Another example of how timing the market is not a good idea, or, “time in the market beats timing the market.”
But why is it considered an invariant, the fact that there aren’t houses where people want houses? Wouldn’t it be extremely possible for people to change where it is they’re willing to live and work as a result of the housing market?
One thing that makes this difficult still is, what if there are two different markets you want to be in.
Time in the market for stocks beats timing the market for stocks.
Time in the market for housing beats timing the market for housing.
But let’s say you have $30k USD. Currently you have this money in stocks, and you are renting an apartment to live in.
Time in the stock market should mean that in 15-20 years, those $30k USD you put in stocks today might grow to be worth a fair bit more.
But at the same time, you are losing out on owning a house. Instead paying rent to someone else.
And in this case it is not possible to know if it would be better to keep the money in stocks and keep renting, or go and get a loan so you can get some little place of your own with the $30k of yours + the $90k or so that a bank will lend you.
People live where they have jobs. Jobs usually exist where there are people - new jobs can be created if some company or industry’s growth demands it.
Amazon warehouses and Walmarts exist where there are enough people to justify it. Coffee shops, fast food restaurants, financial services, etc all provide jobs and are located in cities, not rural areas. Water service, electricity, natural gas service do not exist by default.
People can’t just choose to change where they want to live.
People absolutely can choose to change where they want to live, by educating themselves on what’s available in places they previously thought were uninhabitable to them.
Much work can be done remotely, and much other work is done in many different places than it used to be done in, not to mention the possibility of commuting to/from a job in an expanded range as a result of housing scarcity.
Moving is very much a growing option for people, and the data for cross state moves shows that to be the case [0].
American mobility tends to be pretty high relative to other people in the world - meaning Americans are more likely to uproot and move to a new community, even 100s or 1000s of miles away from what was "home".
With WFH the "objective function" has shifted for part of society who can WFH - its less about job location and more about lifestyle, quality of life and cost of living. However, my anecdotal analysis tells me that WFH, while still a strong factor, is beginning to subside. Not so much due to employers demanding employees be in the office but more because theres a shift back to cities after a 3 year trend out of them.
On a tangential topic - here's an interesting Pew Research report on mobility - I believe from 2012. So it's quite dated, but is still a good framework to understand how to think about mobility: https://www.pewresearch.org/wp-content/uploads/sites/3/2011/...
I would argue that those social constraints ought not hold in the face of growing housing scarcity, and the predictions that all else will remain static in people’s behavior is usually an inaccurate one.
Assuming you mean detached houses, how can this be without a decrease in demand for land in the area you live in?
Either more people want to live where you are living (meaning the location is desirable), or fewer people want to live where you are living (meaning it is undesirable).
Technically, you could have a decline in population, but immigration will probably make up for that for a long time.
That would be more aligned with renting. For most people, their house is the biggest purchase they’ll ever make. It isn’t unreasonable to expect it to at least keep pace with inflation so they can sell it and afford to move into a nursing home someday. (Even with the massive growth we’ve seen in recent years, for most long term holders the annual rate of growth has significantly underperformed the markets, even before accounting for maintenance and taxes)
If it was simply a depreciating asset, housing would have to be sold for less than the construction cost in order for people to be able to sustain the depreciating value and have enough cash left over to invest elsewhere for their later years drawdown.
> That would be more aligned with renting. For most people, their house is the biggest purchase they’ll ever make. It isn’t unreasonable to expect it to at least keep pace with inflation so they can sell it and afford to move into a nursing home someday.
That sucks and we should fix it. It is unreasonable and unsustainable for housing to be that vector. Pensions once existed.
Defined benefit pension fund managers invest in the same markets everyone else does. And the biggest DB pension, Social Security, already exists, along with the biggest nursing home payor, Medicaid. At the end of the day, it’s just allocating a certain percentage of the country’s labor to older people’s needs.
Question is, what proportion of resources does society want to allocate to the country’s older people? Interest rate policy to support asset price increases is one way the government increases this proportion.
But with declining proportion of working age population, these measures become more and more evident.
Well you can rent and put the savings (vs owning a home) into a variety of vehicles for retirement savings. Many, many people have shown that this actually yields far more significant returns than the house. But people are not perfectly rational economic actors. There is something innate (or deeply culturally embedded) about wanting to have control over your living space, so it becomes the primary savings vehicle for many/most people.
We can wish whatever we'd like. The logical, real-world value of a house should depreciate over time as the structure gets older and needs more repairs.
The exception, I suppose, is if the overall supply of houses and/or land decreases, but then you lock newcomers out of the market.
> The logical, real-world value of a house should depreciate over time as the structure gets older and needs more repairs
This is true, but the cost of building a new house is also rising. So at some point buying existing housing is cheaper than building a new house. That should put a floor on the depreciating value you speak of.
Agreed. My perspective on homes has fallen to "air-conditioned box", and I feel so much less stress this way. I don't care that my SFH in Texas isn't appreciating like $QQQ or $MSFT.
My general rule of thumb today is to not own construction older than 10 years. I look at home ownership in the same way as car ownership now.
It's ultimately a game of hot potato, unless we are talking about transactions via Sotheby's & friends. Homes in the 6 to low 7 figure range are not long-term things in my view anymore. You are never going to get more out than you put into one of those things, unless you are OK with experiencing an incredible amount of stress and expending untold amounts of time & energy fighting market forces.
Making gains on this kind of real estate is mostly a lie. It's the same variety of lie where we claim cloud->on-prem is cheaper by conveniently ignoring all of the other indirect costs.
I dont think that ever makes sense in reality for several reasons.
1) Cost of labor is going up, 2) Taxes are going up, and 3) Cost of materials are going up, and 4) Population is going up.
When My house was built is 1915, Taxes were 8% of GDP and cost of a carpenter was $0.50/hour. Today, Taxes are 40% of GDP and cost of a carpenter is $30/hour.
This means my house would be far more expensive, even accounting for inflation.
It would be nice to have a situation in which land in desirable locations was not scarce and increasingly desired over time, I suppose, but its not a prequisite for a “healthy market”, and the other alternatives for achieving that require active intervention in ways which make it far fron a healthy market.
Yea, I don't understand myself, at least if they are in the US. Could be very location dependant, but mostly housing prices greatly increased since then.
I don’t want to, but looks like I’ll have to, interest rates being what they are. I really liked the place, made a nice little garden for the first time in my life
But if yall think selling is a good idea, that’s a good omen
Sounds like either you are not in the US and did not have access to fixed rate mortgages, or you are in the US and opted for an adjustable rate mortgage, and somehow missed the unprecedented refinancing opportunities of 2020/2021?
I bought a home in 2017 and considering what I have spent on down payment, mortgage, taxes, insurance, and standard home maintenance and improvements in the last six years if I sold it today I would still make about 35% more than all the cash I have put into it so far. My home is simply not an expense, it’s a savings account I get to live in.
We are in a similar situation (Florida). I’ll admit it’s tempting to sell and grab that cash, but the more I run the math it just makes sense to stick around until we have to sell, or if it looks like the real estate marker starts moving the other way. Then we hop out, ladder the proceeds into some CDs and use the interest to rent until we find the right place to buy again.
