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I motice that you left out real estate from your analysis. RE is interesting because it's both an asset as well as something you can use. So if there's general

I motice that you left out real estate from your analysis. RE is interesting because it's both an asset as well as something you can use. So if there's general inflation, it's got both upward pressure (because it's an alternative to rent from a consumer standpoint) and downward pressure (because bonds are an alternative to RE from an investment standpoint).

hackernewds 4y ago
RE is at massive peak levels already though that buyers cannot shell out those prices, esp as mortgage prices go up.
- rcpt 4y ago
  Government is doing everything it can to prop up the assets of voters. MBS bailouts haven't stopped, Biden housing plan is all about subsidizing buyers, mortgage forbearance is as much as ever. Will it work idk but if there's one thing the state is scared of it's voting boomer homeowners.
- architravesty 4y ago
  Worst part is the utterly absurd shortage means RE is never going to meaningfully dip for any period of time without serious structural reforms. The focus on interest rates as the main RE driver is almost completely cope and I wish I could believe it. Low-rate mortgages certainly aren't helping, but they're "not helping" in the same way that hucking an armload of kindling into an already-raging house fire is "not helping". I'm cautiously optimistic that societal unrest from this will eventually forcibly neuter local zoning controls but short of that we're just going to keep subsidizing demand and kicking the can down the road as if people don't need places to live.
  - ethbr0 4y ago
    Local zoning codes change on the order of decades. That will take a long time to play out.
    - robocat 4y ago
      In theory a state could force cities to allow more development? New Zealand had a bi-partisan agreement at the national level to prevent city council level restrictions, which is going to have a massive impact on the number of apartments built. https://www.stuff.co.nz/national/politics/300433304/labour-national-announce-sweeping-housing-density-law-threestorey-homes-without-consent https://www.stuff.co.nz/national/politics/300433304/labour-n... New rules that mean that property owners have a mostly automatic consent, if you build within the limitations. Councils and neighbours are mostly prevented from blocking development. There are rules/constraints on height, setbacks, shadowing (recession planes) etcetera, however the restrictions are not ridiculous. Similarly, after the Christchurch earthquake (which caused a loss of about 5% of the housing stock), the government stepped in to force the local councils to allow more new development. https://www.mbie.govt.nz/dmsdocument/1088-housing-pressures-christchurch-2013-pdf https://www.mbie.govt.nz/dmsdocument/1088-housing-pressures-... I would say NZ is fairly similar to Oregon if you want to compare size, population etcetera against the US. Although looks like NZ has more population in major cities than Oregon (Greater Auckland population 1.5M, cf Portland 650k). https://en.wikipedia.org/wiki/List_of_cities_in_New_Zealand https://en.wikipedia.org/wiki/List_of_cities_in_New_Zealand
  - chmod600 4y ago
    I agree that local zoning is a problem, but I've seen a trend to try to turn it into the wild west. I'm not sure people building duplexes in R1 is really a solution. It seems like we need more medium density in commercial areas (e.g. four stories of apartments on top of one floor of commercial). That could bring down rents and improve quality of life, and improve the suburbs as well. If you drive by a poorly-maintained house in the suburbs, that's probably someone who would live in medium density if it were available.
    - lumost 4y ago
      The problem is that everyone has their own oppinion on the matter, and will block anyone from trying out any other opinion. At some point, you just need to build. If some ideas don’t pan out… then people will move, investors will lose. At present, even in densely populated Boston, any type of housing will command a high rate.
    - n8cpdx 4y ago
      There’s a housing emergency in most places people want to live. If society wanted to have moderate solutions, they should have tried these conservative solutions before crisis point. It’s like saying pouring water on a house fire is too extreme, maybe try an ABC extinguisher instead. The time for half measures is long past. If NIMBY home owners don’t like that there’s an apartment in their neighborhood, they can choke.
    - Nagyman 4y ago
      I've heard the idea to zone for one level above the average in an area, to avoid the wild west situation. Doubtful that would fly with some very rich single family neighbourhoods near cities, but perhaps it's too late for the gradual re-zoning and a more blunt approach is necessary. Aside... where the heck is tech in building housing faster? Where's the prefab and automated assembly? Too many building regulations? Entrenched interests? Incredibly hard problem for large scale engineering?
