3 ms·

Actually, when housing value grows faster than inflation, rents stay low, and you could have observed that yourself in 2010-2020, when the capital gains in the

Actually, when housing value grows faster than inflation, rents stay low, and you could have observed that yourself in 2010-2020, when the capital gains in the property value subsidized renters. When the growth stops is the time for rents to catch up. >To solve the housing crisis, Americans need to be deprogrammed out of this belief that owning a home is supposed to yield a return. Markets don't quite work like that. A seller will sell at the highest price offered (as same as the buyer will buy at the lowest price), if you were able to "deprogram" this behavior, you'd put the entire market, not just the real estate, in complete chaos.

lotsofpulp 3y ago
> A seller will sell at the highest price offered Not if the highest price offered is too low for the seller and they are sitting on a low fixed rate mortgage and/or low property taxes. That is the difference between land or space and most other items in the market. If the annual costs are low enough, many times it makes sense to just wait for the government to bring back easy money, and you get to profit for doing nothing.
- pandaman 3y ago
  Someone who is not selling is not a seller, is he? And, predicting the next correction, someone who cannot afford to buy even at the lowest price, also, is not a buyer.
  - lotsofpulp 3y ago
    A properly functioning market requires lots of sellers and buyers. Hence people complaining about extended time of empty storefronts and empty housing, it shows the lack of a properly functioning market.
    - pandaman 3y ago
      This depends on your definition of "properly", a market doesn't require either. E.g. a market for fine art usually has no sellers most of the time, it might not be properly functioning but it's a market and still follows the same principle: people will sell for as much as they can possibly get and buy for as little as possible.
      - lotsofpulp 3y ago
        Let’s change to efficient and inefficient instead of properly and improperly. No one is hurt by a less efficient art market, so there is no outcry about it. An inefficient property/land/house/space market leads to all sorts of problems in society.
        pandaman 3y ago
        The market efficiency is a theory that asserts that the seller sells at the highest price available and the buyer buys at the lowest, it doesn't not put any requirements on having lots of either [1] 1.https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp https://www.investopedia.com/terms/e/efficientmarkethypothes...
        lotsofpulp 3y ago
        EMH assumes good price discovery (since it is always referring to deep markets like publicly listed stocks), which depends on having many buyers and sellers: https://en.wikipedia.org/wiki/Price_discovery https://en.wikipedia.org/wiki/Price_discovery
        pandaman 3y ago
        Not really: if Mona Lisa went on sale, I am sure all the prospective buyers learned about such an event despite having just one possible seller. The information propagation on the American RE market is also quite robust, most of properties go through the MLS and even if not, buyers scout for possible deals very vigilantly.
AnimalMuppet 3y ago
>>To solve the housing crisis, Americans need to be deprogrammed out of this belief that owning a home is supposed to yield a return. > Markets don't quite work like that. A seller will sell at the highest price offered (as same as the buyer will buy at the lowest price), if you were able to "deprogram" this behavior, you'd put the entire market, not just the real estate, in complete chaos. I don't think your criticism here works. The point is that people buy with expectations of return, and therefore are willing to pay investment prices rather than just equivalent-to-renting prices. Your reply doesn't address that at all.
- pandaman 3y ago
  If I understood correctly, you are saying that the buyers on the RE market pay more than they could have to clear the deal? I'd like to see some sources for that.
  - AnimalMuppet 3y ago
    No. I'm saying that the demand side price for "a place to live plus an investment" is higher than for "a place to live"[1]. Within that dynamic, prices are where they have to be to clear the deal. [1] I think this is intuitively obvious. The promise of future return will never have a price of zero.
    - pandaman 3y ago
      That's quite possible but then I don't understand your critique. Investment driven demand appears to result from the already raising prices. I don't know who could possibly manipulate the market if it has been naturally declining, the capital requirements for that are insane.
      - AnimalMuppet 3y ago
        I'm saying that, in your reply to _vertigo, you are thinking (or at least replying as if you think) that _vertigo wants to break the "accepting the highest price offered" behavior of sellers. I don't think that's _vertigo's point at all. I think the point is to change the "I can offer more because it's going to go up in value after I buy" psychology of buyers. That will change the offered prices, of which sellers will still accept the best. > Investment driven demand appears to result from the already raising prices. This is more on point... and it's also almost the definition of a bubble (people buying as an investment because the price is going up, and the money coming in raising prices further). I don't know any way to fix it except to increase supply enough to soak up all the money coming in, plus a bit. But, worse, I don't know any way to fix it that won't damage people who bought it as an investment. I guess the only thing I can see is to build more, but not absolutely flood the market, so that the price goes down (or at least stops going up) but doesn't absolutely crater.

