5 ms·

This isn’t 2008, at this point I think people are underestimating the speculative home buyer. The people who are buying houses now are more likely people lookin

This isn’t 2008, at this point I think people are underestimating the speculative home buyer. The people who are buying houses now are more likely people looking to build rental income cash cows. In a world where productivity is somewhat slowing after massive growth, people are taking to rent seeking activity and the disincentives aren’t there to encourage productive behavior. Why buy and sell when you can buy, charge rent, and pass down to your kids?

Victerius 4y ago
Eventually, people just move away. US states with a high cost of living have lost millions of residents to low cost of living states during the last 10 years, to the point when California and New York are about to lose an electoral college seat each. And, yes, California and New York landlords are partially responsible for that for the reasons mentioned above. The financial industry is moving away from the northeast to the south, primarily Florida, Texas, and the Carolinas. High rents, taxes, and property prices make people and businesses run away.
- nxm 4y ago
  Property taxes,income taxes, fuel taxes, high utilities costs all limit growth of prices in blue states.
  - formerkrogemp 4y ago
    On the flip side, "red" states are seeing rapid population growth from climate and economic migration, so inflation is high for low wage earners in the low cost of living areas. We're probably going to see a smaller range in costs between LCOL and MCOL than we have recently.
    - briandear 4y ago
      Nobody is migrating to Texas over climate.
      - formerkrogemp 4y ago
        I want some of what you're smoking. Perhaps people are primarily moving for economic considerations for now, but come back here and tell me with a straight face with all of the flooding, subsidence, land slides, wildfires, and water issues don't force people out as well in the next year or two.
civilized 4y ago
So, if houses were to become investments on a massive scale, and -- as seems inevitable -- they ended up in the hands of only a few, does that change the politics of housing supply? Before, your neighborhood's voters were homeowners who benefit from rising property values; after, they're renters who benefit from falling rents. I've heard that Germany has more of this renting situation but no idea about the politics of housing supply over there.
- taneq 4y ago
  Are houses not considered an investment where you’re from? Ever hear the term “safe as houses”?
  - civilized 4y ago
    In the US, I think people still mostly buy homes primarily to live in them.
- Schiendelman 4y ago
  Renters are so much less likely to be voters that this has little impact. In Seattle, for instance, municipal elections are on odd-numbered years. As a result, get out the vote operations that tend to increase renter turnout during presidential elections don’t have much impact on local elections. We had a vote in the 90s that reduced housing supply considerably, “Citizens Alternative Plan.” It was a February special election with 23% turnout. 15% of Seattle voters downzoned the city.
  - xboxnolifes 4y ago
    > Renters are so much less likely to be voters that this has little impact. This, however, does not mean it is causal. Just because it's the case at the moment does not mean it would be the case if homeownership dropped 50%.
    - Schiendelman 4y ago
      Homeownership is well below 50% of the voting eligible population in many major cities. But it’s the majority of the voters. There are many studies on homeownership and voting. I recommend the book “The Homevoter Hypothesis” if you’d like to start informing yourself about these issues!
iddan 4y ago
This is exactly what happened in Israel. Everyone who bought houses have doubled or tripled their investment in three decades.
- rdubz 4y ago
  Is this accounting for inflation? 4% inflation per year (the most common estimate I see in the US) means 3x over 30 years doesn't even break even (1.04**30 ≈ 3.24). I often wonder how much people obsessed with home prices rising (in the US at least) take this into account. How much housing mania is fueled by people getting excited about gains that aren't as real as they think?
  - HFguy 4y ago
    This is great point I often make. Not many people take this into consideration. Now, inflation has been lower than 4% for last 10-20 years. But the point stands.
  - smcl 4y ago
    I did some very rough spreadsheet work, collecting average UK house prices[0] and rates of inflation[1] and tried to figure this out. So starting with January 2007's average price of GBP 176,758 I tried to repeatedly apply the annual interest rates I end up with: * Jan 2007 price (inflation adjusted to 2022): GBP 243,199 * Jan 2022 price (actual): GBP 273,762 So it seems that in the UK at least the prices do seem to grow ahead of inflation. And the starting price we're talking about here is after a long, sustained housing bubble and was already quite unaffordable for many. Further still I think many people's wages have kept pace with inflation. So looking at the raw price changes doesn't tell the whole story, but the whole story is still quite grim. [0] = https://www.statista.com/statistics/751605/average-house-price-in-the-uk/ https://www.statista.com/statistics/751605/average-house-pri... [1] = https://www.worlddata.info/europe/united-kingdom/inflation-rates.php https://www.worlddata.info/europe/united-kingdom/inflation-r...
    - jaclaz 4y ago
      >Further still I think many people's wages have kept pace with inflation. Inflation: 243,000/177,000-1=37% House: 274,000/177,000-1=54% In 2007 the yearly wage for a 22-29 year old was 20,000 pounds, in 2021 it was 26,000: https://www.statista.com/statistics/802196/full-time-annual-salary-in-the-uk-by-age-group/ https://www.statista.com/statistics/802196/full-time-annual-... 26,000/20.000-1= 30% If you try with an higher income, let's say 30-39, respectively 26,000 and 33,000 33,000/26,000-1= 27% I think we can say that average houses have appeciated almost double average wages in these 15 years, which is the essence of the crazyness about houses being not affordable to most, and - as you said - it's not like in 2007 houses were cheap, data for a longer period show even more how young people then could actually buy a house and now it has become impossible: https://landregistry.data.gov.uk/app/ukhpi/browse?from=1990-01-01&location=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Funited-kingdom&to=2022-07-01&lang=en https://landregistry.data.gov.uk/app/ukhpi/browse?from=1990-...
MatthiasPortzel 4y ago
> This isn’t 2008, at this point I think people are underestimating the speculative home buyer. The people who are buying houses now are more likely people looking to build rental income cash cows. I agree that most people investing in real estate aren't hoping for the underlying asset to significantly appreciate in value. Real estate pays significant dividends (more than stock), and you can be confident that it will provide a hedge against inflation. Owning real estate also has a lot of tax advantages over stock (you can write off upkeep expenses and you can do a 1031 exchange, for example).

