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When you make housing an investment, by definition, it has to become less affordable in the future. Until a country decides to stop making policy to support th

• cperciva 5y ago
  Nonsense. Investments should be profitable, but that profit doesn't have to take the form of capital gains. Plenty of businesses are profitable by using assets rather than by reselling them. The exception of course is if it's impossible to make a profit using the asset. Rent controls are very effective in this regard: If you ensure that being a landlord yields no operating profit, the only incentive to buy property is if there's hope of future capital gains.
  • judge2020 5y ago
    The point is that housing is required to live. Apartments aren't being built at a rate that keeps YoY growth in houses to <5%, which is a lot of growth compared to inflation and wage trends but would be healthier than the growth we're seeing in some regions (eg. Atlanta suburb Lawrenceville, with 27% YoY growth[0]). 0: https://www.zillow.com/lawrenceville-ga/home-values/ https://www.zillow.com/lawrenceville-ga/home-values/
• dcolkitt 5y ago
  I don’t think this is necessarily true. The value of the land you own can increase over time, but the cost of a square foot of housing decrease, as long as density keeps increasing. Say I bought a house on a half acre for $500k. Then someone buys it for $750k and builds four houses on eight acre lots and sells them each for $300k. Owner occupied housing as an investment has produced a positive return but the cost of housing has gone down.
  • loeg 5y ago
    Sure, density is a good lever for reducing the cost of housing despite increased demand for land. In your example, if local government instead forbids that development (via zoning), maybe you can sell your house for $1M instead of $750k, because those 8 prospective buyers are now bidding on the only available property. Homeowners that view housing as an investment would prefer to see housing costs rise further (beyond benefiting solely from land value increases), and so they advocate their local governments to constrain housing supply via zoning. On the west coast, and particularly in California, they've been very successful.
• throw123123123 5y ago
  This is exceedingly equivocal economics. Housing can increase price and also become affordable.
• arcticbull 5y ago
  Yes you're absolutely right, housing cannot be both a good investment and affordable by definition. Time to give up the narrative. It doesn't make sense. I've mentioned this before but it's worth saying again: 1 square foot of housing is approximately the same price - adjusted for inflation - as it was in the 1970s, on average. [1] There's a few caveats however. (1) New houses are 2x bigger on average than they were back then, and the average American family is smaller [1]. (2) City councils, and by extension zoning rules, in major metros preclude construction meaning that supply cannot meet demand. This benefits existing landowners to the detriment of both the next generation and renters. San Francisco is a prime example [2] - SF needed to build 6X as many houses as it did between just 2012 and 2016 just to meet the job growth in the area. This pushes the price per square foot inside metros up way above what they would otherwise be. (3) Zoning rules outside of major metros, including setback rules and minimum size rules, parking rules, etc, make houses outside metros much bigger. Also, expectations have shifted. This pushes the square footage of suburban homes up - and with it the total price. (4) This applies mostly in the last few years - but lower interest rates make houses that are more expensive much more affordable on a monthly basis, which is totally fine as most folks end up with a 30 year fixed rate mortgage. A drop from 3% to 2% makes a house about 25% more expensive cost the same amount per month. Yes, it increases down payments, but down payments tend to be up to 20% of the price - so an increase not of 25% but 4%. So what can we do? Easiest thing is state-wide or federal zoning rules. Build up. Allow smaller homes. [edit](Stop with the mandatory parking.) In Japan, supply and demand meet, and a new 3 bedroom house in Tokyo is like 400K USD [edited for current data] - right around the cost of construction. This is thanks to their federal zoning rules. [3] [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa... [2] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage https://en.wikipedia.org/wiki/San_Francisco_housing_shortage [3] https://marketurbanism.com/2019/03/19/why-is-japanese-zoning-more-liberal-than-us-zoning/ https://marketurbanism.com/2019/03/19/why-is-japanese-zoning...
  • wesapien 5y ago
    How do you with prime real estate markets like NYC, Bay Area, LA, etc? I would assume similar highly coveted areas will be exception to the rule. What about the Japan housing model? Apparently they don't have these property bubbles anymore.
• unityByFreedom 5y ago
  > Until a country decides to stop making policy to support this notion Which policy? You mean government charters for e.g. Fannie Mae that were established in part to combat behavior like redlining, which excluded certain ethnicities from loans for certain neighborhoods based on the loan applicant's skin color?
  • bombcar 5y ago
    Everyone found a workaround for that - price the “undesirables” out instead of banning an accidental aspect. The average well-to-do homeowner is much more concerned about living next to a “poor” of any race or color than living next to a rich.
    • unityByFreedom 5y ago
      Competition based on price has always been a thing. The point of combatting redlining was to provide equal opportunity for the same income levels, and to not discriminate on the basis of ethnicity alone.
  • DeathArrow 5y ago
    >You mean government charters for e.g. Fannie Mae that were established in part to combat behavior like redlining US government used $200 billion of taxpayers money to revive Fannie Mae and Freddie Mac. Those money will lower the cost of borrowing and thus push the prices up. A new crisis will come, people will lose their houses, Fannie Mae will lose the tax payers money. The government will give Fannie Mae and Freddie Mac $400 billion this time, thinking that $200 billion was clearly not enough.
