17 ms·

The Rise of the Forever Renter Class

154 points by embeng4096 2y ago

photochemsyn 2y ago
[flagged]
- georgeecollins 2y ago
  I don't want to disturb you in your doom bunker but: - 65% households own their home. https://www.statista.com/statistics/184902/homeownership-rate-in-the-us-since-2003/ https://www.statista.com/statistics/184902/homeownership-rat... - The US is the richest country in the world and growing faster than the world at large. - If you don't want to sound like some ancient Maoist, call it "the global south".
georgeecollins 2y ago
Having lived through a housing crash, and long before that a time of much cheaper houses.. I would say wait and see. One of the reasons why people freak out about the prices of homes is there is often pressure to get one right now. I am moving, I got married, I had a(nother) kid. These are reasons I bought a house in my life and in retrospect I can tell you I did not need to buy a house. In your life it's hard to make a decision on the time frame of house prices (or even market cycles). I am not sure how to tell someone maybe they should wait five years. But clearly sometimes that is the best thing to do. It does not make a lot of sense for homes to sell for so much more then they can rent for. It happens all the time but it is not sustainable. It also happens that their are housing shortages but they don't last forever. People build.
- betaby 2y ago
  > I would say wait and see How long to wait? Asking in Canadian.
  - georgeecollins 2y ago
    Three years? No one can time the market perfectly. The time frame for house prices is much longer than the time frame of opinion piece writers. So you will see pieces in 2006 saying prices will never go down. If you waited 3-4 years they were half off. It happens. Best thing is not to have a fixed plan but to be opportunistic.
    - betaby 2y ago
      Prices never went down in Canada for any substantial amount. Even 10% means we replay back to 1-2 years. Government of Canada actively intervene and change the immigration rate and the discount rate to keep prices from falling.
  - bombcar 2y ago
    Instead of waiting, build a calculator in Excel or similar that shows various options, and update the numbers now and then. You'll start to get a "feel" for your options (which include renting, owning, building, moving, etc) and you will be more comfortable acting when the time is right. You can't perfectly time the market but you can at least notice it.
    - sevagh 2y ago
      In Canada big metro cities (Toronto, Vancouver, Montreal), the spreadsheet will most likely tell you that you should have bought on sight instead of making a spreadsheet.
- pjc50 2y ago
  > It does not make a lot of sense for homes to sell for so much more then they can rent for. Isn't rent also remarkably high in any areas where there's decent levels of employment? You can either rent a house, or rent the money to buy one. Usually the price of renting a house is the price of renting the money plus a margin for maintenance and profit. But since homeownership is pretty much the only situation in which normal people can make a huge leveraged investment - you can't borrow $100k to invest in stocks, they won't let you - it's a very advantageous form of investment. The only way I can see this changing is the forever renters starting to acquire enough political power to overrule anti-building NIMBYs. Birth rates aren't falling fast enough to reduce demand to meet supply.
  - georgeecollins 2y ago
    Rent is high in places with good employment, but the penalty you pay for buying (price to rent ratio) is higher their. https://smartasset.com/data-studies/price-to-rent-ratio-in-the-50-largest-us-cities-2022 https://smartasset.com/data-studies/price-to-rent-ratio-in-t... In other words, rent is high in San Jose but renting is cheaper than buying in places like that.
    - HPsquared 2y ago
      In other words, rental yields are low in those places. Probably because the prices are expected to increase, so the owners benefit from capital gains rather than rent. Definitely should be a temporary phenomenon though. Prices are falling in a lot of high-priced urban locations, eg. London.
  - geysersam 2y ago
    Is building more really the solution? (sure it's one solution) I think the main issue is the one you formulated so succinctly, the question why people are able to access such huge amounts of credit so cheaply. Why are interest rates for house buyers so low?
    - pjc50 2y ago
      Interest rates everywhere have been low for a long time; the US whacked them up to 5.5% to combat inflation, but that's expected to decline. In general the rates for house buying are so good because the loan is secured on the house, whose value is very stable.
- ericmcer 2y ago
  I was 19 in 2008, and I don't know if something like that will ever happen again now that the government has shown their willingness to dumping money to prop up any weakening asset. Look at the pandemic, everything kept going up.
  - Workaccount2 2y ago
    In 2008 the government opened the floodgates because it was desperately needed, and even then there was a long languishing period afterwards. In 2020 the government opened the floodgates again, but it far beyond overkill for the actual damage done. Most people kept on working and still got tons of economic stimulus (largely in the form of low interest loans and debt moratoriums, not really the checks).
- mindslight 2y ago
  While agreeing with where you're coming from, one of the big things that makes it hard for me to see relief coming is that construction prices remain quite high. Of course they could be high because the industry is busy building many new construction spec homes. But from what I've seen it feels like there's just too many accumulated layers of administrative workers/overhead, instead of increased wages that would encourage more people to do this work.
  - QuadmasterXLII 2y ago
    We had a community of 10 million extremely talented and hardworking people illegally building houses for $4 an hour. It's beyond me to comprehend the moral valence of our decision, starting in 2016, to remove this group from the labor force- it was definitely unethical to deport them, it was definitely unethical to exploit them. Practically speaking though, I don't know why anyone's shocked that afterwards the price to build a home skyrocketed.
    - bombcar 2y ago
      From my experience, illegals weren't making $4/hr building houses, at least not in the areas I knew. You'd pull down $15 minimum and often in cash, in California in the boom times that are now 20 years ago.
      - mindslight 2y ago
        That's still only one third to one half of a fully loaded system legible worker though. And when illegible labor goes away, it's not like there's a supply of legible workers that have been just sitting around waiting to take over the work. This also ties in to the seeming overabundance of management layers, as there are now drastically fewer people to be managed.
        bombcar 2y ago
        And it’s something people miss - illegal labor does suppress wages somewhat but definitely defrauds the government and any other things that depend on correctly reported income.
- nojvek 2y ago
  > People build. If they are allowed to. Most major cities are now permit backlogged. Could be years until you get to build. The number of home builders in US are falling down like dominoes. When there is less competition, we get higher prices.
jmclnx 2y ago
I blame this mostly on the mortgage as an investment trend. Probably goes back to the 1980's savings and loan crash which one of the Bush brothers had a big hand in. As I have told people in the past, we are heading towards a new serfdom type economy where either you inherit your property or you are a serf paying most of your income to property holders. Already I have seen articles stating the US Gov is concerned that young people are not moving to other regions of the country as they did 25 - 30 years ago. They articles indicated people moving is in a slow downward spiral. Another indication of a serfdom environment.
- bittercynic 2y ago
  This sentiment feels right to me, but the numbers don't appear to support it: https://en.wikipedia.org/wiki/Homeownership_in_the_United_States#/media/File:Home_Ownership_rate.png https://en.wikipedia.org/wiki/Homeownership_in_the_United_St...
  - jmclnx 2y ago
    In the page, seems you see a slight downward trend starting in 2004, 2005 is at 69%, 2015 is at 63.7%. The charts I see end in 2015, which maybe the rate could have increased. But I wonder how this is calculated. Say if a company/person owns hundreds of homes, would the company be counted as owning just 1 home or multiple homes. What is needed is a count of real people owning homes. So, if 1 person owns multiple homes, they are counted as 1 home owner with the total of all owned homes used to calculate the % value. That would give us a better comparison.
    - bittercynic 2y ago
      It's the number of homes occupied by their owner. The number of people/households who own their home is lower, since many homes are occupied by their owner plus others.
- tharmas 2y ago
  Are there jobs in these "other" regions? In Canada, Newfoundland is cheaper, but theres no jobs. Partly why its cheaper.
betaby 2y ago
Developed world is in denial of the rapid population growth. Developed countries just don't build enough.
- pjc50 2y ago
  The population of the US grew by 0.4% last year, not an amount I would describe as "rapid".
  - betaby 2y ago
    It's rapid because it's exponential. Add there decay of the existing housing, add the fact that a lot of folks living alone. All that translates to the higher demand for units.
  - JackFr 2y ago
    Yeah, significant portion of the developed world is shrinking not growing. Regardless, housing demand is more directly influenced (and influences) net household formation, and it is very regional and dependent on regional economies. There are rust belt communities in the US which suffered decades of net negative household formation even as the US population ticked up. Detroit and Baltimore had peak populations in 1950. While many would consider portions of them blighted and undesirable, that was more the result of and less the cause of the population decline.
