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> Housing prices increasing over time is the conspiracy. That's a stretch. It would be basically impossible for a house to not increase in price unless it was

by jjav 4y ago

> Housing prices increasing over time is the conspiracy. That's a stretch. It would be basically impossible for a house to not increase in price unless it was built to such low quality that it disintegrates when exposed to weather or the whole region goes into economic collapse (e.g. Detroit of some time back). Neither of these are conditions you'd want if you can avoid them, so you don't actually want a depreciating house. The reasons are simple, no conspiracy. If you build a house on one of two empty lots today and then someone wants to build an exactly identical house in the other lot in 20 years, it's going to cost a lot more to build that second house. Because materials and labor costs have increased quite a bit. But the house is identical, so market price of the older house will necessarily be about the same as the new house. (Yes this assumes the older house has been maintained so it is identical to the new one.)

HDThoreaun 4y ago
> Because materials and labor costs have increased quite a bit. Obviously housing value increases with inflation. The question is why it increases so much faster than inflation. Yes, there are some natural reasons like land scarcity in the face of demographic shifts toward urban areas, but the biggest reason is laws that have been passed by local legislatures that are captured by homeowners. I think that's a conspiracy.
- jjav 4y ago
  > The question is why it increases so much faster than inflation. Does it historically? Looking at "Case-Shiller Home Price Index vs. CPI (US)" (second graph on this page) https://www.longtermtrends.net/home-price-vs-inflation/ https://www.longtermtrends.net/home-price-vs-inflation/ housing prices tracked inflation very closely until the dot.com era. Then housing prices started to rise faster, until the 2008 crash. Then housing prices pretty much reverted back to the inflation curve. The last decade has been an unprecedented bull market with low inflation, so yes, over these ten years housing prices have run away from inflation. But now inflation is rising and housing is dropping. It's anyone's guess whether it'll drop back to the inflation curve but it well might. So it's clear that housing prices have much larger market swings than the steady march of inflation, but it's not clear that in the long run it actually outpaces it much. Would be most interesting to see this same graph on a per-city basis instead of nationwide average, but I didn't find that info. Certainly housing prices will outrun inflation in a few hotspot markets like SF or NY. But that also means that for most regular cities the housing prices don't increase at the rate shown in the graph.

by jjav 4y ago

HDThoreaun 4y ago

> Because materials and labor costs have increased quite a bit. Obviously housing value increases with inflation. The question is why it increases so much faster than inflation. Yes, there are some natural reasons like land scarcity in the face of demographic shifts toward urban areas, but the biggest reason is laws that have been passed by local legislatures that are captured by homeowners. I think that's a conspiracy.

jjav 4y ago
> The question is why it increases so much faster than inflation. Does it historically? Looking at "Case-Shiller Home Price Index vs. CPI (US)" (second graph on this page) https://www.longtermtrends.net/home-price-vs-inflation/ https://www.longtermtrends.net/home-price-vs-inflation/ housing prices tracked inflation very closely until the dot.com era. Then housing prices started to rise faster, until the 2008 crash. Then housing prices pretty much reverted back to the inflation curve. The last decade has been an unprecedented bull market with low inflation, so yes, over these ten years housing prices have run away from inflation. But now inflation is rising and housing is dropping. It's anyone's guess whether it'll drop back to the inflation curve but it well might. So it's clear that housing prices have much larger market swings than the steady march of inflation, but it's not clear that in the long run it actually outpaces it much. Would be most interesting to see this same graph on a per-city basis instead of nationwide average, but I didn't find that info. Certainly housing prices will outrun inflation in a few hotspot markets like SF or NY. But that also means that for most regular cities the housing prices don't increase at the rate shown in the graph.