[HN Gopher] Low interest rates in advanced countries have pushed...
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Low interest rates in advanced countries have pushed money into
real estate
Author : 609venezia
Score : 156 points
Date : 2021-11-22 13:13 UTC (2 days ago)
(HTM) web link (www.ft.com)
(TXT) w3m dump (www.ft.com)
| anigbrowl wrote:
| The economic theory arguments are important, but I think it's
| also worth noting that the internet's facilitation of
| preferential attachment (asymptotically) fosters bimodal
| distributions in everything and the effect of the spikes swamps
| the hoped-for benefits of long tails.
|
| Economic distributions that are massively skewed aren't
| sustainable, any more than organic distributions are; either you
| end up with chronic bad conditions (like diabetes) or abrupt
| discontinuities (like heart attacks and strokes, parallel to
| authoritarian crises or revolutions). I think moderate (2-3%)
| inflation might actually be a good thing in the short-medium term
| as long as its led by wage increases. Much of the inflation we're
| seeing now is result of demand shocks following the pandemic and
| thus economically rational.
| 323 wrote:
| US has plenty of space. And unlike Europe, you can easily find a
| large "mostly empty" patch of land.
|
| But for some reason new cities are not built anymore.
|
| And when someone proposes building a new city inevitably the
| press fills up with dystopia/rent-seeking/we-should-make-
| existing-housing-cheaper/... articles.
| chrisco255 wrote:
| The vast majority of that empty land is either in less ideal
| climates out in the west or on federal land.
|
| See: https://sitn.hms.harvard.edu/wp-
| content/uploads/2017/12/Fig1...
| closeparen wrote:
| Cities are built from less intense settlements. We don't build
| cities anymore because we systematically declare them "done"
| when they're just getting started.
| sgt wrote:
| How about we build a perfect grid of cities across the US -
| perfectly spaced 50 miles apart. Mountain in the way? We'll use
| explosives. /s
| felistoria wrote:
| I think there is a billionaire trying to make a utopian city
| called Telosa.
| igammarays wrote:
| Why don't we build new cities? Because we don't have pioneers
| anymore. This is actually a really intriguing idea. We should
| crowdfund the creation of new cities, pioneered by a new
| generation of dissatisfied priced-out hyper-techified
| metrosexual young people.
| spideymans wrote:
| Why build new cities, when there are plenty of smaller towns
| (<500,000 population) that can grow?
| ericmay wrote:
| Is "building a new city" meaningfully different from just
| expanding or growing the current city or introducing medium
| density?
|
| I'm supportive of new cities as experimentation projects -
| think that's great actually. If it's take a sprawling suburb
| and build another one it's like why would you bother doing that
| versus just doing the same thing you're doing now in current
| cities?
| rsj_hn wrote:
| Yeah, building a city from scratch opens up new possibilities
| for governance, institution building, city zoning and layout.
| I'm for a lot of small cities, each experimenting.
|
| Adding to an existing city plugs you into all these incumbent
| systems, including existing hierarchies and notables.
| 323 wrote:
| I agree with you, expanding cities should be preferred.
|
| But that doesn't happen either, maybe because existing cities
| are surrounded by private lands, or other stuff that is hard
| to displace, in a litigious place like US.
| Scarblac wrote:
| Or don't expand them, make them denser. Hopefully means
| less travel needed as well.
| throwawaymanbot wrote:
| is there a point making a new city when so many US cities need
| investment to make them better?
| zrail wrote:
| Cities grow around something. In the past, that "something" has
| generally been a point-specific natural resource that can be
| exploited. Natural harbors, confluences of rivers, mines, etc.
| Sometimes cities grow around point-specific artificial
| resources like crossroads.
|
| Sometimes there are resources that are exploited but everyone
| knows that the resource is very temporary so a city doesn't
| really grow. Instead, a town forms but never plants roots. For
| example, the small cities across the Bakken Formation which
| grew huge transitory populations but no one stays because
| everyone there knows when the price of oil shifts the Bakken
| will become unprofitable.
|
| The important thing is attempting to plant a city in the middle
| of nowhere almost always fails absent very strong government
| incentives. Washington DC is sort of like that, where it was
| put where it is because of very strong political incentives
| (Virginia and Maryland didn't want that land). Brasilia is the
| other example that jumps to mind, where they wanted the seat of
| government away from Rio and forced the issue.
| a45a33s wrote:
| my dad lives in a "master planned" community in the middle of
| nowhere in the desert centered around a man made lake that
| needs to get refilled periodically. the weird thing is that
| 20 years later its actually much more populated and thriving
| mikem170 wrote:
| Are there jobs nearby? Do most people have far to commute?
|
| I imagine that things may have changed a bit over the
| years, depending how big the development was perhaps it was
| the catalyst for more development?
| zrail wrote:
| Would you be willing to share what brings people there? Is
| it a retirement community?
| a45a33s wrote:
| just a development for families, with some amenities like
| community center, pools etc. you can get a very large
| house for not so much money. it honestly is fairly nice,
| visiting used to seem depressing when I was younger but
| now when I visit with my kids it seems like not a bad
| place for a family to grow up in.
| danans wrote:
| > in the middle of nowhere in the desert centered around a
| man made lake that needs to get refilled periodically.
|
| How is that refilling paid for? What source of water does
| it draw from?
| a45a33s wrote:
| no idea, there's also a fish truck that dumps fish in it
| every week or so
| ec109685 wrote:
| There's generally home owner dues in those types of
| communities.
| inglor_cz wrote:
| Starbase, TX, seems to have a good reason to grow.
| 323 wrote:
| > Cities grow around something.
|
| Today that resource could just be "cheap land". We don't need
| coal or iron today, we need housing.
|
| > very strong government incentives
|
| Could "cheap housing" be such an incentive?
| spacemanmatt wrote:
| Last I checked, those resources are water and roads (or
| promises of roads). But people can't live without water and
| don't keep building where they can't get it.
| MisterBastahrd wrote:
| You can have all the empty space you want to build on, but
| if it doesn't have water or electricity, it will continue
| to be empty. Modern societies rely on modern
| infrastructure.
| 323 wrote:
| Do you think someone building a new city will not connect
| it to the grid and think about the water?
| larsiusprime wrote:
| They will certainly try, but if they pick the wrong spot
| it will be prohibitively expensive compared to other
| locations and so they will be more inclined to pick
| another location, and the market price of the land will
| price this all in
| aardvarkr wrote:
| That's exactly the point. Where do you think water comes
| from? You can't just build a city in the middle of the
| desert. In order for it to be sustainable you need it
| located next to a lake or river or other large source of
| freshwater that's easily exploited. Water is a natural
| resource just like any other.