Consider yourself lucky. If I was to sell my house today I would probably get basically the same price I paid in 2017. All the money I've spend on renovations and improvements are 'lost'.
That being said, I love my house and I'm very happy I get to live here. So in the grand scheme of things I still consider buying this place a huge win.
The Atlantic isn't even trying anymore. Timing varies by region. It is a very good time to buy a house in the mid-west. Its sad how their paywall's first line is "Uncompromising quality."
I feel like we got really lucky.. We bought in 2014 and sold in the summer of 2019, moved and bought another place in October of that year. Interest was 3% and 3.5% respectively. Granted we moved from one southern major suburb to another in the Midwest...but the price wasn't that great of a jump.
The author of this piece is using as a base line the two most expensive housing markets in America. That's not really representatives of 95% of people. It's understandable not being able to afford to buy in Manhattan, or San Francisco, but have they tried Dayton, Ohio, Houston, Louisville, maybe Orlando?
Every single one of these articles about how outrageous, housing prices are always seem to hedge around this idea that buying a place is only worth it if you get to live in a very cosmopolitan, walkable neighborhood. Those are few, and in high demand, so it would reason they would command a higher price.
Unless you're working remotely those prices in Dayton are expensive as the local wages are much lower. People at the bottom end of income need places to live/rent too. And these days with collusion in the rental markets renting is a great way to go broke faster than ever.
> The author of this piece is using as a base line the two most expensive housing markets in America. That's not really representatives of 95% of people.
Those two cities are expensive, but I think there are a lot of other expensive cities too (Austin, Los Angeles, etc.)
I checked with Bard, and it looks like 9.2% of the US population lives in New York or San Francisco:
"The New York metropolitan area is home to 22.1 million people, or 6.6% of the US population. The San Francisco Bay Area is home to 8.7 million people, or 2.6% of the US population."
The only sensible financial reaction is to save, save, save for a down payment well in excess of 20%. Just an extra 5% will save you roughly $150k On a 600k home over the course of a 30-yr 6.9% mortgage (the current rate).
Problem is that most people will never be able to achieve this - the average down payment for first home buyers is less than 10%.
Truly hate to say it but people will need to get used to buying homes much later in life.
With more collusion occurring in rental markets, home owners are able to extract more wealth from those that do not own homes. Unless something changes in supply (of which current owners will not want) then 'get used to not buying homes' is really what's being said.
I hear you, it's not a good place to be in (I've been renting my whole adult life). If people can't or are unwilling to swallow that bitter pill, perhaps major shifts are coming.
You can get there with social housing through either:
- the Singapore model, rent-to-own via the government
- the Japanese model, housing is a depreciating asset
- the Vienna model, ubiquitous social housing up to mid-tier of the market
Personally I feel like renting or owning a house should be a choice of features, not of financial benefit. Buying a house should be about being able to make it your own (moving walls, redoing the garden, building a shed). On a 5, 15, 30, 60 year timeline, owning and renting a house should come out to the same financial net outcome.
The way to get there is murky to me. I have far too little understanding of the deeper effects government policies have on the real estate market to make even the roughest guess.
Of course, if rates are low and money is cheap, max out the loan. But one of the key points of the article was that interest rates are not going to fall for a long time and when they do, house prices will resume their ascent.
If that’s true it’s truly unfortunate the because there’s a sense of stability and security that comes with buying, and younger people tend to be among those who need that most.
I bought right before the interest rate shot back up with a ~5% down payment, and the past few years of ownership have improved my mental state substantially. You don’t know how much stress is caused by having that potential rent hike (and associated potential apartment hunt and move required to keep housing costs within reason) that comes with lease renewal looming on the horizon until it’s not there anymore.
It's vexing to me that so many seem to refuse to believe that stability is important to mental health (for at least some of us), and then wonder why young people are exhibiting ever greater mental health issues. I think only psychopaths are "happy" with the current state of things. Sadly, our institutions seem purpose-built to select them as our leaders.
Depends on how much renting is. Waiting for a higher down payment while paying more to rent doesn't necessarily work out better.
Additionally having an emergency fund afterwards is super important.
Finally since prepayment penalties aren't a thing the difference between paying extra principal early on and a bigger down payment is mostly PMI. (And the interest on the payments until you make them)
Here in Houston, a city with a medium cost-of-living, the cheapest house that you can get that's in livable condition and isn't outrageously far from where the jobs are is something like $300k. 20% of that is $60k.
For us techies or others with a Well-Paying Job™, saving $60k is not a big deal.
For pretty much everyone else, saving $60k is a huge feat, even after removing all unnecessary expenses. (Why should "they" have to ride the struggle bus when we techies can blow $18 on lattes and avo toast or whatever's hype these days while still hitting these savings goals?)
And when they finally do that 15 years later or whatever, they're competing against the Well-Paying Job™ folks who are rolling equity from the sale of their starter home and putting down all-cash offers.
By saying "people will need to get used to buying homes much later in life," what you're essentially proposing is class-redlining the poors (many of whom come from families that were historically-discriminated against home ownership, either directly or indirectly) out of home ownership. I'm going to assume that this isn't what you intended by writing that, but that's how it comes off.
> (Why should "they" have to ride the struggle bus when we techies can blow $18 on lattes and avo toast or whatever's hype these days while still hitting these savings goals?)
Can you define what techies should be able to buy compared to “them”?
If interest rates to drop again in the foreseeable future, it will likely be due to an old fashioned recession.
If that happens, both mortgage rates and home prices will fall (due to lower demand / ability to pay and possibly forced selling).
The article doesn’t mention this scenario, even though it’s entirely probable. If you are waiting on the sidelines, that might actually be a good time to buy.
Of course the catch is that if the recession is bad enough to crash the housing market, you may find yourself out of a job and unable to afford anything, so the premise of the article stands — it may never be a good time to buy a house, at least not in the average buyer’s circumstances.
If it is a "good time to buy" then prices will rise again as demand increases from (presumably) cash buyers or investors buying up things cheap. Unless you mean in minor towns and cities, where prices are only kept up by hope and expectations. Any meaningful "dip" in prices in somewhere like NYC or London and you'll find huge action from foreign investors as they swoop in to capitalise
In my opinion, house prices never "go down" in major world cities - you'll perhaps have a little 3-5% wobble for a year or so, but typically prizes just stay the same for a long time if it is a "bad market". Then when conditions improve they just start going up again. You only ever see major corrections in the xx% range of permanent decreases in places where it was a bubble and no one wanted to live in the first place. You'll very likely never get this in a NYC, SF, London type place unless there is some other huge once-in-250-years mayjor even type thing (e.g. London getting flattened in WW2 etc)
I guess the point I’m trying to make is that there’s a big difference between “good time to buy” for the “average” buyer vs someone who has been hoarding capital waiting to jump in at a better time.
A recession probably will create a good opportunity for those who have been waiting and are in a position to avoid getting hammered by that recession. That is probably not the “average” buyer, but maybe more representative of some of the people here on this forum.
