8 ms·

A lot of people and funds bought up a lot of houses to flip or rent at a premium, so even though free money is gone, they can't lower their prices. The next ste

A lot of people and funds bought up a lot of houses to flip or rent at a premium, so even though free money is gone, they can't lower their prices. The next step is to tax people hard who leave houses empty. Make owning unsalable and unrentable property a liability again!

whimsicalism 3y ago
I disagree that this is a major driver of housing costs. And why can't they lower their prices?
- jfghi 3y ago
  I’d say it’s because the pricing is algorithmic based off of demographic and personal data. Similar to hotels, it can be more profitable to keep some empty in order to reduce supply and price up the others.
  - whimsicalism 3y ago
    > it can be more profitable to keep some empty in order to reduce supply and price up the others. You mean if you own a massive complex, which is the vast minority of housing - and also not what was mostly accused of being bought up by individuals or firms for speculation. If you're talking smaller units, landlords are effectively price takers and it is pretty much never profitable to keep empty and price up everything else unless you are anticipating immediate increase in prices. None of this is a major driver of housing prices either way.
    - jfghi 3y ago
      I’d say based upon the overall profitability and scale of single family corporate landlords like American homes for rent that commercial interests have great influence over pricing. Smaller landlords are then able to price similarly. It makes little sense for them to have houses be empty and lose money, but this is often the case. However, the focal point is the drivers of pricing and I don’t see any evidence in your argument as to why I am wrong.
      - whimsicalism 3y ago
        > I don’t see any evidence in your argument as to why I am wrong. Basic economics on how prices work? The fact that obviously everybody is a price-taker in most home markets? Your theory is for some sort of massive coordinated action that would reap massive profits to anybody for defecting from. It's game-theoretically impossible but I need to provide the evidence? There are some landlord pricing tools that should absolutely be subject to anti-trust enforcement, but this is again: an extremely small current in modern rental/housing markets.
- gorjusborg 3y ago
  Debt. A person might not be able to lower prices because they owe more than the house will sell for. I can't imagine that is broadly the case in this market, unless the house was just bought. A corporation is even less likely to lower prices if they own lots of properties. If they lower the price of one, their loss may be multiplied by the number of comparable holdings. I imagine that it might affect borrowing for highly leveraged real estate investors. If you are securing loans on asset values and they drop in perceived value, lenders might get nervous and call loans in.
  - candiodari 3y ago
    In other words the solution is some serious level of sustained inflation.
    - gorjusborg 3y ago
      Theoretically, that'll make the debt easier to pay, given enough time. However, there are levels of debt-to-income that prevent the borrower from getting that time (insolvency exists). I am hoping policy-makers have a more sophisticated approach than 'money printers go brrr'. Economies like price stability. Deflation and inflation can be destructive in the extreme.
- Alupis 3y ago
  > And why can't they lower their prices? Because if you bought an over-inflated peak-market house you're stuck with that mortgage rate. There's people paying $1,500 - $2,000 monthly on mortgages for average homes. To rent it out, it's not sufficient (for a variety of reasons) to simply collect the mortgage payment, meaning you have to charge even more to stay afloat. If the market cools, and people no longer are willing to pay $2,5000 a month in rent on average homes, then the home owner is in a pickle... try to re-fi, if possible, offload the home, or ride the storm out (if financially feasible).
  - jandrewrogers 3y ago
    The vast, vast majority of rental properties have a much lower cost basis than if you were to buy it yourself today. Many landlords could rent it for much less than your mortgage payment on the same property and still turn a profit.
    - Alupis 3y ago
      > The vast, vast majority of rental properties have a much lower cost basis than if you were to buy it yourself today Anything to quote here for this? I'm inclined to believe you are probably right, but an awful lot of real estate has changed hands in the past 5ish years... all of which is hugely inflated above actual property values in a normal market. Lots of people with FOMO bought into houses way above their weight, and thought the rental market was a "game" anyone can play.
  - smeej 3y ago
    "Hold it empty" is not a better way to "ride the storm out" than to rent it at lower cost. The solution to losing money isn't losing even more money even faster.
    - ProfessorLayton 3y ago
      This is absolutely dependent on the market. It makes sense to hold an empty property in cities that make it incredibly hard to remove tenants without cause.
