5 ms·

Much as I (a relatively young person) am in favor of more housing, isn't it also true that a surge in homebuilding would eviscerate the wealth of a lot of older

by sp527 4y ago

Much as I (a relatively young person) am in favor of more housing, isn't it also true that a surge in homebuilding would eviscerate the wealth of a lot of older Americans who are on the verge or in the midst of retirement? I feel dread whenever I look at the retirement savings numbers. So many elderly who'll have to live on a knife's edge financially.

bombcar 4y ago
Unless you're massively over-extended, the usual result of a housing price crash is to require you to hang around in whatever house you were in at the time of the crash (because the fixed loan payments don't change, and you can't afford to sell). But even if homebuilding increased to the point of keeping prices steady, it would probably be enough.
throwaway1777 4y ago
Lots of boomers did refis and helocs and don’t have any equity anyway. Of course a large portion do have equity but they are generally not the ones on a “knife’s edge”
pessimizer 4y ago
If we want to give money to old people, we should just give it to them. And there's no reason to prioritize the wealthiest old people. Plenty of old people don't own homes, they pay rent.
TulliusCicero 4y ago
> eviscerate the wealth of a lot of older Americans who are on the verge or in the midst of retirement? Using rising home values as a retirement account is essentially just a pyramid scheme. Like, just think about how this has to work. It only functions if home values drastically increase between purchase and retirement, right? Let's say they have to double, for it to be significant for retirement savings: that means that each generation, houses are getting twice as expensive for the next set of buyers. Literally exponential growth in housing prices. This can only happen a few times in a market before only people with a lot of wealth already -- intergenerational or otherwise -- can still afford the homes; just look at the bay area for an example. I grew up in the south bay, and hardly anyone from my childhood still lives there: they can't really afford it. To buy a house there, you usually need two people in tech with high salaries (and even then it can be stretching things a bit). Is that what you want? The current situation in places that have had incredible growth in property prices is that people are funding their retirements, not from saving during their work years, but off the backs of their kids and grandkids, because they got lucky in where they chose to settle down. It's unearned wealth, plain and simple. The ideal price of housing is zero*. * okay yes obviously there's caveats there, but the fact that unlike other consumer goods where inflation is obviously held to be bad, people treat increasingly unaffordable housing as a good thing is insane.
- sp527 4y ago
  > Using rising home values as a retirement account is essentially just a pyramid scheme. Paying down a mortgage builds equity in the home. It's because homes are relatively illiquid and most people choose to own instead of rent that housing works rather well as a de facto retirement account. I see no issue with that personally. > Like, just think about how this has to work. It only functions if home values drastically increase between purchase and retirement, right? No it doesn't, for the same reason as stated above: accrued equity as a mortgage is paid down. Also, average home appreciation in the US roughly tracks inflation (which makes sense). > just look at the bay area for an example Why would you look at the most extreme real estate market in the country to draw any important conclusions? > It's unearned wealth, plain and simple. No it was just an investment whose return variance is principally explained by randomness. And of course not representative of the larger set. Almost everyone who has money in housing loses out after accounting for opportunity cost and things like maintenance + repair + property taxes.
  - TulliusCicero 4y ago
    > Paying down a mortgage builds equity in the home. It's because homes are relatively illiquid and most people choose to own instead of rent that housing works rather well as a de facto retirement account. I see no issue with that personally. Irrelevant. Mere equity in a home with a flat value is essentially unaffected by lowered property values overall: you'll not be forced to 'save' as much, but the point of saving was to not have a mortgage payment anymore. If you don't need to 'save' as much to reach the same outcome, if anything that's a net good. The only real downside here is if you were counting on moving to somewhere not affected by lower property values, AND you didn't invest the money elsewhere that would've gone into more expensive housing. But for most people, it's a good thing. > Also, average home appreciation in the US roughly tracks inflation (which makes sense). Your data is out of date. It used to hover around 200k current dollars on average, but now it's far higher. The increasingly terrible zoning and other building regulations finally caught up to us: https://dqydj.com/historical-home-prices/ https://dqydj.com/historical-home-prices/ And note that it tends to be particularly bad anywhere the economy is good. Of course, some of that is expected, but the effect is just more drastic than it should be. > No it was just an investment whose return variance is principally explained by randomness. No, it's just luck compounded by regulations that favor handing out wealth to the elderly over the keeping costs reasonable for younger people.