    • unityByFreedom 5y ago
      The question remains, what policy was the above commenter refering to if not those that combat redlining? Fannie/Freddie were captured and should never have bought NINA (no-income-no-asset) loans. If they had died out as a natural result of competition that would have been fine. But they were misled into a disaster. Allowing them to crash in 2008 would have been a bigger disaster. They no longer give out such risky loans. Now the sharks have moved on to other scams.
• kkjjkgjjgg 5y ago
  You can not easily create more land, as a country.
  • loeg 5y ago
    You could increase density, though, if local zoning did not forbid it.
    • kkjjkgjjgg 5y ago
      Just like that? Why shouldn't people have the right to live in less dense places, if they pay for it?
  • yobbo 5y ago
    Realistically only an issue in places like Singapore or Hong Kong. The scarce asset is not actually land but infrastructure such as roads, water, sewage and electricity. These are usually financed publicly, but the increase in land value usually befalls the lucky house owners. Here is one of the justifications for property tax.
• porknubbins 5y ago
  I'm not clear on when the house as investment began. It seems clear that from the quality of the 50s era construction I live in that housing was though of in more utilitarian terms (ie put up cheaply and quickly). It seems like it was in the 80s in my area that you start to see much more custom and luxurious homes, but I'm not sure if the transition was more a cultural or economic one.
  • yobbo 5y ago
    They became speculative assets (not investments) when prices started appreciating faster than incomes. Government subsidised mortgages are the cause of this. The technical implementation varies in different countries. House prices are "levered" on mortgage interest rates.
  • Lammy 5y ago
    > I'm not clear on when the house as investment began. https://fred.stlouisfed.org/series/OEHRENWBSHNO https://fred.stlouisfed.org/series/OEHRENWBSHNO :)
    • sillysaurusx 5y ago
      Good lord, that graph looks far scarier than the 2008 bubble.
      • arcticbull 5y ago
        It probably shouldn't, that's total real estate equity - not real estate equity per capita, and it doesn't look like it's even adjusted for inflation? You can make any graph look scary if you try hard enough haha.
      • wahern 5y ago
        Among OECD countries, the United States is mostly middle of the pack. See https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ECO/WKP(2019)58&docLanguage=En https://www.oecd.org/officialdocuments/publicdisplaydocument... IOW, these trends are basically global, not specific to the U.S. (Americans always think they're exceptional....) For example, the U.S. is slightly below average in mortgage debt-to-income. One of the few places that the U.S. stands out is the percentage of home owners--we're second from the top at 40-50%.
• bagels 5y ago
  Plenty of investments lose value, so that isn't a working definition.
• sillysaurusx 5y ago
  I'm not sure I understand this argument. It may be true that housing is a basic need. But that doesn't change the fact that housing is also finite. And unlike food or cars, it's not a depreciating asset; a house rarely breaks down. Even when it does, the land it's built on is still yours. When food goes rotten or a car gets totaled, you have to throw it out. What do you propose?
  • garbagetime 5y ago
    Housing is finite in the sense that all things on Earth are finite. But more houses may always be built. And I do disagree that houses are not depreciating assets. The technology and the style of a house become outdated. And much deteriorates over time. Yes, the land may not depreciate, but that is a separate matter from, or, at best, only a component of the value of the house.
    • sillysaurusx 5y ago
      I think this just sidesteps the argument entirely. Yes, everything on Earth is finite. But that doesn't change the fact that nearly an endless supply of cars can be built, whereas you can't build an endless supply of houses. You can maybe build a bunch of apartment buildings to build housing, but those aren't houses.
      • thegrimmest 5y ago
        The problem being that in order to build houses or cars you need the cooperation of everyone involved - the property owners, the contractors, the municipality. How do you propose to extract this cooperation if it's not forthcoming? Handcuffs?
      • garbagetime 5y ago
        I'm more than happy to sidestep the argument. I think the most sensible thing for us to discuss is homes rather than houses. We can build a lot of homes in areas where there is high demand for them by upping housing density in those areas. Building a lot of homes also reduces demand for individual houses, so helps to slow the increase of price of houses.
• thegrimmest 5y ago
  Food is also a "basic need", does that mean we should enslave farmers with regulation? Or just enslave the rest of us in order to pay farmers? Edit: I'm suggesting that feeding (and housing) yourself is a personal responsibility, not a collective one. And that the instrument we use to enforce basic order and peaceful coexistence (punish noncompliance with imprisonment) is far to blunt for enforcing cooperation (helping each other find food/shelter).
  • themitigating 5y ago
    Do people horde food as an investment? Regardless it's extremely affordable for most people
    • thegrimmest 5y ago
      yes? Food staples are commodities, just like steel, oil and chocolate, and are speculated on by commodities traders.
      • kazen44 5y ago
        people dont hoard food to make the supply on the market less though. throughout history. society has not been kind to people who tried this. scalping staple foods usually leads to bread riots. and because food is absolutely biologically required to survive, those usually turned very violent.
        • thegrimmest 5y ago
          They do, to varying degrees, just not enough to be noticable. Commodities traders buy and hold all the time. The thing about free markets is that you need a hell of a lot of collusion to do what you're suggesting because someone always stands to gain from misguided speculation. This is actually exactly the issue with housing. The market is controlled by municipalities who are elected by NIMBYs. The only reasonable thing to do in these conditions is to buy as much housing as you can, since your assets are protected from competition (local densification) by the government. We've literally regulated ourselves into this crisis. The solution can't be more regulation. Edit: see https://en.wikipedia.org/wiki/Missing_middle_housing https://en.wikipedia.org/wiki/Missing_middle_housing
• scottcodie 5y ago
  Inflation can make it an invest and keep affordability the same. It isn't 'by definition'.