| deepnotderp wrote:
| > We don't need coal or iron today
|
| Yes, who uses steel anymore? /s
| fragmede wrote:
| All of us, but the Swedish are doing it without using
| coal or other fossile fuels. [0] Iron's going to be a bit
| harder to remove from the process though ;)
|
| [0]
| https://www.forbes.com/sites/davidrvetter/2021/08/19/how-
| swe...
| Dracophoenix wrote:
| >Cities grow around something. In the past, that "something"
| has generally been a point-specific natural resource that can
| be exploited. Natural harbors, confluences of rivers, mines,
| etc. Sometimes cities grow around point-specific artificial
| resources like crossroads.
|
| They can also grow around political and religious motivations
| like the Massachusetts Bay Colony, Las Vegas, Salt Lake City,
| the utopian experiment of New Harmony, Indiana, etc.
| zrail wrote:
| Massachusetts Bay Colony formed around a natural harbor
| that was already in use by native americans. The others
| I'll grant you.
| nradov wrote:
| We should build a major new city at the confluence of the
| Mississippi and Ohio Rivers. It seems like an ideal location.
| alexashka wrote:
| It's not that surprising.
|
| It's not 'profitable' and it requires actual competence.
|
| It's the same reason you have meetings where nobody will commit
| to anything, hoping that some other fool will commit to take on
| extra responsibility for no extra pay. Politics is exactly like
| that.
| snarf21 wrote:
| I don't understand "new cities are not built anymore". Villages
| become towns and towns become cities all over the place. There
| isn't likely to be new planned cities in the middle of nowhere.
| Cities need infrastructure like power, roads, water, airports,
| etc. These things happen organically except in state created
| cities like in China or Saudi Arabia.
| larsiusprime wrote:
| Not all space is the same, nobody wants to live in Gerlach,
| Nevada because there's nobody there and also because it's the
| middle of the desert, which in turn is why there's nobody
| there:
|
| https://web.archive.org/web/20210809032137/https://landequit...
|
| Land in Gerlach goes for $0.0054/sqft
|
| Land in the heart of San Fran can go for $865.21/sqft
|
| That's 159,000 times more expensive.
|
| The increase comes from the fact that some land is more
| naturally productive than others, and also because of
| agglomeration effects: https://en.wikipedia.org/wiki/Economies_
| of_agglomeration#:~:....
| 323 wrote:
| Pheonix is also in the middle of the desert:
|
| > Phoenix is officially America's fastest-growing major city.
|
| https://news.yahoo.com/phoenix-nation-fastest-growing-
| big-17...
| contrahax wrote:
| Phoenix has some location advantages (large rivers flow
| into the valley, warmer climate, better soil for
| agriculture) than northern Nevada that makes it more
| desirable and spurred growth.
| larsiusprime wrote:
| Phoenix was not just some random place in the desert that
| was as good as any other, it was founded because of a pre-
| existing canal system that the founders expanded upon that
| gave it much better access to water
|
| http://www.azheritagewaters.nau.edu/loc_hohokam.html
| fragmede wrote:
| Oh, a fellow Burner.
|
| Nearby Gerlach is Reno, the biggest little city in the world.
| It's 100 miles or 1 hr:45 mins away by car, 51 weeks of the
| year. With no income tax and a Tesla plant, Reno is thriving.
| Northern Nevada may have a lot of desolation, but the same
| rules of real estate apply - the three most important things
| are location, location, location. Land in Reno is expensive
| compared to Gerlach but cheap compared to downtown SF, at
| $270/sq ft (of course, SF being one of the most expensive
| cities in the US means everywhere is cheaper).
| larsiusprime wrote:
| Yup! I actually forgot about Gerlach being associated with
| Burning Man (never been, myself). It just comes up when you
| search for "cheapest land in America."
|
| And yeah, my point is the same as yours -- it's always the
| location that matters. If you can somehow bootstrap
| yourself a desert-mega city in the world's worst location,
| then agglomeration effects take over and the land becomes
| valuable because people want to be next to other people.
| But typically desert cities get off the ground because
| there's something about the initial conditions of that
| particular piece of desert that's more interesting than
| everything around it (that's what happened with Phoenix
| with regards to the canals/water).
|
| Of course, once a critical mass of settlers shows up and
| sticks around long enough, wherever they happened to
| congregate is the most valuable location in the local area
| from then on.
| zz865 wrote:
| I think Californians know about expensive houses but most of the
| USA is pretty cheap. Places like Europe/Canada/Australia didn't
| go down in price in the 2008 crash like the US did - its been
| straight up for decades.
| kazen44 wrote:
| Mind you though, prior to the 1980's, most housing in (western)
| europe was either socially or state owned. Mainly because
| housing was build as a solution to the mass housing crisis
| after world war 2.
| pjdemers wrote:
| Twenty years from now, when 10,000 baby boomers are dying every
| day, housing prices will be in free fall, with no end in sight.
| That's too late for most of us, but today's small children will
| have no problem buying a house as adults, if they even want one.
| thisisnico wrote:
| Immigration will make up for the difference.
| cblconfederate wrote:
| Assuming that people will still want to emigrate to the west
| twiddling wrote:
| https://www.1billionamericans.com/
| GoOnThenDoTell wrote:
| They'll just increase the immigration rate to make up for it
| poulsbohemian wrote:
| I work in real estate so I'm alway interested in people's
| hypotheses... knowing that the Millennial and Z generations are
| both bigger than the Baby Boomers, I'm curious why your
| hypothesis is that housing prices will be in a free fall rather
| than continue to be a case of less (desirable) supply relative
| to demand.
| inherently_juxt wrote:
| Nah, large companies will continue to buy up all the dying
| boomers' homes like they do today. The companies will then jack
| up the rent on all property in the area. Small kids today will
| never know ownership unless its through their daddy's company.
| whytaka wrote:
| Or we might have a commensurate number of immigrants/refugees
| fleeing the effects of climate change caused by western
| consumption.
| BlueTie wrote:
| If your mortgage rate is 2.5% and inflation is 4.5%. You're
| getting 2% real returns. But you're also getting leverage since
| most buyers put 20% down or less. 4:1 leverage on 2% is 10% real
| returns.
|
| This is BEFORE asset appreciation. That is, if the house stays
| the same in value in 30 years you're still outperforming the
| stock market's historical average.
| driverdan wrote:
| This is one of the main reasons I bought a house this year. Low
| interest rates combined with high inflation and leverage mean
| buying real estate is one of the best things you can do with
| your money right now.
