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That would be more aligned with renting. For most people, their house is the biggest purchase they’ll ever make. It isn’t unreasonable to expect it to at least

by voisin 3y ago

That would be more aligned with renting. For most people, their house is the biggest purchase they’ll ever make. It isn’t unreasonable to expect it to at least keep pace with inflation so they can sell it and afford to move into a nursing home someday. (Even with the massive growth we’ve seen in recent years, for most long term holders the annual rate of growth has significantly underperformed the markets, even before accounting for maintenance and taxes) If it was simply a depreciating asset, housing would have to be sold for less than the construction cost in order for people to be able to sustain the depreciating value and have enough cash left over to invest elsewhere for their later years drawdown.

Wowfunhappy 3y ago
We can wish whatever we'd like. The logical, real-world value of a house should depreciate over time as the structure gets older and needs more repairs. The exception, I suppose, is if the overall supply of houses and/or land decreases, but then you lock newcomers out of the market.
- voisin 3y ago
  > The logical, real-world value of a house should depreciate over time as the structure gets older and needs more repairs This is true, but the cost of building a new house is also rising. So at some point buying existing housing is cheaper than building a new house. That should put a floor on the depreciating value you speak of.
femiagbabiaka 3y ago
> That would be more aligned with renting. For most people, their house is the biggest purchase they’ll ever make. It isn’t unreasonable to expect it to at least keep pace with inflation so they can sell it and afford to move into a nursing home someday. That sucks and we should fix it. It is unreasonable and unsustainable for housing to be that vector. Pensions once existed.
- lotsofpulp 3y ago
  Defined benefit pension fund managers invest in the same markets everyone else does. And the biggest DB pension, Social Security, already exists, along with the biggest nursing home payor, Medicaid. At the end of the day, it’s just allocating a certain percentage of the country’s labor to older people’s needs. Question is, what proportion of resources does society want to allocate to the country’s older people? Interest rate policy to support asset price increases is one way the government increases this proportion. But with declining proportion of working age population, these measures become more and more evident.
- voisin 3y ago
  Well you can rent and put the savings (vs owning a home) into a variety of vehicles for retirement savings. Many, many people have shown that this actually yields far more significant returns than the house. But people are not perfectly rational economic actors. There is something innate (or deeply culturally embedded) about wanting to have control over your living space, so it becomes the primary savings vehicle for many/most people.

by voisin 3y ago

Wowfunhappy 3y ago

We can wish whatever we'd like. The logical, real-world value of a house should depreciate over time as the structure gets older and needs more repairs. The exception, I suppose, is if the overall supply of houses and/or land decreases, but then you lock newcomers out of the market.

voisin 3y ago
> The logical, real-world value of a house should depreciate over time as the structure gets older and needs more repairs This is true, but the cost of building a new house is also rising. So at some point buying existing housing is cheaper than building a new house. That should put a floor on the depreciating value you speak of.

femiagbabiaka 3y ago

> That would be more aligned with renting. For most people, their house is the biggest purchase they’ll ever make. It isn’t unreasonable to expect it to at least keep pace with inflation so they can sell it and afford to move into a nursing home someday. That sucks and we should fix it. It is unreasonable and unsustainable for housing to be that vector. Pensions once existed.

lotsofpulp 3y ago
Defined benefit pension fund managers invest in the same markets everyone else does. And the biggest DB pension, Social Security, already exists, along with the biggest nursing home payor, Medicaid. At the end of the day, it’s just allocating a certain percentage of the country’s labor to older people’s needs. Question is, what proportion of resources does society want to allocate to the country’s older people? Interest rate policy to support asset price increases is one way the government increases this proportion. But with declining proportion of working age population, these measures become more and more evident.
voisin 3y ago
Well you can rent and put the savings (vs owning a home) into a variety of vehicles for retirement savings. Many, many people have shown that this actually yields far more significant returns than the house. But people are not perfectly rational economic actors. There is something innate (or deeply culturally embedded) about wanting to have control over your living space, so it becomes the primary savings vehicle for many/most people.