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Surprise, surprise. The historical housing bubble was caused by artificially low interest rates adopted worldwide. Ever-increasing housing prices is bad for pe

Surprise, surprise. The historical housing bubble was caused by artificially low interest rates adopted worldwide. Ever-increasing housing prices is bad for people who own homes (higher property taxes, property tax distortions across cities, higher fees when changing houses) and those who don't own any. Low interest rates discourage saving and encourage unproductive speculation and house flipping. The people benefitting from the status quo are only those who make money off trading and borrowing fees (banks, realtors), and the occasional person who left a high price area to a low price area.

hemloc_io 3y ago
You're missing one more demographic that's a pretty big deal. California homeowners insulated from property tax due to prop 13.
- eweise 3y ago
  California homeowners pay property tax and the rate goes up either with inflation or 2%. I'm guessing you think it should go up with the market value of the home. Thank god it doesn't or I would have had to sell instead of being able to give my kids a stable home for the past 18 years.
  - hemloc_io 3y ago
    Late to the party here, but yeah 100% I believe in property tax like more or less every other state has done. The way California has done property tax is hilariously bad, commercial properties get no cost basis step up forever? until recently People can inherit property with infinite value without a reassessment? come on. Imo prop 13 is at the root of most of the state's problems. The reason people lobby for prop 13, particularly older property owners who vote, is because of the appreciation you mentioned. That should not be happening in the first place, because the state should not systemically under-build housing. The government policies which cause that underbuilding are lobbied for by the same demographic that enjoys the benefits of prop 13. If it's for personal preference in lifestyle or a quest for artificially increasing home value it doesn't matter there's no reason to create an aristocracy in California. We need to change those policies so we can build enough housing supply to meet demand, and treat housing like a commodity good that it is. Instead of this absurd game where we underbuild on purpose and patch over the issues to the best of our ability for the benefit of a relatively small supply of homeowners who bare none of the social costs.
  - lotsofpulp 3y ago
    Maybe the price has upward pressure because the tax increases are capped. Fewer home sellers, less supply of homes, high demand, hence higher prices. Besides, local government expenses have to be covered somehow. It’s just putting it on new homeowners who are not beneficiaries of the capped property tax from years ago. Governments should not be dictating prices, they should be influencing supply and demand in order to affect prices. Doing it the “easy” way will simply distort supply and demand and the pain will still have to be felt somewhere. For example, if the goal is lower property taxes, then the solution is lower local government spending / more efficiencies / more population to spread fixed costs over.
  - njarboe 3y ago
    California homeowners pay property tax on the "assessed value", i.e. of the home. This value generally starts at the purchase price and then goes up with the lower of either inflation or 2%. The tax rate is the same for everyone but will be on different values. The rate is 1%, going to the State of California, and usually additional, but lesser, local taxes.
  - deathanatos 3y ago
    You're obtusely ignoring the commenter's point, and I suspect you know it. You've got the mechanics a bit wrong, but the point is that your property tax, in real dollars, goes down YoY, as it cannot do anything but that due to Prop 13. In particular, it cannot even track the real dollar (let alone increase). This is a well-known issue and underlying cause of a number of CA's political problems, biggest of which being the housing crisis. It's further well-reported how two identical homes, in the same neighborhood, can have vastly different property tax rates, with one paying very little, and one paying a lot, because the latter is owned by someone younger such as a millennial. These are the simple mechanics of Prop 13. I'm glad you were able to raise your kids, but my generation is being screwed out of that, as we cannot break into the housing market, cannot get affordable healthcare, and cannot get meaningful real wage growth. My affordability limit as a SWE is something like $4k/mo, and homes in my market are ~$6k/mo. Either I do like the OP suggests — pay way above affordable and take on the huge risks that come with that — or I continue to rent and cannot get into a starter home from which I might start a family.