| bullen wrote:
| This is a common misconception that originated from the
| inflation in the 70s and 80s where wages increased with the
| inflation. Actually the inflation WAS salary inflation (caused
| by rising interest rate when most money was not debt) much
| different from todays energy inflation.
|
| If your salary does not increase with inflation, you don't get
| the additional 4.5% in salary and then you are NOT getting 2%
| real returns.
|
| Combine that with all energy costs going up and you have a real
| problem because the governements cannot raise interest rates
| (without crashing everything), that leaves banks to compensate
| for energy (which you cannot print) which means people are
| going to get hurt.
|
| My prediction is that house prices cannot increase more than
| general inflation now since the margin of the central banks are
| now zero (we have had official zero interest rate for some
| time, but not for the banks, only last year did the central
| banks remove the spread for banks to borrow money from or hold
| money at the FED, but now they cannot increase the incentive to
| borrow ever again for this civilization) this means the asset
| wont be able to appreciate either!
|
| And energy inflation is VERY deflationary for housing because
| you need to buy heat, water and food before you pay
| rent/interest.
|
| We're living through the biggest margin call possible right now
| and there is nothing anyone can do about it!
| mikem170 wrote:
| What happens if the values go down along the way?
|
| I guess the ups and downs are ok as long as you don't have to
| sell and can continue to make the payments. And taxes.
| zionic wrote:
| Well if the value collapses don't your taxes?
| mikem170 wrote:
| I'm not sure, especially if everyone's house drops in value
| in a locality. Services like garbage, police, fire, and
| schools would still would cost the same, right? So the
| municipality would need the same amount of money, I'd
| assume.
| madsbuch wrote:
| Wouldn't that be realized in a 4.5% annual appreciation of the
| house? Ie. this is not before appreciation but because of
| appreciation.
| Terry_Roll wrote:
| Is this not demonstrating Maslow's Hierarchy of Needs?
| copenja wrote:
| Check out 'Exhibit 4' in report linked from the article:
| https://archive.md/DRUiI.
|
| It shows that in the USA "net worth relative to nominal GDP" is
| actually pretty stable. The US has the lowest multiple of all the
| countries under analysis. Indeed the graph shows the US being
| almost exactly at the historical average.
|
| I'm not sure what this means, but I certainly found it
| surprising.
| onlyrealcuzzo wrote:
| This is what I find interesting. No one seems to complain about
| house prices more than people in the US - and yet on average -
| housing relative to rents & wages is much more affordable in
| the US than almost every other country in the world.
| kazinator wrote:
| Could that because of of the USA's slums dragging down the
| average?
|
| Say that your income is at the 0.75 quantile, nationally:
| you're just barely in the top quarter.
|
| Now arrange the housing from least desirable to most and look
| at the 0.75 quantile of that: how affordable is the entry to
| the 25% most desirable places to live?
|
| How close are those places to where you earn your 0.75
| quantile living?
| ffggvv wrote:
| its not about slums. the US has abundant land and houses
| are cheap in most of the country. It's just big (especially
| coastal) cities where the prices are insane. Alot of
| americans do in fact live in "fly over country" where
| prices are 300k or sometimes less. In addition, we are
| lucky that we have a lot of cities, not just one major one.
|
| Contrast this to a tiny country like britain or japan with
| only one major city london/tokyo where everyone wants to
| live. Where land actually is a limiting factor.
| sokoloff wrote:
| This headline doesn't seem all that surprising (nor does the
| article drop any particularly deeper revelations).
|
| As soon as "indoors" was invented, humans preferred to live that
| way, even though it was expensive as compared to outdoors. I
| don't see a reason to think that would change and, especially
| with people spending more time in their home and less money on
| services and experiences, would expect that more money would flow
| into improving the at-home experience, bidding up housing.
| LatteLazy wrote:
| Yes, that was the whole reason at least in the UK and US. That's
| literally what was publicly stated as the reason.
| MrPowers wrote:
| This quote seems disconnected from recent observations:
|
| > the big government spending programmes of the post-Covid era
| present a new opportunity to try and push money into more
| productive sectors, which could ultimately bring wealth and
| growth back into alignment
|
| We've seem some huge big government spending programs recently
| (monetary expansion and fiscal stimulus) and it's pretty clear
| the money has flowed into speculative asset classes, equities,
| and real estate. The conclusion is a non sequitir. Government
| spending programs have arguably caused the real estate bubble,
| not sure why more of them would have a different impact.
|
| Here are some government programs that would probably help
| lowering housing prices:
|
| * allow for multifamily housing
|
| * remove the mortgage interest deduction
|
| * implement land taxes instead of property taxes
|
| * have the Fed stop purchasing mortgage backed securities (in the
| midst of a housing bubble)
|
| * get the government out of the mortgage securitization business
| larsiusprime wrote:
| Fun fact -- the majority of bank loans are also for real
| estate, further bidding up the price of housing.
|
| The Great Mortgaging is a great source on this:
| https://www.nber.org/system/files/working_papers/w20501/w205...
|
| Just look at this scary chart:
| https://www.fortressofdoors.com/content/images/2021/10/2021-...
| sokoloff wrote:
| > remove the mortgage interest deduction
|
| Removing the mortgage interest deduction (for owner-occupants)
| would widen the gap between commercial landlord's ability to
| buy a property and an owner-occupant's ability to buy that same
| property. (It's spectacularly unlikely that mortgage interest
| for commercial landlords would become non-deductible as a
| general principle of tax code allows the deduction of ordinary
| and necessary business expenses in pursuit of profit. Mortgage
| interest for commercial landlords is clearly such a business
| expense.)
|
| So, if you would like to favor owner-occupants over commercial
| landlords, you should be in favor of, not opposed to, the
| mortgage interest deduction for the former.
|
| From: https://www.irs.gov/businesses/small-businesses-self-
| employe...
|
| > What Can I Deduct?
|
| > To be deductible, a business expense must be both ordinary
| and necessary. An ordinary expense is one that is common and
| accepted in your trade or business. A necessary expense is one
| that is helpful and appropriate for your trade or business. An
| expense does not have to be indispensable to be considered
| necessary.
| poulsbohemian wrote:
| Perhaps it's because I'm one of those dirty rotten real estate
| agents, but I'm not understanding your motivation with this set
| of recommendations you posit.
|
| >* allow for multifamily housing
|
| Zoning is entirely a local matter, so sure, talk to your local
| city / county / state if you prefer there to be more allocation
| for multifamily. It isn't something that the feds have any
| control over.
|
| >* remove the mortgage interest deduction
|
| So what's your goal here, given that historically this was the
| single biggest tax benefits to the (ever-declining) middle
| class.