    - betaby 2y ago
      > Yeah, significant portion of the developed world is shrinking not growing. That's absolutely not true. Otherwise cite reputable statistic sources. I'm looking at https://www.cia.gov/the-world-factbook/field/population-growth-rate/country-comparison/ https://www.cia.gov/the-world-factbook/field/population-grow...
      - JackFr 2y ago
        While it's true that Japan and Italy are the only two major developed countries suffering actual decline, basically all of the big wealthy countries are experiencing fertility below replacement. https://data.worldbank.org/indicator/SP.DYN.TFRT.IN?locations=US https://data.worldbank.org/indicator/SP.DYN.TFRT.IN?location... Fertility, total births per woman 2021 Australia 1.7 EU 1.5 UK 1.6 Japan 1.3 Korea 0.8 US 1.7 Replacement fertility is estimated at 2.1. Countries with below replacement fertility are growing based on immigration.
noodlesUK 2y ago
One thing I have never quite understood is the desire for housing prices to constantly go up. Even a current homeowner might want to move one day, and if house prices uniformly fell by 50% relative to current earnings, they would find themselves more able to upgrade their house. The only people it would hurt would be people moving from owned accommodation to rented accommodation or cheaper owned accommodation. What am I misunderstanding here? EDIT: It seems I was forgetting a key fact: mortgages. When people hold a mortgage and their property value goes down, they can be left holding the bag.
- jl6 2y ago
  Most homeowners have a mortgage, and that doesn’t go down when the house price goes down. This can result in negative equity and it traps people in their current property until they can pay off the original debt.
  - mistrial9 2y ago
    the number of mortgage-free residential homes in the USA is at record levels, increasing steadily in the last 20 years. Contrast this to the demographic bulge of middle class born shortly after WW II, and the financial advantages of long-term home ownership with low monthly costs.
- pjc50 2y ago
  The wealth effect of "number go up" is really powerful.
- geysersam 2y ago
  It would hurt people who own property because it would make them relatively less wealthy compared to people who don't own property.
  - mistrial9 2y ago
    if the emotional reality of humans are "hurt" by others doing "less worse" then they are .. then this signals a powerful downward spiral of the social contract.. It could be said that similar feelings continued long ancient traditions of privileged priesthood, Monarchy and even the institution of slavery
phkahler 2y ago
>> But rising home prices are just one factor impacting affordability. High interest rates are another. I believe that statement is in error. Higher interest rates should lower home prices, just like lowering them from 1980 through 2000 contributed to rising prices. There are economists scratching their head right now wondering why the recent rate hikes have not resulted in lower prices in some areas. IMHO There is definitely something else going on in the real estate market. I'm sure those benefitting most are laughing maniacally as people scurry around trying to figure it out.
- throwaway11460 2y ago
  It's really not hard to understand... Extreme undersupply due to regulation/bureaucracy and extreme overdemand due to lack of opportunities elsewhere. I live in the capital city of my country, just checked the situation in my hometown - average jobs pay 1/2 and the job I do would pay 1/5 - while the rental and property prices are just 10-20% lower; schools are terrible, no night life, no interesting restaurants, literally zero startups of any kind, people are (voting for) racists and conservatives... What the hell would I do there? I like my nice cheap (compared to my buying power) apartment in the middle of a nice progressive cosmopolitan city.
  - KoolKat23 2y ago
    I agree with nearly everything you say. I'm of the opinion that regulation/bureaucracy are being scapegoated to an extent. Supply of knowledgeable builders and development finance is not very elastic and does not increase easily even when there is less regulation. The real reason I feel is the higher risk = higher reward equation is broken. Building fewer units means increasing scarcity, allowing increased prices despite there being lower (due to building less houses). Developers are chasing good profit margins rather than revenue. Less regulation just means even better profit margins for these developers.
    - throwaway11460 2y ago
      Where I live there would be 100 people waiting to buy an apartment you just built, giving you absurd amounts of money for it. There is no reason to build less than the absolute maximum possible. There are many developers and builders who want to do it, could do it and eventually will do it - but getting an approval takes 11 years.
jareklupinski 2y ago
For the price of an apartment, I can put that money into an interest-bearing account, and pay the rent on a comparably sized apartment (or bigger house outside the city) using just the incoming interest, never losing a dime of the original capital (even growing it if I scrimp on the apartment) why would i ever buy while this holds true it's free real estate
- pjc50 2y ago
  Meanwhile I can borrow the money from a bank, buy an apartment, rent it to jareklupinski, gradually raise it over the years, and benefit from the capital appreciation (far greater than interest rates over the past few decades!) as well.
  - jareklupinski 2y ago
    my parents tried that; i got to watch in real-time how landlording is _not_ the 'get comfortable quick' scheme people make it out to be
    - Nav_Panel 2y ago
      What were some of the unanticipated challenges they faced?
      - jareklupinski 2y ago
        they lived in NYC and the apartment was in Florida, so even the smallest bumps in the road required a round-trip flight just to start figuring out how to solve the issue basically if the goal was "to make money", there was never a viable path once the rubber hit the road (if they chose a nearer place, the initial costs would never be realized)
        bartonfink 2y ago
        that is a uniquely boneheaded approach to managing a rental property. you can say "there never was a viable path" about anything if you chucklefuck your way through it instead of doing it well.
questinthrow 2y ago
Wasn't this always the plan? If you combine scarce housing (by law or otherwise) and unrestricted immigration then you can get people to fight for scraps whilst taking 30-60% of their paycheck on average just through renting and also maybe through software subscriptions in the near future. In this way you can extract maximum productivity out of them because each month they're just a few steps away from homelessness. You also depress wages by a lot due to immigration which is doubly beneficial for the owning class AND you force the workers to be more productive because otherwise they'll be replaced by desperate immigrants. Its quite literally perfect from a capitalist point of view. The only thing that can put a stop to this are violent revolts. But if you have automated policing via drones and ubiquitous surveillance it should be easy to subdue the unruly masses.
- nostrebored 2y ago
  Really untrue. You’re treating the pools of each as if they’re infinite. Everyone in a declining population country will implement this strategy to keep asset prices afloat. The pool of people you want to immigrate to your country is not large enough to support that strategy. Soon the government will have to provide huge incentives have children or immigrate. Then the cost to maintain that asset price is larger and more direct.
  - questinthrow 2y ago
    "The pool of people you want to immigrate to your country is not large enough to support that strategy." Is this true though? In Vancouver apartment prices have increased by 600% between 2000 and 2024. And Canada is still taking in between 500k to 1 million immigrants yearly. https://topqualitycanada.ca/2023/05/15/shift-of-two-decades-comparing-housing-prices-in-canada-from-2000-to-2023/ https://topqualitycanada.ca/2023/05/15/shift-of-two-decades-...
    - nostrebored 2y ago
      This is because asset pricing in Canada is entirely dependent on increasing populations. Immigration requirements have been relaxing and will continue to relax. Which means that you should expect a higher “miss” rate on immigrants over time. The problem with immigration this way is that there’s a careful balance of cost vs production. The question is already becoming “is this net positive” and will soon become “what deficit are we okay with running to prop up the asset market”
jihadjihad 2y ago
> raising your income is the best thing you can do to improve your financial situation in the long run. It's such a vacuous statement it's practically a tautology. And it's false: plenty of people who earn modest money over the course of their career end up wealthy. How? They learn to live within their means and budget accordingly.
tacticalturtle 2y ago
> The vast majority of 20 and 30 somethings can’t afford a home today. I’m not sure this is true? Over 50% of millennials, and around 26% of GenZ own a home in the U.S. https://investors.redfin.com/news-events/press-releases/detail/1032/redfin-reports-gen-zs-homeownership-rate-stagnated-in https://investors.redfin.com/news-events/press-releases/deta...
- ericmcer 2y ago
  Agree, The author of the post said he has been paying $2500/mo in rent, that is similar to the mortgage on a $450k house with 20% down. The problem is all the $450k houses are miles from where most young people want to live. I am not sure why they want to live in large cities and many suburbs have been abandoned. Probably has something to do with loss of manufacturing and other middle class jobs.
  - giraffe_lady 2y ago
