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The US M2 in 1950 was <$300 billion and in 2024 was >$20,500 billion (70x increase). The article is using an inflation estimate of ~13x. The author doesn't give

by roenxi 2y ago

The US M2 in 1950 was <$300 billion and in 2024 was >$20,500 billion (70x increase). The article is using an inflation estimate of ~13x. The author doesn't give an average but the top 3 states by population (California, Texas, Florida) saw increases of 65x, 39x and 44x respectively. I think it is more likely that house prices have slightly decreased in real terms and they are tracking closer to the M2 as houses are assets not consumables. This gels with home ownership [0] which is generally stable or higher than usual, it doesn't look like people are actually struggling to acquire homes all that much. Especially since I expect household size is shrinking. Most of the pain people are feeling is because of the insanity leading up to and flowing from the '07 crisis if the home ownership rates are good evidence. [0] https://en.wikipedia.org/wiki/Homeownership_in_the_United_States https://en.wikipedia.org/wiki/Homeownership_in_the_United_St...

IAmGraydon 2y ago
[flagged]
- mattnewton 2y ago
  I don't think it leads to productive conversation to simply say that people who think there is a problem here are entitled.
lamp_book 2y ago
Yeah homebuilding got absolutely murdered due to the financial crisis. 2009 was the lowest number of new builds since 1959 and we haven't yet reached the 2005 peak. https://ipropertymanagement.com/research/housing-starts https://ipropertymanagement.com/research/housing-starts
mattnewton 2y ago
The wikipedia article you linked showed only a decline of 1% home ownership as defined, but mentions a massive decline in "home equity" down to around 34% owning the home outright - this means that people are struggling to own homes in the classical sense of the word "ownership" to me, and the ownership rates are being papered over by long periods of access to cheap loans.
- roenxi 2y ago
  The article isn't about how easy it is to own homes though; it is about whether the real price of homes is changing over time. Article suggests it is, I'm suggesting that the CPI is an inappropriate index to use and I suspect the trend is - if anything - probably in the other direction. Relative to the money printing that has taken place, the real price of homes appears to have dropped a smidgen which is what we'd expect given technology improvements. I do agree that houses are probably a lot less affordable. All that debt is expensive. But that has little to do with the real value of the house, it depends on how the financial system is architected.
  - mattnewton 2y ago
    If the real price of homes is increasing we would expect people to be able to afford them less, per your original comment. I am arguing owning less equity is equivalent to owning less homes in a highly financialized system with cheap credit access. I am not sure about your argument here.
    - roenxi 2y ago
      My argument is that the CPI is an inappropriate index to use, it hasn't done a good job of measuring general inflation. My interpretation is that the price of the house is staying about the same (probably slightly down) and real incomes are dropping a bit faster than that (which'd be consistent with real incomes tracking metrics like energy availability per capita & the relative lack of capital investment in the US compared to Asia). There isn't a particular reason why the real price of houses would go up. A house today is more or less the same good as in 1950, and technology improvements suggest that if anything it is probably easier to build cheap houses today than back then. And on the other hand, the money printing being done is entering into the economy through loans so it probably turns up first in things like house prices. I can imagine scenarios where the real price rose, but the more likely explanation for affordability issues is that real incomes dropped.
Jensson 2y ago
> I think it is more likely that house prices have slightly decreased in real terms and they are tracking closer to the M2 as houses are assets not consumables Still means homes has became much more unaffordable than in the past since you have to use your income to pay for the house.
HDThoreaun 2y ago
Keeping money supply the same in the face of a growing economy leads to deflation. Deflation is the economy killer as it makes it extremely difficult to get a loan so investment grinds to a standstill. What exactly should the fed have done in the decade following 07 when the economy was growing and prices were stable?
- roenxi 2y ago
  > Deflation is the economy killer as it makes it extremely difficult to get a loan so investment grinds to a standstill. (1) If any economy ever has been killed by deflation, you should include it on the the Wikipedia page for deflation. The list of economies that experience deflation [0] is almost a whos-who of places I'd be happy to live - it is often a precursor to economic success. I don't argue that it is a good thing, but inflation is actually a way to kill an economy because it can get completely out of hand and regularly does. Deflation isn't and doesn't. (2) It doesn't make it any harder to get a loan. When making a loan, you estimate the real return (say 2%) and adjust for inflation/deflation. So if there is 1% inflation you loan at 3% and if there is 1% deflation you loan at 1%. Deflation does put a floor on what people will loan money for. The argument that this is a bad thing is very questionable indeed - why we should want people borrowing investing in low-return activities when they could be not-borrowing and resources could be going into high-return activities is a mystery to me. Lending money doesn't make real-world resources appear out of nowhere. And again, lending can be good or bad so I'm not arguing against it in the abstract. But encouraging lending in marginal and risky gambits is stupid, it causes regular collapses and seems to me to be be making society relatively poorer. People don't save enough as a starting point, end up broke in their retirement all too often. They shouldn't be punished for putting money aside on top of that. > What exactly should the fed have done in the decade following 07 when the economy was growing and prices were stable? The election is behind us, people can stop with this silliness. The US economy is obviously not growing. Countries don't put a Trump in charge twice when economies are growing. Global hegemons don't get overtaken by China when the economy is growing. The US has very visibly not been growing strongly for the last decade, it has been papering over cracks with money printing. Maybe that is fine, growth has to end sooner or later. [0] https://en.wikipedia.org/wiki/Deflation#Historical_examples https://en.wikipedia.org/wiki/Deflation#Historical_examples

by roenxi 2y ago

IAmGraydon 2y ago

[flagged]

mattnewton 2y ago
I don't think it leads to productive conversation to simply say that people who think there is a problem here are entitled.