|
| >* implement land taxes instead of property taxes
|
| Real estate is predicated on the concept that adding value to
| the land increases its value. So... what exactly become the
| merit of taxing land over property? If you tax property, the
| value of the land is included in that tax.
|
| >* have the Fed stop purchasing mortgage backed securities (in
| the midst of a housing bubble)
|
| Real estate is local. I'm sure there are markets that are in a
| bubble, but that doesn't mean that every market is experiencing
| that.
|
| >* get the government out of the mortgage securitization
| business
|
| These programs by and large benefit the non-wealthy by
| providing a degree of stability in the mortgage market that
| make it worthwhile for lenders to lend. Wealthy investors
| generally don't care - they are paying cash, working out seller
| financing arrangements, borrowing from hard money lenders, or
| have long-term bank relationships such that they have all the
| access to conventional money they need. It's the less fortunate
| and middle-class that get hurt when government programs are
| restricted.
| msluyter wrote:
| >>* remove the mortgage interest deduction
|
| >So what's your goal here, given that historically this was
| the single biggest tax benefits to the (ever-declining)
| middle class.
|
| Weird, I've mostly read that it disproportionally helps the
| rich. Examples:
|
| [1] https://www.stlouisfed.org/open-vault/2018/may/why-
| economist...
|
| [2] https://www.forbes.com/sites/artcarden/2019/06/28/should-
| we-...
|
| [3] https://fivethirtyeight.com/features/the-tax-deductions-
| econ...
| prutschman wrote:
| > So... what exactly become the merit of taxing land over
| property? If you tax property, the value of the land is
| included in that tax.
|
| If land--but specifically not improvements to that land--is
| taxed then there's relatively more incentive to make
| productive use of the land. $1 of investment to improve the
| productivity of land by building housing or whatever is tax
| advantaged over $1 of investment to try to hold onto
| appreciating land in hopes it goes up.
| antognini wrote:
| > Real estate is predicated on the concept that adding value
| to the land increases its value. So... what exactly become
| the merit of taxing land over property? If you tax property,
| the value of the land is included in that tax.
|
| An issue with property taxes as they are currently
| implemented is that they discourage development. Someone who
| owns a parking lot in downtown Los Angeles will pay very low
| property taxes on that land relative to someone who has built
| a large apartment building (even setting aside Prop 13). If
| the owner of the parking lot decides to build an apartment
| building on it, their property taxes will go way up. So the
| county is punishing the property owner for developing on that
| land, even though it's socially desirable.
|
| The idea is that the land value is value that is created by
| the property's location, not anything the owner has
| specifically done. In other words, it's value created by the
| rest of the society that the owner has captured. However,
| development on the land is produced by the owner. A land
| value tax captures some of the value produced by society as a
| whole and does not tax value that was created by the owner.
| This incentivizes owners to develop on their land. (Or more
| properly, doesn't disincentivize development.)
| kache_ wrote:
| It gets more bleak every day
| deepnotderp wrote:
| IMO this is the single biggest malaise in society. "Investing"
| (speculating) in real estate creates nothing of value to society
| and instead serves only to artificially drive up the cost of
| shelter, a basic necessity. It also directs capital away from
| investing in technology and businesses.
|
| Due to the zero-sum nature of real estate, it fundamentally
| breaks the positive sum theory of capitalism. Adam Smith even
| called landlord's right "theft".
| HPsquared wrote:
| Houses are not zero-sum, as it's possible to build more.
|
| Even for land, the value is all about how developed it is,
| which is not zero-sum: one can always develop more land.
|
| In England for example, known as a densely-packed country, only
| about 2% of land is actually built on, and of that 2% only a
| tiny fraction is actually dense.
| theluketaylor wrote:
| Housing doesn't need to be this way, but in much of the
| developed world we've artificially turned it into a zero-sum
| game with development restrictions, zoning rules, height
| limits, historic districts, green belts, and tons of other
| rules. None of those things is inherently bad on its own, and
| some are even a net good for society like a well managed
| green belt. Zoning in north america has an awful racist
| history and needs to be first on the chopping block. In
| combination all these restrictions have made adding density
| and housing units in areas with economic opportunity nearly
| impossible.
|
| Those who already own property (myself included) are
| participating in a system that is increasingly pulling up the
| ladder on those who wish to join. The housing market is one
| of the least free. Rules requiring bedrooms have 2 points of
| egress and that building have minimum fire resistance are
| fantastic and need to stay. Rules that do things like prevent
| 2, 3 and 4-plexes, mandate a whole city can't go above 4
| stories, and require 1:1 parking for every adult need to get
| tossed out right away.
| wahern wrote:
| > Rules that do things like prevent 2, 3 and 4-plexes,
| mandate a whole city can't go above 4 stories, and require
| 1:1 parking for every adult need to get tossed out right
| away.
|
| In places like California, simply strictly applying the
| existing rules would be a _huge_ step forward. Instead,
| even projects that are 100% compliant with all building and
| zoning rules and already granted building department
| approval are subject to an endless and often patently
| _illegal_ "community review" process. See, e.g.,
| https://www.sfchronicle.com/sf/article/State-gives-
| S-F-30-da... and
| https://www.sfchronicle.com/sf/article/Supervisor-Mar-
| pushes...
|
| Under Supreme Court precedent such ex post facto community
| "vetoes" are unconstitutional. The community votes by
| passing laws a priori, not through ad hoc, targeted
| manipulation of the regulatory review process. But for
| complex procedural and policy reasons the Supreme Court has
| unfortunately been too reticent to police violations of
| this principle. My disposition is toward federalism and
| local control, but in many cases the system is violating
| fundamental principles in our society about the creation
| and application of law. Principles even more basic and
| fundamental than property, free speech, or personal liberty
| rights.
| jimbob45 wrote:
| To what end? How many houses do we need before we're just
| making houses to enrich people rather than create shelter?
|
| States like Oregon and Washington that greatly limit supply
| are widely praised for their natural beauty and conservation
| precisely because they don't chop down forestry to build
| cheap homes to sell to the CCP.
|
| Fools have created an acronym - NIMBY - to denigrate those
| who don't want to waste land just for personal financial
| gain. However, there remain very real benefits to conserving
| forests and very real consequences to turning every square
| mile of land into an AirBNB. The landlord won't live in that
| area and the renter won't stay in the area long enough to
| care about the area but the long-term residents will pay the
| price regardless.
| JamesBarney wrote:
| If you can afford to live in one of those places it's
| great. If your homeless you'd probably be ok with a little
| less green space if it meant you had a home to live in.
