4 ms·

There are a lot of answers, but they all stem from one core answer: Because governments do not want to fix it, because those with wealth (largely) do not see it

There are a lot of answers, but they all stem from one core answer: Because governments do not want to fix it, because those with wealth (largely) do not see it as a problem. Three generations of people (silent, boomers, and gen x) were told that real estate was the best investment they could make for their ENTIRE LIFE. Millennials also heard this growing up. In the US we even took extra steps to make sure that homeownership was "the thing". We created non-market solutions (the 30yr mortgage via Fannie & Freddie) that made homeownership available to every American, and then kept going and essentially turned homeownership into the forced savings and retirement program. Now, *decades* later, home values must go up. They must go up always and forever. The entire world economy revolves on the appreciation of homes in highly developed countries like the US, Canada, Australia, and the UK. People with homes need those homes to go up in value or they can't borrow against them. They can't retire. Governments need the value of homes to go up for tax revenue. The entire world monetary system, as least as it relates to the dollar, pound and euro needs homes to continue to appreciate and the easiest way to do that is by limiting the supply of homes. If someone waved some magic wand tomorrow that removed all building restrictions and made it so people could easily build homes, and those homes would be sold at market rates, average home values would plummet and global markets would collapse. The only "solution" that is ever going to actually happen is more government subsidization. Longer loans. More federal guarantees. More federal tax credits. Home values must go up. Supply must be kept scarce. Our system is built on this.

bamboozled 4y ago
Except we know they can't and won't go up forever in those countries as they mostly have a declining birth rate, a long with many other countries. So going to be a fun crash?
- themagician 4y ago
  That can, and will, be pushed out for generations. It's a declining birth RATE—there are still more people. Plenty more people. And we will continue to limit the number of homes. If we need to, we will shrink the number of homes available. Home values must go up. They will go up. You should bet on them going up. Because if, for some reason that were to reverse global finance implodes and nothing else really matters. A permanent, long term downward trend in home values may as well be the end of "money" as we know it all together. And it sort of would be, literally, since much of money creation these days is via mortgage loans.
  - rcarr 4y ago
    This, unfortunately, is correct. The birth rate means jack shit. People with the capital to do so will just buy multiple homes. Holiday homes, homes closer to work, rental properties etc. If the crash ever came it would be so bad it would make the Great Depression look like a picnic. This is why governments will go to ludicrous measures such as bailing out the banks during the financial crisis and then pumping the markets with money for an entire decade (!!!) afterwards. The problem is that the system might well collapse anyway. Here in the UK we seem to be right in the center of it and it’s not looking good. The health system is on the verge of collapse and almost every public profession is striking or in the process of voting to strike and there’s now talk of coordinated action between the unions for maximum pain because the government is flat out refusing to talk. I’ve said it before but I will say it again: the government came out and said during Covid that we were essentially running a war time economy. And the war in Ukraine and the disruption it is causing means we’re essentially still in one. During WW2, tax on the wealthiest in society was around 90%. To be quite frank, that kind of tax rate for a few years on the super rich and the globo corps is the only thing that is going to turn the ship around. No-one expects that as a long term solution, no-one is saying that is how it should always be, but in times of real, actual crisis like this, the super wealthy have to step up and take responsibility to save the system they have profited from. Temporary, very high tax rates to get some normality back and then the cycle can start over again. The poor cannot shoulder the burden anymore because they’ve been shouldering it for the last decade. They have nothing left to give and there is nothing left to cut from public services. The problem we have today is that the super rich now have very little ties to their own countries. They are hyper mobile with private jets, multiple passports, secret tax havens, and armies of lawyers and accountants to hide money and assets. They don’t have the same pride or sense of civic duty they once did in 1939-1945 where many of them took command positions in the war or oversaw industrial production. Nowadays, they are all snapping up mansions in New Zealand and other perceived safe havens in case shit goes sideways and governments decide to play hardball. Getting them to pay their fair share to keep the system running would be exceptionally difficult, perhaps even impossible. So where does that leave us? With either a form of brutal neo-feudalism and potentially a peasant revolt or, perhaps most likely, a technology driven dystopia where enough of the populous is given just enough support to survive. Creative can kicking accounting from the civil service to quell the threat. To make it more tolerable, the populous will be plowed with endless distractions to sedate them into compliance. Bread and circuses, quite literally the standard playbook for millennia. Eventually, once the surplus older generations have died off and the global birth rate has declined sufficiently everywhere, all of the world’s wealth will have been concentrated into a smaller set of hands and enough resources will be in circulation that life will be comfortable once again. A generation or two will go by with no direct experience of the hardships of the past and they will start living large again. Borrowing from tomorrow to pay for today. And thus the cycle continues…
- maeil 4y ago
  South Korea might be the country to watch. In Korea too, for many decades people have been sold on the dream that homes will always be a fantastic, high-return investment. But the lowest birthrate in the world means the population already shrunk last year. Covid will have played a part by causing excess deaths but those were quite low in Korea. Adversion to immigration as a potential solution is even higher than in the US and this seems very unlikely to change as well. It will be interesting to see what happens to the housing market giving the extremely rapid aging of the population that is already happening.
aogaili 4y ago
". They must go up always and forever. The entire world economy revolves around the appreciation of homes in highly developed countries like the US," Sorry, that makes no sense. It's a bold, assertive statement that will render the whole situation hopeless. And the economy doesn't really depend on housing, it depends on people doing productive things and innovating. If a lot of people choose to speculate on housing, that's their problem when it stops going up or goes down, just like any speculative asset.