> That’s in part thanks to mortgage rates. The monthly payment on a new home has increased by more than 50 percent in the past three years, as 30-year mortgage rates have climbed from less than 3 percent to nearly 8 percent.
Sounds like it's not just "in part", but more than 100% due to rising interest rates.
A $1mm 30 year mortgage at 3% fixed means paying $4200 a month [0].
The same mortgage at 8% requires monthly payments of more than $7,000 [1].
If the author's figures are accurate, houses have not got more expensive at all. Credit has become more expensive.
Worth noting that this way of thinking is true in the inverse too — when interest rates were super low, house values didn’t really go up, only credit got cheaper. In other words, the appreciation in costs is not about house value, it’s about the cost of a loan.
But underneath, it really is just under-supply of homes. People are competing for limited housing, but instead of hitting a natural ceiling of affordability, they’ve continued to compete on prices by out-borrowing each other to offer ever-higher bids.
We now seem to be hitting the next ceiling — buyers are unable leverage their bids any higher. I can’t wait to see what “innovations” the financial sector comes up with to create a new ceiling. I’m guessing fractional ownership or something like that.
There is a new thing happening though as well. Existing homeowners with 3-4% mortgages are not listing their homes for sale very often anymore because they aren’t going to take 7% mortgage on the new property. This is keeping home prices pretty high. I don’t see a way for monthly mortgage payments to become affordable without this being addressed.
That it is not being addressed is a ridiculously pure market failure.
Let's say Jane & Joe have a mortgage at 3%, would like to move but don't have to move. The only reason they're not moving is because they're unwilling to take on a 7% mortgage. Somebody out there is holding the other end of that 3% mortgage, and would love to exchange that mortgage for one at a higher rate.
If Jane & Joe could get into the same room as their mortgage holder they would quickly hash out a compromise, exchange their 3% mortgage for a 5% mortgage; the canonical win-win situation that's supposed to happen in a market. Both sides are willing to make a deal, so why can't they?
But it's not happening because the bank they made the mortgage with doesn't actually hold the mortgage, it's bundled and sliced and sold on.
This is a huge market opportunity, and you'd think that eventually the same forces that figured out how to slice & dice mortgages will figure out how to take advantage of this opportunity.
Statistics. If you have a pool of people, some of whom would not be willing to jump without a good rate and some of whom would be, you offer it to everyone and you make more money than those who don't offer the good rate.
This effect is known as the "consumer surplus". People willing to pay more get the same price as those who aren't.
No, they're losing money right now by not offering it. Right now they're losing money on their 3% mortgages. If it converts to 5% it turns a loss into a small profit.
OTOH, if you don't offer the 5%, there are 3 scenarios:
1. the homeowner keeps the 3% and you keep losing money
2. the homeowner converts to a 7% with you and get a large profit
3. the homeowner converts to a 7% with somebody else and you make no profit.
#1 and #3 are by far the most likely options, IMO.
There's a fourth scenario - the homeowner pays off the mortgage early. In the US, early payment can involve a penalty, so the homeowner buys out the loan significantly above market rate.
Over the course of a mortgage, a significant number of homeowners will find they "need" to relocate for work or to join a partner or to upsize or downsize. Offering these people a big improvement on "pay a penalty rate to discharge your loan early" would cost the banks money, so they need to pitch any refinancing offer where it makes enough profit off the other homeowners to be worthwhile.
Would a bank pay cash to be relieved of a 3% mortgage? My brother sold his house half a year ago when he split up from his partner. I'm pretty sure they had a 15yr 2% mortgage. Did they do the bank a huge favor by just selling the house and dissolving the mortgage?
Yes it would be a favor, assuming there is enough demand that the bank can then use the money from the 2% mortgage to issue a 7% mortgage or another >2% mortgage. Otherwise probably no.
Yes, they did the bank a huge favour. But likely they didn't have a choice, ~75% of mortgages are non-transferable, and they cannot hold the mortgage without the collateral of the house.
But if they were part of the ~25% of mortgage holders with transferable or assignable mortgages they had other options.
Yeah so I was wondering if a possible solution to your proposed market failure could be a service that motivates people to get rid of their mortgages by buying them off. This would eliminate the problem of having to find a counter party, you only have to find the people willing to compromise on their 3% mortgages.
Basically the business would be: Find the amount of money banks would pay upfront to the holders of the 3% mortgages, market that amount of money to the holders looking to move that otherwise wouldn't want to.
It would create a little bit of extra liquidity in the market and it might allow home owners to deploy their excess capital that they now hold back because of the awful deal they get.
Weird thing, I'm in The Netherlands and here 100% of the mortgages are transferable to a new house, at least within the same bank. I tried googling why that is but I only found all the banks advertising the fact without saying if they do that to comply with some government regulation.
> Did they do the bank a huge favor by just selling the house and dissolving the mortgage?
No, the bank borrowed for 15 years fixed as well so they were getting their projected return on yesterday’s dollars. It’s not like they now have more money to invest better.
Banks effectively have infinite capital for mortgages and make pretty much the same margin whether rates are 2% or 30%.
The bank probably just bundled and sold on the mortgage. But somebody is holding the mortgage, and it is likely they borrowed for 15 years fixed.
But when the brother paid off their mortgage, the previous holder can now use that money to buy back that 15 year fixed bond at a massive discount. That massive discount is the huge favour the brother did.
Why would anyone offer a 5% mortage? That is only 0.4% over 30 year bond... Not nearly enough risk premium. Considering everything involved with mortgages.
But trading a 3% note for a 5% note straight up would be a fabulous deal. Sure, there would be a discount on the 5% note, but very small compared to the discount on the 3% note.
A lender does not have $1M tied up in a 3% loan. Many lenders have small pieces of that $1M tied up in multiple mortgage backed securities with various tranches of seniority.
The paperwork required to undo all of that and re-underwrite the debt would be enormous.
There is a lot of money to be made if someone can figure out how to do that paperwork. There are 12 trillion dollars of mortgage loans in the US, so converting a tiny fraction from 3% to 5% would be a goldmine.
Essentially a 66% return for doing "the paperwork". That's 660k profit for doing the paperwork on a loan previously worth 1mm.
This is obviously rare today due to the paperwork complexity. That complexity IS the alleged market failure.
just ballparking it based on the ratios of the rates, 5/3. This is concervative due to the way loans compound and amortize. If you had a loan you were looking to net 1mm profit, you would net > 5/3 or >166% the profit a the the higher rate.
If you put it in an actual calculator, a 2 million,3%, 30-year loan will pay the bank back 3mm (1mm profit). The same principal at 5% will pay the bank back 3.8mm (1.8 profit, e.g >166%)
The numbers themselves are less relevant than the value proposition. If you could tell a bank that you will increase the profit on already invested capital, with no additional investment, they should jump on it.
I feel like you’ve just refuted gp’s point about houses haven’t gotten any more expensive. People get mortgages, not buy houses. So while they are technically correct, it’s not a worthwhile distinction.
Monthly payments can go up too, but that usually has to do with other short and long term factors besides interest rate. Eg inflation, land and labor scarcity, ect
this is why the housing market is frozen up in the US, until job losses or something else force people to sell renters can't afford houses and home owners have no reason to sell because losing their 3% mortgage would force them to downgrade homes.