      - surfmike 4y ago
        This sub stack has some great coverage of those questions: https://constructionphysics.substack.com/p/why-its-hard-to-innovate-in-construction https://constructionphysics.substack.com/p/why-its-hard-to-i...
  - lazide 4y ago
    The only reason there is a shortage is because money has been so cheap. Just watch, in a few years things will have changed quite a bit. The more desirable areas will still have demand of course, but what counts as desirable is shifting.
jbay808 4y ago
RE is highly leveraged (people borrow money to buy it), meaning that it gets hit hard by rising interest rates.
- ethbr0 4y ago
  New buying gets hit hard. In the US, fixed rate 30 year mortgages mean that a lot of existing owners are isolated from rates (albeit not from market price devaluations).
  - jbay808 4y ago
    I mean that real estate prices get hit hard. The consequences of that may vary depending on where you are, what you've borrowed, and what you own.
    - ethbr0 4y ago
      Granted! I just wanted to call out that must-sell (2008, falling market prices, unaffordable adjustable high-rate mortgages, low inflation) is different than can-hold (falling market prices, affordable recent low-rate mortgages, high inflation). If you've got a fixed-rate mortgage at 3%, there are worse forms of debt...
      - cwalv 4y ago
        And the must-sell, can-hold (and I'd add must-hold, where you can afford what you have but any buy+sell would be result in an untenable downgrade) statuses have a big impact on prevailing prices .. since you don't get the fire sell busts outside of must-sell
  - BbzzbB 4y ago
    It's outside the US too, but holy moly is it dirt cheap in the US, averages not even 4% [1]. When I looked last year RBC showed like 8% (now 9.75%[2]) for 25 years fixed in Canada; tougher choice against 5 year terms than down South. 1: https://policyadvice.net/insurance/insights/mortgage-statistics/ https://policyadvice.net/insurance/insights/mortgage-statist... 2: https://www.ratehub.ca/best-mortgage-rates/25-year/fixed https://www.ratehub.ca/best-mortgage-rates/25-year/fixed
tenpies 4y ago
Aside from the leverage issues other point out in RE, you have to consider the political risk. How safe do you feel that a piece of paper saying that plot of land is yours will hold up when there's a raging mob threatening politicians to do something about homelessness/housing prices/AirBnB/Asset managers holding all the properties? The political risk in the West is at Emerging Markets levels. We've seen G7 nations de-bank their citizens extra-judicially, seize assets and remove licenses, remove freedom of movement, create an entire second-class of citizenship, lock up people for committing no crimes. This is normal. No one is protesting. The media agrees as does Hollywood. If I had anything beyond my one property in which I reside I'd actually be pretty scared. This stuff happens in Emerging Markets all the time: the government tells anyone with more than one property to pick one to keep. All foreign property owners have their property forfeit or taxed to the point where they are forced to sell. These actions are not out of the realm of possibility in the West any more, especially with the current leaders. There will be no tears shed for the poor landlords and property owners who can only keep their principal residence.
- bennysomething 4y ago
  What do you mean by create an entire second class of citizenship ? (Genuine question) Are you referring to things like "key workers" (I personally hate this idea)
- lupire 4y ago
  Landlords have been protected by governments for as long as governments existed.
  - jimmaswell 4y ago
    There are exceptions like what Mao Ze Dung did.
  - hnmullany 4y ago
    https://www.nytimes.com/1976/04/12/archives/housing-abandonment-spreads-in-bronx-and-parts-of-brooklyn-housing.html https://www.nytimes.com/1976/04/12/archives/housing-abandonm...
fny 4y ago
Real estate is interesting. The issue is will you be able to make enough rent to actually get a return. I think at this point that's still the case over a 30 year period, but I'm not quite sure what that'll look like in time.
robocat 4y ago
Here’s an interesting analysis of shortage: https://constructionphysics.substack.com/p/is-there-a-housing-shortage-or-not https://constructionphysics.substack.com/p/is-there-a-housin... I like the comment: “I think one of the problems in this discussion is that the word ‘shortage’ doesn't have a clear meaning. If gas is $6 a gallon, should we say there is a shortage of gas? If I get stuck in traffic on the way to work, can I say there is a shortage of roads? If I have to park 4 blocks away from my apartment, is there a shortage of parking?” And a one-sided view on why your home is not an investment: https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/ https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terri...

