It's a "safe investment" because people need a place to live and the supply is artificially constrained. Personally don't see why the barrier to having a place to live for new generations should be raised just so that boomers can guarantee returns on an asset.
Either renting is so bad that people will still rather buy the house, or renting is actually not that bad and then it's not an issue if people rent instead of buying the house. It can't be both at the same time.
Also I think your calculation of "rent until price bottoms out" only makes sense if the price is dropping by more, each month, than a month's rent. Idk but that seems like a dramatic drop.
Rent what inventory? If everyone wants to rent the monthly rent goes up until the market reaches equilibrium. Once again, look at cars. Do you see a majority of the people renting cars because "prices will be lower for the same model next year"?
Not if the government keeps building new housing like this article is mentioning. There will always be supply.
Like I mentioned in another comment it’s different if the housing is being built simultaneously nationwide, like Japan, then people don’t have an option. That represents a nationwide shift in mentality where housing is no longer an investment. Cars are pretty evenly priced across the nation (within a few thousand) so people don’t have an alternative. But that’s not the case here.
Congratulations on having completely different priorities than 99% of people that buy a house.
For the other 99%, time marches on - they want to have children and raise those children in a house _within a fixed timeline_. Because of time, they are unable to wait forever, so they (figuratively) put a stake in the ground and realize that a house is a home - not an investment - where they can raise a family. Since those 99% of people aren't waiting for the lowest price, housing prices don't collapse and rental prices don't skyrocket.
The supply for renters are large apartment buildings while the supply for buyers are single family homes. Some major caveats to this model, like condos. Would be interested to see condo prices during this timeframe.
I do not believe that it is a bad thing for the home to be a less attractive investment.
Certainly, having something like one out of five homes being bought up by investors simply for the investment seems to be very skewed - something along the lines of old coin collecting or acquiring art.
Housing has a specific purpose and if the supply is so downregulated that it is losing that purpose something has gone wrong...
It definitely needs to stop being a thing. For housing to be a worthwhile investment it has to become less affordable to future buyers. That applies not just to institutional investors but families as well.
> Why is housing magically different from from the innumerable other things we regularly buy even though their value depreciates after purchase?
It might be good or bad, but clearly it is very different simply due to price.
If a relatively cheap trinket depreciates to zero, hardly anyone cares.
Cars are generally the second most expensive thing people will ever buy and they depreciate, which does bother most people from a financial perspective. But they last a long time and while they are very expensive they're not life-changing expensive.
A house though, is going to cost decades of your labor, so having that depreciate too fast is going to scare a lot of people.
Your and a sibling comment want to make the Floyd protests into an explanation for the data… while the trend both existed before the event and has continued afterwards
Yes there was a slight trend before 2020 but then during 2020 it accelerates rapidly. Considering Minneapolis was particularly hard hit by the ACAB rehetoric and the "firey but mostly peaceful" protests it would be hard to not seriously believe that the BLM protests/riots were a significant part of that.
I agree with the fundamental principle being stated but I also don't like bad and manipulative data.
Yes they were but if you look at the actual chart it went from median rents slowly going from 100 to around 95 from 2017 to 2020 and then dropping drastically to 80 in 2020.
If anyone believes that the "firey but mostly peaceful" protests didn't have an effect are trying really hard to believe that 2 + 2 = 5.
Every city has had protests- Atlanta, Philadelphia, San Francisco, New York but rents are higher than ever. Does that mean protests are good for the housing market?
Maybe, just maybe, the government building a lot of new housing like the article says may be the reason prices are dropping?
Or are you suggesting some kind of contemporary white flight when the white population of Minneapolis has actually increased significantly between 2020 and 2021 from 59% to 63%.
Can someone from Minneapolis share ground truth as to what the mix of building looks like? Condos? Mid rise apartments? Townhomes? Curious how this can be replicated elsewhere where the local planning is amiable to housing over NIMBYS.
40 comments
[ 3.0 ms ] story [ 148 ms ] threadSo people who want to park their money in a house rather than living in it are discouraged to buy up the available housing.
Yup, good. Seems like it should be going exactly as expected.
Why develop new housing blocks (as a private developer) if it is a depreciating asset.
To live in the house.
>Why develop new housing blocks (as a private developer) if it is a depreciating asset.
To sell to people who want to live in the house.
I’ll just rent until the price bottoms out
>To sell to people who want to live in the house.
People won’t buy and you’ll be stuck renting.
Also I think your calculation of "rent until price bottoms out" only makes sense if the price is dropping by more, each month, than a month's rent. Idk but that seems like a dramatic drop.
Rent what inventory? If everyone wants to rent the monthly rent goes up until the market reaches equilibrium. Once again, look at cars. Do you see a majority of the people renting cars because "prices will be lower for the same model next year"?
Like I mentioned in another comment it’s different if the housing is being built simultaneously nationwide, like Japan, then people don’t have an option. That represents a nationwide shift in mentality where housing is no longer an investment. Cars are pretty evenly priced across the nation (within a few thousand) so people don’t have an alternative. But that’s not the case here.
The speed of building is limited and may be below demand.
Often in conclusions like this a particular trend is getting extrapolated outside of the applicability region, becoming invalid.
For the other 99%, time marches on - they want to have children and raise those children in a house _within a fixed timeline_. Because of time, they are unable to wait forever, so they (figuratively) put a stake in the ground and realize that a house is a home - not an investment - where they can raise a family. Since those 99% of people aren't waiting for the lowest price, housing prices don't collapse and rental prices don't skyrocket.
Certainly, having something like one out of five homes being bought up by investors simply for the investment seems to be very skewed - something along the lines of old coin collecting or acquiring art.
Housing has a specific purpose and if the supply is so downregulated that it is losing that purpose something has gone wrong...
People who need a place to live? Why? Do you think all housing in Tokyo is built by the government?
People who were buying homes because they can? Yup, absolutely. That's the whole freaking point.
It might be good or bad, but clearly it is very different simply due to price.
If a relatively cheap trinket depreciates to zero, hardly anyone cares.
Cars are generally the second most expensive thing people will ever buy and they depreciate, which does bother most people from a financial perspective. But they last a long time and while they are very expensive they're not life-changing expensive.
A house though, is going to cost decades of your labor, so having that depreciate too fast is going to scare a lot of people.
I agree with the fundamental principle being stated but I also don't like bad and manipulative data.
If anyone believes that the "firey but mostly peaceful" protests didn't have an effect are trying really hard to believe that 2 + 2 = 5.
Maybe, just maybe, the government building a lot of new housing like the article says may be the reason prices are dropping?
Or are you suggesting some kind of contemporary white flight when the white population of Minneapolis has actually increased significantly between 2020 and 2021 from 59% to 63%.
https://en.wikipedia.org/wiki/Demographics_of_Minneapolis (Under race and ethnicity)