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I think this is flipped. VC's wouldn't compete here if the the supply was much bigger because than the price globally would dip they wouldn't have a leverage ad
by xphos 3y ago
I think this is flipped. VC's wouldn't compete here if the the supply was much bigger because than the price globally would dip they wouldn't have a leverage advantage. If there was no shortfall in constructions for multiple decades that VC see houses as an opportunity.
I think if we allowed house densities to increase and changed zoning laws to allow houses to be built. The cost of housing would fall significantly especially if VC saw a wave a new house they would be prompted to sell before the wave (at a lower prices) or risk significant loses.
Whether you could actually build enough houses to fix the supply inversion is another question. However, without changing zoning laws I don't see how you'd even be able to try catch supply at this point because the places where houses need to be sold prevent multi family units which are much more efficient at soaking up demand per unit than single family houses
- PH95VuimJjqBqy 3y agoIf they're using it to "house cash" then the only thing they need is continued inflation of housing costs. Even if it were lower than today, the inflation is the only thing needed for them to continue investing in it as its then considered to be a protection against inflation if nothing else.
- userinanother 3y agoThey will get burned on interest rates and transaction fees
- PH95VuimJjqBqy 3y agothat's not true, these things exist today and they don't stop anyone from investing. What you're trying to say is that it would be less profitable and that may be true but as long as it tracks with inflation it would be worth it as an investment tool.
- userinanother 3y agoThat’s a big caveat. Inflation is 4-5% officially, bonds are 7-8 ish maybe more for real estate investment. But real estate prices are falling or flat. If you suddenly need to earn even 6% off a house you need to rent it for quite a bit. It might make sense still at the low end (under 250k) but a 500k property needs to rent out for 2500a month to break even. And that’s not including taxes, maintenance, vacancy, admin, and transaction costs at sale. House prices need to come down for this to be a profitable venture again. The bet is that real estate prices will rise to new highs faster than inflation or at least comparable assets. If that doesn’t happen then you lose money
- PH95VuimJjqBqy 3y agoyou want what you're saying to be true because you want reality to agree that you're going to make it unprofitable to invest in real estate. good luck with that.
- userinanother 3y ago?? It’s not always profitable to invest in real estate. When interest rates go up that’s not favorable for real estate for basic math reasons
- PH95VuimJjqBqy 3y agoI keep re-reading my post and I can't see where I've used the word always there. Can you point it out for me?