  • arcticbull 5y ago
    Generally return on investment is measured in real dollar terms - not notional terms - meaning after accounting for inflation. It's not a gain if it keeps pace with inflation. Certainly not after you net out maintenance. It needs to appreciate in real dollar terms like 1-2% per year just to break even.
    • scottcodie 5y ago
      That's real rate of return, not return on investment
      • arcticbull 5y ago
        Ah yes, my bad. Thanks for the correction.
  • refurb 5y ago
    That’s a wildly crappy investment if you get out the same or less than you put in in real dollars.
    • scottcodie 5y ago
      Sure, I'm just saying that it's possible to make an investment to preserve capital that doesn't impact affordability. It is still an investment because it beats holding cash. A 'good' investment would be one that beats inflation but housing can simply be an investment vehicle to keep pace with inflation.
• roenxi 5y ago
  Just being thorough, but in theory it could be both if there was a steadily more desirable city core where people invested and a large affordable urban fringe where everyone could live. No principle says everyone should be able to live in San Francisco. And what would be ideal, in a healthy market, is that housing is sometimes a little overbuilt and becomes a bad investment, then becomes very affordable and a good investment. Sitting at some sort of market equilibrium if you will. Investors consistently winning is bad for affordability, and investors always losing means eventually nobody will build houses and people start having to live outside.
  • AnthonyMouse 5y ago
    A good way to do this (once zoning is fixed to allow new construction) is to provide tax incentives for new construction. Then the price at which new construction is viable goes lower and so does the cost of housing.
  • wiseowise 5y ago
    > No principle says everyone should be able to live in San Francisco. This. I don't understand why people think that it's their fundamental right to live somewhere where they want.
    • epicureanideal 5y ago
      What’s your view on immigration then?
      • wiseowise 5y ago
        What does this has to do with my message? If there's a place - sure, join. But it's not your fundamental right to move everyone because you want to be there.
• po1nt 5y ago
  I don't think you understand how the value of these assets is supposed to rise. When you buy a flat in the center of town, it's supposed to increase it's value for being in the center while town is expanding. That means that there are always new housing units creating in the expanding periphery which drives population of town and therefor demand for living in the center. The issue is that newly created housing is already priced sky high. You can blame quantitative easing which lowers interest rates and drives comodities we usually buy with credit high. Just add another line to the graph and you'll see it. Problem is not the market, but the fact someone is tempering with it so bad it inevitably collapses.
  • AnthonyMouse 5y ago
    > When you buy a flat in the center of town, it's supposed to increase it's value for being in the center while town is expanding. If the town is expanding then the supply of housing goes up along with the demand and prices stay the same, i.e. proportional to the cost of constructing new housing. Once you reach a certain point you have to build taller buildings which are more expensive to build and then housing prices would reflect the higher construction cost, but this only applies to urban areas and the costs only get really high when the buildings get really tall. If you converted some of the suburbs to three story buildings that filled the lots, the cost per square foot wouldn't be much higher than it is for single family homes, but there would be ten times more housing per acre. Doing this is prohibited by zoning, which is the real reason why housing is unaffordable.
    • sokoloff 5y ago
      People who wish to live in areas of three story multi-family structures that fill the lot should be able to find or make places where that’s legal and the predominant style, I agree. (I’m opposed to the effective exclusion of that via pervasive 1/2 family zoning.) Equally, people who don’t want to live like that should be able to find or make places where detached 1-3 family buildings that don’t fill the lot are legal and the predominant style. (I’m opposed to zoning laws/changes that prohibit these neighborhoods as well.) Forcing everyone to live in what they consider an undesirable hellscape isn’t good policy in either direction.
• AmericanChopper 5y ago
  Owning a house is not a basic need by any definition I’ve ever seen. This premise that having access to housing and owning a house are the same thing is just so plainly wrong, that it undermines the credibility of most housing reform arguments.
• mytailorisrich 5y ago
  Homes are people more important asset and the way the market is (unique items that people choose carefully and bid on) it's quite normal that over time prices would rise in line with wages. Historically, wages are increasing faster than inflation (people are getting richer), which means house prices have a 'natural' potential to rise faster than inflation, and thus be viable investments. If prices rise faster than wages across the board there will be a correction at some point: quite simply prices cannot go higher than what people can pay.
  • orwin 5y ago
    Untrue: if dividends rise quicker than wages, you can have house prices rise faster than wages. And in fact earnings from capital now surpass earnings from work in the world (or is it in the west?). So I suspect house prices will continue to rise faster than wages, until enough people got fed up.
    • mytailorisrich 5y ago
      This has no relation with dividends, which are also capped but not by wages.
      • orwin 5y ago
        So house prices are driven by income, right? Not wages, income. So as the income from capital grow faster than the income from work, you will have more and more houses owned by capitalists (in the sense of capital-owner) and less by workers. In most modern countries, large part of the workers are also capitalists and this works OK-ish, but in countries with the same governance as the western world one hundred years ago (Brazil, Mexico, but also probably soon India and some ME countries), this create a severe imbalance.
    • chii 5y ago
      > earnings from capital now surpass earnings from work they are not comparable things. Capital can be deployed on massive scale, but for work, a human only has at most 24hrs to work (if they don't sleep).
