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Housing is a massive bomb because for so many people is is the singular investment that their net worth and retirement is held in. This idea has been so deeply

Housing is a massive bomb because for so many people is is the singular investment that their net worth and retirement is held in. This idea has been so deeply entrenched for so long that a reversal will wipe out millions of people's net worth. At some point the bomb will go off, but there's no incentive to look at the long term of 10+ years out when the explosion will destroy people's political careers in the short term.

bombcar 2y ago
I know so many people 20 years ago who "I'll sell my CA house and retire elsewhere" was a majority of their plan. As of now, I can only count a very few who actually did it, turns out it's hard to leave where you've lived your entire working life to move somewhere you've never been, and the price differential isn't as amazing as it once was (since Covid flattened that out somewhat). The ones who did end up doing it ended up following their children (who were priced out of where they grew up). Normally you'd expect measured, predictable, steady inflation to be the method to "defuse the bomb" but so far that hasn't been really tried (if houses keep going up 1-2% a year, but inflation is 5%, you have a 3% drop in value each year even though on paper, you have an increase).
- crowcroft 2y ago
  20 years ago is when the bomb probably could have been diffused, but I think the recovery out of the GFC put it on the back burner and then it was too late. Housing should have been getting built like crazy in places like CA so that those people thinking of selling had a reason to sell. By not building houses property values keep booming, and even if you plan to sell and move somewhere it's easy to endlessly delay that decision when you're getting rich as hell.
- koolba 2y ago
  CA housing cannot be fixed without across the board reassessment. Otherwise the winner with an old property paying 2% of their 1980s purchase price will never sell. The immediate tax hit for moving to a similar house would be financial insanity. And reassessing across the board is not going to happen either because it would price out grandma living on a fixed income.
  - clpm4j 2y ago
    I bought my house (in CA) in 2019, and my property tax bill is ~$30k/yr. My literal nextdoor neighbor's property tax bill is less than $1k/yr (it last sold in the 1960s and has been passed down within the same family).
  - bombcar 2y ago
    And to fix the problem, they added Prop 90 and 19, which now let you transfer the base value around! What an amusing shell game. https://www.boe.ca.gov/prop19/#FAQs https://www.boe.ca.gov/prop19/#FAQs But more efficiently shuffling existing supply doesn't create new supply.
  - jacobr1 2y ago
    Tax deferral to the estate for anyone over X age or that has owned a property for more than Y years. Or some gradient on either age or property ownership duration would address some of the issue. Even if you mitigate things with some kind of blanket exemption either of the estate or just to for life for a small set of folks that qualify, you need to stop it from new homeowners getting locked in.
- jacobr1 2y ago
  If we have supply start matching demand, we'd get closer to the the "houses keep going up 1-2% a year, but inflation is 5%, you have a 3% drop in value each year even though on paper, you have an increase" approach. Most metro areas are still not keeping up with demand. Even the ones that are doing better in things like zoning (such as in TX, NC, FL) are getting enough growth from other locations that the induced demand is still outpacing supply. We need state and federal policies that can override the local NIMBYism. CA's recent experience is both a good start but also provides a bunch of lessons learned on how these policies can fail and should be improved both in CA in other jurisdictions - especially when localities are actively trying to work around them.
  - AnonymousPlanet 2y ago
    What is demand? People who want to live somewhere and people who want to park their money in land or real estate. Prices won't go down if you deal with only one kind of demand.
hello_moto 2y ago
Technically multiple bombs explode here and there. Here's how: * Family bought 1 house (assets), big mortgage (cause it's expensive), live until retirement * Parents sell the house (lost the assets) to either a wealthier family or investors to downgrade * Parents potentially share the proceeding to the kids to support their Housing endeavor but Kids will be forced to buy something smaller (usually Condos) because detached is expensive and kids wage just starting from the bottom of the paygrade. Long-term, middle class will erode.
- crowcroft 2y ago
  You just touched on another one of my big concerns – Condos. I love condos, but the older generations have no idea what modern condo living is really like and what maintenance is required for these kinds of places. They get talked about like 'starter' homes for young people that can't afford a single family house and so often they nudge younger people to buy them and 'get on the ladder'. Often they are TERRIBLE investments though. Property tax is relatively high in most cities, ongoing fees are huge, governance is normally terrible, and every now and then something major goes wrong and the current owners are left with huge extra bills. 'Getting on the ladder' in this way, along with student debt really cripples so many people into a life of debt payments while building very little wealth.
  - scarface_74 2y ago
    I love my condo that we downsized to from our big house in the burbs. But you are right, they are horrible “investments”. I knew that going in.
  - hello_moto 2y ago
    That is what eroding middle class looks like. This is what happened when The Rich outcompetes the middle class.
tokioyoyo 2y ago
The current global realpolitiks shows that unless you have a very heavy industry that you can invest in, to replace the cratering housing prices, no country is willing to blow it up on purpose. China is trying to strategically do it, but they still have so many more people that they can lift up, move around and put to work into different industries. It's just not really the case for developed countries. I'm assuming India will take the same course in the near future, but their challenges are a bit different. Also, when supermajority+ have the same problem, it's in the interest of the government to do anything possible to delay the problem for the future generations. That's why I have reservations about US, Canada, UK, Australia and others doing the same thing. It also doesn't help when your entire population growth is depended on immigration, as you can, theoretically, keep the demand higher without many complaints, while limiting the supply. There's also the Japan problem, but it's weird. In Tokyo we're seeing rental prices actually going up, as it's the only region where the population is growing for all the wrong reasons. Oh well, good luck to us.