Check out Canada housing prices where they only have 5 year fixed rates, 1.3M dollar homes 2 years ago are selling for 700-800K. This is what will happen in the US unless interest rates go down again, it's basic math.
I didn't see this in Christchurch, New Zealand. Interest rates went up making mortgages harder to get.
However house prices remained steady and you couldn't see much price reduction in the market because if someone has a house and a mortgage, they don't want to psychologically take a loss. Few people are willing to lose money. They can't buy in same market (downgrade) because so few people are selling and mortgages are harder to get. Mostly the few people selling are only selling because they are forced to due to their circumstances.
The turnover (houses sold per month) dropped drastically.
We don't have 30 year fixed. We have essentially variable rate interest rates (you can fix for up to 5 years (median fixes for 2 years) but after that the interest rate resets back to current market rate - you can fix again for a few years at current market).
> A $1mm 30 year mortgage at 3% fixed means paying $4200 a month
I feel like I'm teaching someone to suck eggs but but the price of houses has rocketed in both terms of absolute and relative-to-earnings.
Your $1mm house was $300k two decades ago, and $60k two decades before that. 8%/30yr on those sums was affordable. Interest rates of 8-10% were normal in the 90s. Expensive credit isn't the problem.
It's all the downsides of a market, with speculation, supply/demand-strikes, etc, etc, but then it's not actually a 'market' in the sense that new supply cannot be simply conjured to meet demand (land is finite, and of course location, location, location) - so any 'demand market signals' only go to inflate the price, not stimulate production.
Truly, economics is the dismal science, and it's wholesale embrace by govt and society is making our lives dismal too.
> Truly, economics is the dismal science, and it's wholesale embrace by govt and society is making our lives dismal too.
Yes, I think of this a lot in the context of healthcare; applying market economics to human morbidity and mortality is just grim and macabre. At points it is unavoidable I'm sure, but in the end you end up with unanswerable questions regarding the value of human life. I sort of get the feeling that in that context, "Logan's Run" was basically the optimal economic solution.
As someone who eventually needs a hip replacement, I'd say we spend huge sums on lots of other things too. I can't really fault people for trying to stave off death as long as possible, but I also understand that doctors are unwilling to receive a lot of those interventions for good reason.
The problem in the housing market is land taxes are too low to incentivize land owners to do something (more) productive with the land, like building more dense housing.
"Truly, economics is the dismal science, and it's wholesale embrace by govt and society is making our lives dismal too."
Calling economics a "science" is a stretch. If one subscribes to a definition of science that requires a process for falsifying hypotheses,^1 then how are economic theories falsified. (Prediction: No replies will answer this question.)
Originally economics was called "political economy" and that's the era from which the "dismal science" term came from.^2 The original use of the term "dismal science" to refer to economics occured long before the scientific method was widely adopted.
1. This did not appear until the 1930s.
2. The first use of the term "dismal science" was an article in an 1849 issue of Fraser's Magazine about trying to use political economy ("economics") to justify the use of slavery on plantations in the West Indies.
"It may be granted that, even in its purest form, economic theory has implications for policy and in that sense makes political propaganda of one kind or another. This element of propaganda is inherent in the subject and, even when a thinker studiously maintains a sense of Olympian detachment, philosophical and political preferences enter at the very beginning of the analysis in the formation of, as Schumpeter would have it, his vision: the preanalytical act of selecting certain features of reality for examination."
This is not how language works and this type of argument is, at best, silly.
You talk about science as though it isn't applied empirical philosophy with plenty of caveats. You can't treat economics with a significant gap between theory and reality... in the same way that we treat physics as a theoretical study of the external world with significant gaps between theory and reality.
The time to relax zoning laws is here, and has been here for decades.
Manhattan is an outlier, but other cities have no reason for being as expensive as they are. Not everyone needs or wants a four bedroom single family home, but in many cities this is all that is available.
On top of that, we need to invest in better public transit and infrastructure outside of the core of our cities, so that more people can live where they work.
In 1936 interwar Poland tried to address catastrophic situation with housing market by relaxing zoning law: If you could buy plot of land, you could build a housing there.
Result was few richest poles first race”ing to buy all the land around cities and then build on those plots apartment blocks for rich poles and foreigners to rent units at.
It was post-war communist govt that started building cheap living blocks en masse in ruined cities. Today those neighborhoods have reputation for being some best places to live due to quality of urban planning: a lot of space between blocks and walking distance to services, schools and health care.
It would be nice to live in a world where not everything is so complicated.
You work so hard, finally build up some savings, only to realise the government doesn't want to explicitly tax wealth so they do so covertly by printing extra money.
Not only that, but in order to stimulate the economy they've been forcefully keeping the interest rates as low as possible for over a decade forcing the house prices through the roof.
So if you decided buying a house was too risky because getting a high mortgage would expose you to too much leverage, you missed out on the wealth shift to real estate owners that low interest rate created as a side effect.
Yet even though on paper a lot of the house owners are now more wealthy, they are at risk of losing a lot of money if the interest rates go up more. The house you bought for 800k might be worth a lot less in a few years, or maybe not.
Now I don't know if things would be better without all the monetary games, but they for sure would be simpler.
God I totally agree with this sentiment. I'm certainly not expert enough to know if we're better or worse off with all of these ridiculous financial instruments, but it sure seems like a bunch of bullshit designed to fleece people. It feels like money and value have been separated, if that makes sense. A lot of this stuff really just feels like it's designed specifically to create a gradient of information so that those in the know can make money off those who aren't. A lot of it also just feels like ridiculous betting to me which feels wrong given the stakes.
Useless hand waving comment here, but I agree generally that it just feels way too difficult and complicated to work hard at an honest job and pay for a decent life. And I have it way better than most. Can't imagine what the hell I'd be doing right now if I was still a sound guy or barista.
Fundamentally this is correct but there are less bad times to do it. In the UK for example, if you have reasonable capital in the bank, high interest rates and collapsing BTL market then buying something immediately is crack smoking insanity which will lose you £50k in the first year you do it with little to no equity return. You foot all the risk immediately.
One thing the government could do right away that would serve to spread out good jobs is move executive branch departments to other states. For example, let's move the USDA to somewhere in the Midwest. Government employees would move there as would contractor staff and all kinds of ancillary business serving the above.
Remote work helps too but the increase in supporting businesses that serve onsite employees is important for an area
DC is called the swamp for a reason, spreading those jobs around would make life more difficult for lobbyists and other parasites who extract wealth from tax payers so it will never happen.
DC is run like it's still the 1700s despite all the technology that makes it pointless for everything to run in DC. Logically having all leadership concentrated in a single place is a huge risk, but they won't change it
1. Political propaganda by (mostly, unusually corrupt) politicians cultivating an crusading pure outsider image by encouraging people to focus on negative inages of the soace the politician is seeking to enter and ignore the details of the politicians own personal record, and
2. The fact that it is built on a literal, not at all metaphorical, swamp.
NoVa is the richest area in the nation, even more than NYC or SF. What is produced there? What businesses were founded there to create such wealth? None, it's all wealth extracted from the citizens, and the people in DC mock and look down on the people they need to survive
I personally know people who have made millions by lobbying to create BS grants and other funds using tax payer money and then getting money through them. Anybody with actual exposure to DC is disgusted by it.