hackernewds 4y ago

RE is at massive peak levels already though that buyers cannot shell out those prices, esp as mortgage prices go up.

rcpt 4y ago
Government is doing everything it can to prop up the assets of voters. MBS bailouts haven't stopped, Biden housing plan is all about subsidizing buyers, mortgage forbearance is as much as ever. Will it work idk but if there's one thing the state is scared of it's voting boomer homeowners.
architravesty 4y ago
Worst part is the utterly absurd shortage means RE is never going to meaningfully dip for any period of time without serious structural reforms. The focus on interest rates as the main RE driver is almost completely cope and I wish I could believe it. Low-rate mortgages certainly aren't helping, but they're "not helping" in the same way that hucking an armload of kindling into an already-raging house fire is "not helping". I'm cautiously optimistic that societal unrest from this will eventually forcibly neuter local zoning controls but short of that we're just going to keep subsidizing demand and kicking the can down the road as if people don't need places to live.
- ethbr0 4y ago
  Local zoning codes change on the order of decades. That will take a long time to play out.
  - robocat 4y ago
    In theory a state could force cities to allow more development? New Zealand had a bi-partisan agreement at the national level to prevent city council level restrictions, which is going to have a massive impact on the number of apartments built. https://www.stuff.co.nz/national/politics/300433304/labour-national-announce-sweeping-housing-density-law-threestorey-homes-without-consent https://www.stuff.co.nz/national/politics/300433304/labour-n... New rules that mean that property owners have a mostly automatic consent, if you build within the limitations. Councils and neighbours are mostly prevented from blocking development. There are rules/constraints on height, setbacks, shadowing (recession planes) etcetera, however the restrictions are not ridiculous. Similarly, after the Christchurch earthquake (which caused a loss of about 5% of the housing stock), the government stepped in to force the local councils to allow more new development. https://www.mbie.govt.nz/dmsdocument/1088-housing-pressures-christchurch-2013-pdf https://www.mbie.govt.nz/dmsdocument/1088-housing-pressures-... I would say NZ is fairly similar to Oregon if you want to compare size, population etcetera against the US. Although looks like NZ has more population in major cities than Oregon (Greater Auckland population 1.5M, cf Portland 650k). https://en.wikipedia.org/wiki/List_of_cities_in_New_Zealand https://en.wikipedia.org/wiki/List_of_cities_in_New_Zealand
- chmod600 4y ago
  I agree that local zoning is a problem, but I've seen a trend to try to turn it into the wild west. I'm not sure people building duplexes in R1 is really a solution. It seems like we need more medium density in commercial areas (e.g. four stories of apartments on top of one floor of commercial). That could bring down rents and improve quality of life, and improve the suburbs as well. If you drive by a poorly-maintained house in the suburbs, that's probably someone who would live in medium density if it were available.
  - lumost 4y ago
    The problem is that everyone has their own oppinion on the matter, and will block anyone from trying out any other opinion. At some point, you just need to build. If some ideas don’t pan out… then people will move, investors will lose. At present, even in densely populated Boston, any type of housing will command a high rate.
  - n8cpdx 4y ago
    There’s a housing emergency in most places people want to live. If society wanted to have moderate solutions, they should have tried these conservative solutions before crisis point. It’s like saying pouring water on a house fire is too extreme, maybe try an ABC extinguisher instead. The time for half measures is long past. If NIMBY home owners don’t like that there’s an apartment in their neighborhood, they can choke.
  - Nagyman 4y ago
    I've heard the idea to zone for one level above the average in an area, to avoid the wild west situation. Doubtful that would fly with some very rich single family neighbourhoods near cities, but perhaps it's too late for the gradual re-zoning and a more blunt approach is necessary. Aside... where the heck is tech in building housing faster? Where's the prefab and automated assembly? Too many building regulations? Entrenched interests? Incredibly hard problem for large scale engineering?
    - surfmike 4y ago
      This sub stack has some great coverage of those questions: https://constructionphysics.substack.com/p/why-its-hard-to-innovate-in-construction https://constructionphysics.substack.com/p/why-its-hard-to-i...
- lazide 4y ago
  The only reason there is a shortage is because money has been so cheap. Just watch, in a few years things will have changed quite a bit. The more desirable areas will still have demand of course, but what counts as desirable is shifting.