Victerius 4y ago

Eventually, people just move away. US states with a high cost of living have lost millions of residents to low cost of living states during the last 10 years, to the point when California and New York are about to lose an electoral college seat each. And, yes, California and New York landlords are partially responsible for that for the reasons mentioned above. The financial industry is moving away from the northeast to the south, primarily Florida, Texas, and the Carolinas. High rents, taxes, and property prices make people and businesses run away.

nxm 4y ago
Property taxes,income taxes, fuel taxes, high utilities costs all limit growth of prices in blue states.
- formerkrogemp 4y ago
  On the flip side, "red" states are seeing rapid population growth from climate and economic migration, so inflation is high for low wage earners in the low cost of living areas. We're probably going to see a smaller range in costs between LCOL and MCOL than we have recently.
  - briandear 4y ago
    Nobody is migrating to Texas over climate.
    - formerkrogemp 4y ago
      I want some of what you're smoking. Perhaps people are primarily moving for economic considerations for now, but come back here and tell me with a straight face with all of the flooding, subsidence, land slides, wildfires, and water issues don't force people out as well in the next year or two.

civilized 4y ago

So, if houses were to become investments on a massive scale, and -- as seems inevitable -- they ended up in the hands of only a few, does that change the politics of housing supply? Before, your neighborhood's voters were homeowners who benefit from rising property values; after, they're renters who benefit from falling rents. I've heard that Germany has more of this renting situation but no idea about the politics of housing supply over there.