- civilitty 3y ago
  > And why can't they lower their prices? The properties are valued based on the advertised rental rates and if property values fall, they can have significant down stream effects on financing like banks requiring the property owner to put up more collateral next time they need a loan, whether it's to build more housing somewhere else or pay for maintenance that has large upfront costs.
mlinhares 3y ago
There's also the fact a lot of people got a really good interest rate on their homes and will not get anything like that if they decide to sell (i got under 3%, not a chance I'm entering the market again at 7%) so the actual amount of not-new homes available in the market is very low.
- harambae 3y ago
  >not a chance I'm entering the market again at 7% If you're not buying another house, how does that change the net availability? You're not buying or selling.
  - mlinhares 3y ago
    That's exactly the issue, there would usually be a considerable amount of people in the market moving to bigger homes, changing neighborhoods, downscaling, but right now if you have a low rate loan it would be insane to give up your loan and pick one with the current rate, so these people generally left the market. This odd lots episode is a pretty good discussion on the whole subject: https://www.bloomberg.com/news/articles/2023-07-24/how-the-housing-bears-got-the-last-year-all-wrong?srnd=null#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-07-24/how-the-h...
    - harambae 3y ago
      I bought my last car 13 years ago and wanted to upgrade during Covid but didn't (after prices went up a bunch). Didn't sell my existing car, didn't buy a new one. So, by your definition, did I contribute to the auto shortage?
TeckPerspecc 3y ago
Ban corporate ownership of SFH.
- whimsicalism 3y ago
  Not a major driver of home prices at all. Plus, corporate landlords are some of the only ones that are even making it possible to rent at all in large swathes of America. I view this as basically left-wing science denialism. The right has climate, the left denies the overwhelming consensus of economists as to the cause of housing affordability crises (it's supply and bad policy, not blackstone). [0]. Institutional investors own less than 3% of rental homes, which is a minority of overall homes and disproportionately buy homes that were not fit for sale anyways (so-called fixer uppers). [0]: https://www.nytimes.com/2022/10/19/opinion/affordable-housing-private-equity.html https://www.nytimes.com/2022/10/19/opinion/affordable-housin...
  - hn_throwaway_99 3y ago
    This is flat out false, at least in Texas: https://www.keranews.org/business-economy/2022-06-14/investors-bought-nearly-a-third-of-all-homes-in-texas-last-year https://www.keranews.org/business-economy/2022-06-14/investo... Also, there have been other articles I read during the pandemic (the topic was how long eviction moratoriums were killing small landlords while corporate landlords could weather it) that small, individual landlords do a much better job at renting out housing more affordably, being more willing to work with renters when they are behind on their payments, etc.
    - Obscurity4340 3y ago
      Individual landlords also tend to play games with renovictions or personal-use evictions to inflate their rents. I would never rent from someone who can decide their "nephew" wants the space and they just couldn't say no to him but then that fell through and meanwhile you're out on the street.
      - hn_throwaway_99 3y ago
andromeduck 3y ago
Just tax land.
- x3n0ph3n3 3y ago
  What do you think property taxes are?
  - andromeduck 3y ago
    Not a land tax.
  - BobbyJo 3y ago
    It's funny how well property taxes work to control housing prices, and yet high COL areas are completely unable to utilize them.
    - supertrope 3y ago
      See: Chicago, IL. High property tax bills keep housing purchase prices from zooming up.
  - padjo 3y ago
    Not land taxes? https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Property_tax https://en.m.wikipedia.org/wiki/Property_tax
  - deleted 3y ago
    [deleted]
  - supertrope 3y ago
    A tax on both land and the structure. A land value tax would not have the perverse incentive against building more units on the same lot.
smeej 3y ago
Isn't it already a liability to have debt on property that can't make you any money? Especially if you can't flip them because they're underwater?
- Someone1234 3y ago
  Barely on a 3% mortgage. There's a reason a lot of investment companies are buying empty lots and putting storage units on them, they are just trying to break even on the business and expect the land itself to inflate over time. If they purchased this property at e.g. 7% or more, you may have a point.
- deleted 3y ago
  [deleted]
danaris 3y ago
"Can't" == "refuse to lose money on the transaction". That's not a luxury we plebes have when buying and selling homes. If the market happens to have crashed just before we have to move, for whatever reason, we have to take the loss, no matter how much it hurts. So these lovely people (I'm sure) just lock up vast amounts of real estate at unrealistically inflated prices, hurting the entire system, purely so that they don't have to record a loss.

