5 ms·

It's almost like our entire political system is premised on the idea that house prices should never go down...

birdyrooster 3y ago
it makes sense though as this is how the middle class sees a lot of their wealth passed through death and marriage, its houses for the middle class. its just that the middle class is shrinking and so now the same houses are owned by fewer families. for everyone else there is renting and homelessness.
- caddemon 3y ago
  In SF/Bay Area there is definitely a separate issue besides just the shrinking middle class. SWEs that by all other metrics would be solidly middle class if not upper middle are having a hard time finding affordable homes there. The only people I know who've entertained ownership in the area are DINK, and I know many people in their late 20s and early 30s who have been consistently earning over 6 figures since the day they left college. That said, I can understand arguments for protecting existing middle class homeowners. I think a huge chunk of the problem could be resolved by having policies that treat property like any other speculative investment while having some sort of exceptions for primary family homes that are actively being lived in by the owners. I'm guessing if that were the only class protected by the SF property tax laws only a small minority of the current places would remain with locked-in rates.
  - seiferteric 3y ago
    I think you could ban investment properties entirely and we would still have the same problems, it would barely be a blip I bet. There just isn't enough housing and there isn't likely to be anytime soon.
- birdyrooster 3y ago
  https://www.cnbc.com/2023/01/18/amid-inflation-more-middle-class-americans-struggle-to-make-ends-meet.html https://www.cnbc.com/2023/01/18/amid-inflation-more-middle-c...
exclusiv 3y ago
There's some of that for sure, but real estate is a good inflation hedge. So if you print like we have been and new supply doesn't jack up, then here we are. That's just a natural economic thing; not a political system at play, other than a byproduct of massive printing which has been out of control for some time. I mean, we had interest rates jack up (for the US in modern times at least lol) and prices didn't drop as much as they should (and many that lost in bidding wars in the frothy market went to the sidelines) When the Fed goes the other way because they have no real choice, prices are going even higher.
- briantakita 3y ago
  Real estate prices is propped up with credit. Credit can be created at ever increasing numbers until there is a collapse in the credit markets or the monetary system. When loans become unpayable, defaults occur. If credit markets collapse, then housing prices go down. Real estate has value & a premium associated with the credit markets & revenue generated by the property (e.g. rentals).
  - exclusiv 3y ago
    > Real estate has value & a premium associated with the credit markets & revenue generated by the property (e.g. rentals). Yes for commercial - usually cap rate based which is related to return and risk, replacement cost valuation, or revenue multiplier. With regard to residential - prices are going to go up when fed goes the other way. They have NOT been propped up with credit or favorable interest rates. Those factors have gotten worse but prices have held strong. They have been propped up because supply is still low and new construction is expensive. Those things aren't likely to change anytime soon. Not to mention US RE is still a good place to park foreign cash in relative terms and is a good inflation hedge. Rents will go up. Home prices will go up. Commercial hasn't fallen out yet though. Office space should be converted to multi family residential or mixed use. Commercial collapse is likely though which I think you are referring to. But to the article at hand - could be a way to monetize a sharp drop in revenue due to WFH and the hike in interest rates - convert to affordable housing and offset any investment to cities (ie taxpayers) to address the homeless and affordability crisis.
seiferteric 3y ago
Even without the politics/nimbyism I am trying to imaging a realistic scenario where housing prices go down and stay down in California, but I just can't.
- skulk 3y ago
  Can you imagine one where wages go up instead to compensate?
  - missedthecue 3y ago
    It seems that the price of housing is directly related to how much people can afford to pay, meaning that increases in wages won't remediate housing cost increases, but contribute to them directly and indirectly.
  - seiferteric 3y ago
    Nah, this is why you can make $180k in CA and still feel poor cause you are competing with everyone around you in a zero sum game (real estate).
willcipriano 3y ago
The real problem is wages aren't allowed to go up.
- jacobsenscott 3y ago
  Wages have gone up significantly recently: when wages go up - house prices (and the price of everything else) go up. Raising wages doesn't magic up more houses.
  - willcipriano 3y ago
    > Wages have gone up significantly recently "Since President Biden took office in January 2021, the increase in prices due to inflation is over 14%, resulting in a loss in real wages of nearly 4%" https://budget.house.gov/press-release/fiscal-state-of-the-union-bidens-real-wage-decline https://budget.house.gov/press-release/fiscal-state-of-the-u... "Americans With a College Degree Saw Wages Decline the Most in Two Decades" https://www.bloomberg.com/news/articles/2023-02-10/americans-with-a-college-degree-saw-wages-decline-most-in-two-decades#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-02-10/americans... "Between 1973 and 2015, real hourly earnings for the typical 25–54 year-old man with only a high school degree declined by 18.2 percent" https://www.aeaweb.org/articles?id=10.1257/jep.33.2.163 https://www.aeaweb.org/articles?id=10.1257/jep.33.2.163
    - jacobsenscott 3y ago
      https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N You can zoom in to any point on the chart to tell whatever story you wish.
      - willcipriano 3y ago
        Labor is taking less and less of what it creates home with it, you can't hide that with gamed CPI: https://fred.stlouisfed.org/series/LABSHPUSA156NRUG https://fred.stlouisfed.org/series/LABSHPUSA156NRUG Every recession labor gives up a little more ground and never gains it back. More reading: https://fredblog.stlouisfed.org/2019/08/capitals-gain-is-lately-labours-loss/ https://fredblog.stlouisfed.org/2019/08/capitals-gain-is-lat...
missedthecue 3y ago
Is it possible to have a healthy flourishing community where housing prices decrease every year? Has this ever happened anywhere?
- Server6 3y ago
  Japan. For an island with limited space they treat their real estate market very differently. The land itself has value, but structures depreciate to zero. https://housekey.jp/why-japanese-real-estate-is-different/ https://housekey.jp/why-japanese-real-estate-is-different/
  - missedthecue 3y ago
    Housing prices in Japan have been going up for years. They had the implosion after the superbubble in the 1990s (prices got so ridiculous, that the land beneath the emperor's palace was worth more than all the land in California) But other than this extreme, the trend has very definitely been up and to the right, year after year after year. Even as the population declines.

