaurants more and restaurants waste a lot more food than cooking at home usually does. (Seriously... look into how much food most restaurants throw away!) Cities are hands-down superior to suburbs and the country in a fossil fuel powered world. In a post-fossil-fuel world it's very debatable. Last but not least, we new urbanists (Gen-X and younger) have discovered that big cities are real estate cartels that make it impossible for the middle class to accumulate wealth. That's already pushing people away. For young people today I would recommend not going to a high cost of living city for any reason other than to level up your career and then leave. Big cities used to be fun centers of art and culture, but that's being driven away by real estate hyperinflation. I'm seeing more and more cool stuff happening in small towns across the country where creatives are settling so they can afford to live without spending >50% of their income on rent.

gilbetron 5y ago

> Real estate is so ludicrous we need quite a bit of inflation to make it reasonable again. Don't house prices usually go up with inflation?