5 ms·

> The bad news is that we decided that owning a house is a retirement plan instead of giving people proper retirement plans. I've pondered on this a lot. House

by kodah 4y ago

> The bad news is that we decided that owning a house is a retirement plan instead of giving people proper retirement plans. I've pondered on this a lot. Houses have been treated as "nest-eggs", which is really a fancy term for a fallback plan, for quite some time. The housing market really only got out of control after the 80's which coincides with when mortgage packages started getting sold on the stock market. To me, that, city zoning, corporate SFH buying, and state governments that have economic policies that embrace/grow inflation seem to be the actual problem. I still think it's worth while to have house equity as a way to securely store money, but the government has to protect the housing market conservatively to make that work. Just like anything else the market is a system of incentives.

NegativeLatency 4y ago
Perhaps also single family zoning started to make its effects clear in the 80's. Personally I'd prefer to live in a nice townhouse in a dense neighborhood but that's hard to pull off (location wise not many options, and price wise there's just not enough available to make the nice ones comparable to a single family house)
- kodah 4y ago
  I suspect a successful city depends on diverse housing availability. Having too much high and medium density brings its own issues, same with too much low density. There's probably also something to how those are arranged within a city. I always wanted to grab something with lots of trees in near-proximity to the city, but I don't want to live near the active hustle and bustle. That usually comes with other trade-offs like a lack of greenery.
  - nine_k 4y ago
    City parks solve the problem of greenery reasonably well. Trees on streets help, too.
    - kodah 4y ago
      While I like going to parks, I really want the greenery in my yard.
- inglor_cz 4y ago
  Housing price has skyrocketed in most developed countries, not just the USA. So the reasons are likely to be more generic and less America-related.
ska 4y ago
> I've pondered on this a lot. Houses have been treated as "nest-eggs" There is a nasty policy trap here, in that reducing the investment value of houses can mean (as a federal government) you are expecting pain down the road caring for people with insufficient retirement savings.
- yamtaddle 4y ago
  A crash back to where we'd be with a following-inflation rate of increase in house prices since, say, 1995, would absolutely wipe out a terrifying proportion of the working-age population's on-paper wealth. IDK what the solution is that doesn't completely fuck a generation or three, one way or another. Of course the best answer would have been to never get into this situation in the first place, but here we are.
  - Firmwarrior 4y ago
    If we just started building enough housing now, things would be fine IMO. No need to bring prices down to a reasonable level and wipe out all the NIMBYs
    - nerdponx 4y ago
      I would settle for prices simply flattening, which at least would cut off the cycle of homeowners expecting property to continue appreciating. We also need to start building different kinds of homes. More "starter homes", fewer McMansions in the suburbs and luxury condo apartments in the cities.
      - bombcar 4y ago
        The fixed costs basically make it impossible to build anything but high margin. It’s disgustingly.
      - JKCalhoun 4y ago
        > More "starter homes", fewer McMansions Sadly, investors that own the undeveloped property, construction companies — they want the big margins and so build expensive homes. (Which the rest of us buy because that's what's available — a bit like a car dealership lot these days where their entire inventory are the expensive, top-of-the-line models.)
yamtaddle 4y ago
It's worth considering that money that isn't going to mandatory-contribution retirement schemes (as in many union jobs, or government retirement schemes) is freed up to put in one's own retirement account... or to use to buy better housing (in a better school district, say) than one would otherwise be able. Get a few defectors who choose to do this and suddenly the housing you can get without sacrificing money that should be going into a retirement account is worse than it would have been if no-one had that option, so it gets more and more tempting/necessary to do it.
Tiktaalik 4y ago
A big problem is that homeowners understand that for the value of their "nest-egg" to appreciate, this implicitly relies on housing scarcity, and this influences the outcome of elections, which influences the outcome of government housing policy. As home valuations become more important and critical to the wellbeing of the "middle class", any policy that would even indirectly hinder valuations comes under great criticism. There were a number of issues in my recent municipal council election, but I cannot help but notice that the candidates suggesting to build rental housing everywhere, which would have empowered renters and hurt homeowning minor landlords that benefit from high rents, lost, and those that won suggested the status quo that would protect detached home areas, with their main housing policy suggestion being around faster renovation permitting, useful of course for those minor home owning landlords wanting to create a secondary suite to get a renter to pay off their massive mortgages.