whimsicalism 3y ago

I disagree that this is a major driver of housing costs. And why can't they lower their prices?

jfghi 3y ago
I’d say it’s because the pricing is algorithmic based off of demographic and personal data. Similar to hotels, it can be more profitable to keep some empty in order to reduce supply and price up the others.
- whimsicalism 3y ago
  > it can be more profitable to keep some empty in order to reduce supply and price up the others. You mean if you own a massive complex, which is the vast minority of housing - and also not what was mostly accused of being bought up by individuals or firms for speculation. If you're talking smaller units, landlords are effectively price takers and it is pretty much never profitable to keep empty and price up everything else unless you are anticipating immediate increase in prices. None of this is a major driver of housing prices either way.
  - jfghi 3y ago
    I’d say based upon the overall profitability and scale of single family corporate landlords like American homes for rent that commercial interests have great influence over pricing. Smaller landlords are then able to price similarly. It makes little sense for them to have houses be empty and lose money, but this is often the case. However, the focal point is the drivers of pricing and I don’t see any evidence in your argument as to why I am wrong.
    - whimsicalism 3y ago
      > I don’t see any evidence in your argument as to why I am wrong. Basic economics on how prices work? The fact that obviously everybody is a price-taker in most home markets? Your theory is for some sort of massive coordinated action that would reap massive profits to anybody for defecting from. It's game-theoretically impossible but I need to provide the evidence? There are some landlord pricing tools that should absolutely be subject to anti-trust enforcement, but this is again: an extremely small current in modern rental/housing markets.
gorjusborg 3y ago
Debt. A person might not be able to lower prices because they owe more than the house will sell for. I can't imagine that is broadly the case in this market, unless the house was just bought. A corporation is even less likely to lower prices if they own lots of properties. If they lower the price of one, their loss may be multiplied by the number of comparable holdings. I imagine that it might affect borrowing for highly leveraged real estate investors. If you are securing loans on asset values and they drop in perceived value, lenders might get nervous and call loans in.
- candiodari 3y ago
  In other words the solution is some serious level of sustained inflation.
  - gorjusborg 3y ago
    Theoretically, that'll make the debt easier to pay, given enough time. However, there are levels of debt-to-income that prevent the borrower from getting that time (insolvency exists). I am hoping policy-makers have a more sophisticated approach than 'money printers go brrr'. Economies like price stability. Deflation and inflation can be destructive in the extreme.
Alupis 3y ago
> And why can't they lower their prices? Because if you bought an over-inflated peak-market house you're stuck with that mortgage rate. There's people paying $1,500 - $2,000 monthly on mortgages for average homes. To rent it out, it's not sufficient (for a variety of reasons) to simply collect the mortgage payment, meaning you have to charge even more to stay afloat. If the market cools, and people no longer are willing to pay $2,5000 a month in rent on average homes, then the home owner is in a pickle... try to re-fi, if possible, offload the home, or ride the storm out (if financially feasible).
- jandrewrogers 3y ago
  The vast, vast majority of rental properties have a much lower cost basis than if you were to buy it yourself today. Many landlords could rent it for much less than your mortgage payment on the same property and still turn a profit.
  - Alupis 3y ago
    > The vast, vast majority of rental properties have a much lower cost basis than if you were to buy it yourself today Anything to quote here for this? I'm inclined to believe you are probably right, but an awful lot of real estate has changed hands in the past 5ish years... all of which is hugely inflated above actual property values in a normal market. Lots of people with FOMO bought into houses way above their weight, and thought the rental market was a "game" anyone can play.
- smeej 3y ago
  "Hold it empty" is not a better way to "ride the storm out" than to rent it at lower cost. The solution to losing money isn't losing even more money even faster.
  - ProfessorLayton 3y ago
    This is absolutely dependent on the market. It makes sense to hold an empty property in cities that make it incredibly hard to remove tenants without cause.
civilitty 3y ago
> And why can't they lower their prices? The properties are valued based on the advertised rental rates and if property values fall, they can have significant down stream effects on financing like banks requiring the property owner to put up more collateral next time they need a loan, whether it's to build more housing somewhere else or pay for maintenance that has large upfront costs.

