4 ms·
I'm sorry it's simply not what's happening in housing. For a place that prides itself on logic and deductive reasoning, there's a whole ton of tinfoil hat econo
by arcticbull 5y ago
I'm sorry it's simply not what's happening in housing. For a place that prides itself on logic and deductive reasoning, there's a whole ton of tinfoil hat economics around here.
Let's introduce some facts.
1. The inflation-adjusted cost in $/square-foot of a house in the United States remains unchanged from the 1970s according to BLS data. Wages kept pace with inflation (but not productivity). Okay, so why are houses more expensive then? [1]
2. New homes have on average twice the square footage that they did in the 1970s and this is particularly felt outside of urban areas. This is due to zoning rules, setback rules, minimum size rules, etc.
3. Since the 1970s, major metros have significantly restricted new development. San Francisco built less than half the homes needed to sustain the increase in demand over the same period. [3] This is managed through punitive zoning rules and obstinate city councils.
Houses in places people want to be became way more expensive because supply was not allowed to grow to meet demand. Houses outside of these urban areas are now twice as big. Housing is expensive because Americans believe housing should be an investment first - and the goal of an investment is to become less affordable over time.
You cannot have something be both a good investment and affordable. You must pick a lane.
We know it's not what's happening in housing because Japan has basically the same monetary policy, and the same low interest rates - and has tripled their M2 money supply since 1990. But their CPI and their cost of housing remain dead-ass flat for thirty years. Because they have federal zoning rules that allow supply to meet demand. Look at this graph. [2]
Your cause is noble but you're pointed in the wrong direction, Quixote.
> We are watching the looting of the american citizen in real time, communism/collectivism is once again the wolf in sheeps clothing.
We in this case is not the Fed (properly capitalized this way btw) it's city councils. And that's not communism, if anything it's feudalism.
[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://fred.stlouisfed.org/series/JPNCPIHOUQINMEI https://fred.stlouisfed.org/series/JPNCPIHOUQINMEI
[3] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage https://en.wikipedia.org/wiki/San_Francisco_housing_shortage
- peteradio 5y agoUSA M2 graph is on pace to double in 5 years, that's quite a bit different than the 30 year comparison you make with Japan. Real estate happens on the margins, very few people are selling homes as a percent of homes owned. When I look at Japan's chart there are effectively zero inflection points after 1990.
- arcticbull 5y agoThere's no reason to think that, actually. Certainly not to think that it's responsible. You can pick from any of a large set of developed countries - Canada, the UK, much of Europe - they all had different monetary policies but punitive zoning rules and saw the same effects on housing prices. The ones that stand out as having the most liberal zoning rules see the lowest increases in housing prices.
- peteradio 5y agoYou seem to have identified a case where there is an obvious effect, but that shouldn't then be used to dismiss the obvious potential for other effects. Anyway that's besides the main thrust of my response, that is, M2 of USA in 2020-2022 is nothing like the 30 year history of Japans M2.
- thatfrenchguy 5y agoThere is no proven correlation between M2 and housing prices
- nightski 5y agoI'm no better than a tinfoil hat economist, but is the house investment thesis really true? As a homeowner I'll just say in my experience owning a house is very expensive. Renovations, improvements, maintenance, etc.. cost a lot on top of interest, taxes, and insurance. It's very true if you are lucky (or smart, depending on who you ask) with the location it can be an incredible investment. But there are many neighborhoods where houses barely increase or even decrease in value as well (relative to inflation). If you compare it to the S&P 500 over the past 2 decades as well it probably fares far worse.
- ChefboyOG 5y agoI think in this situation, comparing housing to stocks isn't quite apples-to-apples. One of the appeals of owning a house is the money you no longer spend on rent.
- svachalek 5y agoMy house has more than doubled in value over the past 8 years. If you consider a 20% downpayment, it's nearly a 1000% return on the non-borrowed part of the investment, on something I needed to live in anyway. I can't say I'm unhappy about this, and yet it's also totally insane. And I agree with the GP, this is all thanks to city councils blocking market dynamics.
- arcticbull 5y agoOn average it tracks inflation, in metros it far outpaces it due to artificial supply constraints. Because you only make a 20% downpayment on the property, youre actually making a 5X leveraged bet on real estate at the outset. The S&P goes up what 7% geometrically on an annualized basis but due to the leverage inherent in your mortgage, your house only has to appreciate (at the start) 1.4% to achieve the same return on your equity.
- deleted 5y ago[deleted]
- deleted 5y ago[deleted]