- nerdponx 4y ago
  You could also come at the problem the other way. If incomes were keeping up with productivity and cost-of-living, people wouldn't be relying so heavily on their homes appreciating in order to have enough money to retire.
  - chordalkeyboard 4y ago
    I agree but there is another factor, that is the ability for income earners to effectively save for retirement. Artificially low interest rates forced savers into the stock market, which caused equities to be artificially high relative to their yields, creating a positive feedback cycle where there was no alternative to 'saving' via stock investments and causing corporations to be able to ride a tidal wave of investment without justifying it via dividends. This is all downstream from cheap credit and a lack of incentive to save money (defer consumption) and now we are faced with the unintended consequences of decades of short-sighted monetary policy.
  - WalterBright 4y ago
    > If incomes were keeping up with productivity and cost-of-living Something's got to pay for all that increase in government spending. With all the government spending and government pensions and all the people on the government payroll, sometimes I'm surprised the economy isn't a complete basket case.
WalterBright 4y ago
The boom in housing prices starting in the 70s was the result of the baby boomers coming of age and buying prices. > when mortgage packages started getting sold on the stock market That doesn't cause prices to go up. What it does do is make prices more accurate by reducing transaction friction.
SideQuark 4y ago
Inflation adjusted house per square foot has been quite stable for almost 100 years. Houses are now a lot bigger, making the inflation adjusted prices increase. If you factor in shrinking household size, then square foot per person as increased dramatically over the past 50 years. Finally, if you include house quality (fire retardant, electrical improvements, thermal improvements, etc.), then house benefit per dollar has vastly grown over 50 years. Not sure where you get the "out of control in the 80s" unless you ignore all other relevant variables (like size, quality, efficiency) that also changed. To read this stuff and see Census data (and others) demonstrating it, google for historical house price per square foot inflation adjusted, and read articles and look at data.
- chrismcb 4y ago
  The cake of my house has gone up 5x in twenty years. Ignoring the last year, inflation didn't quite double in that time period. So, for at least me, my house per square foot wasn't stable
  - SideQuark 4y ago
    Outliers don't invalidate the stats, in the same way someone getting outstanding value does not mean everyone got outstanding value. Also, how did your mortgage cost go up 5x? That sounds almost nonsensical, unless there's some really rare thing you chose.
- dzhiurgis 4y ago
  > Inflation adjusted house per square foot To build or to buy? Only rich people build new houses, typically selling older house to the poors. Lately tho they keep old one to rent out, hence no actual new supply.
Auracle 4y ago
Something else happened about that time and it boggles my mind that it’s practically never mentioned when it comes to home prices: https://cis.org/node/11952 https://cis.org/node/11952 We’re letting in far more immigrants than homes being built - of course home prices are going to soar.
- dzhiurgis 4y ago
  Technically you are correct. But practically I'm not sure effect is directly correlated - immigrants typically have nowhere near funds to buy property, so instead rent from rent seekers (which itself is huge problem). Some of them also live in much denser arrangements - think someone sleeping in living room, 4-8 people per bedroom in bunk beds. As person who migrated couple of times it really hurts to come help local economy, pay significantly more taxes and then get accused. For one - my parents will never be able to lend me $100-300k for a deposit. Tons of migrants also have to support extended families back home.
  - Auracle 4y ago
    Right, but those apartments are still off of the market. Demand goes up with supply staying the same. I will say it's a bit more complicated in the US considering how many immigrants are involved in actually building homes, but I very much doubt it makes up for the literal millions of people coming in every year. Are there any (first world) countries that have housing costs going up at a large rate that doesn't have large population growth from immigration?
    - dzhiurgis 4y ago
      Is supply staying the same? I doubt it, but low supply is the main problem indeed. One could even say - you get migrants in and then force them in conditions equal to prison cells...
      - Auracle 4y ago
        https://www.statista.com/statistics/240267/number-of-housing-units-in-the-united-states/ https://www.statista.com/statistics/240267/number-of-housing... It's not hard to see that if we're adding a little more than 1 million housing units a year and our population is going up significantly more than that due to immigrants and their children that we're going to have an issue.

