5 ms·

Companies make cars, people buy them, everyone knows that a car is a depreciating asset (except for current used car shortages, and certain collectible classics

by kelp 4y ago

Companies make cars, people buy them, everyone knows that a car is a depreciating asset (except for current used car shortages, and certain collectible classics) but people still buy them. This is because they are very useful. A house or an apartment is also quite useful without being an asset that appreciates in value. The whole rental market is based on this concept. I don't see why housing needs to increase in value to incentives people to build it. And in Japan this is exactly the case, it's not typical for housing to increase in value in Japan.

NovemberWhiskey 4y ago
This seems to miss the point. Within this metaphor, the companies that make the cars are the construction and real estate developers - both of which are driven by the profit motive.
- lostcolony 4y ago
  You can have a profit motive driving behavior without something being an investment vehicle. Cars are an example of that. Even when scarcity has driven the cost of cars up (such as during the recent pandemic), everyone recognized that more could, and would, be produced, and so no one viewed them as an investment vehicle, that adding time in somehow increased the value over the initial purchase price. Housing is viewed that way. Part of that is due to location; there is innately a level of scarcity (not everyone can live in (insert city)), but there is also massive artifical scarcity. Even where there's room, there is NIMPYism and zoning regulations and etc that keeps enough housing from being built in areas people are able to live (i.e., close enough to civilization to be able to buy groceries without an hour long drive each way, for instance), forcing pricing up, in a positive reinforcement loop (scarcity = pricing goes up = people buying for the 'investment' rather than a place to live = more scarcity)
roflyear 4y ago
It costs a ton to build a house in the US. If I gave you free land likely it would cost you more to build a new home there than it would to buy an equivalent which would include the land.
- Pokepokalypse 4y ago
  It does cost a lot, but in most cases you're going to get more bang for your buck. (and you can also forgo features you don't like or need: like a homeowner's association; or pre-existing utility connections you don't want). The other thing about building a home - particularly if you're in a high-demand area, the appreciation in the first 2 years is pretty insane.
  - roflyear 4y ago
    I don't know. Maybe. Maybe you are not. Some older homes are really well built. Some are not. Some modern homes are well built. Some are not. You can certainly buy an existing home without HOA.
Pokepokalypse 4y ago
Here is exactly why: In America, this is basically the ONLY way "normal people" can make money (or at least used to be - those of us who didn't "get on the bus" in time have missed out). Unless you create valuable intellectual property (ie. inventor, etc), or unless you're a doctor or lawyer, you're mostly just barely getting by. Those of us who were able to invest in housing, and take that ride, might actually have enough economic security to retire on. So why does it have to be that way? Because the politician who tries to change this system, will get voted out of office. I don't want to say bad things about democracy. I love democracy, and I think it's one of the most important human innovations of the past 2000 years. But the way we practice it in the USA; we're basically voting for our own extinction.
- kelp 4y ago
  Yeah, I understand the politics of it, and you're right that it's incredibly politically challenging thing to change. But it's not a fundamental property of how markets for housing have to work. Housing doesn't need to be an appreciating asset for building housing to be a viable business to be in.

by kelp 4y ago

NovemberWhiskey 4y ago

This seems to miss the point. Within this metaphor, the companies that make the cars are the construction and real estate developers - both of which are driven by the profit motive.

lostcolony 4y ago
You can have a profit motive driving behavior without something being an investment vehicle. Cars are an example of that. Even when scarcity has driven the cost of cars up (such as during the recent pandemic), everyone recognized that more could, and would, be produced, and so no one viewed them as an investment vehicle, that adding time in somehow increased the value over the initial purchase price. Housing is viewed that way. Part of that is due to location; there is innately a level of scarcity (not everyone can live in (insert city)), but there is also massive artifical scarcity. Even where there's room, there is NIMPYism and zoning regulations and etc that keeps enough housing from being built in areas people are able to live (i.e., close enough to civilization to be able to buy groceries without an hour long drive each way, for instance), forcing pricing up, in a positive reinforcement loop (scarcity = pricing goes up = people buying for the 'investment' rather than a place to live = more scarcity)

roflyear 4y ago

It costs a ton to build a house in the US. If I gave you free land likely it would cost you more to build a new home there than it would to buy an equivalent which would include the land.

Pokepokalypse 4y ago
It does cost a lot, but in most cases you're going to get more bang for your buck. (and you can also forgo features you don't like or need: like a homeowner's association; or pre-existing utility connections you don't want). The other thing about building a home - particularly if you're in a high-demand area, the appreciation in the first 2 years is pretty insane.
- roflyear 4y ago
  I don't know. Maybe. Maybe you are not. Some older homes are really well built. Some are not. Some modern homes are well built. Some are not. You can certainly buy an existing home without HOA.

Pokepokalypse 4y ago

Here is exactly why: In America, this is basically the ONLY way "normal people" can make money (or at least used to be - those of us who didn't "get on the bus" in time have missed out). Unless you create valuable intellectual property (ie. inventor, etc), or unless you're a doctor or lawyer, you're mostly just barely getting by. Those of us who were able to invest in housing, and take that ride, might actually have enough economic security to retire on. So why does it have to be that way? Because the politician who tries to change this system, will get voted out of office. I don't want to say bad things about democracy. I love democracy, and I think it's one of the most important human innovations of the past 2000 years. But the way we practice it in the USA; we're basically voting for our own extinction.

kelp 4y ago
Yeah, I understand the politics of it, and you're right that it's incredibly politically challenging thing to change. But it's not a fundamental property of how markets for housing have to work. Housing doesn't need to be an appreciating asset for building housing to be a viable business to be in.