    You're not sure why young people want to live in large cities?
  - deleted 2y ago
    [deleted]
- notfbi 2y ago
  regarding the stat redfin uses: homeownership" is only counting those that are head of household (which is who is responding when filling out a census), e.g. if there are ~100 genZ's, consisting of 96 that live with their parents, 3 that rent, 1 that owns their own home, the stat just takes those last two numbers, ~1/4, and redfin then reports "26% of GenZs owned their own home".
- pyoung 2y ago
  I know plenty of millennial homeowners that would not be able to afford todays prices at current interest rates. They bought before the covid bump (or earlier) and could barely afford it then. Had they rented instead they would probably be locked out of the housing market, at least until they got a significant pay increase or some sort of windfall.
MichaelRo 2y ago
In the developed world (including but not exclusively US and EU), the problem is people flocking to big cities which grow way past their housing capabilities while small towns and villages become depopulated with mostly old people living there. I seen this in Romania (where I live), it's the same in France, Germany, etc. Whole houses with terrain and garden in the countryside cost a fraction of an apartment in a big city and yet they become derelict because noone buys them. The work from home "revolution" only touches a very thin layer of people, most people with jobs still need to show up physically every day. And it's only in big cities that jobs get concentrated. I think overall it's a problem going back at least a century, the move from rural economy where 90-95% of the people were working in agriculture, to urban economy. In the rural days, people were spread relatively uniformly. In fact cities were a small fraction of the whole population so no wonder houses were aplenty. Therefore as long as the trend of jobs concentrating in the big cities won't stop or revert, the raise in house prices is inevitable.
- Workaccount2 2y ago
  It's not a trend, it's just plainly more efficient to have dense population centers. For both living and for business. One of the downsides of course is limited land, but there are tons of other upsides. So then the question is whether we should just remove barriers that stop urban spread
  - ta1243 2y ago
    > So then the question is whether we should just remove barriers that stop urban spread Depends what barriers Increasing desnisty? Sure, remove them Increasing area? Nope
    - mikrl 2y ago
      Why not both? If you constrain area, you only have one dimension to expand in to maintain density: height. Not that I have anything against high rises, but they aren’t suitable for every person or geography.
apwell23 2y ago
all housing posts have the following discussions 1. housing shouldn't be an investment 2. 'local democracy' always turns into nimby 3. something about gentrification 4. something about govt incentives/disincentives: don't give tax breaks for homeowners, tax second home ownership ect . 5. something about airbnb 6. some comparisons with europe/denmark did i miss anything
- sloat 2y ago
  don't forget they all have the same solutions too: 1. Get a better job and start working weekends. A house isn't worth it if you're alive to enjoy it. 2. Move to a poor area and gentrify the shit out of it. Everyone will love and appreciate you. 3. Maybe don't buy a house "yet". Keep paying your ever increasing rent, you'll get there someday.
  - brigadier132 2y ago
    > Get a better job and start working weekends. A house isn't worth it if you're alive to enjoy it Literally never seen this argument be made. > Move to a poor area and gentrify the shit out of it. Everyone will love and appreciate you. The last thing I think of when choosing a place to live are the societal implications of it. I really don't care if everyone "loves and appreciates me" because of my apartment choice. > Maybe don't buy a house "yet". Keep paying your ever increasing rent, you'll get there someday ?
    - black6 2y ago
      >> Get a better job and start working weekends. A house isn't worth it if you're alive to enjoy it >Literally never seen this argument be made. From TFA: "Earn more: If you feel like you will be forever priced out of the housing market, start finding ways to earn more. I know this won’t help in the short run, but raising your income is the best thing you can do to improve your financial situation in the long run. If you have both Saturday and Sunday off every single week, then there is no excuse to get started on something that can eventually increase your earnings."
nafizh 2y ago
A lot of this can be explained by just supply and demand. In central New Jersey, the number of people who need to get a home is always increasing, but number of houses being built is extremely low, and even those houses start from 900k-1M.
alexb_ 2y ago
Land value tax fixes this
swozey 2y ago
I sold a house at the beginning of 2019, pre-covid, for $365k. It's zestimate, not that I think it would ever sell for that much, is currently $570k. It's unfathomable to me that someone would pay anywhere near that for my old 1975 1400sq ft 3/2 in Austin. And my god it hurts to see that and think of all the money that I missed out on. I'm back to renting a condo, $3100/month for a 2/3 in Denver.
diogenescynic 2y ago
I graduated during the financial crisis and unemployment rates were brutally high, wages low, and job prospects minimal. I really think millennials got the shit end of the stick--high college costs, high housing costs, weak job opportunities and then just as most of us were getting our careers established the pandemic happened and housing and inflation costs went through the roof. Meanwhile boomers basically did nothing but coast on the hard work of their parents generation.
em-bee 2y ago
there is a huge difference between owning an apartment and owning a property with your own house. in an apartment you own the right to live and are responsible for your own maintenance. but if you do not own the building, do you really own the apartment? you are still beholden to the demands of the building owners. you still have to pay for building maintenance. any serious renovation needs permission because it could affect the building structure. in germany and other countries tenant protection is so strong that as a tenant i have practically the same rights as if i were an owner. the only difference is the form of payment. and with building maintenance fees i would still never reach the point where i am free of monthly payments (ignoring utilities which are always the same for both). and as an owner i carry a risk that the apartment becomes worthless because it somehow becomes unsellable. so unless i can get my own ground to build on, why own? my family has been renting the same apartment in the city of vienna for 150 years now. any money that we could have saved in rent we would have had to invest into renovations
- bombcar 2y ago
  And except for a few people who grabbed Allodial Title (New Mexico had it for a bit) you still pay property tax even when you own the land, and that can get moderately significantly high.
- wan23 2y ago
  Generally when you own a condo you own the building and the land collectively with the other unit owners, and there is no other outside owner that you are beholden to. The building is managed either directly by the owners or else in larger buildings there is a democratically elected board that oversees outside management.
  - em-bee 2y ago
    in that situation you would still be beholden to the owners collective, and depending on the circumstances and the people, that can be better or worse.
blackeyeblitzar 2y ago
Is there anything wrong with this? Even ownership isn’t true ownership. You still have to pay property tax. So you’re basically always a renter.
anovikov 2y ago
Intuitively, something has to put a limit on number of people residing in mega-cities, and everyone wants to live in a mega-city but not everyone can, or should be able to. It is either cost of housing (because buying is pricier than renting, it will be a price to rent), or commute time. I see nothing wrong with it. Just like "cancer is something that kills you if nothing else does", so high percentage of cancer deaths is an indicator of healthy population because everything that can be treated or prevented, is treated or prevented, housing being a choke point for a large proportion, or majority of people, is a sign of healthy economy - because housing in the age of hyper-urbanisation is a positioning good that can't be abundant - people want to live somewhere where most people can't be and the only reason why they want is exactly that - because most can't be there - so there is less competition for the amazing opportunities they offer. If housing in hyper-centers was somehow "solved", they won't work as hyper-centers anymore, and those opportunities won't exist, as labour markets there will be saturated.
- BobaFloutist 2y ago
  > not everyone can, or should be able to. Why not? I'm not sure I'm willing to just take that as a given.
  - anovikov 2y ago
    If a labor market somewhere is allowed to saturate, opportunities will end and centers of innovation, will be no more: they get this way because of course, to begin with, there are some condensation nuclei like a good uni doing research or a bunch of government contractors, but these are present in many places - and then, it needs some limitation on supply of labor. If it is present, people get to make a lot, raising cost of living and property, which pushes mediocre people out and attracts the best (increasing net benefit for the best and reducing, then making it negative for the mediocre ones), so you get a place where there is a high concentration of good people and thus high S/N ratio. Remove limitation and you just stay in the mediocriland and these condensation nuclei result in no rain. Increased buying power of the newly forming local industry does not transpire in (sustained) higher wages because enough new people flock in to fill all the space, as a result there is no ripple effect, no higher SNR, and no reason for others to move in there (just because why, you don't get any benefits either as a worker nor as a business). Labour limitation and making people compete to get in the pool of candidates, is the key. As a simple analogy, imagine a uni with a 100% acceptance rate. Even if it has some initial advantage like a few famous professors, it is bound to be a useless piece of shit and any initial advantage will quickly dissipate. Filter is the key.
