6 ms·

The US is rotating from housing as commodity investment to housing as intergenerational asset, something which has happened in a lot of other countries already

by trgn 4y ago

The US is rotating from housing as commodity investment to housing as intergenerational asset, something which has happened in a lot of other countries already (see e.g. Western Europe, mentioned in other comments here). House prices will remain up because any gain from sale will be plowed into the next home. It's a ratchet upward. Higher mortgage rates are somewhat irrelevant in this dynamic, because the home itself is not an asset to get capital gain from, but a claim to shelter a family for an _indefinite_ period of time in a chosen location. USA was inoculated for a very long time, because horizontal expansion over cheap land allowed for expansion of supply. That era is over. Car and highway technology is no longer adequate to expand cheaply and still remain within viable commuting distance. There really is no limit on how high home prices relative to income can be. When meemaw dies, her inheritance will fund the downpayment of little Sally. That's the perpetuum mobile in Europe, which the US is now cranking up as well. Rents may still remain affordable, but home prices will detach.

EVa5I7bHFq9mnYK 4y ago
Houses in the US couldn't serve as intergenerational asset simply because they are built of wood with average livespan of ~70 years. While in Europe houses are generally build of brick or cement and last centuries.
- spacedcowboy 4y ago
  My (paid for) house in the Bay Area was built ~70 years ago, and it’s just fine, thanks :) As a European living over here for the last two decades, I agree that European houses are generally sturdier (my parents house pre-dates the USA, I don’t expect mine to last that long), but when you’re spending 6 figures on something, looking after it is a good policy. Catching problems early is the key - as soon as you notice something, fix it and fix the cause…
- senkora 4y ago
  I think it is clear that the parent is using home-ownership to include land-ownership.
  - ChrisMarshallNY 4y ago
    Don’t know how it is in most of Europe, but I think that, in the UK, you don’t actually own the land your house sits on; Lord Such-and-Such owns it, and collects rent from you. In the US, we own the land, and that is usually the real value. I’m the proud owner of a 0.125-acre New York postage stamp. It’s in a fairly affluent area, so is fairly valuable. In Wyoming, they’d laugh at it. I think Japan is similar.
    - timthorn 4y ago
      No, that's not the universal case in the UK. My freehold gives me ownership of my house and the land on which it is built. You're right that most of the value of the property is in the land and not the building though.
    - midhhhthrow 4y ago
      You don’t really own it. That’s just a legal construct. If you have to pay rent to the government (property taxes) to “keep” it then you don’t really own it
      - ChrisMarshallNY 4y ago
        In Virginia, you need to pay taxes for your car (at least, you used to. Not sure if they still do). This was different from registration, and applied, even if your car is sitting in your driveway without plates. I think they also used to charge tax for significant-value property, like computers.
    - brnaftr361 4y ago
      You're paying taxes, yeah? And if you were to overlook those tax payments, what would become of your supposed ownership? And subject to eminent domain? Not to mention the many laws of the lands and social expectations besides. How much do you really own?
      - MichaelBurge 4y ago
- seanmcdirmid 4y ago
  The really old homes I’ve seen in Europe are made out of wood oddly enough. Of course, when the house was built in the 1400s, it is probably a ship of Theseus. Well, most homes that are around for a whole have to be maintained, even (especially) if they are made out of concrete or brick.
  - ido 4y ago
    I think it depends where in Europe? In Germany and Austria they're mostly made of masonry. Here for example is a 1000+ years old church in Vienna: https://en.wikipedia.org/wiki/St._Rupert%27s_Church,_Vienna https://en.wikipedia.org/wiki/St._Rupert%27s_Church,_Vienna
    - seanmcdirmid 4y ago
      That church undergoes a lot of maintnence, masonry requires constant repair, so it gets constant repair.
- refurb 4y ago
  This is a bizarre comment because: 1. there is housing that is >100 years old all over the US, some of it the most expensive in the country. 2. Brick and cement houses are certainly not maintenance free and crumble apart over time 3. Most of the value is the land, not the house
