4 ms·

That cash came from somewhere, and that somewhere is inflated asset values, and those asset values are from comically low interest rates for a decade.

Manuel_D 3y ago
No, real value goes up. There isn't a fixed pie of value that never changes. The houses are expensive, because a lot of people want them and there aren't enough to satisfy demand.
- recursivedoubts 3y ago
  When everything is expensive that isn't value going up, that's the value of money going down. That's not to say that there aren't shifts in preferences that cause relative valuation changes as well, obviously covid/remote work changed the situation wrt housing to an extent. But that shift is also superimposed on top of The Everything Bubble caused by a decade+ of negative real rates, which has dramatically inflated asssets relative to incomes, concentrating wealth and allowing second-home buyers, investors, etc to buy up these smaller towns. Let's watch and see if the market ever comes down and, if it does, if mountain town housing prices also come down. That will confirm or disprove my theory.
  - Manuel_D 3y ago
    Even without inflation, the real value of assets increases. Economies are not zero sum. The mountain town prices aren't going to come down until more houses are built (or other scenarios, like climate change reducing snowfall and closing the ski resort).
    - recursivedoubts 3y ago
      I don't know why you keep focusing on zero-sum here. My claim is that a large component of mountain-town value increases is driven by second home, investor and semi-retirement of wealthy people driven by cheap credit and, now, by the asset gains of that cheap credit. There has been an inflationary expansion, the early receivers of that inflation (myself included) then can put that money into mountain towns. That doesn't mean that there aren't other factors, just that I believe it to be the major one. There are others, such as people fleeing chaos in the large western cities, remote work, etc. And, as you say, we can expect some increase in the land value of these places over time as well. If the market ever crashes and mountain west towns stay relatively expensive, I will be shown to be wrong. We'll see.
      - Manuel_D 3y ago
        > My claim is that a large component of mountain-town value increases is driven by second home, investor and semi-retirement of wealthy people driven by cheap credit and, now, by the asset gains of that cheap credit. Then why is it still a problem when mortgage rates are so high? This is also explicitly contradicted by the article: many of the offers are all cash. Credit is not a factor there.
        recursivedoubts 3y ago
        That cash is coming from sales of inflated assets that have grown during The Everything Bubble. The Everything Bubble grew during a decade of negative real rates and, thus far, has not popped during rate normalization (although you can argue that rates are still very low or negative in real terms, depending on your measure of inflation.) If The Everything Bubble eventually deflates (maybe it's different this time) and mountain towns remain expensive then I will be proven wrong. And I have to admit, the longer interest rates stay high and asset prices do not adjust down the less certain I am of my thesis. We will see.

Manuel_D 3y ago

No, real value goes up. There isn't a fixed pie of value that never changes. The houses are expensive, because a lot of people want them and there aren't enough to satisfy demand.

recursivedoubts 3y ago
When everything is expensive that isn't value going up, that's the value of money going down. That's not to say that there aren't shifts in preferences that cause relative valuation changes as well, obviously covid/remote work changed the situation wrt housing to an extent. But that shift is also superimposed on top of The Everything Bubble caused by a decade+ of negative real rates, which has dramatically inflated asssets relative to incomes, concentrating wealth and allowing second-home buyers, investors, etc to buy up these smaller towns. Let's watch and see if the market ever comes down and, if it does, if mountain town housing prices also come down. That will confirm or disprove my theory.
- Manuel_D 3y ago
  Even without inflation, the real value of assets increases. Economies are not zero sum. The mountain town prices aren't going to come down until more houses are built (or other scenarios, like climate change reducing snowfall and closing the ski resort).
  - recursivedoubts 3y ago
    I don't know why you keep focusing on zero-sum here. My claim is that a large component of mountain-town value increases is driven by second home, investor and semi-retirement of wealthy people driven by cheap credit and, now, by the asset gains of that cheap credit. There has been an inflationary expansion, the early receivers of that inflation (myself included) then can put that money into mountain towns. That doesn't mean that there aren't other factors, just that I believe it to be the major one. There are others, such as people fleeing chaos in the large western cities, remote work, etc. And, as you say, we can expect some increase in the land value of these places over time as well. If the market ever crashes and mountain west towns stay relatively expensive, I will be shown to be wrong. We'll see.
    - Manuel_D 3y ago
      > My claim is that a large component of mountain-town value increases is driven by second home, investor and semi-retirement of wealthy people driven by cheap credit and, now, by the asset gains of that cheap credit. Then why is it still a problem when mortgage rates are so high? This is also explicitly contradicted by the article: many of the offers are all cash. Credit is not a factor there.
      - recursivedoubts 3y ago
        That cash is coming from sales of inflated assets that have grown during The Everything Bubble. The Everything Bubble grew during a decade of negative real rates and, thus far, has not popped during rate normalization (although you can argue that rates are still very low or negative in real terms, depending on your measure of inflation.) If The Everything Bubble eventually deflates (maybe it's different this time) and mountain towns remain expensive then I will be proven wrong. And I have to admit, the longer interest rates stay high and asset prices do not adjust down the less certain I am of my thesis. We will see.