I don’t think this would help if your goal is not rapidly increase housing costs. If covid proved anything about the housing market, it’s that theres a housing shortage everywhere. Plenty of LCoL areas still have disproportionately high housing costs compared to median income now. When remote work was required, people fled cities and led to housing crises in areas that aren’t just major cities.
Federal agencies are pretty distributed already. In fact, there are many (MANY!) small towns throughout the country where the US Government or a contractor that's essentially a feeder for the US Government is the biggest employer there.
> Large institutions owned roughly 5% of the 14 million single-family rentals nationally in early 2022.
But this relatively low number is deceptive because most of these purchases were past 2009 -- in the past they bought apartment buildings. Also they are focused on inexpensive homes in growing metro areas. So they basically beheaded the market, so to speak. This should never have been allowed but here were are near 15 years in and all that there is a few failed bills. For example: https://www.billtrack50.com/billdetail/1496012/18956
If the entire focus is on structuring the economy for rentier capitalists, this is to be expected. It will get worse as private equity starts owning a lot of single family homes with worse experience for renters[5]. They just started getting their feet wet [2]. This will rapidly increase [3].
Singapore, Japan and Austria[1] (maybe some other countries too!) seem to have solved housing. In contrast, we have Canada, Australia and US.
I feel like the solution is simply non-market housing. Wether is government housing, or associative housing, non-market housing solve the "rent-controlled" issue: new non-market housing are usually not that cheaper than regular rented housing and do not have any effect on the "new", but as time pass, the rent do not increase (it decrease even if it is associative housing, as the loans are reimbursed).
In France, outside the Paris area (Paris is Paris), cities that had a huge "HLM" (non-market housing by the virtue of being regulated by the state) proportion in the 80s built on average more, more quickly. Now the proportion is on average under 10%, and the non-market housing have no more influence on the non-market housing in those places, but i wonder that if the proportion stayed between 20 and 40% non-market housing, even cities like La Rochelle, Nantes or Bordeaux (who are a pain to build around because of historical buildings and swampy surrounding) would be much cheaper.
Also in france, non-market housing is like 85% "HLM" (which are also made cheaper because of low build quality), 5% anah (tax credit if you only rent at cost, only available on limited type of houses), which leave 10% for associative housing that is almost exclusively used for athletes and by emmaüs. Associative housing in other countries are not as skewed, and non-market housing is both less regulated and with way better service in Montreal, Vienna and probably other places i've not visited yet.
The whole thing is so messed up. Rates are high, so mortgage is expensive, but also prices have not really budged and so you are paying a lot in property tax compared to if you had bought even just a few years ago. Moreover, you are paying so much just to live there you probably don't have much left over to make any improvements... at least until your equity increases and you can take out another loan and start paying monthly for that! It's like it's designed so you are just renting everything from the bank. Houses many decades ago used to cost like as much as a car (or two)! something you could pay off much faster and have money left over to actually do things! That being said, renters have it worse.
Housing prices are very, very sticky. If housing demand is soft people tend to just hold real estate instead of selling. The only time you see housing fall a lot is when a whole region collapses economically like Detroit in the 1980s.
The only way housing gets affordable again is if the entire rest of the economy inflates while housing stands still. That would probably require a combination of inflation and a building boom or inflation with high interest rates.
Housing is the great millstone around the neck of the economy. Fundamentally it’s rooted in the fact that our society treats it as both a product and an investment. Housing cannot simultaneously be affordable and a good investment, placing its utility and its quality as an investment at odds and creating perverse incentives everywhere. It’s a horrifically bad system that is deeply entrenched and that tends to benefit older and wealthier people and so would be very hard to change.
You can escape the worst of it by leaving high real estate cost traps like the West Coast and Boston/NYC. Telework makes this easier. If you do go to those places just go for a while to establish your career and then leave.
maybe i'm wrong since i'm not an economist, but i see tons of new apartment complexes all over the country being built in sites where houses would have been in the past, which, to me, indicates that the future is a huge renter class with renting being socially normalized.
not sure if this is a good or bad thing.
i believe that many of today's social expectations around home ownership are a relic from a time where land was widely available and (suburban) home ownership was a mostly-new concept. i also believe that home ownership is a ton of work and a long-term debt trap for a lot of people.
if that's true, i can see the appeal of being able to rent homes that are ready-made and allow for popular types of modifications (painting walls, changing out appliances, adding a new room) with maintenance built in.
I once saw calculations that your net worth increased just as much from renting as from owning a home -- if you instead invested your down payment in a well-diversified stock portfolio. (If you're talking about a 20- or 30-year mortgage, that gives the original investment time to double, double again, and maybe even double for a third time.)
Every time I see an article bemoaning how hard it is to buy a home, I think of that...
Higher median home prices and higher rates means you need to nearly double your income to qualify - while you'll be paying more than double every month to afford it.
Adding in the downpayment is more interesting to me because that is also a factor of having savings.
When I lived in SF, I had a good high paying job, but I didn't have the $200-250k downpayment. I couldn't even get a shitty house in the avenues. I spent a year looking for a place and finally gave up.
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[ 2.9 ms ] story [ 194 ms ] threadBut why is it considered an invariant, the fact that there aren’t houses where people want houses? Wouldn’t it be extremely possible for people to change where it is they’re willing to live and work as a result of the housing market?
Or maybe people like competing, and aspiring to move up the socioeconomic ladder.
Time in the market for stocks beats timing the market for stocks.
Time in the market for housing beats timing the market for housing.
But let’s say you have $30k USD. Currently you have this money in stocks, and you are renting an apartment to live in.
Time in the stock market should mean that in 15-20 years, those $30k USD you put in stocks today might grow to be worth a fair bit more.
But at the same time, you are losing out on owning a house. Instead paying rent to someone else.
And in this case it is not possible to know if it would be better to keep the money in stocks and keep renting, or go and get a loan so you can get some little place of your own with the $30k of yours + the $90k or so that a bank will lend you.
Amazon warehouses and Walmarts exist where there are enough people to justify it. Coffee shops, fast food restaurants, financial services, etc all provide jobs and are located in cities, not rural areas. Water service, electricity, natural gas service do not exist by default.
People can’t just choose to change where they want to live.
Much work can be done remotely, and much other work is done in many different places than it used to be done in, not to mention the possibility of commuting to/from a job in an expanded range as a result of housing scarcity.
Moving is very much a growing option for people, and the data for cross state moves shows that to be the case [0].
[0] https://www.census.gov/library/stories/2023/11/state-to-stat...
American mobility tends to be pretty high relative to other people in the world - meaning Americans are more likely to uproot and move to a new community, even 100s or 1000s of miles away from what was "home".
With WFH the "objective function" has shifted for part of society who can WFH - its less about job location and more about lifestyle, quality of life and cost of living. However, my anecdotal analysis tells me that WFH, while still a strong factor, is beginning to subside. Not so much due to employers demanding employees be in the office but more because theres a shift back to cities after a 3 year trend out of them.