jbay808 4y ago

RE is highly leveraged (people borrow money to buy it), meaning that it gets hit hard by rising interest rates.

ethbr0 4y ago
New buying gets hit hard. In the US, fixed rate 30 year mortgages mean that a lot of existing owners are isolated from rates (albeit not from market price devaluations).
- jbay808 4y ago
  I mean that real estate prices get hit hard. The consequences of that may vary depending on where you are, what you've borrowed, and what you own.
  - ethbr0 4y ago
    Granted! I just wanted to call out that must-sell (2008, falling market prices, unaffordable adjustable high-rate mortgages, low inflation) is different than can-hold (falling market prices, affordable recent low-rate mortgages, high inflation). If you've got a fixed-rate mortgage at 3%, there are worse forms of debt...
    - cwalv 4y ago
      And the must-sell, can-hold (and I'd add must-hold, where you can afford what you have but any buy+sell would be result in an untenable downgrade) statuses have a big impact on prevailing prices .. since you don't get the fire sell busts outside of must-sell
- BbzzbB 4y ago
  It's outside the US too, but holy moly is it dirt cheap in the US, averages not even 4% [1]. When I looked last year RBC showed like 8% (now 9.75%[2]) for 25 years fixed in Canada; tougher choice against 5 year terms than down South. 1: https://policyadvice.net/insurance/insights/mortgage-statistics/ https://policyadvice.net/insurance/insights/mortgage-statist... 2: https://www.ratehub.ca/best-mortgage-rates/25-year/fixed https://www.ratehub.ca/best-mortgage-rates/25-year/fixed

tenpies 4y ago

Aside from the leverage issues other point out in RE, you have to consider the political risk. How safe do you feel that a piece of paper saying that plot of land is yours will hold up when there's a raging mob threatening politicians to do something about homelessness/housing prices/AirBnB/Asset managers holding all the properties? The political risk in the West is at Emerging Markets levels. We've seen G7 nations de-bank their citizens extra-judicially, seize assets and remove licenses, remove freedom of movement, create an entire second-class of citizenship, lock up people for committing no crimes. This is normal. No one is protesting. The media agrees as does Hollywood. If I had anything beyond my one property in which I reside I'd actually be pretty scared. This stuff happens in Emerging Markets all the time: the government tells anyone with more than one property to pick one to keep. All foreign property owners have their property forfeit or taxed to the point where they are forced to sell. These actions are not out of the realm of possibility in the West any more, especially with the current leaders. There will be no tears shed for the poor landlords and property owners who can only keep their principal residence.

bennysomething 4y ago
What do you mean by create an entire second class of citizenship ? (Genuine question) Are you referring to things like "key workers" (I personally hate this idea)
lupire 4y ago
Landlords have been protected by governments for as long as governments existed.
- jimmaswell 4y ago
  There are exceptions like what Mao Ze Dung did.
- hnmullany 4y ago
  https://www.nytimes.com/1976/04/12/archives/housing-abandonment-spreads-in-bronx-and-parts-of-brooklyn-housing.html https://www.nytimes.com/1976/04/12/archives/housing-abandonm...

fny 4y ago

Real estate is interesting. The issue is will you be able to make enough rent to actually get a return. I think at this point that's still the case over a 30 year period, but I'm not quite sure what that'll look like in time.

robocat 4y ago

Here’s an interesting analysis of shortage: https://constructionphysics.substack.com/p/is-there-a-housing-shortage-or-not https://constructionphysics.substack.com/p/is-there-a-housin... I like the comment: “I think one of the problems in this discussion is that the word ‘shortage’ doesn't have a clear meaning. If gas is $6 a gallon, should we say there is a shortage of gas? If I get stuck in traffic on the way to work, can I say there is a shortage of roads? If I have to park 4 blocks away from my apartment, is there a shortage of parking?” And a one-sided view on why your home is not an investment: https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/ https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terri...