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Housing prices were going up because of supply/demand and not necessarily because of systemic high inflation. By the way just with regular <2% YoY inflation, a

by fosk 4y ago

Housing prices were going up because of supply/demand and not necessarily because of systemic high inflation. By the way just with regular <2% YoY inflation, a $1m home in 2005 was worth $1.3m+ in 2019 (before covid and the current inflation spike), and that is with regular inflation. Because homes cost a lot of money to begin with, the compounding effects of “healthy” inflation is going to be noticeable, and that doesn’t even factor in the low supply in the market.

wesapien 4y ago
All the people that only saw the city for work/employment now don't have to live there. That was huge. Now we wait what's going to happen to all these office real estate. The office doesn't need to go away but not everyone has to have one these days.
lazide 4y ago
Demand was increasing because money was very easy to get.
- arcticbull 4y ago
  Then why didn't it happen in Japan? Same easy money, no increase in house prices. It's not the interest rates, it's the zoning rules. [1, 2] [1] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI [2] https://fred.stlouisfed.org/series/INTDSRJPM193N https://fred.stlouisfed.org/series/INTDSRJPM193N
  - lazide 4y ago
    No, Japan has had massively crashing population, which offset the massive inflationary impact. https://www.macrotrends.net/countries/JPN/japan/population-growth-rate https://www.macrotrends.net/countries/JPN/japan/population-g... Despite a massive decrease in population, Japan has been mostly flat, when they should be in a strong deflationary environment due to demand destruction - because, you know, people being dead. So hey, if the US population would decrease .5% a year (doesn’t sound like a lot, but it adds up fast - 1.75 mln/yr if in the US), we could also tame some inflation!
    - arcticbull 4y ago
      That's a funny way of saying that 'supply and demand meet in Japan' which you can do but decreasing demand or increasing supply. It really is that simple. When supply and demand are allowed to meet, prices stabilize. Otherwise please explain to me why you think that this is the one asset on earth not affected by supply and demand. And you could really use a solid citation. Thought exercise. There are 140,000,000 houses in the US. What do you think would happen to the price of each house if there were 280,000,000? If you answered anything other than 'they would still go up for some reason despite many of them being empty and derelict' then we are in agreement that it is a supply and demand issue. Ergo a zoning issue.
      - lazide 4y ago
        Have you been to Japan? There is massive excess supply of housing in Japan. They literally demolish entire villages because no one lives there anymore. Everyone who can moves to Tokyo, and prices there are insane. In the US, if we had 288 million homes, the big question would be ‘where?’. We already have millions of acres of land with literally no zoning rules at all. Even Greenlee County Arizona (1500 sq miles) is more than enough. No one would want to though, because it’s not the place people want to live.
        arcticbull 4y ago
        You’re fighting a straw man, nobody is arguing you need to do what Japan did verbatim. The only argument I’m making is when you allow supply and demand to meet prices stop going up. All the rest is narrative. The answer to where is “up.” Also the prices in Tokyo aren’t insane at all they’re super affordable by any standard.
        lazide 4y ago
        That is not at all reflective of reality. https://japanpropertycentral.com/tag/tokyo-apartment-prices/ https://japanpropertycentral.com/tag/tokyo-apartment-prices/ Tokyo prices are running 908k yen/square meter, or $685 square foot. While manhattan real estate is $1.5k/sq Ft and San Francisco $1k/sq ft - median incomes are dramatically lower in Japan, as is purchasing power, with the median Tokyo income being only $66k/yr. There is a reason the stereotypical apartment in Tokyo is tiny - on average 65 square meters (700 square feet), of which only 41 square meters (441 square feet) is livable space. That’s often for more than one person. Outside of Tokyo, property is nearly free. Inside Tokyo it’s expensive, crowded, and tiny. Looking at the national stats, it roughly averages out. But that isn’t this utopia you seem to think is occurring.
  - upsidesinclude 4y ago
    Homes are not assets in Japan, they are liabilities. They only depreciate
Maursault 4y ago
> Housing prices were going up because of supply/demand I don't think that's the case. Development was occurring so quickly, supply exceeded demand, and new houses sat or became entangled in bad mortgages. Property values increase as a function of population, which sounds the same as supply and demand but isn't quite. Housing prices increased because labor, builder and materials rates increased.