bamboozled 4y ago

Except we know they can't and won't go up forever in those countries as they mostly have a declining birth rate, a long with many other countries. So going to be a fun crash?

themagician 4y ago
That can, and will, be pushed out for generations. It's a declining birth RATE—there are still more people. Plenty more people. And we will continue to limit the number of homes. If we need to, we will shrink the number of homes available. Home values must go up. They will go up. You should bet on them going up. Because if, for some reason that were to reverse global finance implodes and nothing else really matters. A permanent, long term downward trend in home values may as well be the end of "money" as we know it all together. And it sort of would be, literally, since much of money creation these days is via mortgage loans.
- rcarr 4y ago
  This, unfortunately, is correct. The birth rate means jack shit. People with the capital to do so will just buy multiple homes. Holiday homes, homes closer to work, rental properties etc. If the crash ever came it would be so bad it would make the Great Depression look like a picnic. This is why governments will go to ludicrous measures such as bailing out the banks during the financial crisis and then pumping the markets with money for an entire decade (!!!) afterwards. The problem is that the system might well collapse anyway. Here in the UK we seem to be right in the center of it and it’s not looking good. The health system is on the verge of collapse and almost every public profession is striking or in the process of voting to strike and there’s now talk of coordinated action between the unions for maximum pain because the government is flat out refusing to talk. I’ve said it before but I will say it again: the government came out and said during Covid that we were essentially running a war time economy. And the war in Ukraine and the disruption it is causing means we’re essentially still in one. During WW2, tax on the wealthiest in society was around 90%. To be quite frank, that kind of tax rate for a few years on the super rich and the globo corps is the only thing that is going to turn the ship around. No-one expects that as a long term solution, no-one is saying that is how it should always be, but in times of real, actual crisis like this, the super wealthy have to step up and take responsibility to save the system they have profited from. Temporary, very high tax rates to get some normality back and then the cycle can start over again. The poor cannot shoulder the burden anymore because they’ve been shouldering it for the last decade. They have nothing left to give and there is nothing left to cut from public services. The problem we have today is that the super rich now have very little ties to their own countries. They are hyper mobile with private jets, multiple passports, secret tax havens, and armies of lawyers and accountants to hide money and assets. They don’t have the same pride or sense of civic duty they once did in 1939-1945 where many of them took command positions in the war or oversaw industrial production. Nowadays, they are all snapping up mansions in New Zealand and other perceived safe havens in case shit goes sideways and governments decide to play hardball. Getting them to pay their fair share to keep the system running would be exceptionally difficult, perhaps even impossible. So where does that leave us? With either a form of brutal neo-feudalism and potentially a peasant revolt or, perhaps most likely, a technology driven dystopia where enough of the populous is given just enough support to survive. Creative can kicking accounting from the civil service to quell the threat. To make it more tolerable, the populous will be plowed with endless distractions to sedate them into compliance. Bread and circuses, quite literally the standard playbook for millennia. Eventually, once the surplus older generations have died off and the global birth rate has declined sufficiently everywhere, all of the world’s wealth will have been concentrated into a smaller set of hands and enough resources will be in circulation that life will be comfortable once again. A generation or two will go by with no direct experience of the hardships of the past and they will start living large again. Borrowing from tomorrow to pay for today. And thus the cycle continues…
maeil 4y ago
South Korea might be the country to watch. In Korea too, for many decades people have been sold on the dream that homes will always be a fantastic, high-return investment. But the lowest birthrate in the world means the population already shrunk last year. Covid will have played a part by causing excess deaths but those were quite low in Korea. Adversion to immigration as a potential solution is even higher than in the US and this seems very unlikely to change as well. It will be interesting to see what happens to the housing market giving the extremely rapid aging of the population that is already happening.

aogaili 4y ago

". They must go up always and forever. The entire world economy revolves around the appreciation of homes in highly developed countries like the US," Sorry, that makes no sense. It's a bold, assertive statement that will render the whole situation hopeless. And the economy doesn't really depend on housing, it depends on people doing productive things and innovating. If a lot of people choose to speculate on housing, that's their problem when it stops going up or goes down, just like any speculative asset.