lamp_book 2y ago

Yeah homebuilding got absolutely murdered due to the financial crisis. 2009 was the lowest number of new builds since 1959 and we haven't yet reached the 2005 peak. https://ipropertymanagement.com/research/housing-starts https://ipropertymanagement.com/research/housing-starts

mattnewton 2y ago

The wikipedia article you linked showed only a decline of 1% home ownership as defined, but mentions a massive decline in "home equity" down to around 34% owning the home outright - this means that people are struggling to own homes in the classical sense of the word "ownership" to me, and the ownership rates are being papered over by long periods of access to cheap loans.

roenxi 2y ago
The article isn't about how easy it is to own homes though; it is about whether the real price of homes is changing over time. Article suggests it is, I'm suggesting that the CPI is an inappropriate index to use and I suspect the trend is - if anything - probably in the other direction. Relative to the money printing that has taken place, the real price of homes appears to have dropped a smidgen which is what we'd expect given technology improvements. I do agree that houses are probably a lot less affordable. All that debt is expensive. But that has little to do with the real value of the house, it depends on how the financial system is architected.
- mattnewton 2y ago
  If the real price of homes is increasing we would expect people to be able to afford them less, per your original comment. I am arguing owning less equity is equivalent to owning less homes in a highly financialized system with cheap credit access. I am not sure about your argument here.
  - roenxi 2y ago
    My argument is that the CPI is an inappropriate index to use, it hasn't done a good job of measuring general inflation. My interpretation is that the price of the house is staying about the same (probably slightly down) and real incomes are dropping a bit faster than that (which'd be consistent with real incomes tracking metrics like energy availability per capita & the relative lack of capital investment in the US compared to Asia). There isn't a particular reason why the real price of houses would go up. A house today is more or less the same good as in 1950, and technology improvements suggest that if anything it is probably easier to build cheap houses today than back then. And on the other hand, the money printing being done is entering into the economy through loans so it probably turns up first in things like house prices. I can imagine scenarios where the real price rose, but the more likely explanation for affordability issues is that real incomes dropped.

Jensson 2y ago

> I think it is more likely that house prices have slightly decreased in real terms and they are tracking closer to the M2 as houses are assets not consumables Still means homes has became much more unaffordable than in the past since you have to use your income to pay for the house.

HDThoreaun 2y ago

Keeping money supply the same in the face of a growing economy leads to deflation. Deflation is the economy killer as it makes it extremely difficult to get a loan so investment grinds to a standstill. What exactly should the fed have done in the decade following 07 when the economy was growing and prices were stable?

roenxi 2y ago
> Deflation is the economy killer as it makes it extremely difficult to get a loan so investment grinds to a standstill. (1) If any economy ever has been killed by deflation, you should include it on the the Wikipedia page for deflation. The list of economies that experience deflation [0] is almost a whos-who of places I'd be happy to live - it is often a precursor to economic success. I don't argue that it is a good thing, but inflation is actually a way to kill an economy because it can get completely out of hand and regularly does. Deflation isn't and doesn't. (2) It doesn't make it any harder to get a loan. When making a loan, you estimate the real return (say 2%) and adjust for inflation/deflation. So if there is 1% inflation you loan at 3% and if there is 1% deflation you loan at 1%. Deflation does put a floor on what people will loan money for. The argument that this is a bad thing is very questionable indeed - why we should want people borrowing investing in low-return activities when they could be not-borrowing and resources could be going into high-return activities is a mystery to me. Lending money doesn't make real-world resources appear out of nowhere. And again, lending can be good or bad so I'm not arguing against it in the abstract. But encouraging lending in marginal and risky gambits is stupid, it causes regular collapses and seems to me to be be making society relatively poorer. People don't save enough as a starting point, end up broke in their retirement all too often. They shouldn't be punished for putting money aside on top of that. > What exactly should the fed have done in the decade following 07 when the economy was growing and prices were stable? The election is behind us, people can stop with this silliness. The US economy is obviously not growing. Countries don't put a Trump in charge twice when economies are growing. Global hegemons don't get overtaken by China when the economy is growing. The US has very visibly not been growing strongly for the last decade, it has been papering over cracks with money printing. Maybe that is fine, growth has to end sooner or later. [0] https://en.wikipedia.org/wiki/Deflation#Historical_examples https://en.wikipedia.org/wiki/Deflation#Historical_examples