|
| Also very little of the NIMBY vs YIMBY debate is whether or
| not to turn forests into condos, it's almost also SFH vs
| denser construction.
| iamstupidsimple wrote:
| > Fools have created an acronym - NIMBY - to denigrate
| those who don't want to waste land just for personal
| financial gain.
|
| Coming at this from a UK perspective, housing is a
| nightmare here too. But our green belt is at an all time
| low and London is an unbelievable sprawl. No, I'd rather
| rent forever than ruin the countryside.
| tlss wrote:
| It's possible to build more houses... up to a limit.
|
| Cities need to be supported by enough resources -- that
| includes enough water, proximity to arable land, hospitable
| climate, and ease of access. The 2% figure you quoted can be
| a bit misleading because we can never develop 100% of the
| land into houses.
|
| But as Japan/China/Korea has shown, it is probably still very
| possible for England to become much denser than it currently
| is. It would require all the residents to change their
| lifestyles to match though.
| KptMarchewa wrote:
| >proximity to arable land
|
| Any land is arable if we want to. See Phoenix.
| bumby wrote:
| That potentially just shifts to another zero sum game for
| water rights. The West is dealing with that currently.
| bagels wrote:
| Ocean is full of water. It just costs money (maybe a lot)
| to desalinate it.
| bumby wrote:
| (And to move it).
|
| That just pushes it to another zero sum game of money.
| snidane wrote:
| Land != land. Gresham law applies.
|
| City center land > suburban land > rural land > land on Mars
| > land in faraway galaxy.
|
| There is always scarcity of land even though there is an
| infinite capacity of it across the Universe.
| francisofascii wrote:
| The value is very much about the location of the land. The
| neighborhood, school district, proximity to parks or transit.
| The actual structure matters less and less these days. It is
| "possible" to build more, but rarely politically viable.
| HPsquared wrote:
| Schools, parks and transit are not static and new ones can
| be built. Those all fall under "development".
| herlitzj wrote:
| You say this as if it's fast or easy. All of these can
| easily take 10s of years build from conception to
| completion due to a myriad of reasons. Land acquisition,
| federal state and local funding, environmental review,
| court cases, zoning changes, public review proceses, etc.
| It's not like someone decrees that a school should be
| built and 6 months later it's up and running. And the
| school is the easy one on that list :)
| tlholaday wrote:
| > Houses are not zero-sum, as it's possible to build more.
|
| Every newly-built house lowers the value of every already-
| built house. It is straightforward to specify initial
| conditions where the result is negative-sum.
| ushtaritk421 wrote:
| It lowers the "value" as a monopolistic asset class but not
| the "housing/day units" value.
|
| The second value is what society should care about
| increasing, and it should go out of it's way to destroy the
| first kind of "value".
| kragen wrote:
| > _Every newly-built house lowers the value of every
| already-built house._
|
| Do you mean every already-built house _nearby_ or every
| already-built house _in the world_?
|
| If you mean _nearby_ then your theory would predict that
| places like San Francisco, Manhattan, and Paris would be
| among the cheapest places in the world to buy housing. This
| is very much the opposite of the truth, so if that 's what
| you mean, then either your theory is completely wrong or
| the effect it describes is swamped by other effects that
| are much more important determinants of housing value.
|
| If you mean _in the world_ then I suppose it 's possible
| that you're correct in a market-value sense, since the
| effect on the price of my house due to someone in Shanghai
| building a nice new condo would be to drop the price by,
| say, US$0.00003. But if we're talking about use-value
| rather than exchange-value (which is the sense in which it
| really matters whether things are zero-sum, positive-sum,
| or negative-sum) it's hard to see how that could be true.
| Perhaps you think the use-value of my house is primarily
| that it enables me to laugh at the suffering of the
| homeless beggars of Dhaka? I assure you I spend zero time
| on that activity.
|
| So I think it's clear that your theory is just completely
| bogus.
| ProfessorLayton wrote:
| It's not bogus. It really is as simple as supply and
| demand. Yes, SF and NYC etc. are super expensive despite
| their density, however, what you're missing is that 1:
| Supply hasn't kept up with demand, and 2: SF/NYC would be
| _even more expensive_ if they weren 't as dense as they
| are now, and continuing to build (however slowly).
| kragen wrote:
| (I notice that you didn't answer the two questions I
| asked, an omission I deem discourteous.)
|
| So evidently the main determinant of housing prices is
| "demand", not your hypothetical effect of houses getting
| cheaper because other houses are nearby.
|
| What do you think produces "demand"? Why is there more
| demand for houses in Phoenix than for houses 200 km to
| the northwest? In some cases, of course, there are real
| differences in land quality: land that is close to
| waterways or railroads is more valuable for industry than
| land that isn't, land that's close to iron ore deposits
| is more valuable for automotive manufacturing, land
| that's frozen cold 9 months out of the year is less
| valuable for human habitation, and so on. But none of
| these explains the universally observed price premium for
| land in cities over land in the nearby countryside, which
| often amounts to three orders of magnitude.
|
| It turns out that the _main_ driver of demand for housing
| is being close to other housing. So building houses
| drives _up_ the price of land nearby. Not down, as your
| theory predicts.
| ProfessorLayton wrote:
| I'm not really sure what point you're trying to prove.
| You're using land and housing prices interchangeably,
| when the problem being discussed is about _real estate
| prices_ not land prices specifically. Yes land prices are
| part of real estate costs, but that 's not all of it by a
| long shot.
|
| Building codes, bureaucracy, and NIMBYism all contribute
| to construction costs, which in many cases _severely
| constrict supply_ (SF being a shining example), and thus
| make existing units more expensive. Focusing solely on
| land prices is missing the forrest for the trees. The
| problem is that there isn 't enough supply to meet
| demand, so prices are skyrocketing.
|
| Building more housing will drive prices down at best, or
| _slow price increases_ at worst, but it doest affect
| _housing_ affordability, which is the original statement
| I was commenting on.
| bumby wrote:
| > _It turns out that the main driver of demand for
| housing is being close to other housing._
|
| This seems to be conflating the symptom with the cause. I
| doubt housing is more attractive because there are more
| houses nearby; they're attractive because more services
| are nearby. Granted, they are going to correlate strongly
| but I think it's a mistake to conflate the two.
|
| Consider the following:
|
| 1) A house with no neighbors within a 100 mile radius.
| But it has all the best restaurants, utilities, schools
| etc. within walking distance.
|
| 2) A neighborhood with hundreds of houses, but none of
| those services within 100 mile radius. It's a little
| isolated island of housing.
|
| Which do you think would cost more to live in?
| dan_mctree wrote:
| Have you considered that density may drive demand?