taneq 4y ago
Are houses not considered an investment where you’re from? Ever hear the term “safe as houses”?
- civilized 4y ago
  In the US, I think people still mostly buy homes primarily to live in them.
Schiendelman 4y ago
Renters are so much less likely to be voters that this has little impact. In Seattle, for instance, municipal elections are on odd-numbered years. As a result, get out the vote operations that tend to increase renter turnout during presidential elections don’t have much impact on local elections. We had a vote in the 90s that reduced housing supply considerably, “Citizens Alternative Plan.” It was a February special election with 23% turnout. 15% of Seattle voters downzoned the city.
- xboxnolifes 4y ago
  > Renters are so much less likely to be voters that this has little impact. This, however, does not mean it is causal. Just because it's the case at the moment does not mean it would be the case if homeownership dropped 50%.
  - Schiendelman 4y ago
    Homeownership is well below 50% of the voting eligible population in many major cities. But it’s the majority of the voters. There are many studies on homeownership and voting. I recommend the book “The Homevoter Hypothesis” if you’d like to start informing yourself about these issues!

iddan 4y ago

This is exactly what happened in Israel. Everyone who bought houses have doubled or tripled their investment in three decades.

rdubz 4y ago
Is this accounting for inflation? 4% inflation per year (the most common estimate I see in the US) means 3x over 30 years doesn't even break even (1.04**30 ≈ 3.24). I often wonder how much people obsessed with home prices rising (in the US at least) take this into account. How much housing mania is fueled by people getting excited about gains that aren't as real as they think?
- HFguy 4y ago
  This is great point I often make. Not many people take this into consideration. Now, inflation has been lower than 4% for last 10-20 years. But the point stands.
- smcl 4y ago
  I did some very rough spreadsheet work, collecting average UK house prices[0] and rates of inflation[1] and tried to figure this out. So starting with January 2007's average price of GBP 176,758 I tried to repeatedly apply the annual interest rates I end up with: * Jan 2007 price (inflation adjusted to 2022): GBP 243,199 * Jan 2022 price (actual): GBP 273,762 So it seems that in the UK at least the prices do seem to grow ahead of inflation. And the starting price we're talking about here is after a long, sustained housing bubble and was already quite unaffordable for many. Further still I think many people's wages have kept pace with inflation. So looking at the raw price changes doesn't tell the whole story, but the whole story is still quite grim. [0] = https://www.statista.com/statistics/751605/average-house-price-in-the-uk/ https://www.statista.com/statistics/751605/average-house-pri... [1] = https://www.worlddata.info/europe/united-kingdom/inflation-rates.php https://www.worlddata.info/europe/united-kingdom/inflation-r...
  - jaclaz 4y ago
    >Further still I think many people's wages have kept pace with inflation. Inflation: 243,000/177,000-1=37% House: 274,000/177,000-1=54% In 2007 the yearly wage for a 22-29 year old was 20,000 pounds, in 2021 it was 26,000: https://www.statista.com/statistics/802196/full-time-annual-salary-in-the-uk-by-age-group/ https://www.statista.com/statistics/802196/full-time-annual-... 26,000/20.000-1= 30% If you try with an higher income, let's say 30-39, respectively 26,000 and 33,000 33,000/26,000-1= 27% I think we can say that average houses have appeciated almost double average wages in these 15 years, which is the essence of the crazyness about houses being not affordable to most, and - as you said - it's not like in 2007 houses were cheap, data for a longer period show even more how young people then could actually buy a house and now it has become impossible: https://landregistry.data.gov.uk/app/ukhpi/browse?from=1990-01-01&location=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Funited-kingdom&to=2022-07-01&lang=en https://landregistry.data.gov.uk/app/ukhpi/browse?from=1990-...

MatthiasPortzel 4y ago

> This isn’t 2008, at this point I think people are underestimating the speculative home buyer. The people who are buying houses now are more likely people looking to build rental income cash cows. I agree that most people investing in real estate aren't hoping for the underlying asset to significantly appreciate in value. Real estate pays significant dividends (more than stock), and you can be confident that it will provide a hedge against inflation. Owning real estate also has a lot of tax advantages over stock (you can write off upkeep expenses and you can do a 1031 exchange, for example).