bombcar 2y ago

I know so many people 20 years ago who "I'll sell my CA house and retire elsewhere" was a majority of their plan. As of now, I can only count a very few who actually did it, turns out it's hard to leave where you've lived your entire working life to move somewhere you've never been, and the price differential isn't as amazing as it once was (since Covid flattened that out somewhat). The ones who did end up doing it ended up following their children (who were priced out of where they grew up). Normally you'd expect measured, predictable, steady inflation to be the method to "defuse the bomb" but so far that hasn't been really tried (if houses keep going up 1-2% a year, but inflation is 5%, you have a 3% drop in value each year even though on paper, you have an increase).

crowcroft 2y ago
20 years ago is when the bomb probably could have been diffused, but I think the recovery out of the GFC put it on the back burner and then it was too late. Housing should have been getting built like crazy in places like CA so that those people thinking of selling had a reason to sell. By not building houses property values keep booming, and even if you plan to sell and move somewhere it's easy to endlessly delay that decision when you're getting rich as hell.
koolba 2y ago
CA housing cannot be fixed without across the board reassessment. Otherwise the winner with an old property paying 2% of their 1980s purchase price will never sell. The immediate tax hit for moving to a similar house would be financial insanity. And reassessing across the board is not going to happen either because it would price out grandma living on a fixed income.
- clpm4j 2y ago
  I bought my house (in CA) in 2019, and my property tax bill is ~$30k/yr. My literal nextdoor neighbor's property tax bill is less than $1k/yr (it last sold in the 1960s and has been passed down within the same family).
- bombcar 2y ago
  And to fix the problem, they added Prop 90 and 19, which now let you transfer the base value around! What an amusing shell game. https://www.boe.ca.gov/prop19/#FAQs https://www.boe.ca.gov/prop19/#FAQs But more efficiently shuffling existing supply doesn't create new supply.
- jacobr1 2y ago
  Tax deferral to the estate for anyone over X age or that has owned a property for more than Y years. Or some gradient on either age or property ownership duration would address some of the issue. Even if you mitigate things with some kind of blanket exemption either of the estate or just to for life for a small set of folks that qualify, you need to stop it from new homeowners getting locked in.
jacobr1 2y ago
If we have supply start matching demand, we'd get closer to the the "houses keep going up 1-2% a year, but inflation is 5%, you have a 3% drop in value each year even though on paper, you have an increase" approach. Most metro areas are still not keeping up with demand. Even the ones that are doing better in things like zoning (such as in TX, NC, FL) are getting enough growth from other locations that the induced demand is still outpacing supply. We need state and federal policies that can override the local NIMBYism. CA's recent experience is both a good start but also provides a bunch of lessons learned on how these policies can fail and should be improved both in CA in other jurisdictions - especially when localities are actively trying to work around them.
- AnonymousPlanet 2y ago
  What is demand? People who want to live somewhere and people who want to park their money in land or real estate. Prices won't go down if you deal with only one kind of demand.

hello_moto 2y ago

Technically multiple bombs explode here and there. Here's how: * Family bought 1 house (assets), big mortgage (cause it's expensive), live until retirement * Parents sell the house (lost the assets) to either a wealthier family or investors to downgrade * Parents potentially share the proceeding to the kids to support their Housing endeavor but Kids will be forced to buy something smaller (usually Condos) because detached is expensive and kids wage just starting from the bottom of the paygrade. Long-term, middle class will erode.

crowcroft 2y ago
You just touched on another one of my big concerns – Condos. I love condos, but the older generations have no idea what modern condo living is really like and what maintenance is required for these kinds of places. They get talked about like 'starter' homes for young people that can't afford a single family house and so often they nudge younger people to buy them and 'get on the ladder'. Often they are TERRIBLE investments though. Property tax is relatively high in most cities, ongoing fees are huge, governance is normally terrible, and every now and then something major goes wrong and the current owners are left with huge extra bills. 'Getting on the ladder' in this way, along with student debt really cripples so many people into a life of debt payments while building very little wealth.
- scarface_74 2y ago
  I love my condo that we downsized to from our big house in the burbs. But you are right, they are horrible “investments”. I knew that going in.
- hello_moto 2y ago
  That is what eroding middle class looks like. This is what happened when The Rich outcompetes the middle class.

tokioyoyo 2y ago

The current global realpolitiks shows that unless you have a very heavy industry that you can invest in, to replace the cratering housing prices, no country is willing to blow it up on purpose. China is trying to strategically do it, but they still have so many more people that they can lift up, move around and put to work into different industries. It's just not really the case for developed countries. I'm assuming India will take the same course in the near future, but their challenges are a bit different. Also, when supermajority+ have the same problem, it's in the interest of the government to do anything possible to delay the problem for the future generations. That's why I have reservations about US, Canada, UK, Australia and others doing the same thing. It also doesn't help when your entire population growth is depended on immigration, as you can, theoretically, keep the demand higher without many complaints, while limiting the supply. There's also the Japan problem, but it's weird. In Tokyo we're seeing rental prices actually going up, as it's the only region where the population is growing for all the wrong reasons. Oh well, good luck to us.