| ProfessorLayton wrote:
| What is one supposed to do with that consideration, not
| build more housing? Because that's already happening, and
| it's not going well.
| stocknoob wrote:
| Why assume housing demand is fixed? Population increase,
| people want second homes, people want vacation rentals...
| larsiusprime wrote:
| > the value is all about how developed it is
|
| If by "developed", you mean "built upon", that's empirically
| not the case:
|
| Here's an empty lot in the heart of San Francisco for $2
| million dollars: https://www.fortressofdoors.com/content/imag
| es/2021/08/image...
|
| Here's a building next door to it on a similar sized lot for
| $2.3 million dollars: https://www.fortressofdoors.com/content
| /images/2021/08/image...
|
| Location, Location, Location. The vast majority of the value
| of urban real estate is land (locational) value.
| HPsquared wrote:
| The land value is increased by the nearby development known
| as "San Francisco".
|
| The same land in the same location, with no development
| nearby, would be worthless.
| cik2e wrote:
| I agree with your comment in theory but I'd say that only
| applies over a long-enough horizon. At any given point in
| time when someone enters the market, there's a fixed supply.
| Sure, someone could commission the construction of their own
| home, but good luck with that in an urban area.
| hyuuu wrote:
| how would you direct private capital to maintain/build living
| spaces then? Unless you are thinking to have government to be
| responsible to do that, building more to keep up with the
| demand + maintenance of the existing ones. It does work in
| places like Singapore, but I am not sure I would trust the US
| Gov's execution.
| deepnotderp wrote:
| By separating the productive activities of construction and
| administration from the parasitic activity of rent seeking.
| kansface wrote:
| Rent seeking isn't parasitic. It provides liquidity to the
| housing market where it wouldn't otherwise exist. You want
| to move to a different city, renting doesn't exist, then
| what? How does that work for anyone who can't make a
| downpayment, or anyone who is in a hurry, or at all really?
| Nationalized housing in the US tends is even more dystopian
| than the private sector.
|
| If you want a vibrant, sane, and fair rental market, we'd
| need an actual free and fair market in the first place.
| clairity wrote:
| _rent-seeking_ is the economic concept of income being
| captured from simply owning an asset rather than from
| productivity. its literally anti-capitalistic, as it 's
| always a market distortion that creates the coercive
| force necessary to inefficiently funnel income this way.
| fair markets would compete away rent-seeking in short
| order.
|
| that's different from providing rental housing, whereby
| owners earn rent by constantly working to provide safe
| and desirable housing. capitalism is premised on the idea
| of using markets to drive down prices to the marginal
| cost of production plus a small industry-/market-specific
| risk premium. _rent-seeking_ is entirely counter to that.
| golemiprague wrote:
| Some people want to rent and some other people supply it,
| there is nothing parasitic about it, it is like any other
| trade.
| p0larbear wrote:
| " It also directs capital away from investing in technology and
| businesses."
|
| Empirically this does not seem like a problem in the US at the
| moment. Large US banks are starved for lending opportunities,
| and turning away deposits for lack of balance sheet. The
| Federal Reserve bought corporate bonds. Lending conditions are
| loose (see links)
|
| https://fred.stlouisfed.org/series/DRTSCILM
| https://fred.stlouisfed.org/series/DRSDCIS
| https://fred.stlouisfed.org/series/NFCICREDIT
| https://fred.stlouisfed.org/series/NFCI
| chrischattin wrote:
| This is 100% correct and caused by artificially keeping
| interest rates low. If the price of money was allowed to find
| it's natural equilibrium, these distortions wouldn't be
| present. It's anti-capitalist, market intervention by the fed
| that's causing inflated asset prices everywhere. Unfortunately,
| it ends up most hurting the most venerable in society.
| BenoitEssiambre wrote:
| This is very wrong.
|
| Investing in real estate is a real investment when it results
| in houses being built. In fact it is maybe one of the most
| timeless and obvious form of investment. People have built and
| traded dwellings through the ages. Prices have to rise when
| good land gets scarce and labor gets more expensive.
|
| Low interest rates _also_ boost investment in technology and
| businesses.
|
| Raising rates, if you mean central bank rates, would reduce
| investment in both houses and technology. Raising interest
| rates is a signal and incentive from central banks to not
| invest in anything and instead hold on to government paper.
|
| Raising rates means funding the wealthy's savings by providing
| them a backstop. When they can't find assets that retain
| sufficient value on the private markets, they can just hold to
| government paper having above market returns. I wrote more here
| a while back: https://medium.com/@b.essiambre/the-world-
| deserves-a-pay-rai...
| deepnotderp wrote:
| When people say "investing" in real estate they generally
| mean buying existing houses, not investing in construction
| projects.
|
| And "throughout the ages" is nonsensical, slavery is as old
| as civilization and yet abolishing it led to wealthier and
| happier societies.
|
| Imagine if instead of real estate speculation that capital
| went into creating new technologies and businesses.
| BenoitEssiambre wrote:
| The bidding up of existing ones is a side effect that
| happens however central banks are more about controlling
| investment in new ones than the price of existing ones.
|
| Higher prices of houses means there is more incentive for
| them to be built (or repaired) and for the builders to be
| paid well. Central banks stimulation is meant to make sure
| this happens to a sufficient degree, just not so much that
| builders (and workers more generally) are paid too well
| that it would drive inflation too high.
| throwaway2048 wrote:
| Its not resulting in housing being built, its resulting in
| existing stock getting bought and flipped.
| missedthecue wrote:
| You probably could have typed your comment without the "this
| is very wrong" leading it.
| snidane wrote:
| This is not an innate trait of capitalism. This is due to tax
| favorability of land speculation compared to other options. Add
| zero interest rates to it and accelerate flows of all the extra
| money to into further land speculation.
|
| I can easily imagine a society, capitalistic or not, that
| doesn't subsidise land speculation, which doesn't suffer from
| real estate bubbles.
| jonplackett wrote:
| The weird thing about house prices is it's the exact same house
| that now costs waaaay more.
|
| What I mean is, for example, my house is 130 years old. So it's
| in a _worse_ state than it was 20 years ago. But it costs
| probably 10 X more.
|
| It's not like houses are a fine wine that matures. Nor is it in
| any way upgraded or better like a new technology would be.
|
| But up in cost they go, indefinitely. Exponentially.
| Pointlessly. A complete and utter failure of policy.
| Tiktaalik wrote:
| Others have mentioned the underlying land values is the most
| important thing that is driving valuation increases, but
| beyond that the existing 130 year old house _is_ worth more
| because the cost to rebuild it from scratch is increasing as
| construction costs increase.