betaby 2y ago
Relevant article with way more details, also highlights that problem in other developed countries https://www.bloomberg.com/news/features/2024-05-05/global-housing-crisis-affects-immigration-fueled-growth-living-standards?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTcxNTAwMDA3MCwiZXhwIjoxNzE1NjA0ODcwLCJhcnRpY2xlSWQiOiJTRDE2Q1RUMEcxS1cwMCIsImJjb25uZWN0SWQiOiI4Q0ZGMTBDMjFGQkY0OEJFQTFGRjBDNzc1Qjg3RUJGOSJ9.GqBu7HanQul1IEFWtLs_ymEd8nMqbp9sKUkrrHPvsXc https://www.bloomberg.com/news/features/2024-05-05/global-ho...
SirMaster 2y ago
I don't know why so many people look down on renting. There are a lot of hidden costs and time sinks (time is also money) in owning a home that most people vastly overlook when they are trying to compare the true and final cost. Renting can easily make more sense in a lot of cases at least in my experience. I can seem to find renting to be significantly cheaper and take the money I save and invest in real investments that return more than a typical house normally would.
- P_I_Staker 2y ago
  Because it's the culture and incentives are in place to help home owners.
gumby 2y ago
The graph of "million dollar cities" reveals an interesting story: The SF Bay statistical area has many more "million dollar" cities than the San Jose statistical area to which it is adjacent. SF is relatively dense, so the high prices reflect the cost of land. SJ is not dense at all (mostly farmland) and land is not as expensive. This is a further argument for higher density housing of course. And the argument that wages aren't keeping up is hard to reconcile: if wages can't keep up then the price of houses would be falling.
nojvek 2y ago
As a homeowner I get to deduct mortgage interest in taxes. As a renter I don't. If a corporation decides to own commercial interest. Principal + interest + taxes. + maintenance. Everything other than profits gets to be deducted. Renters don't. Trump cutting corporate income tax from 31 to 21% flat made the wealth jump up to the top. Then Biden came and pumped 5 Trillion in the economy with huge PPP payouts to corporations whose owners were already wealthy. Wealth begets wealth. Rich get Richer. The current 20-30 somethings are the first generate in the entire history of this nation to build less wealth than their parents at the same age. The only people in Seattle and SF making it at 20-30 is if they work at BigTech getting $500k in total combined comp. Everyone else is fucked. Even if Powell holds the interest rates high, congress continues to spend in trillions. More on it https://www.youtube.com/watch?v=qEJ4hkpQW8E https://www.youtube.com/watch?v=qEJ4hkpQW8E Canada, UK, Australia, NZ aren't that much better. The housing pressure is very real. We must really hate our kids. If the economy won't crush them, global warming will slowly crush their grand kids. I respect every couple who decide not to have kids. It's a sane financial choice in current economic conditions.
- skissane 2y ago
  > Canada, UK, Australia, NZ aren't that much better I'd argue Australia is even worse, because at least in the US owner occupiers get mortgage interest deductions, in Australia only landlords can do that. Also, in the US residential mortgages are normally no-recourse (if you default you only lose the house), in Australia they are normally full-recourse (if it sells at foreclosure for less than you owe on the mortgage, you still owe that to the lender)
pyoung 2y ago
As a "forever renter" here are some of my thoughts on where things are headed (at least in the bay area, although some of this applies nationally). 1. The housing market is very thinly traded, illiquid market. Additionally there are some mechanisms in place that slow down price discovery on the way up (appraisal contingences based on comps), which slows down price discovery. This means it can take a few years to reach an equilibrium, which in a competitive market is roughly equal to the average mortgage that a pool of buyers can qualify for. This effect can result in a steady stream of year-over-year price gains, which often gets interpreted as "housing only goes up", when in reality, it is just the market adjusting to a small pool of buyers. 2. The bay area has a large contingency of high earning tech employees, large enough to entirely drive the housing market on their own, at least in the short term. This pool of buyers emerged about a decade ago, and have been increasing in numbers since then, at least until recently. 3. Incomes are not normally distributed, there is a bimodal distribution with the tech employees occupying one of the modals, and the rest of the population occupying the other[1]. Stats on this are difficult because the census tops out at $250k, but very roughly the top 5% average ~$560k, the top 20% average $315k, and the 80th percentile HH income is $176k. Medians would be preferred here, but I think you get the picture. By the time you get down to the 80th percentile, those folks are largely priced out of the market unless they go for a cheap condo or combine households. It is the top 5-10% of HH income earners that are driving the Bay Area market. 4. Baby boomers own about 40% of houses and have been the largest cohort of home buyers as of late. Boomers have been hanging onto, and even acquiring more homes abnormally late into their lives. I suspect this is most likely due to the booming housing and stock markets keeping a certain segment of boomers very flush with cash. But father time is going to start reversing this trend soon, and I wouldn't be surprised if a market crash forced a number of boomers to start selling sooner rather than later to keep retirement accounts whole, or even if "higher-for-longer" interest rates entice boomers to start moving assets into safer investments. But the point is, boomers are the largest participants in the market, and they are going to be moving from net buyers to net sellers very soon. 5. It seems like the tech wave has peaked and we have now entered the era of cost cutting. High salary FAANG jobs are harder to come by, and those same companies seem to be looking to move jobs elsewhere to save money. There will still be plenty of highly paid engineers in the Bay, but I suspect those numbers will slowly decline relative to the rest of the bay area. 6. Prop 13 has distorted the rental market considerably. A lot of landlords purchased their properties in 70's, 80's and 90's. These properties are have miniscule mortgages (if any) and pay barely any property tax. If you bought in the last ten years or so, you are mostly likely going to negative cash flow if you try to rent your property. Hardly worth it, especially when you can sell and put that money in T-Bills and make ~5%. 7. Despite the above distortions, median rents are roughly in line with median incomes for an HCOL area. i.e. The median rent is approximately equivalent to 30% AGI of the 60-70th percentile household income. That is not to say that rents are cheap or affordable, or that they can't go higher. It is just that they seem to be inline with what the market can bear. If the median landlord renting the median rental tries to price higher, they will push up against the glut of luxury rentals on the market, and if they price lower, they will probably find a large number of lower income folks living with roommates willing to make the jump to their own place. Barring any sudden major population changes, the rental market will probably track inflation for the near term. 8. And a bit of curveball here, but a law was recently passed that changes Prop 13 so that the property tax basis is no longer allowed to be passed down to heirs. This is likely going to result in a much larger share of homes getting sold (rather than stay as rentals) in the near future. 9. At least in the short term, population increases seem to be in the 5k range. Meanwhile ~20k new housing units were created. The +/- population numbers can change pretty quickly, but at least in the short term, we are adding more housing units than we are people. And keep in mind, the population changes are in terms of number of people, not number of households. So if an average household has three people, adding 20k housing units would support a population growth of 60k people. So taking all of this into account, I am fairly bearish on the bay area housing market. There is probably enough inertia among the FAANG cohort to keep the market chugging along for a few years, but once they get settled in (and assuming the FAANGs don't resume the hiring craziness of a few years ago) we are going to start seeing the market impacts of the boomers unloading property and fully expect prices to drop or at the very least significantly underperform inflation. Meanwhile, rents are reasonably priced for a HCOL area. They will likely track inflation, but there are going to be pressures on both sides so they are unlikely to go up or down much more than where they currently are. For the last few years, my rent has been less than the PITI on an equivalent house. And the down payment that we have saved up over the years in now sitting in a Treasuries, the interest of which covers about half of our rent. I would like to buy someday, but I think I am going to wait until some of the above factors play out. And if not, well, I guess I will go live in a van. [1] https://statisticalatlas.com/metro-area/California/San-Francisco/Household-Income https://statisticalatlas.com/metro-area/California/San-Franc...
throwaway_qiwuw 2y ago
https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N It seems the rate of home ownership has not drastically changed