mlinhares 3y ago

There's also the fact a lot of people got a really good interest rate on their homes and will not get anything like that if they decide to sell (i got under 3%, not a chance I'm entering the market again at 7%) so the actual amount of not-new homes available in the market is very low.

harambae 3y ago
>not a chance I'm entering the market again at 7% If you're not buying another house, how does that change the net availability? You're not buying or selling.
- mlinhares 3y ago
  That's exactly the issue, there would usually be a considerable amount of people in the market moving to bigger homes, changing neighborhoods, downscaling, but right now if you have a low rate loan it would be insane to give up your loan and pick one with the current rate, so these people generally left the market. This odd lots episode is a pretty good discussion on the whole subject: https://www.bloomberg.com/news/articles/2023-07-24/how-the-housing-bears-got-the-last-year-all-wrong?srnd=null#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-07-24/how-the-h...
  - harambae 3y ago
    I bought my last car 13 years ago and wanted to upgrade during Covid but didn't (after prices went up a bunch). Didn't sell my existing car, didn't buy a new one. So, by your definition, did I contribute to the auto shortage?

TeckPerspecc 3y ago

Ban corporate ownership of SFH.

whimsicalism 3y ago
Not a major driver of home prices at all. Plus, corporate landlords are some of the only ones that are even making it possible to rent at all in large swathes of America. I view this as basically left-wing science denialism. The right has climate, the left denies the overwhelming consensus of economists as to the cause of housing affordability crises (it's supply and bad policy, not blackstone). [0]. Institutional investors own less than 3% of rental homes, which is a minority of overall homes and disproportionately buy homes that were not fit for sale anyways (so-called fixer uppers). [0]: https://www.nytimes.com/2022/10/19/opinion/affordable-housing-private-equity.html https://www.nytimes.com/2022/10/19/opinion/affordable-housin...
- hn_throwaway_99 3y ago
  This is flat out false, at least in Texas: https://www.keranews.org/business-economy/2022-06-14/investors-bought-nearly-a-third-of-all-homes-in-texas-last-year https://www.keranews.org/business-economy/2022-06-14/investo... Also, there have been other articles I read during the pandemic (the topic was how long eviction moratoriums were killing small landlords while corporate landlords could weather it) that small, individual landlords do a much better job at renting out housing more affordably, being more willing to work with renters when they are behind on their payments, etc.
  - Obscurity4340 3y ago
    Individual landlords also tend to play games with renovictions or personal-use evictions to inflate their rents. I would never rent from someone who can decide their "nephew" wants the space and they just couldn't say no to him but then that fell through and meanwhile you're out on the street.
    - hn_throwaway_99 3y ago

andromeduck 3y ago

Just tax land.

x3n0ph3n3 3y ago
What do you think property taxes are?
- andromeduck 3y ago
  Not a land tax.
- BobbyJo 3y ago
  It's funny how well property taxes work to control housing prices, and yet high COL areas are completely unable to utilize them.
  - supertrope 3y ago
    See: Chicago, IL. High property tax bills keep housing purchase prices from zooming up.
- padjo 3y ago
  Not land taxes? https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Property_tax https://en.m.wikipedia.org/wiki/Property_tax
- deleted 3y ago
  [deleted]
- supertrope 3y ago
  A tax on both land and the structure. A land value tax would not have the perverse incentive against building more units on the same lot.

smeej 3y ago

Isn't it already a liability to have debt on property that can't make you any money? Especially if you can't flip them because they're underwater?

Someone1234 3y ago
Barely on a 3% mortgage. There's a reason a lot of investment companies are buying empty lots and putting storage units on them, they are just trying to break even on the business and expect the land itself to inflate over time. If they purchased this property at e.g. 7% or more, you may have a point.
deleted 3y ago
[deleted]

danaris 3y ago

"Can't" == "refuse to lose money on the transaction". That's not a luxury we plebes have when buying and selling homes. If the market happens to have crashed just before we have to move, for whatever reason, we have to take the loss, no matter how much it hurts. So these lovely people (I'm sure) just lock up vast amounts of real estate at unrealistically inflated prices, hurting the entire system, purely so that they don't have to record a loss.