by kodah 4y ago

NegativeLatency 4y ago

Perhaps also single family zoning started to make its effects clear in the 80's. Personally I'd prefer to live in a nice townhouse in a dense neighborhood but that's hard to pull off (location wise not many options, and price wise there's just not enough available to make the nice ones comparable to a single family house)

kodah 4y ago
I suspect a successful city depends on diverse housing availability. Having too much high and medium density brings its own issues, same with too much low density. There's probably also something to how those are arranged within a city. I always wanted to grab something with lots of trees in near-proximity to the city, but I don't want to live near the active hustle and bustle. That usually comes with other trade-offs like a lack of greenery.
- nine_k 4y ago
  City parks solve the problem of greenery reasonably well. Trees on streets help, too.
  - kodah 4y ago
    While I like going to parks, I really want the greenery in my yard.
inglor_cz 4y ago
Housing price has skyrocketed in most developed countries, not just the USA. So the reasons are likely to be more generic and less America-related.

ska 4y ago

> I've pondered on this a lot. Houses have been treated as "nest-eggs" There is a nasty policy trap here, in that reducing the investment value of houses can mean (as a federal government) you are expecting pain down the road caring for people with insufficient retirement savings.

yamtaddle 4y ago
A crash back to where we'd be with a following-inflation rate of increase in house prices since, say, 1995, would absolutely wipe out a terrifying proportion of the working-age population's on-paper wealth. IDK what the solution is that doesn't completely fuck a generation or three, one way or another. Of course the best answer would have been to never get into this situation in the first place, but here we are.
- Firmwarrior 4y ago
  If we just started building enough housing now, things would be fine IMO. No need to bring prices down to a reasonable level and wipe out all the NIMBYs
  - nerdponx 4y ago
    I would settle for prices simply flattening, which at least would cut off the cycle of homeowners expecting property to continue appreciating. We also need to start building different kinds of homes. More "starter homes", fewer McMansions in the suburbs and luxury condo apartments in the cities.
    - bombcar 4y ago
      The fixed costs basically make it impossible to build anything but high margin. It’s disgustingly.
    - JKCalhoun 4y ago
      > More "starter homes", fewer McMansions Sadly, investors that own the undeveloped property, construction companies — they want the big margins and so build expensive homes. (Which the rest of us buy because that's what's available — a bit like a car dealership lot these days where their entire inventory are the expensive, top-of-the-line models.)

yamtaddle 4y ago

It's worth considering that money that isn't going to mandatory-contribution retirement schemes (as in many union jobs, or government retirement schemes) is freed up to put in one's own retirement account... or to use to buy better housing (in a better school district, say) than one would otherwise be able. Get a few defectors who choose to do this and suddenly the housing you can get without sacrificing money that should be going into a retirement account is worse than it would have been if no-one had that option, so it gets more and more tempting/necessary to do it.

Tiktaalik 4y ago

A big problem is that homeowners understand that for the value of their "nest-egg" to appreciate, this implicitly relies on housing scarcity, and this influences the outcome of elections, which influences the outcome of government housing policy. As home valuations become more important and critical to the wellbeing of the "middle class", any policy that would even indirectly hinder valuations comes under great criticism. There were a number of issues in my recent municipal council election, but I cannot help but notice that the candidates suggesting to build rental housing everywhere, which would have empowered renters and hurt homeowning minor landlords that benefit from high rents, lost, and those that won suggested the status quo that would protect detached home areas, with their main housing policy suggestion being around faster renovation permitting, useful of course for those minor home owning landlords wanting to create a secondary suite to get a renter to pay off their massive mortgages.