154 points by embeng4096 2y ago

photochemsyn 2y ago

[flagged]

georgeecollins 2y ago
I don't want to disturb you in your doom bunker but: - 65% households own their home. https://www.statista.com/statistics/184902/homeownership-rate-in-the-us-since-2003/ https://www.statista.com/statistics/184902/homeownership-rat... - The US is the richest country in the world and growing faster than the world at large. - If you don't want to sound like some ancient Maoist, call it "the global south".

georgeecollins 2y ago

Having lived through a housing crash, and long before that a time of much cheaper houses.. I would say wait and see. One of the reasons why people freak out about the prices of homes is there is often pressure to get one right now. I am moving, I got married, I had a(nother) kid. These are reasons I bought a house in my life and in retrospect I can tell you I did not need to buy a house. In your life it's hard to make a decision on the time frame of house prices (or even market cycles). I am not sure how to tell someone maybe they should wait five years. But clearly sometimes that is the best thing to do. It does not make a lot of sense for homes to sell for so much more then they can rent for. It happens all the time but it is not sustainable. It also happens that their are housing shortages but they don't last forever. People build.

betaby 2y ago
> I would say wait and see How long to wait? Asking in Canadian.
- georgeecollins 2y ago
  Three years? No one can time the market perfectly. The time frame for house prices is much longer than the time frame of opinion piece writers. So you will see pieces in 2006 saying prices will never go down. If you waited 3-4 years they were half off. It happens. Best thing is not to have a fixed plan but to be opportunistic.
  - betaby 2y ago
    Prices never went down in Canada for any substantial amount. Even 10% means we replay back to 1-2 years. Government of Canada actively intervene and change the immigration rate and the discount rate to keep prices from falling.
- bombcar 2y ago
  Instead of waiting, build a calculator in Excel or similar that shows various options, and update the numbers now and then. You'll start to get a "feel" for your options (which include renting, owning, building, moving, etc) and you will be more comfortable acting when the time is right. You can't perfectly time the market but you can at least notice it.
  - sevagh 2y ago
    In Canada big metro cities (Toronto, Vancouver, Montreal), the spreadsheet will most likely tell you that you should have bought on sight instead of making a spreadsheet.
pjc50 2y ago
> It does not make a lot of sense for homes to sell for so much more then they can rent for. Isn't rent also remarkably high in any areas where there's decent levels of employment? You can either rent a house, or rent the money to buy one. Usually the price of renting a house is the price of renting the money plus a margin for maintenance and profit. But since homeownership is pretty much the only situation in which normal people can make a huge leveraged investment - you can't borrow $100k to invest in stocks, they won't let you - it's a very advantageous form of investment. The only way I can see this changing is the forever renters starting to acquire enough political power to overrule anti-building NIMBYs. Birth rates aren't falling fast enough to reduce demand to meet supply.
- georgeecollins 2y ago
  Rent is high in places with good employment, but the penalty you pay for buying (price to rent ratio) is higher their. https://smartasset.com/data-studies/price-to-rent-ratio-in-the-50-largest-us-cities-2022 https://smartasset.com/data-studies/price-to-rent-ratio-in-t... In other words, rent is high in San Jose but renting is cheaper than buying in places like that.
  - HPsquared 2y ago
    In other words, rental yields are low in those places. Probably because the prices are expected to increase, so the owners benefit from capital gains rather than rent. Definitely should be a temporary phenomenon though. Prices are falling in a lot of high-priced urban locations, eg. London.
- geysersam 2y ago
  Is building more really the solution? (sure it's one solution) I think the main issue is the one you formulated so succinctly, the question why people are able to access such huge amounts of credit so cheaply. Why are interest rates for house buyers so low?
  - pjc50 2y ago
    Interest rates everywhere have been low for a long time; the US whacked them up to 5.5% to combat inflation, but that's expected to decline. In general the rates for house buying are so good because the loan is secured on the house, whose value is very stable.
ericmcer 2y ago
I was 19 in 2008, and I don't know if something like that will ever happen again now that the government has shown their willingness to dumping money to prop up any weakening asset. Look at the pandemic, everything kept going up.
- Workaccount2 2y ago
  In 2008 the government opened the floodgates because it was desperately needed, and even then there was a long languishing period afterwards. In 2020 the government opened the floodgates again, but it far beyond overkill for the actual damage done. Most people kept on working and still got tons of economic stimulus (largely in the form of low interest loans and debt moratoriums, not really the checks).
mindslight 2y ago
While agreeing with where you're coming from, one of the big things that makes it hard for me to see relief coming is that construction prices remain quite high. Of course they could be high because the industry is busy building many new construction spec homes. But from what I've seen it feels like there's just too many accumulated layers of administrative workers/overhead, instead of increased wages that would encourage more people to do this work.
- QuadmasterXLII 2y ago
  We had a community of 10 million extremely talented and hardworking people illegally building houses for $4 an hour. It's beyond me to comprehend the moral valence of our decision, starting in 2016, to remove this group from the labor force- it was definitely unethical to deport them, it was definitely unethical to exploit them. Practically speaking though, I don't know why anyone's shocked that afterwards the price to build a home skyrocketed.
  - bombcar 2y ago
    From my experience, illegals weren't making $4/hr building houses, at least not in the areas I knew. You'd pull down $15 minimum and often in cash, in California in the boom times that are now 20 years ago.
    - mindslight 2y ago
      That's still only one third to one half of a fully loaded system legible worker though. And when illegible labor goes away, it's not like there's a supply of legible workers that have been just sitting around waiting to take over the work. This also ties in to the seeming overabundance of management layers, as there are now drastically fewer people to be managed.
      - bombcar 2y ago
        And it’s something people miss - illegal labor does suppress wages somewhat but definitely defrauds the government and any other things that depend on correctly reported income.
nojvek 2y ago
> People build. If they are allowed to. Most major cities are now permit backlogged. Could be years until you get to build. The number of home builders in US are falling down like dominoes. When there is less competition, we get higher prices.

jmclnx 2y ago

I blame this mostly on the mortgage as an investment trend. Probably goes back to the 1980's savings and loan crash which one of the Bush brothers had a big hand in. As I have told people in the past, we are heading towards a new serfdom type economy where either you inherit your property or you are a serf paying most of your income to property holders. Already I have seen articles stating the US Gov is concerned that young people are not moving to other regions of the country as they did 25 - 30 years ago. They articles indicated people moving is in a slow downward spiral. Another indication of a serfdom environment.

bittercynic 2y ago
This sentiment feels right to me, but the numbers don't appear to support it: https://en.wikipedia.org/wiki/Homeownership_in_the_United_States#/media/File:Home_Ownership_rate.png https://en.wikipedia.org/wiki/Homeownership_in_the_United_St...
- jmclnx 2y ago
  In the page, seems you see a slight downward trend starting in 2004, 2005 is at 69%, 2015 is at 63.7%. The charts I see end in 2015, which maybe the rate could have increased. But I wonder how this is calculated. Say if a company/person owns hundreds of homes, would the company be counted as owning just 1 home or multiple homes. What is needed is a count of real people owning homes. So, if 1 person owns multiple homes, they are counted as 1 home owner with the total of all owned homes used to calculate the % value. That would give us a better comparison.
  - bittercynic 2y ago
    It's the number of homes occupied by their owner. The number of people/households who own their home is lower, since many homes are occupied by their owner plus others.
tharmas 2y ago
Are there jobs in these "other" regions? In Canada, Newfoundland is cheaper, but theres no jobs. Partly why its cheaper.

betaby 2y ago

Developed world is in denial of the rapid population growth. Developed countries just don't build enough.