- jdblair 4y ago
  All houses need maintenance and upkeep to survive. My wood frame house in Oakland was built in 1896. Clearly it lasted longer than 70 years. Brick is a terrible building material in California, due to earthquakes. My brick house in Amsterdam was built in 1886. However, the piles it sat on were wood, which decayed, and the house sank 8 cm. Both needed new foundations, both were gutted and remodeled on the inside to update them to modern standards.
- AngryData 4y ago
  A decently built wood home will last centuries too if it is maintained.
- qeternity 4y ago
  The land the asset, less so the structure.
zamfi 4y ago
> USA was inoculated for a very long time, because horizontal expansion over cheap land allowed for expansion of supply. That era is over. True. > Car and highway technology is no longer adequate to expand cheaply and still remain within viable commuting distance. False. The US has mind-boggling amounts of land available. What's changed is the ability and desire to build on it. Used to be, the government would pay you (in land, anyway) to build a house. We gave railroads untold amounts of land to develop it. These days, to build a house you pay the government for all manner of permits, studies, etc. -- and that's if they even let you build in the first place! Zoning laws prohibit new construction in overwhelming amounts of the country, especially in the most expensive areas. In NYC and SF, most existing buildings would be illegal to build under current zoning rules. What makes building housing expensive is policy, not a lack of "cheap land". I don't know if the same applies in Europe, perhaps not. In both Europe and the US land has long been the primary vehicle for intergenerational wealth transfer (think estates and productive land, not housing, though -- middle-class homeownership is an extremely recent phenomenon).
- danans 4y ago
  > The US has mind-boggling amounts of land available. What's changed is the ability and desire to build on it. Times have changed and most people don't want to live in marginal lands that are available in mind boggling quantities. In addition, the reason that a lot of cities were built a few generations ago in the hinterlands was because manpower was needed for resource extraction industries, which have since either become highly automated or fallen into secular decline. We are no longer a nation of farmers and miners.
  - zamfi 4y ago
    > most people don't want to live in marginal lands that are available in mind boggling quantities That's not "times have changed" -- people have never wanted to live on marginal lands, that's why the government paid people to move there. > a lot of cities were built a few generations ago in the hinterlands Few cities are built in the hinterlands for the purposes of resource extraction; cities grow where trade is, but yes there are definitely towns that have vanished because we don't as many farmers and miners. The SF Bay Area is dominated by single family homes on large lots. Yes, SF proper has a high density, but the surrounding areas really don't, and not for lack of demand: developers who would build more housing are literally stymied at every turn, and this is not an accident, it is an intentional plan to reduce the availability of housing and keep it expensive, to avoid "traffic", "crowding", and "changing the character of the neighborhood".
refurb 4y ago
I like your thesis, but the problem is we only need to look back 15 years to see that housing has had massive corrections before. I think you're underestimating buyer sentiment. In Canada all it took was a couple rate increases in April for housing prices in the 'burbs of Toronto to drop ~20%. Housing can go from "hot" to "not" really damn quick when prices start their downhill trajectory. What was suddenly a "must have, hot asset" becomes a "fool's game" when people get burned badly. And based on social media posts, people are getting burned badly in Canada right now.
- trgn 4y ago
  Thanks, I'm sensitive to that, and it's a great point, in the US for sure the 2008 correction was felt for years. US will likely continue to see rate increases in the next couple years. We'll see if that is going to affect home prices here. Let's check back in 2025 :)
joshspankit 4y ago
I’ve seen the houses being built and “intergenerational asset” is an almost laughable assumption (not by you, but by the American public). Yes the land is worth $$, but I would be surprised if a currently-priced $300k home lasts more than 20 years without needing a $50-100k injection and who knows what labour and materials will actually cost by then.