by sp527 4y ago

bombcar 4y ago

Unless you're massively over-extended, the usual result of a housing price crash is to require you to hang around in whatever house you were in at the time of the crash (because the fixed loan payments don't change, and you can't afford to sell). But even if homebuilding increased to the point of keeping prices steady, it would probably be enough.

throwaway1777 4y ago

Lots of boomers did refis and helocs and don’t have any equity anyway. Of course a large portion do have equity but they are generally not the ones on a “knife’s edge”

pessimizer 4y ago

If we want to give money to old people, we should just give it to them. And there's no reason to prioritize the wealthiest old people. Plenty of old people don't own homes, they pay rent.

TulliusCicero 4y ago

> eviscerate the wealth of a lot of older Americans who are on the verge or in the midst of retirement? Using rising home values as a retirement account is essentially just a pyramid scheme. Like, just think about how this has to work. It only functions if home values drastically increase between purchase and retirement, right? Let's say they have to double, for it to be significant for retirement savings: that means that each generation, houses are getting twice as expensive for the next set of buyers. Literally exponential growth in housing prices. This can only happen a few times in a market before only people with a lot of wealth already -- intergenerational or otherwise -- can still afford the homes; just look at the bay area for an example. I grew up in the south bay, and hardly anyone from my childhood still lives there: they can't really afford it. To buy a house there, you usually need two people in tech with high salaries (and even then it can be stretching things a bit). Is that what you want? The current situation in places that have had incredible growth in property prices is that people are funding their retirements, not from saving during their work years, but off the backs of their kids and grandkids, because they got lucky in where they chose to settle down. It's unearned wealth, plain and simple. The ideal price of housing is zero*. * okay yes obviously there's caveats there, but the fact that unlike other consumer goods where inflation is obviously held to be bad, people treat increasingly unaffordable housing as a good thing is insane.

sp527 4y ago
> Using rising home values as a retirement account is essentially just a pyramid scheme. Paying down a mortgage builds equity in the home. It's because homes are relatively illiquid and most people choose to own instead of rent that housing works rather well as a de facto retirement account. I see no issue with that personally. > Like, just think about how this has to work. It only functions if home values drastically increase between purchase and retirement, right? No it doesn't, for the same reason as stated above: accrued equity as a mortgage is paid down. Also, average home appreciation in the US roughly tracks inflation (which makes sense). > just look at the bay area for an example Why would you look at the most extreme real estate market in the country to draw any important conclusions? > It's unearned wealth, plain and simple. No it was just an investment whose return variance is principally explained by randomness. And of course not representative of the larger set. Almost everyone who has money in housing loses out after accounting for opportunity cost and things like maintenance + repair + property taxes.
- TulliusCicero 4y ago
  > Paying down a mortgage builds equity in the home. It's because homes are relatively illiquid and most people choose to own instead of rent that housing works rather well as a de facto retirement account. I see no issue with that personally. Irrelevant. Mere equity in a home with a flat value is essentially unaffected by lowered property values overall: you'll not be forced to 'save' as much, but the point of saving was to not have a mortgage payment anymore. If you don't need to 'save' as much to reach the same outcome, if anything that's a net good. The only real downside here is if you were counting on moving to somewhere not affected by lower property values, AND you didn't invest the money elsewhere that would've gone into more expensive housing. But for most people, it's a good thing. > Also, average home appreciation in the US roughly tracks inflation (which makes sense). Your data is out of date. It used to hover around 200k current dollars on average, but now it's far higher. The increasingly terrible zoning and other building regulations finally caught up to us: https://dqydj.com/historical-home-prices/ https://dqydj.com/historical-home-prices/ And note that it tends to be particularly bad anywhere the economy is good. Of course, some of that is expected, but the effect is just more drastic than it should be. > No it was just an investment whose return variance is principally explained by randomness. No, it's just luck compounded by regulations that favor handing out wealth to the elderly over the keeping costs reasonable for younger people.