On a tangential topic - here's an interesting Pew Research report on mobility - I believe from 2012. So it's quite dated, but is still a good framework to understand how to think about mobility: https://www.pewresearch.org/wp-content/uploads/sites/3/2011/...
Maybe you need to take care of an aging parent. Or have kids in school and don't want to disrupt their life.
There are a huge number of social network effects constraining where most people live.
http://www.threepanelsoul.com/comic/moral-dilemmas
Either more people want to live where you are living (meaning the location is desirable), or fewer people want to live where you are living (meaning it is undesirable).
Technically, you could have a decline in population, but immigration will probably make up for that for a long time.
If it was simply a depreciating asset, housing would have to be sold for less than the construction cost in order for people to be able to sustain the depreciating value and have enough cash left over to invest elsewhere for their later years drawdown.
That sucks and we should fix it. It is unreasonable and unsustainable for housing to be that vector. Pensions once existed.
Question is, what proportion of resources does society want to allocate to the country’s older people? Interest rate policy to support asset price increases is one way the government increases this proportion.
But with declining proportion of working age population, these measures become more and more evident.
The exception, I suppose, is if the overall supply of houses and/or land decreases, but then you lock newcomers out of the market.
This is true, but the cost of building a new house is also rising. So at some point buying existing housing is cheaper than building a new house. That should put a floor on the depreciating value you speak of.
I’m not sure I understand this viewpoint at all.
My general rule of thumb today is to not own construction older than 10 years. I look at home ownership in the same way as car ownership now.
It's ultimately a game of hot potato, unless we are talking about transactions via Sotheby's & friends. Homes in the 6 to low 7 figure range are not long-term things in my view anymore. You are never going to get more out than you put into one of those things, unless you are OK with experiencing an incredible amount of stress and expending untold amounts of time & energy fighting market forces.
Making gains on this kind of real estate is mostly a lie. It's the same variety of lie where we claim cloud->on-prem is cheaper by conveniently ignoring all of the other indirect costs.
In the US you cannot depreciate your primary residence. Are you suggesting it should be possible?
They are wrong because there are many more factors than just speculation
1) Cost of labor is going up, 2) Taxes are going up, and 3) Cost of materials are going up, and 4) Population is going up.
When My house was built is 1915, Taxes were 8% of GDP and cost of a carpenter was $0.50/hour. Today, Taxes are 40% of GDP and cost of a carpenter is $30/hour.
This means my house would be far more expensive, even accounting for inflation.
But if yall think selling is a good idea, that’s a good omen
Of course YMMV…
I’m in Austin, so my house went up in value quite a lot.
That being said, I love my house and I'm very happy I get to live here. So in the grand scheme of things I still consider buying this place a huge win.
https://fortune.com/2023/10/19/midwest-housing-market-real-e...
The author of this piece is using as a base line the two most expensive housing markets in America. That's not really representatives of 95% of people. It's understandable not being able to afford to buy in Manhattan, or San Francisco, but have they tried Dayton, Ohio, Houston, Louisville, maybe Orlando?
Every single one of these articles about how outrageous, housing prices are always seem to hedge around this idea that buying a place is only worth it if you get to live in a very cosmopolitan, walkable neighborhood. Those are few, and in high demand, so it would reason they would command a higher price.
* https://www.census.gov/quickfacts/fact/table/daytoncityohio/...
* https://www.census.gov/quickfacts/fact/table/newyorkcitynewy...
Those two cities are expensive, but I think there are a lot of other expensive cities too (Austin, Los Angeles, etc.)
I checked with Bard, and it looks like 9.2% of the US population lives in New York or San Francisco: "The New York metropolitan area is home to 22.1 million people, or 6.6% of the US population. The San Francisco Bay Area is home to 8.7 million people, or 2.6% of the US population."
Problem is that most people will never be able to achieve this - the average down payment for first home buyers is less than 10%.
Truly hate to say it but people will need to get used to buying homes much later in life.
- the Singapore model, rent-to-own via the government
- the Japanese model, housing is a depreciating asset
- the Vienna model, ubiquitous social housing up to mid-tier of the market
Personally I feel like renting or owning a house should be a choice of features, not of financial benefit. Buying a house should be about being able to make it your own (moving walls, redoing the garden, building a shed). On a 5, 15, 30, 60 year timeline, owning and renting a house should come out to the same financial net outcome.
The way to get there is murky to me. I have far too little understanding of the deeper effects government policies have on the real estate market to make even the roughest guess.
Perhaps at todays rate, but this is not always the case and depends on the relative rates.
We did the opposite, Maxed out our loan and kept cash on hand.
I bought right before the interest rate shot back up with a ~5% down payment, and the past few years of ownership have improved my mental state substantially. You don’t know how much stress is caused by having that potential rent hike (and associated potential apartment hunt and move required to keep housing costs within reason) that comes with lease renewal looming on the horizon until it’s not there anymore.
Additionally having an emergency fund afterwards is super important.
Finally since prepayment penalties aren't a thing the difference between paying extra principal early on and a bigger down payment is mostly PMI. (And the interest on the payments until you make them)
At some point, we’re just describing a landed aristocracy alongside a rent to own scheme.
Here in Houston, a city with a medium cost-of-living, the cheapest house that you can get that's in livable condition and isn't outrageously far from where the jobs are is something like $300k. 20% of that is $60k.
For us techies or others with a Well-Paying Job™, saving $60k is not a big deal.
For pretty much everyone else, saving $60k is a huge feat, even after removing all unnecessary expenses. (Why should "they" have to ride the struggle bus when we techies can blow $18 on lattes and avo toast or whatever's hype these days while still hitting these savings goals?)
And when they finally do that 15 years later or whatever, they're competing against the Well-Paying Job™ folks who are rolling equity from the sale of their starter home and putting down all-cash offers.
By saying "people will need to get used to buying homes much later in life," what you're essentially proposing is class-redlining the poors (many of whom come from families that were historically-discriminated against home ownership, either directly or indirectly) out of home ownership. I'm going to assume that this isn't what you intended by writing that, but that's how it comes off.
Can you define what techies should be able to buy compared to “them”?
This just makes renting seem like a better option. If I won’t pay off my home until I’m dead what’s the point?
If that happens, both mortgage rates and home prices will fall (due to lower demand / ability to pay and possibly forced selling).
The article doesn’t mention this scenario, even though it’s entirely probable. If you are waiting on the sidelines, that might actually be a good time to buy.
Of course the catch is that if the recession is bad enough to crash the housing market, you may find yourself out of a job and unable to afford anything, so the premise of the article stands — it may never be a good time to buy a house, at least not in the average buyer’s circumstances.
In my opinion, house prices never "go down" in major world cities - you'll perhaps have a little 3-5% wobble for a year or so, but typically prizes just stay the same for a long time if it is a "bad market". Then when conditions improve they just start going up again. You only ever see major corrections in the xx% range of permanent decreases in places where it was a bubble and no one wanted to live in the first place. You'll very likely never get this in a NYC, SF, London type place unless there is some other huge once-in-250-years mayjor even type thing (e.g. London getting flattened in WW2 etc)
A recession probably will create a good opportunity for those who have been waiting and are in a position to avoid getting hammered by that recession. That is probably not the “average” buyer, but maybe more representative of some of the people here on this forum.