pjc50 2y ago
The population of the US grew by 0.4% last year, not an amount I would describe as "rapid".
- betaby 2y ago
  It's rapid because it's exponential. Add there decay of the existing housing, add the fact that a lot of folks living alone. All that translates to the higher demand for units.
- JackFr 2y ago
  Yeah, significant portion of the developed world is shrinking not growing. Regardless, housing demand is more directly influenced (and influences) net household formation, and it is very regional and dependent on regional economies. There are rust belt communities in the US which suffered decades of net negative household formation even as the US population ticked up. Detroit and Baltimore had peak populations in 1950. While many would consider portions of them blighted and undesirable, that was more the result of and less the cause of the population decline.
  - betaby 2y ago
    > Yeah, significant portion of the developed world is shrinking not growing. That's absolutely not true. Otherwise cite reputable statistic sources. I'm looking at https://www.cia.gov/the-world-factbook/field/population-growth-rate/country-comparison/ https://www.cia.gov/the-world-factbook/field/population-grow...
    - JackFr 2y ago
      While it's true that Japan and Italy are the only two major developed countries suffering actual decline, basically all of the big wealthy countries are experiencing fertility below replacement. https://data.worldbank.org/indicator/SP.DYN.TFRT.IN?locations=US https://data.worldbank.org/indicator/SP.DYN.TFRT.IN?location... Fertility, total births per woman 2021 Australia 1.7 EU 1.5 UK 1.6 Japan 1.3 Korea 0.8 US 1.7 Replacement fertility is estimated at 2.1. Countries with below replacement fertility are growing based on immigration.

noodlesUK 2y ago

One thing I have never quite understood is the desire for housing prices to constantly go up. Even a current homeowner might want to move one day, and if house prices uniformly fell by 50% relative to current earnings, they would find themselves more able to upgrade their house. The only people it would hurt would be people moving from owned accommodation to rented accommodation or cheaper owned accommodation. What am I misunderstanding here? EDIT: It seems I was forgetting a key fact: mortgages. When people hold a mortgage and their property value goes down, they can be left holding the bag.

jl6 2y ago
Most homeowners have a mortgage, and that doesn’t go down when the house price goes down. This can result in negative equity and it traps people in their current property until they can pay off the original debt.
- mistrial9 2y ago
  the number of mortgage-free residential homes in the USA is at record levels, increasing steadily in the last 20 years. Contrast this to the demographic bulge of middle class born shortly after WW II, and the financial advantages of long-term home ownership with low monthly costs.
pjc50 2y ago
The wealth effect of "number go up" is really powerful.
geysersam 2y ago
It would hurt people who own property because it would make them relatively less wealthy compared to people who don't own property.
- mistrial9 2y ago
  if the emotional reality of humans are "hurt" by others doing "less worse" then they are .. then this signals a powerful downward spiral of the social contract.. It could be said that similar feelings continued long ancient traditions of privileged priesthood, Monarchy and even the institution of slavery

phkahler 2y ago

>> But rising home prices are just one factor impacting affordability. High interest rates are another. I believe that statement is in error. Higher interest rates should lower home prices, just like lowering them from 1980 through 2000 contributed to rising prices. There are economists scratching their head right now wondering why the recent rate hikes have not resulted in lower prices in some areas. IMHO There is definitely something else going on in the real estate market. I'm sure those benefitting most are laughing maniacally as people scurry around trying to figure it out.

throwaway11460 2y ago
It's really not hard to understand... Extreme undersupply due to regulation/bureaucracy and extreme overdemand due to lack of opportunities elsewhere. I live in the capital city of my country, just checked the situation in my hometown - average jobs pay 1/2 and the job I do would pay 1/5 - while the rental and property prices are just 10-20% lower; schools are terrible, no night life, no interesting restaurants, literally zero startups of any kind, people are (voting for) racists and conservatives... What the hell would I do there? I like my nice cheap (compared to my buying power) apartment in the middle of a nice progressive cosmopolitan city.
- KoolKat23 2y ago
  I agree with nearly everything you say. I'm of the opinion that regulation/bureaucracy are being scapegoated to an extent. Supply of knowledgeable builders and development finance is not very elastic and does not increase easily even when there is less regulation. The real reason I feel is the higher risk = higher reward equation is broken. Building fewer units means increasing scarcity, allowing increased prices despite there being lower (due to building less houses). Developers are chasing good profit margins rather than revenue. Less regulation just means even better profit margins for these developers.
  - throwaway11460 2y ago
    Where I live there would be 100 people waiting to buy an apartment you just built, giving you absurd amounts of money for it. There is no reason to build less than the absolute maximum possible. There are many developers and builders who want to do it, could do it and eventually will do it - but getting an approval takes 11 years.

jareklupinski 2y ago

For the price of an apartment, I can put that money into an interest-bearing account, and pay the rent on a comparably sized apartment (or bigger house outside the city) using just the incoming interest, never losing a dime of the original capital (even growing it if I scrimp on the apartment) why would i ever buy while this holds true it's free real estate

pjc50 2y ago
Meanwhile I can borrow the money from a bank, buy an apartment, rent it to jareklupinski, gradually raise it over the years, and benefit from the capital appreciation (far greater than interest rates over the past few decades!) as well.
- jareklupinski 2y ago
  my parents tried that; i got to watch in real-time how landlording is _not_ the 'get comfortable quick' scheme people make it out to be
  - Nav_Panel 2y ago
    What were some of the unanticipated challenges they faced?
    - jareklupinski 2y ago
      they lived in NYC and the apartment was in Florida, so even the smallest bumps in the road required a round-trip flight just to start figuring out how to solve the issue basically if the goal was "to make money", there was never a viable path once the rubber hit the road (if they chose a nearer place, the initial costs would never be realized)
      - bartonfink 2y ago
        that is a uniquely boneheaded approach to managing a rental property. you can say "there never was a viable path" about anything if you chucklefuck your way through it instead of doing it well.

questinthrow 2y ago

Wasn't this always the plan? If you combine scarce housing (by law or otherwise) and unrestricted immigration then you can get people to fight for scraps whilst taking 30-60% of their paycheck on average just through renting and also maybe through software subscriptions in the near future. In this way you can extract maximum productivity out of them because each month they're just a few steps away from homelessness. You also depress wages by a lot due to immigration which is doubly beneficial for the owning class AND you force the workers to be more productive because otherwise they'll be replaced by desperate immigrants. Its quite literally perfect from a capitalist point of view. The only thing that can put a stop to this are violent revolts. But if you have automated policing via drones and ubiquitous surveillance it should be easy to subdue the unruly masses.

nostrebored 2y ago
Really untrue. You’re treating the pools of each as if they’re infinite. Everyone in a declining population country will implement this strategy to keep asset prices afloat. The pool of people you want to immigrate to your country is not large enough to support that strategy. Soon the government will have to provide huge incentives have children or immigrate. Then the cost to maintain that asset price is larger and more direct.
- questinthrow 2y ago
  "The pool of people you want to immigrate to your country is not large enough to support that strategy." Is this true though? In Vancouver apartment prices have increased by 600% between 2000 and 2024. And Canada is still taking in between 500k to 1 million immigrants yearly. https://topqualitycanada.ca/2023/05/15/shift-of-two-decades-comparing-housing-prices-in-canada-from-2000-to-2023/ https://topqualitycanada.ca/2023/05/15/shift-of-two-decades-...
  - nostrebored 2y ago
    This is because asset pricing in Canada is entirely dependent on increasing populations. Immigration requirements have been relaxing and will continue to relax. Which means that you should expect a higher “miss” rate on immigrants over time. The problem with immigration this way is that there’s a careful balance of cost vs production. The question is already becoming “is this net positive” and will soon become “what deficit are we okay with running to prop up the asset market”

jihadjihad 2y ago

> raising your income is the best thing you can do to improve your financial situation in the long run. It's such a vacuous statement it's practically a tautology. And it's false: plenty of people who earn modest money over the course of their career end up wealthy. How? They learn to live within their means and budget accordingly.

tacticalturtle 2y ago

> The vast majority of 20 and 30 somethings can’t afford a home today. I’m not sure this is true? Over 50% of millennials, and around 26% of GenZ own a home in the U.S. https://investors.redfin.com/news-events/press-releases/detail/1032/redfin-reports-gen-zs-homeownership-rate-stagnated-in https://investors.redfin.com/news-events/press-releases/deta...

ericmcer 2y ago
Agree, The author of the post said he has been paying $2500/mo in rent, that is similar to the mortgage on a $450k house with 20% down. The problem is all the $450k houses are miles from where most young people want to live. I am not sure why they want to live in large cities and many suburbs have been abandoned. Probably has something to do with loss of manufacturing and other middle class jobs.
- giraffe_lady 2y ago
  You're not sure why young people want to live in large cities?
- deleted 2y ago
  [deleted]
notfbi 2y ago
regarding the stat redfin uses: homeownership" is only counting those that are head of household (which is who is responding when filling out a census), e.g. if there are ~100 genZ's, consisting of 96 that live with their parents, 3 that rent, 1 that owns their own home, the stat just takes those last two numbers, ~1/4, and redfin then reports "26% of GenZs owned their own home".
pyoung 2y ago
I know plenty of millennial homeowners that would not be able to afford todays prices at current interest rates. They bought before the covid bump (or earlier) and could barely afford it then. Had they rented instead they would probably be locked out of the housing market, at least until they got a significant pay increase or some sort of windfall.