| enaaem wrote:
| It's not the house that's worth more. It's the land. If
| cities and towns develops, land prices should go up.
| Buildable land near an office, supermarket and bar should be
| worth more than the same piece in the middle of nowhere.
| sokoloff wrote:
| It's also partly the monetary unit being worth less than 20
| years ago. $2 20 years ago is about the same as $3 today.
| closeparen wrote:
| To steal a phrase from Matt Yglesias: we only have so much
| "throughput" from land prices to housing prices because we
| refuse to build vertically.
| batshit_beaver wrote:
| Slight correction - people don't want to live in
| vertically built accommodations. Everyone wants a nice
| little house they don't share with anyone. Can't exactly
| blame them.
| danny_codes wrote:
| Eh, I don't think that's true. Maybe for older
| generations, but for people in their 20s and 30s I
| suspect the opposite is true. People want to live in
| cities and if they've done any research at all don't want
| to live in suburbia since it's a living hell.
| closeparen wrote:
| I don't think that's true. Obviously a lot of people pay
| a lot of money for them. I think even the most craven
| NIMBY would adore a high rise condo if it had comparable
| square footage.
|
| It's _everyone else 's_ vertically built accommodations
| that attract the hatred.
| wallacoloo wrote:
| i just have trouble understanding this angle. i grew up
| in the suburbs and moved into the city during year 2 of
| my career. i rent a home with 3 roommates even though i
| could afford that SFH you're describing. why does a
| person desire to live in the city for any reason
| _besides_ for the density?
|
| "jobs", "good food", "nightlife", "dating" and "social
| opportunities" are all things i hear. the last two are a
| _direct_ result of density. the first 3 are only possible
| as indirect results.
|
| anecdotally, the price per sqft of townhomes exceeds that
| of detached homes in several Seattle neighborhoods.
| several confounding factors, including the year of the
| building, but in general that suggests a preference
| opposite to what you claim. or at least, that, in the
| face of constricted supply we can't really tell where the
| preferences _truly_ lie.
| JamesBarney wrote:
| Everyone wants to live on an acre in the city in a
| palatial mansion.
|
| But if you have to decide between an hour commute and
| living vertically plenty of people would choose to live
| vertically.
| missedthecue wrote:
| I don't know... The suburbs are really popular
| JamesBarney wrote:
| Most of the people I know who moved to the suburbs did so
| for better schools and a larger house.
| [deleted]
| walshemj wrote:
| In the UK the fall out from the Grenfell fire has made
| even low rise flats look a very poor investment.
|
| And the experience of high rise social housing from the
| 60's and 70's shows that that tower blocs do not solve
| housing problems.
| zbrozek wrote:
| I'm not sure that we build at all. Out, up, down, or
| anywhere else.
| skipants wrote:
| I slightly disagree. The land definitely factors; I don't
| think we can argue that. But there's also a lot of value of
| a house just being on the land, no matter its quality
| (ignoring complete dilapidation).
|
| If labour and material costs are also high that increases
| the value of houses that are pre-existing. It means the
| buyer does not have to pay extra for and wait for a house
| to be built, which has some value. Also, there's a certain
| tolerance that I'm sure many people, if I may project, have
| for how crappy of quality a house actually is. They just
| want a damn place to live and call their own. Especially
| when the market is not in the buyer's favour.
|
| At least that's how it all seems in Toronto. In the city of
| Toronto proper, a detached house selling around $1,000,000
| is almost guaranteed to be of relatively bad quality right
| now.
| saiya-jin wrote:
| Yes but if prices rise, its 90-100% of the land price
| increase, and 0-10% of the house itself. That is land
| with all network connections and permit to build the
| house. It basically goes up only with material and labor
| costs.
|
| House is often a necessary evil - its never what buyers
| imagine as ideal, but in comparison with going through
| the hell of building one's own (or also adding tearing
| down the old) its an acceptable compromise for many.
|
| Life is too short, and no house is worth destroying a
| marriage.
| amcoastal wrote:
| This depends on where you live. In rural areas, and dying
| towns (most of america geographically), land prices have
| stayed about the same over the last decade or so.
| However, materials and labor have increased a lot. So
| there are certainly situations where the building itself
| inflates in value more than the land.
| PeterisP wrote:
| I heard an anecdote from a rural insurance agent that the
| fire insurance is crazy because repairing/rebuilding a
| house after a fire costs much more than the market price
| of the house + land, or an equivalent house + land nearby
| - the issue is that (in some areas) the rural house
| prices there are way down as there's no demand and
| everyone's leaving, while the costs of construction are
| sky high.
|
| So if they offer a policy that covers the market value of
| the house, that's much less than what it would cost to
| repair/rebuild (so insured people can't afford to get
| their house back after a fire), and they don't want to
| offer full repair/rebuild value, as that incentivizes
| people to just burn the house down because in that case
| the insurance payment would be much more than what they
| can sell the house for.
| Spooky23 wrote:
| I think you're confusing depreciation with value.
|
| In most cases every 20 year increment backward yields a
| higher quality house. Newer houses are garbage in many
| dimensions.
|
| An older home requires a little more capital investment, but
| if it has lasted 130 years, it's sound and could be
| remade/modernized at a cost well below any new construction.
| tibiahurried wrote:
| What's 10x is not the house, but the land, the physical space
| the house seats on. The land is a finite resource, thus it
| can only appreciate in value.
| nickff wrote:
| > _" The land is a finite resource, thus it can only
| appreciate in value."_
|
| This is a non-sequitur; lots of things are limited, but
| often collapse in value. As a former Saudi energy minister
| once said: 'the stone age ended, but not for lack of
| stones'.
| batshit_beaver wrote:
| To add to this, it's not even necessarily true that the
| value of land itself is up 10x. It could very well be that
| the value of dollar is DOWN 10x. The effect on price tag is
| exactly the same.
| Spooky23 wrote:
| Only if the capital is available. Speculators tend to use
| borrowed money to do their thing and drive prices up. Good
| times until they're not, then boom.
|
| I have family who made a fortune off the backs of people
| living under this delusion in the 1980s and the 1960s.
| baq wrote:
| Only if population grows. Land will depreciate if there are
| less people to live on it.
| snidane wrote:
| In the 21st century, even if country population stagnates
| or even drops, population still grows in cities compared
| to rural areas.
| liketochill wrote:
| Not just land, but land in desirable places with amenities
| like roads, sewer, water, power, schools, food stores near
| by.
| MathYouF wrote:
| If everyone lived with their siblings in the same house they
| grew up in, we wouldn't have a problem.