    - eweise 3y ago
      Until the recently the inflation rate was really low so my property tax did track the real dollar. In fact my house lost value for the first three years. The problem with prop 13 is that it also covers commercial property. This is a serious loss to our tax base with no good reason. easy loans plus not enough building are the reason can't afford a home, not prop 13. The average length of homeownership in CA is less than five years. They turn over.
  - ramesh31 3y ago
    >Thank god it doesn't or I would have had to sell instead of being able to give my kids a stable home for the past 18 years. No, you wouldn't. You could have taken out a HELOC for a tiny portion of your appreciation over those years to pay your fair share of taxes, the way people do in literally every other state. Glad you got yours, though.
    - deleted 3y ago
      [deleted]
    - eweise 3y ago
      Funny I never thought my neighbors weren't paying their fair share when I bought in. Figured the rule has been there since the 70s and applies to everyone equally (well except I'm over 55 and can now keep my current tax basis to the next house I buy) I'll pay taxes on the appreciation when I sell so the government will get theirs. Should I also only carry a variable rate mortgage so that I pay whatever a new home buyer pays? Should the government spend whatever they take in even if their costs haven't increased with home values? Sorry home ownership is not affordable. It hasn't been in California since the late 90s. I threw 20 years of savings at mine so I could have a reasonable mortgage. I actually would be better off financially if I had put that money in the stock market. Now with remote work, you don't have to live near a work center, opening tons of location possibilities. I wish that happened before I bought.
- cma 3y ago
  Many other states have similar provisions too, capping increases.
ytdytvhxgydvhh 3y ago
> The people benefitting from the status quo are only those who make money off trading and borrowing fees (banks, realtors), and the occasional person who left a high price area to a low price area. I think that second category should also include retirees who downsize from their empty nest SFH to a cheaper, smaller condo, which is something that I think happens way more than occasionally.
- glimshe 3y ago
  These people don't benefit so much from the high interest rates because they sell at high prices and buy at high prices too. Just check how much condos are going for in desirable areas in Florida.
- fragmede 3y ago
  A retiree with an empty nest SFH, looking at inflation and the rising cost of goods, and the future of living on a fixed income, might choose to cash out their equity with a HELC, use that to buy the smaller cheaper condo, and rent out their SFH instead. More work, but more money, and hey, you're retired, what else are you going to do? End result is, no new SFH on the market.
carlosjobim 3y ago
> Ever-increasing housing prices is bad for people who own homes On the contrary, ever-increasing housing prices have allowed generations of home-owners to reap immense amounts of tax-free income by borrowing against their real estate. For large parts of the population, having a job is not the way they make a living. Borrowing money is how they make a living, having a job and even a career is just the ticket they need to be able to borrow as much money as possible. In many countries the majority of the population make a living by borrowing, while only a few by working. The only people who actually make a living by working are the idiots, and that's why they remain broke their entire lives and have nothing to give their children after they pass away. Usually they don't even have children. This system works as long as there's more money to borrow to keep real estate value going up and more idiots born to work for a living. And when the jig is over, all debts of the real estate owners will be forgiven, while the rest will be sent off to die in some war.
Der_Einzige 3y ago
GenAI is going to keep the economy good while interest rates stay high probably forever, meaning that housing availability won't actually drop significantly. We should not expect house prices to go down more than a trickle.
- harambae 3y ago
  Predicting the future is difficult. Does anyone else remember when the top upvoted HN comment on the leaked FTX balance sheet article was “I work in the crypto industry and FTX is going to be fine…”? Because I remember that.
throwaway14356 3y ago
Lower salaries would do the trick too! Jokes aside, I would like a list of reasons why people could own homes build out of grunt work 100 years ago but cant today with all the truly marvelous technology. Besides choking in the red tape stuff like: wood is expensive if you don't plant trees. Long ago people planted the trees (where the house was to be build) when the baby was born.