MichaelRo 2y ago

In the developed world (including but not exclusively US and EU), the problem is people flocking to big cities which grow way past their housing capabilities while small towns and villages become depopulated with mostly old people living there. I seen this in Romania (where I live), it's the same in France, Germany, etc. Whole houses with terrain and garden in the countryside cost a fraction of an apartment in a big city and yet they become derelict because noone buys them. The work from home "revolution" only touches a very thin layer of people, most people with jobs still need to show up physically every day. And it's only in big cities that jobs get concentrated. I think overall it's a problem going back at least a century, the move from rural economy where 90-95% of the people were working in agriculture, to urban economy. In the rural days, people were spread relatively uniformly. In fact cities were a small fraction of the whole population so no wonder houses were aplenty. Therefore as long as the trend of jobs concentrating in the big cities won't stop or revert, the raise in house prices is inevitable.

Workaccount2 2y ago
It's not a trend, it's just plainly more efficient to have dense population centers. For both living and for business. One of the downsides of course is limited land, but there are tons of other upsides. So then the question is whether we should just remove barriers that stop urban spread
- ta1243 2y ago
  > So then the question is whether we should just remove barriers that stop urban spread Depends what barriers Increasing desnisty? Sure, remove them Increasing area? Nope
  - mikrl 2y ago
    Why not both? If you constrain area, you only have one dimension to expand in to maintain density: height. Not that I have anything against high rises, but they aren’t suitable for every person or geography.

apwell23 2y ago

all housing posts have the following discussions 1. housing shouldn't be an investment 2. 'local democracy' always turns into nimby 3. something about gentrification 4. something about govt incentives/disincentives: don't give tax breaks for homeowners, tax second home ownership ect . 5. something about airbnb 6. some comparisons with europe/denmark did i miss anything

sloat 2y ago
don't forget they all have the same solutions too: 1. Get a better job and start working weekends. A house isn't worth it if you're alive to enjoy it. 2. Move to a poor area and gentrify the shit out of it. Everyone will love and appreciate you. 3. Maybe don't buy a house "yet". Keep paying your ever increasing rent, you'll get there someday.
- brigadier132 2y ago
  > Get a better job and start working weekends. A house isn't worth it if you're alive to enjoy it Literally never seen this argument be made. > Move to a poor area and gentrify the shit out of it. Everyone will love and appreciate you. The last thing I think of when choosing a place to live are the societal implications of it. I really don't care if everyone "loves and appreciates me" because of my apartment choice. > Maybe don't buy a house "yet". Keep paying your ever increasing rent, you'll get there someday ?
  - black6 2y ago
    >> Get a better job and start working weekends. A house isn't worth it if you're alive to enjoy it >Literally never seen this argument be made. From TFA: "Earn more: If you feel like you will be forever priced out of the housing market, start finding ways to earn more. I know this won’t help in the short run, but raising your income is the best thing you can do to improve your financial situation in the long run. If you have both Saturday and Sunday off every single week, then there is no excuse to get started on something that can eventually increase your earnings."

nafizh 2y ago

A lot of this can be explained by just supply and demand. In central New Jersey, the number of people who need to get a home is always increasing, but number of houses being built is extremely low, and even those houses start from 900k-1M.

alexb_ 2y ago

Land value tax fixes this

swozey 2y ago

I sold a house at the beginning of 2019, pre-covid, for $365k. It's zestimate, not that I think it would ever sell for that much, is currently $570k. It's unfathomable to me that someone would pay anywhere near that for my old 1975 1400sq ft 3/2 in Austin. And my god it hurts to see that and think of all the money that I missed out on. I'm back to renting a condo, $3100/month for a 2/3 in Denver.

diogenescynic 2y ago

I graduated during the financial crisis and unemployment rates were brutally high, wages low, and job prospects minimal. I really think millennials got the shit end of the stick--high college costs, high housing costs, weak job opportunities and then just as most of us were getting our careers established the pandemic happened and housing and inflation costs went through the roof. Meanwhile boomers basically did nothing but coast on the hard work of their parents generation.

em-bee 2y ago

there is a huge difference between owning an apartment and owning a property with your own house. in an apartment you own the right to live and are responsible for your own maintenance. but if you do not own the building, do you really own the apartment? you are still beholden to the demands of the building owners. you still have to pay for building maintenance. any serious renovation needs permission because it could affect the building structure. in germany and other countries tenant protection is so strong that as a tenant i have practically the same rights as if i were an owner. the only difference is the form of payment. and with building maintenance fees i would still never reach the point where i am free of monthly payments (ignoring utilities which are always the same for both). and as an owner i carry a risk that the apartment becomes worthless because it somehow becomes unsellable. so unless i can get my own ground to build on, why own? my family has been renting the same apartment in the city of vienna for 150 years now. any money that we could have saved in rent we would have had to invest into renovations

bombcar 2y ago
And except for a few people who grabbed Allodial Title (New Mexico had it for a bit) you still pay property tax even when you own the land, and that can get moderately significantly high.
wan23 2y ago
Generally when you own a condo you own the building and the land collectively with the other unit owners, and there is no other outside owner that you are beholden to. The building is managed either directly by the owners or else in larger buildings there is a democratically elected board that oversees outside management.
- em-bee 2y ago
  in that situation you would still be beholden to the owners collective, and depending on the circumstances and the people, that can be better or worse.

blackeyeblitzar 2y ago

Is there anything wrong with this? Even ownership isn’t true ownership. You still have to pay property tax. So you’re basically always a renter.

anovikov 2y ago

Intuitively, something has to put a limit on number of people residing in mega-cities, and everyone wants to live in a mega-city but not everyone can, or should be able to. It is either cost of housing (because buying is pricier than renting, it will be a price to rent), or commute time. I see nothing wrong with it. Just like "cancer is something that kills you if nothing else does", so high percentage of cancer deaths is an indicator of healthy population because everything that can be treated or prevented, is treated or prevented, housing being a choke point for a large proportion, or majority of people, is a sign of healthy economy - because housing in the age of hyper-urbanisation is a positioning good that can't be abundant - people want to live somewhere where most people can't be and the only reason why they want is exactly that - because most can't be there - so there is less competition for the amazing opportunities they offer. If housing in hyper-centers was somehow "solved", they won't work as hyper-centers anymore, and those opportunities won't exist, as labour markets there will be saturated.