• noduerme 5y ago
  I'm sorry, but this is sheer silliness. A "country" doesn't "decide" to make an asset class appreciate or depreciate. It's always been driven by supply and demand. If the population of this country stopped growing and started shrinking, a lot of real estate would be freed up. Demand for housing in the densest cities would drop, and it would be cheaper to live. Real estate prices have gone up for the last hundred years because there are more people. This is why it has been an effective and predictable model for businesses like car dealerships to always locate on the outskirts of cities and wait for the city to come to them, sell the land and move further out. There isn't anything nefarious or even strange about it. It's a natural result of population growth and increasing demand that consistently (so far) outpaces supply. Nor is it inevitable; look at China. Tons of empty apartments, cheap bordering on free to live in. That's what happens when supply outstrips demand.
  • watwut 5y ago
    It is possible to build new houses. It is possible to scratch zoning policies that prevents building more houses in one area. Housing does not have to be fixed amount resource.
  • yobbo 5y ago
    > by supply and demand. The relevant unit of supply/demand here is mortgages, which are indeed controlled by government policies.
    • noduerme 5y ago
      Interest rates act as an incentive or disincentive, but ultimately a government can't forever lend infinite credit to a population that doesn't pay its debts. America has certainly tried to extend her credit infinitely, and our parents and their parents got the best of that, but ultimately our credit as a country is tapering off. Are you suggesting credit should be loosened again so you don't need 20% down to buy a property?
      • beebmam 5y ago
        Citations needed for basically every sentence in this comment please
• perl4ever 5y ago
  >by definition, it has to become less affordable in the future. Whoa. "By definition", investments have to go up after accounting for inflation? I've never been convinced that any investment can go up faster than inflation forever. But you say they all do? Also, I'm wondering what the phrase "you make housing an investment" means. Who makes it so? What do they do? How does it ensure it goes up?
  • kgwgk 5y ago
    Note that the price can also go up a bit after accounting from inflation without making it “less affordable”. Median income in the US has increased about 10% more than inflation since 2000.
• dmurray 5y ago
  > When you make housing an investment, by definition, it has to become less affordable in the future. Not really. It's fine to "invest" in something that just outperforms holding cash, or bank deposits. Trillions of dollars are invested in treasuries. You can even invest in something with negative expected returns, if it hedges exactly the risks you will face in the future (eg, the risk of accommodation costs rising is offset by owning a house, because you will always need somewhere to live). So you can make housing an attractive investment for medium-net-worth individuals, say, that section of the population that can afford to own 1-2 houses over their lifetime, without it becoming less affordable over time. You can use tax incentives to tweak this further: many jurisdictions give you a lot of tax relief on your first home. So, what causes house prices to rise faster than incomes is not an approach of making housing an investment per se, but a focus on making it an investment competitive with the stock market and attractive to institutional investors seeking outright yield.
  • YetAnotherNick 5y ago
    > So, what causes house prices to rise faster than incomes is not an approach of making housing an investment per se, but a focus on making it an investment competitive with the stock market and attractive to institutional investors seeking outright yield. If it is an investment, it has to be competitive by definition. Otherwise your aim is something different than investment, which should be the case for housing ideally.
    • DeathArrow 5y ago
      >If it is an investment, it has to be competitive by definition. No, it just has to yield profits higher than the inflation rate. Not all investments have the same return.
      • YetAnotherNick 5y ago
        No, all investment has to give same expected return(for the same risk) to be counted as investment.
• tannhaeuser 5y ago
  Yeah, and it has absolutely nothing to do with loose monetary policy/low interest due to rampant public spending and both people and pension funds bringing their money to the housing market due to everything else depreciating; no, not at all.
• DeathArrow 5y ago
  Housing is an investment only if you own more than one. Also you have to find a way to derive some monetary value from owning it. Also buying anything can be or not an investment. If you buy some bananas expecting to sell them for profit, then it is an investment. Should countries also stop buying and selling bananas for profit? After all, eating is a basic need, more so than housing.
  • kayamon 5y ago
    When you reach the point at which the buying/selling of bananas becomes more important than eating bananas, that may be the time at which to consider that something's gone wrong in the economy.
    • chii 5y ago
      unless houses and apartments sit empty and un-lived-in, there is still nothing wrong yet.
      • namdnay 5y ago
        Have you ever been to London?
      • danaris 5y ago
        So, you agree there's definitely something wrong, then.
  • graeme 5y ago
    This is incorrect. In a lot of countries people rent or have historically rented. Including America in the past. America subsidizes homeownership specifically so now everyone does that, but people’s first and only house is definitely an investment. Housing is a basic need, homeownership isn’t one, any more than running a farm is a basic human need.
    • deleted 5y ago
      [deleted]
• Gys 5y ago
  Every basic need increases in price over time. It is called inflation
• SergeAx 5y ago
  I want to agree with you, but how to draw a line between first housing as a basic need and a second one? Between apartment, condo, townhouse and mansion? We will eventually get to socialism.
• agumonkey 5y ago
  I do agree that housing as an asset is a bad idea. I regularly think that if you gave everybody a rent free room, society would be wildly different. People are running around to pay rent doing insane stuff just to get by. It's humanly painful.
  • ricksunny 5y ago
    It's like Squid Game, except debt is replaced with, oh wait, still debt. Just of the housing variety (we call it 'mortgage').