hemloc_io 3y ago

You're missing one more demographic that's a pretty big deal. California homeowners insulated from property tax due to prop 13.

eweise 3y ago
California homeowners pay property tax and the rate goes up either with inflation or 2%. I'm guessing you think it should go up with the market value of the home. Thank god it doesn't or I would have had to sell instead of being able to give my kids a stable home for the past 18 years.
- hemloc_io 3y ago
  Late to the party here, but yeah 100% I believe in property tax like more or less every other state has done. The way California has done property tax is hilariously bad, commercial properties get no cost basis step up forever? until recently People can inherit property with infinite value without a reassessment? come on. Imo prop 13 is at the root of most of the state's problems. The reason people lobby for prop 13, particularly older property owners who vote, is because of the appreciation you mentioned. That should not be happening in the first place, because the state should not systemically under-build housing. The government policies which cause that underbuilding are lobbied for by the same demographic that enjoys the benefits of prop 13. If it's for personal preference in lifestyle or a quest for artificially increasing home value it doesn't matter there's no reason to create an aristocracy in California. We need to change those policies so we can build enough housing supply to meet demand, and treat housing like a commodity good that it is. Instead of this absurd game where we underbuild on purpose and patch over the issues to the best of our ability for the benefit of a relatively small supply of homeowners who bare none of the social costs.
- lotsofpulp 3y ago
  Maybe the price has upward pressure because the tax increases are capped. Fewer home sellers, less supply of homes, high demand, hence higher prices. Besides, local government expenses have to be covered somehow. It’s just putting it on new homeowners who are not beneficiaries of the capped property tax from years ago. Governments should not be dictating prices, they should be influencing supply and demand in order to affect prices. Doing it the “easy” way will simply distort supply and demand and the pain will still have to be felt somewhere. For example, if the goal is lower property taxes, then the solution is lower local government spending / more efficiencies / more population to spread fixed costs over.
- njarboe 3y ago
  California homeowners pay property tax on the "assessed value", i.e. of the home. This value generally starts at the purchase price and then goes up with the lower of either inflation or 2%. The tax rate is the same for everyone but will be on different values. The rate is 1%, going to the State of California, and usually additional, but lesser, local taxes.
- deathanatos 3y ago
  You're obtusely ignoring the commenter's point, and I suspect you know it. You've got the mechanics a bit wrong, but the point is that your property tax, in real dollars, goes down YoY, as it cannot do anything but that due to Prop 13. In particular, it cannot even track the real dollar (let alone increase). This is a well-known issue and underlying cause of a number of CA's political problems, biggest of which being the housing crisis. It's further well-reported how two identical homes, in the same neighborhood, can have vastly different property tax rates, with one paying very little, and one paying a lot, because the latter is owned by someone younger such as a millennial. These are the simple mechanics of Prop 13. I'm glad you were able to raise your kids, but my generation is being screwed out of that, as we cannot break into the housing market, cannot get affordable healthcare, and cannot get meaningful real wage growth. My affordability limit as a SWE is something like $4k/mo, and homes in my market are ~$6k/mo. Either I do like the OP suggests — pay way above affordable and take on the huge risks that come with that — or I continue to rent and cannot get into a starter home from which I might start a family.
  - eweise 3y ago
    Until the recently the inflation rate was really low so my property tax did track the real dollar. In fact my house lost value for the first three years. The problem with prop 13 is that it also covers commercial property. This is a serious loss to our tax base with no good reason. easy loans plus not enough building are the reason can't afford a home, not prop 13. The average length of homeownership in CA is less than five years. They turn over.
- ramesh31 3y ago
  >Thank god it doesn't or I would have had to sell instead of being able to give my kids a stable home for the past 18 years. No, you wouldn't. You could have taken out a HELOC for a tiny portion of your appreciation over those years to pay your fair share of taxes, the way people do in literally every other state. Glad you got yours, though.
  - deleted 3y ago
    [deleted]
  - eweise 3y ago
    Funny I never thought my neighbors weren't paying their fair share when I bought in. Figured the rule has been there since the 70s and applies to everyone equally (well except I'm over 55 and can now keep my current tax basis to the next house I buy) I'll pay taxes on the appreciation when I sell so the government will get theirs. Should I also only carry a variable rate mortgage so that I pay whatever a new home buyer pays? Should the government spend whatever they take in even if their costs haven't increased with home values? Sorry home ownership is not affordable. It hasn't been in California since the late 90s. I threw 20 years of savings at mine so I could have a reasonable mortgage. I actually would be better off financially if I had put that money in the stock market. Now with remote work, you don't have to live near a work center, opening tons of location possibilities. I wish that happened before I bought.
cma 3y ago
Many other states have similar provisions too, capping increases.

ytdytvhxgydvhh 3y ago

> The people benefitting from the status quo are only those who make money off trading and borrowing fees (banks, realtors), and the occasional person who left a high price area to a low price area. I think that second category should also include retirees who downsize from their empty nest SFH to a cheaper, smaller condo, which is something that I think happens way more than occasionally.

glimshe 3y ago
These people don't benefit so much from the high interest rates because they sell at high prices and buy at high prices too. Just check how much condos are going for in desirable areas in Florida.
fragmede 3y ago
A retiree with an empty nest SFH, looking at inflation and the rising cost of goods, and the future of living on a fixed income, might choose to cash out their equity with a HELC, use that to buy the smaller cheaper condo, and rent out their SFH instead. More work, but more money, and hey, you're retired, what else are you going to do? End result is, no new SFH on the market.

carlosjobim 3y ago

> Ever-increasing housing prices is bad for people who own homes On the contrary, ever-increasing housing prices have allowed generations of home-owners to reap immense amounts of tax-free income by borrowing against their real estate. For large parts of the population, having a job is not the way they make a living. Borrowing money is how they make a living, having a job and even a career is just the ticket they need to be able to borrow as much money as possible. In many countries the majority of the population make a living by borrowing, while only a few by working. The only people who actually make a living by working are the idiots, and that's why they remain broke their entire lives and have nothing to give their children after they pass away. Usually they don't even have children. This system works as long as there's more money to borrow to keep real estate value going up and more idiots born to work for a living. And when the jig is over, all debts of the real estate owners will be forgiven, while the rest will be sent off to die in some war.

Der_Einzige 3y ago

GenAI is going to keep the economy good while interest rates stay high probably forever, meaning that housing availability won't actually drop significantly. We should not expect house prices to go down more than a trickle.

harambae 3y ago
Predicting the future is difficult. Does anyone else remember when the top upvoted HN comment on the leaked FTX balance sheet article was “I work in the crypto industry and FTX is going to be fine…”? Because I remember that.

throwaway14356 3y ago

Lower salaries would do the trick too! Jokes aside, I would like a list of reasons why people could own homes build out of grunt work 100 years ago but cant today with all the truly marvelous technology. Besides choking in the red tape stuff like: wood is expensive if you don't plant trees. Long ago people planted the trees (where the house was to be build) when the baby was born.