BobaFloutist 2y ago
> not everyone can, or should be able to. Why not? I'm not sure I'm willing to just take that as a given.
- anovikov 2y ago
  If a labor market somewhere is allowed to saturate, opportunities will end and centers of innovation, will be no more: they get this way because of course, to begin with, there are some condensation nuclei like a good uni doing research or a bunch of government contractors, but these are present in many places - and then, it needs some limitation on supply of labor. If it is present, people get to make a lot, raising cost of living and property, which pushes mediocre people out and attracts the best (increasing net benefit for the best and reducing, then making it negative for the mediocre ones), so you get a place where there is a high concentration of good people and thus high S/N ratio. Remove limitation and you just stay in the mediocriland and these condensation nuclei result in no rain. Increased buying power of the newly forming local industry does not transpire in (sustained) higher wages because enough new people flock in to fill all the space, as a result there is no ripple effect, no higher SNR, and no reason for others to move in there (just because why, you don't get any benefits either as a worker nor as a business). Labour limitation and making people compete to get in the pool of candidates, is the key. As a simple analogy, imagine a uni with a 100% acceptance rate. Even if it has some initial advantage like a few famous professors, it is bound to be a useless piece of shit and any initial advantage will quickly dissipate. Filter is the key.

betaby 2y ago

Relevant article with way more details, also highlights that problem in other developed countries https://www.bloomberg.com/news/features/2024-05-05/global-housing-crisis-affects-immigration-fueled-growth-living-standards?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTcxNTAwMDA3MCwiZXhwIjoxNzE1NjA0ODcwLCJhcnRpY2xlSWQiOiJTRDE2Q1RUMEcxS1cwMCIsImJjb25uZWN0SWQiOiI4Q0ZGMTBDMjFGQkY0OEJFQTFGRjBDNzc1Qjg3RUJGOSJ9.GqBu7HanQul1IEFWtLs_ymEd8nMqbp9sKUkrrHPvsXc https://www.bloomberg.com/news/features/2024-05-05/global-ho...

SirMaster 2y ago

I don't know why so many people look down on renting. There are a lot of hidden costs and time sinks (time is also money) in owning a home that most people vastly overlook when they are trying to compare the true and final cost. Renting can easily make more sense in a lot of cases at least in my experience. I can seem to find renting to be significantly cheaper and take the money I save and invest in real investments that return more than a typical house normally would.

P_I_Staker 2y ago
Because it's the culture and incentives are in place to help home owners.

gumby 2y ago

The graph of "million dollar cities" reveals an interesting story: The SF Bay statistical area has many more "million dollar" cities than the San Jose statistical area to which it is adjacent. SF is relatively dense, so the high prices reflect the cost of land. SJ is not dense at all (mostly farmland) and land is not as expensive. This is a further argument for higher density housing of course. And the argument that wages aren't keeping up is hard to reconcile: if wages can't keep up then the price of houses would be falling.

nojvek 2y ago

As a homeowner I get to deduct mortgage interest in taxes. As a renter I don't. If a corporation decides to own commercial interest. Principal + interest + taxes. + maintenance. Everything other than profits gets to be deducted. Renters don't. Trump cutting corporate income tax from 31 to 21% flat made the wealth jump up to the top. Then Biden came and pumped 5 Trillion in the economy with huge PPP payouts to corporations whose owners were already wealthy. Wealth begets wealth. Rich get Richer. The current 20-30 somethings are the first generate in the entire history of this nation to build less wealth than their parents at the same age. The only people in Seattle and SF making it at 20-30 is if they work at BigTech getting $500k in total combined comp. Everyone else is fucked. Even if Powell holds the interest rates high, congress continues to spend in trillions. More on it https://www.youtube.com/watch?v=qEJ4hkpQW8E https://www.youtube.com/watch?v=qEJ4hkpQW8E Canada, UK, Australia, NZ aren't that much better. The housing pressure is very real. We must really hate our kids. If the economy won't crush them, global warming will slowly crush their grand kids. I respect every couple who decide not to have kids. It's a sane financial choice in current economic conditions.

skissane 2y ago
> Canada, UK, Australia, NZ aren't that much better I'd argue Australia is even worse, because at least in the US owner occupiers get mortgage interest deductions, in Australia only landlords can do that. Also, in the US residential mortgages are normally no-recourse (if you default you only lose the house), in Australia they are normally full-recourse (if it sells at foreclosure for less than you owe on the mortgage, you still owe that to the lender)

pyoung 2y ago

As a "forever renter" here are some of my thoughts on where things are headed (at least in the bay area, although some of this applies nationally). 1. The housing market is very thinly traded, illiquid market. Additionally there are some mechanisms in place that slow down price discovery on the way up (appraisal contingences based on comps), which slows down price discovery. This means it can take a few years to reach an equilibrium, which in a competitive market is roughly equal to the average mortgage that a pool of buyers can qualify for. This effect can result in a steady stream of year-over-year price gains, which often gets interpreted as "housing only goes up", when in reality, it is just the market adjusting to a small pool of buyers. 2. The bay area has a large contingency of high earning tech employees, large enough to entirely drive the housing market on their own, at least in the short term. This pool of buyers emerged about a decade ago, and have been increasing in numbers since then, at least until recently. 3. Incomes are not normally distributed, there is a bimodal distribution with the tech employees occupying one of the modals, and the rest of the population occupying the other[1]. Stats on this are difficult because the census tops out at $250k, but very roughly the top 5% average ~$560k, the top 20% average $315k, and the 80th percentile HH income is $176k. Medians would be preferred here, but I think you get the picture. By the time you get down to the 80th percentile, those folks are largely priced out of the market unless they go for a cheap condo or combine households. It is the top 5-10% of HH income earners that are driving the Bay Area market. 4. Baby boomers own about 40% of houses and have been the largest cohort of home buyers as of late. Boomers have been hanging onto, and even acquiring more homes abnormally late into their lives. I suspect this is most likely due to the booming housing and stock markets keeping a certain segment of boomers very flush with cash. But father time is going to start reversing this trend soon, and I wouldn't be surprised if a market crash forced a number of boomers to start selling sooner rather than later to keep retirement accounts whole, or even if "higher-for-longer" interest rates entice boomers to start moving assets into safer investments. But the point is, boomers are the largest participants in the market, and they are going to be moving from net buyers to net sellers very soon. 5. It seems like the tech wave has peaked and we have now entered the era of cost cutting. High salary FAANG jobs are harder to come by, and those same companies seem to be looking to move jobs elsewhere to save money. There will still be plenty of highly paid engineers in the Bay, but I suspect those numbers will slowly decline relative to the rest of the bay area. 6. Prop 13 has distorted the rental market considerably. A lot of landlords purchased their properties in 70's, 80's and 90's. These properties are have miniscule mortgages (if any) and pay barely any property tax. If you bought in the last ten years or so, you are mostly likely going to negative cash flow if you try to rent your property. Hardly worth it, especially when you can sell and put that money in T-Bills and make ~5%. 7. Despite the above distortions, median rents are roughly in line with median incomes for an HCOL area. i.e. The median rent is approximately equivalent to 30% AGI of the 60-70th percentile household income. That is not to say that rents are cheap or affordable, or that they can't go higher. It is just that they seem to be inline with what the market can bear. If the median landlord renting the median rental tries to price higher, they will push up against the glut of luxury rentals on the market, and if they price lower, they will probably find a large number of lower income folks living with roommates willing to make the jump to their own place. Barring any sudden major population changes, the rental market will probably track inflation for the near term. 8. And a bit of curveball here, but a law was recently passed that changes Prop 13 so that the property tax basis is no longer allowed to be passed down to heirs. This is likely going to result in a much larger share of homes getting sold (rather than stay as rentals) in the near future. 9. At least in the short term, population increases seem to be in the 5k range. Meanwhile ~20k new housing units were created. The +/- population numbers can change pretty quickly, but at least in the short term, we are adding more housing units than we are people. And keep in mind, the population changes are in terms of number of people, not number of households. So if an average household has three people, adding 20k housing units would support a population growth of 60k people. So taking all of this into account, I am fairly bearish on the bay area housing market. There is probably enough inertia among the FAANG cohort to keep the market chugging along for a few years, but once they get settled in (and assuming the FAANGs don't resume the hiring craziness of a few years ago) we are going to start seeing the market impacts of the boomers unloading property and fully expect prices to drop or at the very least significantly underperform inflation. Meanwhile, rents are reasonably priced for a HCOL area. They will likely track inflation, but there are going to be pressures on both sides so they are unlikely to go up or down much more than where they currently are. For the last few years, my rent has been less than the PITI on an equivalent house. And the down payment that we have saved up over the years in now sitting in a Treasuries, the interest of which covers about half of our rent. I would like to buy someday, but I think I am going to wait until some of the above factors play out. And if not, well, I guess I will go live in a van. [1] https://statisticalatlas.com/metro-area/California/San-Francisco/Household-Income https://statisticalatlas.com/metro-area/California/San-Franc...

throwaway_qiwuw 2y ago

https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N It seems the rate of home ownership has not drastically changed