it makes sense though as this is how the middle class sees a lot of their wealth passed through death and marriage, its houses for the middle class. its just that the middle class is shrinking and so now the same houses are owned by fewer families. for everyone else there is renting and homelessness.

caddemon 3y ago
In SF/Bay Area there is definitely a separate issue besides just the shrinking middle class. SWEs that by all other metrics would be solidly middle class if not upper middle are having a hard time finding affordable homes there. The only people I know who've entertained ownership in the area are DINK, and I know many people in their late 20s and early 30s who have been consistently earning over 6 figures since the day they left college. That said, I can understand arguments for protecting existing middle class homeowners. I think a huge chunk of the problem could be resolved by having policies that treat property like any other speculative investment while having some sort of exceptions for primary family homes that are actively being lived in by the owners. I'm guessing if that were the only class protected by the SF property tax laws only a small minority of the current places would remain with locked-in rates.
- seiferteric 3y ago
  I think you could ban investment properties entirely and we would still have the same problems, it would barely be a blip I bet. There just isn't enough housing and there isn't likely to be anytime soon.
birdyrooster 3y ago
https://www.cnbc.com/2023/01/18/amid-inflation-more-middle-class-americans-struggle-to-make-ends-meet.html https://www.cnbc.com/2023/01/18/amid-inflation-more-middle-c...

exclusiv 3y ago

There's some of that for sure, but real estate is a good inflation hedge. So if you print like we have been and new supply doesn't jack up, then here we are. That's just a natural economic thing; not a political system at play, other than a byproduct of massive printing which has been out of control for some time. I mean, we had interest rates jack up (for the US in modern times at least lol) and prices didn't drop as much as they should (and many that lost in bidding wars in the frothy market went to the sidelines) When the Fed goes the other way because they have no real choice, prices are going even higher.