    • ricksunny 5y ago
      And this is where it gets fun - Joe/Jill tech-worker wants to live in Menlo Park. So she works at Facebook. To pay his/her mortgage (or mortgage market-correlated rent), (s)he has to build selective sharing algorithms that emphasize anger but maximize 'engagement' and make lots of revenue for the company. Even though friends & family tell him/her (s)he's being detrimental to the world - it's paying his/her salary, and so the mortgage/rent. In-group vs. out-group baiting, mayhem, & loss-of-life ensue. (h/t Frances Haugen)
      • realce 5y ago
        THEN this person has to hide/digest the guilt of their actions, knowing that they are immoral but still required by society. By hiding that guilt, this person becomes disgusted by people who don't commit immoral acts to pay their mortgages, since every good action reminds them of what they're doing wrong.
        • VRay 5y ago
          Haha, dude. I hate Facebook too, but you’re kidding yourself if anyone there thinks they’re evil. The employees just focus on how easy it is for non tech savvy people to share vacation and kid photos across the globe with each other through their service, and go to bed in their $1.2M condos with a smile every night
• greymalik 5y ago
  What governmental policies make housing an investment? Are there countries with policies that effectively make it a depreciating asset? What do those policies look like?
  • loeg 5y ago
    > What governmental policies make housing an investment? Local government (US): Low-density zoning, burdensome review processes on new development, "historical building" preservation, minimum amenity regulations (e.g., parking spaces, "set back"), etc. Federal government (US): Subsidizing the cost of 30-year mortgages for lenders; subsidizing mortgage interest for homebuyers (mortgage interest deduction) at the expense of all other taxpayers (e.g., renters). > Are there countries with policies that effectively make it a depreciating asset? What do those policies look like? I can't speak to the specifics of what other countries do, but many of the obvious steps are to just stop the bleeding that we already know about, mentioned above. Eliminating the federal mortgage interest deduction, removing local government authority to impose arbitrarily burdensome processes on new development, upzoning, deregulating (no minimum parking, reduced minimum setback), etc.
    • jjav 5y ago
      > subsidizing mortgage interest for homebuyers (mortgage interest deduction) at the expense of all other taxpayers (e.g., renters) If the mortgage interest deduction disappeared tomorrow, the landlord's cost to own that house would go up, and every penny of that increase would have to be passed on to the renter. So while it's true a renter doesn't have that tax deduction, eliminating it isn't going to lower any rents, only raise them.
      • loeg 5y ago
        Eliminating the deduction would lower a renter's taxes, and money is fungible.
        • jjav 5y ago
          I don't follow how it would lower the renter's taxes?
• dkdk8283 5y ago
  I spent a lot of money on my house and I absolutely cannot support any measures that devalue my property. Killing housing values will take money away from hundreds of thousands of people who worked hard for what they have. Why can’t we champion hard work? Why should anyone get anything for free?
  • MereInterest 5y ago
    I can't tell if you're being facetious or not, because this reads like the standard "pull yourself up by your bootstraps" arguments. I'll answer the questions on the assumption that you're being straightforward, and you can tell me if the joke went over my head. > Killing housing values will take money away from hundreds of thousands of people who worked hard for what they have. Making housing more affordable will allow hundreds of thousands of hard-working people to own their own homes, rather than being at the mercy of a rental market that can kick them out on short notice. For context, I consider significant increases of rent to be equivalent to kicking somebody out, and short notice to be anything less than half a year, as moving is a stressful and time-consuming prospect. > Why can’t we champion hard work? That's exactly why the housing market needs a correction. Because currently, hard work is not sufficient to get into the housing market. > Why should anyone get anything for free? To answer the question at face value, because we are all human, and every human deserves to have their basic needs for food, shelter, clothing, and health-care met. To answer the question in context, that's why propping up the housing market to the benefit of real-estate speculators and homeowners need to stop, because that is given a benefit for free. I say these as somebody who is in a similar position, having recently purchased a house to live in. What I got out of it is a place to live that I can modify and improve as I want. It isn't an investment opportunity, it's a place to live.
    • dkdk8283 5y ago
      I am being straight forward, I understand the logic behind your thinking but I cannot support it personally. > That's exactly why the housing market needs a correction. Because currently, hard work is not sufficient to get into the housing market. Work smarter not harder. You were able to work smart and afford a home. Many people have. Not all people are equal, your ability to navigate life and the world has a direct input on your quality of life.
• jlokier 5y ago
  I think it's not a coincidence that, over in the metaverse threads, there is discussion about creating intentional artificial scarcity in a world of natural abundance, as the basis for a new economy. Even when there's plenty to go around for everyone, it seems we'd rather not let that happen.
  • dnautics 5y ago
    Isn't it the other way? We're creating artificial abundance (requiring the currency to unboundedly grow) in a system with real and artificial limits (construction capacity, labor capacity, permitting and zoning drag) that forces people into either doing something individually wise but socially stupid (turning a need into an investment) or fall off the devaluation treadmill
  • pydry 5y ago
    This is essentially one of the same points Marx made. Capitalism is often really good at dealing with shortages but it will also perpetually create its own unless kept in check by countervailing forces.
    • Miner49er 5y ago
      Didn't Marx think that Capitalism would end once we were near or at post-scarcity? Seems we'll never be there, because capital will just find ways to artificially create scarcity.