by trgn 4y ago

EVa5I7bHFq9mnYK 4y ago

Houses in the US couldn't serve as intergenerational asset simply because they are built of wood with average livespan of ~70 years. While in Europe houses are generally build of brick or cement and last centuries.

spacedcowboy 4y ago
My (paid for) house in the Bay Area was built ~70 years ago, and it’s just fine, thanks :) As a European living over here for the last two decades, I agree that European houses are generally sturdier (my parents house pre-dates the USA, I don’t expect mine to last that long), but when you’re spending 6 figures on something, looking after it is a good policy. Catching problems early is the key - as soon as you notice something, fix it and fix the cause…
senkora 4y ago
I think it is clear that the parent is using home-ownership to include land-ownership.
- ChrisMarshallNY 4y ago
  Don’t know how it is in most of Europe, but I think that, in the UK, you don’t actually own the land your house sits on; Lord Such-and-Such owns it, and collects rent from you. In the US, we own the land, and that is usually the real value. I’m the proud owner of a 0.125-acre New York postage stamp. It’s in a fairly affluent area, so is fairly valuable. In Wyoming, they’d laugh at it. I think Japan is similar.
  - timthorn 4y ago
    No, that's not the universal case in the UK. My freehold gives me ownership of my house and the land on which it is built. You're right that most of the value of the property is in the land and not the building though.
  - midhhhthrow 4y ago
    You don’t really own it. That’s just a legal construct. If you have to pay rent to the government (property taxes) to “keep” it then you don’t really own it
    - ChrisMarshallNY 4y ago
      In Virginia, you need to pay taxes for your car (at least, you used to. Not sure if they still do). This was different from registration, and applied, even if your car is sitting in your driveway without plates. I think they also used to charge tax for significant-value property, like computers.
  - brnaftr361 4y ago
    You're paying taxes, yeah? And if you were to overlook those tax payments, what would become of your supposed ownership? And subject to eminent domain? Not to mention the many laws of the lands and social expectations besides. How much do you really own?
    - MichaelBurge 4y ago
seanmcdirmid 4y ago
The really old homes I’ve seen in Europe are made out of wood oddly enough. Of course, when the house was built in the 1400s, it is probably a ship of Theseus. Well, most homes that are around for a whole have to be maintained, even (especially) if they are made out of concrete or brick.
- ido 4y ago
  I think it depends where in Europe? In Germany and Austria they're mostly made of masonry. Here for example is a 1000+ years old church in Vienna: https://en.wikipedia.org/wiki/St._Rupert%27s_Church,_Vienna https://en.wikipedia.org/wiki/St._Rupert%27s_Church,_Vienna
  - seanmcdirmid 4y ago
    That church undergoes a lot of maintnence, masonry requires constant repair, so it gets constant repair.
refurb 4y ago
This is a bizarre comment because: 1. there is housing that is >100 years old all over the US, some of it the most expensive in the country. 2. Brick and cement houses are certainly not maintenance free and crumble apart over time 3. Most of the value is the land, not the house
jdblair 4y ago
All houses need maintenance and upkeep to survive. My wood frame house in Oakland was built in 1896. Clearly it lasted longer than 70 years. Brick is a terrible building material in California, due to earthquakes. My brick house in Amsterdam was built in 1886. However, the piles it sat on were wood, which decayed, and the house sank 8 cm. Both needed new foundations, both were gutted and remodeled on the inside to update them to modern standards.
AngryData 4y ago
A decently built wood home will last centuries too if it is maintained.
qeternity 4y ago
The land the asset, less so the structure.

zamfi 4y ago

> USA was inoculated for a very long time, because horizontal expansion over cheap land allowed for expansion of supply. That era is over. True. > Car and highway technology is no longer adequate to expand cheaply and still remain within viable commuting distance. False. The US has mind-boggling amounts of land available. What's changed is the ability and desire to build on it. Used to be, the government would pay you (in land, anyway) to build a house. We gave railroads untold amounts of land to develop it. These days, to build a house you pay the government for all manner of permits, studies, etc. -- and that's if they even let you build in the first place! Zoning laws prohibit new construction in overwhelming amounts of the country, especially in the most expensive areas. In NYC and SF, most existing buildings would be illegal to build under current zoning rules. What makes building housing expensive is policy, not a lack of "cheap land". I don't know if the same applies in Europe, perhaps not. In both Europe and the US land has long been the primary vehicle for intergenerational wealth transfer (think estates and productive land, not housing, though -- middle-class homeownership is an extremely recent phenomenon).

danans 4y ago
> The US has mind-boggling amounts of land available. What's changed is the ability and desire to build on it. Times have changed and most people don't want to live in marginal lands that are available in mind boggling quantities. In addition, the reason that a lot of cities were built a few generations ago in the hinterlands was because manpower was needed for resource extraction industries, which have since either become highly automated or fallen into secular decline. We are no longer a nation of farmers and miners.
- zamfi 4y ago
  > most people don't want to live in marginal lands that are available in mind boggling quantities That's not "times have changed" -- people have never wanted to live on marginal lands, that's why the government paid people to move there. > a lot of cities were built a few generations ago in the hinterlands Few cities are built in the hinterlands for the purposes of resource extraction; cities grow where trade is, but yes there are definitely towns that have vanished because we don't as many farmers and miners. The SF Bay Area is dominated by single family homes on large lots. Yes, SF proper has a high density, but the surrounding areas really don't, and not for lack of demand: developers who would build more housing are literally stymied at every turn, and this is not an accident, it is an intentional plan to reduce the availability of housing and keep it expensive, to avoid "traffic", "crowding", and "changing the character of the neighborhood".

refurb 4y ago

I like your thesis, but the problem is we only need to look back 15 years to see that housing has had massive corrections before. I think you're underestimating buyer sentiment. In Canada all it took was a couple rate increases in April for housing prices in the 'burbs of Toronto to drop ~20%. Housing can go from "hot" to "not" really damn quick when prices start their downhill trajectory. What was suddenly a "must have, hot asset" becomes a "fool's game" when people get burned badly. And based on social media posts, people are getting burned badly in Canada right now.

trgn 4y ago
Thanks, I'm sensitive to that, and it's a great point, in the US for sure the 2008 correction was felt for years. US will likely continue to see rate increases in the next couple years. We'll see if that is going to affect home prices here. Let's check back in 2025 :)

joshspankit 4y ago

I’ve seen the houses being built and “intergenerational asset” is an almost laughable assumption (not by you, but by the American public). Yes the land is worth $$, but I would be surprised if a currently-priced $300k home lasts more than 20 years without needing a $50-100k injection and who knows what labour and materials will actually cost by then.