briantakita 3y ago
Real estate prices is propped up with credit. Credit can be created at ever increasing numbers until there is a collapse in the credit markets or the monetary system. When loans become unpayable, defaults occur. If credit markets collapse, then housing prices go down. Real estate has value & a premium associated with the credit markets & revenue generated by the property (e.g. rentals).
- exclusiv 3y ago
  > Real estate has value & a premium associated with the credit markets & revenue generated by the property (e.g. rentals). Yes for commercial - usually cap rate based which is related to return and risk, replacement cost valuation, or revenue multiplier. With regard to residential - prices are going to go up when fed goes the other way. They have NOT been propped up with credit or favorable interest rates. Those factors have gotten worse but prices have held strong. They have been propped up because supply is still low and new construction is expensive. Those things aren't likely to change anytime soon. Not to mention US RE is still a good place to park foreign cash in relative terms and is a good inflation hedge. Rents will go up. Home prices will go up. Commercial hasn't fallen out yet though. Office space should be converted to multi family residential or mixed use. Commercial collapse is likely though which I think you are referring to. But to the article at hand - could be a way to monetize a sharp drop in revenue due to WFH and the hike in interest rates - convert to affordable housing and offset any investment to cities (ie taxpayers) to address the homeless and affordability crisis.

seiferteric 3y ago

Even without the politics/nimbyism I am trying to imaging a realistic scenario where housing prices go down and stay down in California, but I just can't.

skulk 3y ago
Can you imagine one where wages go up instead to compensate?
- missedthecue 3y ago
  It seems that the price of housing is directly related to how much people can afford to pay, meaning that increases in wages won't remediate housing cost increases, but contribute to them directly and indirectly.
- seiferteric 3y ago
  Nah, this is why you can make $180k in CA and still feel poor cause you are competing with everyone around you in a zero sum game (real estate).

willcipriano 3y ago

The real problem is wages aren't allowed to go up.

jacobsenscott 3y ago
Wages have gone up significantly recently: when wages go up - house prices (and the price of everything else) go up. Raising wages doesn't magic up more houses.
- willcipriano 3y ago
  > Wages have gone up significantly recently "Since President Biden took office in January 2021, the increase in prices due to inflation is over 14%, resulting in a loss in real wages of nearly 4%" https://budget.house.gov/press-release/fiscal-state-of-the-union-bidens-real-wage-decline https://budget.house.gov/press-release/fiscal-state-of-the-u... "Americans With a College Degree Saw Wages Decline the Most in Two Decades" https://www.bloomberg.com/news/articles/2023-02-10/americans-with-a-college-degree-saw-wages-decline-most-in-two-decades#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-02-10/americans... "Between 1973 and 2015, real hourly earnings for the typical 25–54 year-old man with only a high school degree declined by 18.2 percent" https://www.aeaweb.org/articles?id=10.1257/jep.33.2.163 https://www.aeaweb.org/articles?id=10.1257/jep.33.2.163
  - jacobsenscott 3y ago
    https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N You can zoom in to any point on the chart to tell whatever story you wish.
    - willcipriano 3y ago
      Labor is taking less and less of what it creates home with it, you can't hide that with gamed CPI: https://fred.stlouisfed.org/series/LABSHPUSA156NRUG https://fred.stlouisfed.org/series/LABSHPUSA156NRUG Every recession labor gives up a little more ground and never gains it back. More reading: https://fredblog.stlouisfed.org/2019/08/capitals-gain-is-lately-labours-loss/ https://fredblog.stlouisfed.org/2019/08/capitals-gain-is-lat...

missedthecue 3y ago

Is it possible to have a healthy flourishing community where housing prices decrease every year? Has this ever happened anywhere?

Server6 3y ago
Japan. For an island with limited space they treat their real estate market very differently. The land itself has value, but structures depreciate to zero. https://housekey.jp/why-japanese-real-estate-is-different/ https://housekey.jp/why-japanese-real-estate-is-different/
- missedthecue 3y ago
  Housing prices in Japan have been going up for years. They had the implosion after the superbubble in the 1990s (prices got so ridiculous, that the land beneath the emperor's palace was worth more than all the land in California) But other than this extreme, the trend has very definitely been up and to the right, year after year after year. Even as the population declines.