      • lottin 5y ago
        No, he though capitalism would end because of its "internal contradictions" which, in his opinion, led to an ever growing divergence between the haves and have-nots. In a post-scarcity world capitalism would make no sense, because there would be no need for an economy, since everything would be infinitely abundant.
      • jfengel 5y ago
        Marx would certainly be surprised that we have so much more abundance than he dreamed of, while ordinary people still say "the economy must continue to grow". He expected people to demand basic food and shelter in such a society. He would look at our weak but non-zero safety nets and say, "You can do so much better," and note that if they didn't exist then Capitalism would have ended a long time ago. So I don't know what he'd predict from here. We're in a semi stable state, looking at a potentially more stable one but very afraid of it and even more afraid of upsetting the status quo. But if things got worse -- and they keep threatening to -- that would turn the semi stable state real unstable real quick.
• api 5y ago
  TL; DR: Sometimes “exit” is your only vote. Consider exiting inflated property value regions. I bought a house recently. Dealing with the mortgage and properly industry really brought home to me how deeply entrenched the housing as investment mindset is. When houses were shown to me their likelihood of appreciation was highlighted before qualities of the house like it’s construction or the social health of the neighborhood. It was a bit frustrating because the latter types of things were what I wanted to know about. I bought the house to live in and it all goes well our family plans on staying indefinitely. IMHO it will never change without a brutal prolonged housing crash and recession that wipes out the savings of millions, and the government will not allow that because homeowners tend to vote at the highest rates. 2008 showed that the government will burn down the rest of the economy to save property prices. The history of this power dynamic is actually quite deep. In many ancient societies and even early America property owners were the only ones with a voice or in some cases were the only true citizens. Civilization has always revolved around property owners at least since the agricultural revolution. There is only one rational response that I see, especially for younger or lower income people: leave areas with absurdly exploding real estate costs. The phenomenon is nationwide but it is definitely worse in some areas than others. When we bought our house we took advantage of the virtualization of software and left California for Ohio where we grew up. Now housing is exploding here, but less than it is on the West Coast. Not everyone can be this mobile but more people probably can than you would think. If you are in a blue collar profession there are good jobs to be had (and sometimes a shortage) in rural and small city areas with industry. Many such areas also have shortages of lots of professions due to the many decade trend of everyone flocking to top tier cities. Politically America really needs a rural renaissance and this could help drive it. The geographic concentration of wealth is a major driver of our political lunacy. I am a bit older but if I were starting out I would include the real estate cost constraint in planning my career path. Yes there are great jobs in big cities but the RE cost means that when you want a family you must be either get rich or leave and while you are there all your surplus will go to the landlord. It would make sense to avoid career paths that shackle you to high cost real estate. For techies that means maybe choosing industrial IT or coding for industrial or mining or farming concerns over Silicon Vallet cloudhipster stuff, or refusing to work for companies that are not remote first.
  • 5y ago
• mercy_dude 5y ago
  There are more to this than housing becoming an investment tool. I would argue the endless money printing and negative real rate has made saving pretty much useless. Hard assets are only going to keep going up. And then the government guarantees that housing market should never go down. Here in Canada many politicians have publicly stated they wouldn’t stand housing market going down. And of course they aren’t going to make zoning laws any less stringent. The solution isn’t that hard. Raise the real rate. Let’s see how many people can keep buying their third and fourth homes once the rates go up by 5%. Oh but we can’t have that. That will cause the economy cough cough stock market tank. So we have to keep making the bubble bigger.
  • seoaeu 5y ago
    > politicians have publicly stated they wouldn’t stand housing market going down This statement is equivalent to saying that rents will never go down. And that's the core problem. Fiddling with interest rates or whatever is fine, but if your broader strategy results in every generation having to pay a larger fraction of their income on housing than the previous one, that is a problem...
  • jbay808 5y ago
    > There are more to this than housing becoming an investment tool [...] Hard assets are only going to keep going up. And then the government guarantees that housing market should never go down It's exactly housing becoming an investment. In your post you precisely explain why it's a profitable investment, why that makes it unafordable, and the solution you propose is to make it an unprofitable investment. I think you and the OP agree completely.
• anonu 5y ago
  There's a lot to unpack in your comments. First off, I don't think a typical investment thesis is: this thing will be less affordable in the future. People invest for many other reasons other than simply capital appreciation. With housing specifically, it might be cheaper for you to buy vs rent. > country decides to stop making policy So, yes... US policies towards housing are all centered around the notion of taking out a massive loan for a home. You get paid to do it in some ways, through interest deductions for example. And yes, this policy will never change and this is probably the main reason you need to buy a house with a mortgage if youre in the US. However, as a counter-example I know handful of countries where mortgages are not easy to get and not a traditional way to finance a home. Yet, home prices in these regions are also skyrocketing. So cheap leverage alone is not a necessary factor for home price appreciation. Finally: Food and transport can be "replenished" - land cannot. So basic supply and demand concepts would say that land prices will increase, and by proxy so will housing.
  • gonehome 5y ago
    If land was treated as the scarce asset it would fix a lot of issues. Land taxed appropriately would incentivize higher density housing in order for the economics to work. We’re in a weird incentive trap (in the Bay Area anyway) where owners protected by prop13 have massive wealth and are incentivized to restrict supply. New owners that manage to over pay for a home are further incentivized to restrict supply to keep prices high so they’re not underwater. This is a bad feedback loop that creates real property scarcity. It’s also arguably a problem of regulation constraining the market’s ability to meet demand appropriately.