by fosk 4y ago

wesapien 4y ago

All the people that only saw the city for work/employment now don't have to live there. That was huge. Now we wait what's going to happen to all these office real estate. The office doesn't need to go away but not everyone has to have one these days.

lazide 4y ago

Demand was increasing because money was very easy to get.

arcticbull 4y ago
Then why didn't it happen in Japan? Same easy money, no increase in house prices. It's not the interest rates, it's the zoning rules. [1, 2] [1] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI [2] https://fred.stlouisfed.org/series/INTDSRJPM193N https://fred.stlouisfed.org/series/INTDSRJPM193N
- lazide 4y ago
  No, Japan has had massively crashing population, which offset the massive inflationary impact. https://www.macrotrends.net/countries/JPN/japan/population-growth-rate https://www.macrotrends.net/countries/JPN/japan/population-g... Despite a massive decrease in population, Japan has been mostly flat, when they should be in a strong deflationary environment due to demand destruction - because, you know, people being dead. So hey, if the US population would decrease .5% a year (doesn’t sound like a lot, but it adds up fast - 1.75 mln/yr if in the US), we could also tame some inflation!
  - arcticbull 4y ago
    That's a funny way of saying that 'supply and demand meet in Japan' which you can do but decreasing demand or increasing supply. It really is that simple. When supply and demand are allowed to meet, prices stabilize. Otherwise please explain to me why you think that this is the one asset on earth not affected by supply and demand. And you could really use a solid citation. Thought exercise. There are 140,000,000 houses in the US. What do you think would happen to the price of each house if there were 280,000,000? If you answered anything other than 'they would still go up for some reason despite many of them being empty and derelict' then we are in agreement that it is a supply and demand issue. Ergo a zoning issue.
    - lazide 4y ago
      Have you been to Japan? There is massive excess supply of housing in Japan. They literally demolish entire villages because no one lives there anymore. Everyone who can moves to Tokyo, and prices there are insane. In the US, if we had 288 million homes, the big question would be ‘where?’. We already have millions of acres of land with literally no zoning rules at all. Even Greenlee County Arizona (1500 sq miles) is more than enough. No one would want to though, because it’s not the place people want to live.
      - arcticbull 4y ago
        You’re fighting a straw man, nobody is arguing you need to do what Japan did verbatim. The only argument I’m making is when you allow supply and demand to meet prices stop going up. All the rest is narrative. The answer to where is “up.” Also the prices in Tokyo aren’t insane at all they’re super affordable by any standard.
        lazide 4y ago
        That is not at all reflective of reality. https://japanpropertycentral.com/tag/tokyo-apartment-prices/ https://japanpropertycentral.com/tag/tokyo-apartment-prices/ Tokyo prices are running 908k yen/square meter, or $685 square foot. While manhattan real estate is $1.5k/sq Ft and San Francisco $1k/sq ft - median incomes are dramatically lower in Japan, as is purchasing power, with the median Tokyo income being only $66k/yr. There is a reason the stereotypical apartment in Tokyo is tiny - on average 65 square meters (700 square feet), of which only 41 square meters (441 square feet) is livable space. That’s often for more than one person. Outside of Tokyo, property is nearly free. Inside Tokyo it’s expensive, crowded, and tiny. Looking at the national stats, it roughly averages out. But that isn’t this utopia you seem to think is occurring.
- upsidesinclude 4y ago
  Homes are not assets in Japan, they are liabilities. They only depreciate

Maursault 4y ago

> Housing prices were going up because of supply/demand I don't think that's the case. Development was occurring so quickly, supply exceeded demand, and new houses sat or became entangled in bad mortgages. Property values increase as a function of population, which sounds the same as supply and demand but isn't quite. Housing prices increased because labor, builder and materials rates increased.