lotsofpulp 3y ago

> A seller will sell at the highest price offered Not if the highest price offered is too low for the seller and they are sitting on a low fixed rate mortgage and/or low property taxes. That is the difference between land or space and most other items in the market. If the annual costs are low enough, many times it makes sense to just wait for the government to bring back easy money, and you get to profit for doing nothing.

pandaman 3y ago
Someone who is not selling is not a seller, is he? And, predicting the next correction, someone who cannot afford to buy even at the lowest price, also, is not a buyer.
- lotsofpulp 3y ago
  A properly functioning market requires lots of sellers and buyers. Hence people complaining about extended time of empty storefronts and empty housing, it shows the lack of a properly functioning market.
  - pandaman 3y ago
    This depends on your definition of "properly", a market doesn't require either. E.g. a market for fine art usually has no sellers most of the time, it might not be properly functioning but it's a market and still follows the same principle: people will sell for as much as they can possibly get and buy for as little as possible.
    - lotsofpulp 3y ago
      Let’s change to efficient and inefficient instead of properly and improperly. No one is hurt by a less efficient art market, so there is no outcry about it. An inefficient property/land/house/space market leads to all sorts of problems in society.
      - pandaman 3y ago
        The market efficiency is a theory that asserts that the seller sells at the highest price available and the buyer buys at the lowest, it doesn't not put any requirements on having lots of either [1] 1.https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp https://www.investopedia.com/terms/e/efficientmarkethypothes...
        lotsofpulp 3y ago
        EMH assumes good price discovery (since it is always referring to deep markets like publicly listed stocks), which depends on having many buyers and sellers: https://en.wikipedia.org/wiki/Price_discovery https://en.wikipedia.org/wiki/Price_discovery
        pandaman 3y ago
        Not really: if Mona Lisa went on sale, I am sure all the prospective buyers learned about such an event despite having just one possible seller. The information propagation on the American RE market is also quite robust, most of properties go through the MLS and even if not, buyers scout for possible deals very vigilantly.

AnimalMuppet 3y ago

>>To solve the housing crisis, Americans need to be deprogrammed out of this belief that owning a home is supposed to yield a return. > Markets don't quite work like that. A seller will sell at the highest price offered (as same as the buyer will buy at the lowest price), if you were able to "deprogram" this behavior, you'd put the entire market, not just the real estate, in complete chaos. I don't think your criticism here works. The point is that people buy with expectations of return, and therefore are willing to pay investment prices rather than just equivalent-to-renting prices. Your reply doesn't address that at all.

pandaman 3y ago
If I understood correctly, you are saying that the buyers on the RE market pay more than they could have to clear the deal? I'd like to see some sources for that.
- AnimalMuppet 3y ago
  No. I'm saying that the demand side price for "a place to live plus an investment" is higher than for "a place to live"[1]. Within that dynamic, prices are where they have to be to clear the deal. [1] I think this is intuitively obvious. The promise of future return will never have a price of zero.
  - pandaman 3y ago
    That's quite possible but then I don't understand your critique. Investment driven demand appears to result from the already raising prices. I don't know who could possibly manipulate the market if it has been naturally declining, the capital requirements for that are insane.
    - AnimalMuppet 3y ago
      I'm saying that, in your reply to _vertigo, you are thinking (or at least replying as if you think) that _vertigo wants to break the "accepting the highest price offered" behavior of sellers. I don't think that's _vertigo's point at all. I think the point is to change the "I can offer more because it's going to go up in value after I buy" psychology of buyers. That will change the offered prices, of which sellers will still accept the best. > Investment driven demand appears to result from the already raising prices. This is more on point... and it's also almost the definition of a bubble (people buying as an investment because the price is going up, and the money coming in raising prices further). I don't know any way to fix it except to increase supply enough to soak up all the money coming in, plus a bit. But, worse, I don't know any way to fix it that won't damage people who bought it as an investment. I guess the only thing I can see is to build more, but not absolutely flood the market, so that the price goes down (or at least stops going up) but doesn't absolutely crater.