• mchusma 5y ago
  This +1. Housing I the US is broken in a fundamental way, it needs to be seen as a bad investment to get better. If we targeted say 2% annual price decreases in housing, the world would be better off.
  • missedthecue 5y ago
    Who would offer a 30 year loan on an asset guaranteed to depreciate?
    • prometheanfire 5y ago
      The same people that offer loans for cars...
      • missedthecue 5y ago
        30 year loans for cars at 2.25% interest rates?
  • fleddr 5y ago
    You don't buy a house, you buy land. That's why it appreciates in value.
• bradleyjg 5y ago
  As much as I’d like to blame NIMBY zoning and the mortgage interest deduction, which are pernicious and ought to go, monetary policy is the only factor with the explanatory power for the global phenomenon we are seeing right now.
• riazrizvi 5y ago
  Coveted land is a limited resource and will always be an asset to some degree. It’s value depends on social drivers that make the area worth living in. Policy though can help prevent the asset price from being driven further by speculative investors, using tax penalties that heavily favor owner occupiers. It’s difficult to get right because there’s an argument to allow investors to participate, as it drives investment and effort into new house building. But right now, 0% rates for businesses has flowed into large scale purchases of residential homes by Zillow, Redfin and others, who used their data positioning to capitalize on the flight to the suburbs due to Covid. That is what has devastated affordability. There’s no broad social benefit there, I hope it stops.
  • seoaeu 5y ago
    You really think that owner occupiers haven't pushed for policies that inflate the value of their investments at the cost of young people and renters? Having been to community meetings about creating more housing in my area, I'll tell you that there's plenty of people who want to constrain the housing supply who are not hedge fund lobbyists...
    • riazrizvi 5y ago
      Actually I do realize that. The policy of tax advantaging owner-occupiers is to benefit non-owners who want to own a home. Of course many of them, once they own a home, will vote to pull the drawbridge up once they have refuge for themselves to further secure their position regardless of the impact to others. That's typical of earthly creatures that favor the natural law of narrow self-interest.
• rubyfan 5y ago
  I’m not sure that it’s as simple as that. If you think about the sample metro areas in tfa you see sources of high income potential as corporate headquarters and high paying jobs are centered around those metros. That in effect creates high demand for housing and thereby drives up housing prices. The increase in housing price is probably a derivative of shifting or shrinking opportunity to earn a high income outside of centers of commerce and population growth x scarcity in metros. The rise in home prices is just a premium on income opportunity.
  • onlyrealcuzzo 5y ago
    High demand doesn't mean high prices. You can increase supply - but we don't do this. We don't want more supply! Houses are investments. They're supposed to to go up in value! So we limit supply.
    • rubyfan 5y ago
      I agree scarcity is the issue but I think income scarcity is the greater macro driver but made worse by artificial housing scarcity. I think that’s why the divide between housing prices and income is growing. Without income scarcity I don’t believe housing prices would outpace income growth.
      • onlyrealcuzzo 5y ago
        Income is essentially the medium. I'm having trouble imagining how income is scarce - in the same way money can't really be "scarce" - the value would just adjust. If there's too much demand for money (because there's not enough) - the value goes up. Do you mean income is distributed extremely unequally?
• brightball 5y ago
  This is natural and not a country’s decision. Cars can be mass produced. Convenient locations to live, can’t. Plenty of areas have seen depreciation in housing but it’s because the entire area is doing so.
  • simonsarris 5y ago
    They cannot be mass-produced. But they can be produced. What's the newest city you've been to in the USA? When was it founded? Living in New Hampshire in one of the most desirable historic villages, where in the village house prices are quite high, it is not lost on me that I have seen 20-30 strip malls and innumerable cul de sacs built in my life, but no new villages. Despite everyone agreeing that they are the one of the most desirable places to live. There are no shortage of coordination problems yet to be solved, here.
    • brightball 5y ago
      Maybe not any new villages, but there's plenty of low population rural areas that are less expensive to buy land and build a house.
  • closeparen 5y ago
    Yes, they can - vertically.
• ineedasername 5y ago
  Desirable living locations are a limited resource, the population is increasing, people haven't stopped wanting houses, so the relative supply is decreasing. Increased prices are more about that than in investment potential. Just look at "manufactured homes". These tend to be less desirable, in less desirable locations. The house itself often depreciates in value. Although the land it's on may appreciate in value.
  • jbay808 5y ago
    I think it's much more a matter of negative real interest rates. This inflates the price of all assets, but especially real estate, which is available to be purchased with the cheapest fixed-rate leverage around.
    • ineedasername 5y ago
      Ah, yes-- I forgot to mention that. I was astounded when my father mentioned recently that when they bought the home I grew up in, the interest rate was 12%! Right now, living in a suburb with people from the nearby city fleeing for greener pastures in my area or further out still, the paper value of my home is up 10% in a year-- as you say, making any loan on nearby homes effectively a negative rate. Whereas using the interest rates my parents paid, a mortgage today for the same amount as they had, at their interest rates, would have 3x the monthly payment. The house itself is about 3.5x the original price, making the gap between effective living costs much smaller than the nominal sticker price on the house would make it seem. The "don't buy a home mortgage for more than 2x-3x you annual salary" was advice formed at a time of much higher interest rates.