Sounds like it's not just "in part", but more than 100% due to rising interest rates.
A $1mm 30 year mortgage at 3% fixed means paying $4200 a month [0].
The same mortgage at 8% requires monthly payments of more than $7,000 [1].
If the author's figures are accurate, houses have not got more expensive at all. Credit has become more expensive.
[0] https://www.saving.org/loan/loans.php?loan=1,200,000&rate=3&...
[1] https://www.saving.org/loan/loans.php?loan=1,200,000&rate=8&...
https://fred.stlouisfed.org/series/ASPUS
After that point the 'sale' value dropped, but the interest increase has made houses massively more expensive.
But underneath, it really is just under-supply of homes. People are competing for limited housing, but instead of hitting a natural ceiling of affordability, they’ve continued to compete on prices by out-borrowing each other to offer ever-higher bids.
We now seem to be hitting the next ceiling — buyers are unable leverage their bids any higher. I can’t wait to see what “innovations” the financial sector comes up with to create a new ceiling. I’m guessing fractional ownership or something like that.
Let's say Jane & Joe have a mortgage at 3%, would like to move but don't have to move. The only reason they're not moving is because they're unwilling to take on a 7% mortgage. Somebody out there is holding the other end of that 3% mortgage, and would love to exchange that mortgage for one at a higher rate.
If Jane & Joe could get into the same room as their mortgage holder they would quickly hash out a compromise, exchange their 3% mortgage for a 5% mortgage; the canonical win-win situation that's supposed to happen in a market. Both sides are willing to make a deal, so why can't they?
But it's not happening because the bank they made the mortgage with doesn't actually hold the mortgage, it's bundled and sliced and sold on.
This is a huge market opportunity, and you'd think that eventually the same forces that figured out how to slice & dice mortgages will figure out how to take advantage of this opportunity.
You say 5% is a win win compromise between 3 and 7, but how does any bank know that Jane and Joe wouldnt have paid 7.
Banks don't have a good tool to screen and price discriminate between customers for this to work.
This effect is known as the "consumer surplus". People willing to pay more get the same price as those who aren't.
OTOH, if you don't offer the 5%, there are 3 scenarios:
1. the homeowner keeps the 3% and you keep losing money 2. the homeowner converts to a 7% with you and get a large profit 3. the homeowner converts to a 7% with somebody else and you make no profit.
#1 and #3 are by far the most likely options, IMO.
Over the course of a mortgage, a significant number of homeowners will find they "need" to relocate for work or to join a partner or to upsize or downsize. Offering these people a big improvement on "pay a penalty rate to discharge your loan early" would cost the banks money, so they need to pitch any refinancing offer where it makes enough profit off the other homeowners to be worthwhile.
But if they were part of the ~25% of mortgage holders with transferable or assignable mortgages they had other options.
Basically the business would be: Find the amount of money banks would pay upfront to the holders of the 3% mortgages, market that amount of money to the holders looking to move that otherwise wouldn't want to.
It would create a little bit of extra liquidity in the market and it might allow home owners to deploy their excess capital that they now hold back because of the awful deal they get.
Weird thing, I'm in The Netherlands and here 100% of the mortgages are transferable to a new house, at least within the same bank. I tried googling why that is but I only found all the banks advertising the fact without saying if they do that to comply with some government regulation.
No, the bank borrowed for 15 years fixed as well so they were getting their projected return on yesterday’s dollars. It’s not like they now have more money to invest better.
Banks effectively have infinite capital for mortgages and make pretty much the same margin whether rates are 2% or 30%.
But when the brother paid off their mortgage, the previous holder can now use that money to buy back that 15 year fixed bond at a massive discount. That massive discount is the huge favour the brother did.
If a lender has 1mm tied up in a 3% loan, They would love to convert that to a 5% loan on 1mm.
The paperwork required to undo all of that and re-underwrite the debt would be enormous.
There is a lot of money to be made if someone can figure out how to do that paperwork. There are 12 trillion dollars of mortgage loans in the US, so converting a tiny fraction from 3% to 5% would be a goldmine.
Essentially a 66% return for doing "the paperwork". That's 660k profit for doing the paperwork on a loan previously worth 1mm.
This is obviously rare today due to the paperwork complexity. That complexity IS the alleged market failure.
If you put it in an actual calculator, a 2 million,3%, 30-year loan will pay the bank back 3mm (1mm profit). The same principal at 5% will pay the bank back 3.8mm (1.8 profit, e.g >166%)
The numbers themselves are less relevant than the value proposition. If you could tell a bank that you will increase the profit on already invested capital, with no additional investment, they should jump on it.
(The valuation of bonds for example)
It isn't one or the other. It is both.
People don't care much what portion of their payment goes to principal vs interest. Just the final monthly cost.
Check out Canada housing prices where they only have 5 year fixed rates, 1.3M dollar homes 2 years ago are selling for 700-800K. This is what will happen in the US unless interest rates go down again, it's basic math.
However house prices remained steady and you couldn't see much price reduction in the market because if someone has a house and a mortgage, they don't want to psychologically take a loss. Few people are willing to lose money. They can't buy in same market (downgrade) because so few people are selling and mortgages are harder to get. Mostly the few people selling are only selling because they are forced to due to their circumstances.
The turnover (houses sold per month) dropped drastically.
We don't have 30 year fixed. We have essentially variable rate interest rates (you can fix for up to 5 years (median fixes for 2 years) but after that the interest rate resets back to current market rate - you can fix again for a few years at current market).
I feel like I'm teaching someone to suck eggs but but the price of houses has rocketed in both terms of absolute and relative-to-earnings.
Your $1mm house was $300k two decades ago, and $60k two decades before that. 8%/30yr on those sums was affordable. Interest rates of 8-10% were normal in the 90s. Expensive credit isn't the problem.
It's all the downsides of a market, with speculation, supply/demand-strikes, etc, etc, but then it's not actually a 'market' in the sense that new supply cannot be simply conjured to meet demand (land is finite, and of course location, location, location) - so any 'demand market signals' only go to inflate the price, not stimulate production.
Truly, economics is the dismal science, and it's wholesale embrace by govt and society is making our lives dismal too.
>Housing can’t both be a good investment and be affordable
Yes, I think of this a lot in the context of healthcare; applying market economics to human morbidity and mortality is just grim and macabre. At points it is unavoidable I'm sure, but in the end you end up with unanswerable questions regarding the value of human life. I sort of get the feeling that in that context, "Logan's Run" was basically the optimal economic solution.
As long as you can mostly buy and sell houses freely it's a market, it being supply constrained just means high prices (which is what we see).
Calling economics a "science" is a stretch. If one subscribes to a definition of science that requires a process for falsifying hypotheses,^1 then how are economic theories falsified. (Prediction: No replies will answer this question.)
Originally economics was called "political economy" and that's the era from which the "dismal science" term came from.^2 The original use of the term "dismal science" to refer to economics occured long before the scientific method was widely adopted.