nerdponx 4y ago
You could also come at the problem the other way. If incomes were keeping up with productivity and cost-of-living, people wouldn't be relying so heavily on their homes appreciating in order to have enough money to retire.
- chordalkeyboard 4y ago
  I agree but there is another factor, that is the ability for income earners to effectively save for retirement. Artificially low interest rates forced savers into the stock market, which caused equities to be artificially high relative to their yields, creating a positive feedback cycle where there was no alternative to 'saving' via stock investments and causing corporations to be able to ride a tidal wave of investment without justifying it via dividends. This is all downstream from cheap credit and a lack of incentive to save money (defer consumption) and now we are faced with the unintended consequences of decades of short-sighted monetary policy.
- WalterBright 4y ago
  > If incomes were keeping up with productivity and cost-of-living Something's got to pay for all that increase in government spending. With all the government spending and government pensions and all the people on the government payroll, sometimes I'm surprised the economy isn't a complete basket case.

WalterBright 4y ago

The boom in housing prices starting in the 70s was the result of the baby boomers coming of age and buying prices. > when mortgage packages started getting sold on the stock market That doesn't cause prices to go up. What it does do is make prices more accurate by reducing transaction friction.

SideQuark 4y ago

Inflation adjusted house per square foot has been quite stable for almost 100 years. Houses are now a lot bigger, making the inflation adjusted prices increase. If you factor in shrinking household size, then square foot per person as increased dramatically over the past 50 years. Finally, if you include house quality (fire retardant, electrical improvements, thermal improvements, etc.), then house benefit per dollar has vastly grown over 50 years. Not sure where you get the "out of control in the 80s" unless you ignore all other relevant variables (like size, quality, efficiency) that also changed. To read this stuff and see Census data (and others) demonstrating it, google for historical house price per square foot inflation adjusted, and read articles and look at data.

chrismcb 4y ago
The cake of my house has gone up 5x in twenty years. Ignoring the last year, inflation didn't quite double in that time period. So, for at least me, my house per square foot wasn't stable
- SideQuark 4y ago
  Outliers don't invalidate the stats, in the same way someone getting outstanding value does not mean everyone got outstanding value. Also, how did your mortgage cost go up 5x? That sounds almost nonsensical, unless there's some really rare thing you chose.
dzhiurgis 4y ago
> Inflation adjusted house per square foot To build or to buy? Only rich people build new houses, typically selling older house to the poors. Lately tho they keep old one to rent out, hence no actual new supply.

Auracle 4y ago

Something else happened about that time and it boggles my mind that it’s practically never mentioned when it comes to home prices: https://cis.org/node/11952 https://cis.org/node/11952 We’re letting in far more immigrants than homes being built - of course home prices are going to soar.

dzhiurgis 4y ago
Technically you are correct. But practically I'm not sure effect is directly correlated - immigrants typically have nowhere near funds to buy property, so instead rent from rent seekers (which itself is huge problem). Some of them also live in much denser arrangements - think someone sleeping in living room, 4-8 people per bedroom in bunk beds. As person who migrated couple of times it really hurts to come help local economy, pay significantly more taxes and then get accused. For one - my parents will never be able to lend me $100-300k for a deposit. Tons of migrants also have to support extended families back home.
- Auracle 4y ago
  Right, but those apartments are still off of the market. Demand goes up with supply staying the same. I will say it's a bit more complicated in the US considering how many immigrants are involved in actually building homes, but I very much doubt it makes up for the literal millions of people coming in every year. Are there any (first world) countries that have housing costs going up at a large rate that doesn't have large population growth from immigration?
  - dzhiurgis 4y ago
    Is supply staying the same? I doubt it, but low supply is the main problem indeed. One could even say - you get migrants in and then force them in conditions equal to prison cells...
    - Auracle 4y ago
      https://www.statista.com/statistics/240267/number-of-housing-units-in-the-united-states/ https://www.statista.com/statistics/240267/number-of-housing... It's not hard to see that if we're adding a little more than 1 million housing units a year and our population is going up significantly more than that due to immigrants and their children that we're going to have an issue.