      • parineum 5y ago
        > I was astounded when my father mentioned recently that when they bought the home I grew up in, the interest rate was 12%! The prices of houses adjust very quickly to changes in interest rates because housing prices are based on what an "affordable" mortgage payment for the market is. Housing prices change to make that math work. Interest rates and housing prices only matter to people who are buying a house that aren't selling one at the same time. Low interest rates are bad for first time home buyers and investors. > The "don't buy a home mortgage for more than 2x-3x you annual salary" was advice formed at a time of much higher interest rates. Also, when that adage was coined, the cost of the "essentials" required to live hasn't gone up as much so people have more of their income to spend on housing.
• amelius 5y ago
  Housing is part of inflation. https://www.whitehouse.gov/cea/blog/2021/09/09/housing-prices-and-inflation/ https://www.whitehouse.gov/cea/blog/2021/09/09/housing-price...
  • dragonwriter 5y ago
    > Housing is part of inflation. It is, but the upthread reference to “housing” actually meant “home ownership”, not the “housing” that is part of inflation (residential rents, actual and imputed).
    • amelius 5y ago
      Yes! Ok. But they also said home ownership is "a basic need" which is not really true considering that you can rent a place.
  • randcraw 5y ago
    The point of the article is that wages should inflate too, yet increasingly fail to do so. And this needs to be acknowledged and then addressed.
• Dylan16807 5y ago
  > When you make housing an investment, by definition, it has to become less affordable in the future. Why do people keep saying this? No, it doesn't. If house prices went up 1.5% per year they would be a perfectly good investment but would not become less affordable.
  • SkittyDog 5y ago
    If you're talking about a 1.5% nominal price increase, then it's impossible to say whether it's a good or bad investment, from just that information. If inflation is 2%, then your house rising at 1.5% is a terrible investment, compared to a stock market rising at 5%. Investments are graded based on their expected real rate of return, over time... In simple terms, that would be the increase in the nominal value of the asset, minus inflation. The higher the increase in real value, the better the investment. If an asset's value increases faster than inflation, then over time the real price of the asset is rising. That means less and less people will be be able to afford it, each year. Remember, inflation is basically measuring how much purchasing power we have... So if the price of something is rising faster than inflation, by definition that thing is becoming more expensive, which means less people will be able to afford it. Even though 1.5% real (above inflation) appreciation seems like a small number, the total appreciation will eventually grow quite large after several years... Each year, housing will become affordable to fewer and fewer people. It may take a while to notice, but that's the definition of a rising real asset price.
    • Dylan16807 5y ago
      > If inflation is 2%, then your house rising at 1.5% is a terrible investment, compared to a stock market rising at 5%. I don't care if it's much worse than the stock market. All a house has to do is hold your money pretty steady against inflation and it will be an acceptable investment. If the intent is "houses can't beat the stock market and remain affordable" then that's what people should say, because that's very different from just being "an investment". And for what it's worth my intent was a number slightly below inflation, because it doesn't really matter if it's half a percent over or half a percent under. > Remember, inflation is basically measuring how much purchasing power we have... So if the price of something is rising faster than inflation, by definition that thing is becoming more expensive, which means less people will be able to afford it. That's only true if you assume wages stay steady with inflation, and they don't have to do that. If house prices would grow faster than inflation but slower than wage growth then everyone could be pretty happy with the result.
• jarpschop 5y ago
  I hope fertility rates plummet because of this and population goes downhill fast. I can't see how people are deciding to have kids knowing how unaffordable everything is becoming.
• jjav 5y ago
  > When you make housing an investment, by definition, it has to become less affordable in the future. Sadly this has become a meme response, always repeated in every housing topic. Can we dig deeper? What would it mean? A house has value, one can live in it, a basic human need. It also takes raw materials and skilled labor to create. Both of those go up over time, so building an identical house in the future will nearly always cost more than today. Thus, that house can't help but appreciate in value. At a minimum, with inflation. Even that makes it a decent investment with minimal risk. So you propose a house should depreciate? How, exactly? And would you want to live in those conditions? One way to have housing depreciate is to have the economy of the region collapse (e.g. Detroit). But clearly that's not a good solution. Maybe another way is to build houses with such bad quality that they disintegrate before the mortgage is paid off. But that's not an attractive solution either, I don't want to live in such a structure. So what exactly are you proposing?
  • persedes 5y ago
    The value of a House does depreciate, especially when not taken care of. Even then maintaining comes with significant costs. You have repairs like water heaters, plumbing, roof, painting, hvac l, kitchen, bathrooms, floors, the list goes on.. that are due eventually. Next older homes are much less energy efficient,had to adhere to different building standards or might've been built in a style that does not appeal anymore. Plenty of reasons why a home should not increase in value,just because. Where this becomes really irksome to me is for rentals. Unfortunately most landlords do the bare minimum with regards to upkeep (financially this just makes the most sense I bet), but they can easily upsell it to the next investor, if they're in a good area.
    • jjav 5y ago
      > Plenty of reasons why a home should not increase in value,just because. It's not just because. It is because the cost of a brand new identical house is higher in the future (more expensive materials, higher labor cost), so that will pull up the value of the existing comparable houses. Older houses are often more attractive so may price above the new ones. The new house comes pretty bare (unless it is a luxury builder but then you're paying that premium), often with zero landscaping etc. An established house gets you a nice yard, mature trees, etc.
• Goety 5y ago
  This wasnt an inevitable conclusion post 2008 but apparently it is one we may need to examine.