1. This did not appear until the 1930s.
2. The first use of the term "dismal science" was an article in an 1849 issue of Fraser's Magazine about trying to use political economy ("economics") to justify the use of slavery on plantations in the West Indies.
"It may be granted that, even in its purest form, economic theory has implications for policy and in that sense makes political propaganda of one kind or another. This element of propaganda is inherent in the subject and, even when a thinker studiously maintains a sense of Olympian detachment, philosophical and political preferences enter at the very beginning of the analysis in the formation of, as Schumpeter would have it, his vision: the preanalytical act of selecting certain features of reality for examination."
Blaug, Economic Theory in Retropsect
You talk about science as though it isn't applied empirical philosophy with plenty of caveats. You can't treat economics with a significant gap between theory and reality... in the same way that we treat physics as a theoretical study of the external world with significant gaps between theory and reality.
The "science" of economics seems to have been left out.
https://www.aubreydaniels.com/blog/economics-is-not-a-scienc...
"No, Economics Is Not a Science"
https://www.thecrimson.com/article/2013/12/13/economics-scie...
"Don't let the Nobel prize fool you. Economics is not a science"
https://www.theguardian.com/commentisfree/2015/oct/11/nobel-...
"10 reasons why economics is an art, not a science"
https://www.washingtonpost.com/business/10-reasons-why-econo...
"ECONOMICS IS NOT NATURAL SCIENCE"
https://www.edge.org/conversation/douglas_rushkoff-economics...
"Is Economics a Science? Well, Not Yet."
https://www.ricardodahis.com/papers/Dahis_IEAS.pdf
Manhattan is an outlier, but other cities have no reason for being as expensive as they are. Not everyone needs or wants a four bedroom single family home, but in many cities this is all that is available.
On top of that, we need to invest in better public transit and infrastructure outside of the core of our cities, so that more people can live where they work.
Result was few richest poles first race”ing to buy all the land around cities and then build on those plots apartment blocks for rich poles and foreigners to rent units at.
It was post-war communist govt that started building cheap living blocks en masse in ruined cities. Today those neighborhoods have reputation for being some best places to live due to quality of urban planning: a lot of space between blocks and walking distance to services, schools and health care.
You work so hard, finally build up some savings, only to realise the government doesn't want to explicitly tax wealth so they do so covertly by printing extra money.
Not only that, but in order to stimulate the economy they've been forcefully keeping the interest rates as low as possible for over a decade forcing the house prices through the roof.
So if you decided buying a house was too risky because getting a high mortgage would expose you to too much leverage, you missed out on the wealth shift to real estate owners that low interest rate created as a side effect.
Yet even though on paper a lot of the house owners are now more wealthy, they are at risk of losing a lot of money if the interest rates go up more. The house you bought for 800k might be worth a lot less in a few years, or maybe not.
Now I don't know if things would be better without all the monetary games, but they for sure would be simpler.
Useless hand waving comment here, but I agree generally that it just feels way too difficult and complicated to work hard at an honest job and pay for a decent life. And I have it way better than most. Can't imagine what the hell I'd be doing right now if I was still a sound guy or barista.
Remote work helps too but the increase in supporting businesses that serve onsite employees is important for an area
DC is run like it's still the 1700s despite all the technology that makes it pointless for everything to run in DC. Logically having all leadership concentrated in a single place is a huge risk, but they won't change it
Two main reaosons:
1. Political propaganda by (mostly, unusually corrupt) politicians cultivating an crusading pure outsider image by encouraging people to focus on negative inages of the soace the politician is seeking to enter and ignore the details of the politicians own personal record, and
2. The fact that it is built on a literal, not at all metaphorical, swamp.
I personally know people who have made millions by lobbying to create BS grants and other funds using tax payer money and then getting money through them. Anybody with actual exposure to DC is disgusted by it.
Great piece from M. Nolan Grey, who is an excellent twitter follow: https://www.theatlantic.com/ideas/archive/2022/08/housing-cr...
> Large institutions owned roughly 5% of the 14 million single-family rentals nationally in early 2022.
But this relatively low number is deceptive because most of these purchases were past 2009 -- in the past they bought apartment buildings. Also they are focused on inexpensive homes in growing metro areas. So they basically beheaded the market, so to speak. This should never have been allowed but here were are near 15 years in and all that there is a few failed bills. For example: https://www.billtrack50.com/billdetail/1496012/18956
Singapore, Japan and Austria[1] (maybe some other countries too!) seem to have solved housing. In contrast, we have Canada, Australia and US.
[1] https://www.politico.eu/article/vienna-social-housing-archit...
[2] https://www.blackstone.com/housing/our-track-record-in-housi...
[3]Bezos-Backed Company Surpasses $100M In Single-Family Home Acquisitions While U.S. Housing Shortage Worsens: https://finance.yahoo.com/news/bezos-backed-company-surpasse...
[5] Google: blackstone owned homes complaints
In France, outside the Paris area (Paris is Paris), cities that had a huge "HLM" (non-market housing by the virtue of being regulated by the state) proportion in the 80s built on average more, more quickly. Now the proportion is on average under 10%, and the non-market housing have no more influence on the non-market housing in those places, but i wonder that if the proportion stayed between 20 and 40% non-market housing, even cities like La Rochelle, Nantes or Bordeaux (who are a pain to build around because of historical buildings and swampy surrounding) would be much cheaper.
Also in france, non-market housing is like 85% "HLM" (which are also made cheaper because of low build quality), 5% anah (tax credit if you only rent at cost, only available on limited type of houses), which leave 10% for associative housing that is almost exclusively used for athletes and by emmaüs. Associative housing in other countries are not as skewed, and non-market housing is both less regulated and with way better service in Montreal, Vienna and probably other places i've not visited yet.
Nail on the head.
The only way housing gets affordable again is if the entire rest of the economy inflates while housing stands still. That would probably require a combination of inflation and a building boom or inflation with high interest rates.
Housing is the great millstone around the neck of the economy. Fundamentally it’s rooted in the fact that our society treats it as both a product and an investment. Housing cannot simultaneously be affordable and a good investment, placing its utility and its quality as an investment at odds and creating perverse incentives everywhere. It’s a horrifically bad system that is deeply entrenched and that tends to benefit older and wealthier people and so would be very hard to change.
You can escape the worst of it by leaving high real estate cost traps like the West Coast and Boston/NYC. Telework makes this easier. If you do go to those places just go for a while to establish your career and then leave.
not sure if this is a good or bad thing.
i believe that many of today's social expectations around home ownership are a relic from a time where land was widely available and (suburban) home ownership was a mostly-new concept. i also believe that home ownership is a ton of work and a long-term debt trap for a lot of people.
if that's true, i can see the appeal of being able to rent homes that are ready-made and allow for popular types of modifications (painting walls, changing out appliances, adding a new room) with maintenance built in.
Every time I see an article bemoaning how hard it is to buy a home, I think of that...
When I lived in SF, I had a good high paying job, but I didn't have the $200-250k downpayment. I couldn't even get a shitty house in the avenues. I spent a year looking for a place and finally gave up.