|
| As is, people have children who occupy a cumulative more
| houses with or without others than their parents/grandparents
| did, and there's not more land being made. So that's why the
| old land and what's on it go up in value.
|
| Basically, the increasing population (demand) is the cause of
| an asset increasing in value despite not increasing in
| quality.
|
| One can make policies which reduces the number people who
| wish to use homes in the domestic market of a given country
| if they want to prevent that from happening without expanding
| the supply massively instead, that may lead to other negative
| externalities though based on which method is chosen (birth
| limits, immigration controls, ect.).
| baq wrote:
| On the contrary, it's demographics. If you had any land, as
| long as more people want to live on it, the price goes up. If
| there are more people full stop, land goes up more, because
| there's more people to at the bid.
|
| Now whether anyone should be allowed to own land is a good
| question. Lots of folks can't even imagine a world where
| that's impossible, but ownership is just law, a social
| construct.
| sharemywin wrote:
| it's also replacement cost. to build a new house would
| require a ton of money.
| Dumblydorr wrote:
| I'd disagree that houses are the same as they used to be.
| There's a spectrum of housing from from degraded to new to
| renovated. But the ideal house today, compared to the past,
| today's house has so many more luxuries and conveniences:
| appliances, energy efficiency, air quality, amount and
| variety of lighting, safety standards and knowledge of
| advanced materials, there's literally no system that you
| can't improve in a house. Even the humble hand made log cabin
| could be outfitted with an efficient modern solar battery
| system with a precisely engineered woodstove to boot.
|
| All this to say, many houses are upgraded over time, not
| merely degraded. I'd much rather live in my house now after
| the decades of upgrades than when it was freshly made in the
| 70s.
| bawolff wrote:
| Investing can also include making new buildings and structures
| (e.g. new apt building) which increases amount of shelter
| available.
| ok123456 wrote:
| mao was right
| AnimalMuppet wrote:
| That particular cure is _far_ worse than the disease.
| sien wrote:
| At least 1/3 of people rent in most developed economics.
| Investing in real estate creates dwellings for them to rent.
|
| Food, clothing and shelter are basic needs. Providing one of
| them is most certainly creating value.
|
| Real estate is not zero sum. Having shops, schools, offices,
| factories and whatnot around your real estate makes it more
| valuable, not less.
|
| There is a problem now around the world in many cities where a
| great deal of value is created in that government has made it
| too hard to build new dwellings and the price of dwellings has
| been rising.
|
| However, there are also cities around the world that have had a
| lot of growth while having reasonably priced houses.
|
| In 2000, Houston had a population of 3.8M in 2020 it was 6.3 M.
| From
|
| https://www.macrotrends.net/cities/23014/houston/population
|
| They have also managed this with affordable housing.
|
| That's something to learn from.
| max47 wrote:
| >n real estate creates nothing of value to society and instead
| serves only to artificially drive up the cost of shelter
|
| And yet there is literally millions of people begging for a
| opportunity to get a unit in large/rich cities. If there was no
| value to it, why does everyone cares so much about living
| there?
| markus_zhang wrote:
| Capital flows to where it can grow. I don't see this against
| the principle of capitalism. IMHO capitalism has one and only
| one rule: grow your capital as fast as you can. That said, if
| the return rate of investing in real estate is lower than the
| rate in technology, then naturally more money will pour into
| technology.
| [deleted]
| wyager wrote:
| Storing wealth doesn't redirect capital away from businesses.
| It represents the possessor deciding to temporarily step away
| from the continuous auction process to allocate productive
| capacity ("the market") which increases the purchasing power of
| those who remain, to either invest in capital goods or
| consumable goods. Buying monetized assets (real estate, gold,
| bitcoin) is not economically harmful - in fact, it's better
| than reflexively buying index funds, which is basically the
| other option.
| VictorPath wrote:
| > Due to the zero-sum nature of real estate, it fundamentally
| breaks the positive sum theory of capitalism.
|
| From World War II to the early 1970s, the utilization of
| existing US capital equipment rarely dipped during the worst of
| a deep recession, to what have been the highest levels of
| capital capacity utilization rate since the 2008 financial
| crisis. The old lows have been about what the new highs have
| been. This indicates an overabundance of capital investment and
| overproduction, which was the opinion of former GE CEO Jack
| Welch.
|
| https://www.federalreserve.gov/releases/g17/revisions/Curren...
| antupis wrote:
| There is simple solution for this
| https://en.m.wikipedia.org/wiki/Georgism but some reason
| georgism is still pretty marginal thing.
| bumby wrote:
| That requires a somewhat radical shift in the societal
| perceptions of property rights. When the U.S. Constitution
| specifically mentions intellectual property rights, I don't
| think it could ever be construed as a "simple solution" to
| change that definition.
| jspaetzel wrote:
| The ability to transfer property quickly thanks to investors
| does provide some value. However, sitting on property and
| collecting rent is essentially theft. To fix this we need more
| incentives that reward the use of property more then the
| ownership of it.
| api wrote:
| https://en.wikipedia.org/wiki/Georgism
|
| TL;DR: things that people produce such as labor, products, and
| services are not taxed at all. No payroll taxes, no sales tax,
| no income tax, and no capital gains tax on investments in
| productive activity or human-made capital.
|
| Things that people did _not_ produce such as land or the right
| to extract natural resources are taxed. For land the _land
| value_ is taxed, but this does not include the value of things
| built on the land.
|
| You're basically billed for the right to "own" things that
| existed before any of us were born. Since not much else is
| taxed, these taxes could be rather steep.
|
| This strongly incentivizes efficient use of land and natural
| resources and discourages non-productive squatting on them. You
| would not see, for example, a bunch of self-storage places and
| gigantic sprawling car washes in Silicon Valley. The land value
| taxes in such an area would be far too high to justify anything
| but highly efficient productive uses of the land such as
| housing, manufacturing, offices, etc. Vertical construction
| would be highly incentivized in high value areas.
| odiroot wrote:
| > TL;DR: things that people produce such as labor, products,
| and services are not taxed at all. No payroll taxes [..]
|
| This is actually very logical. Never understood why salaries
| are taxed so high. Always seemed to me like the governments
| are punishing workers for actively working.
| bawolff wrote:
| > The land value taxes in such an area would be far too high
| to justify anything but highly efficient productive uses of
| the land such as housing, manufacturing, offices, etc.
|
| Wouldn't that just mean those lots would stand empty? Its not
| like the car washes are there because there is a higher
| revenue option but people just dont want to do it.
| deepnotderp wrote:
| Yeah I'm personally a fan of Georgism but realistically
| something like a LVT is too radical to implement. I think
| that a carefully thought out property tax code (eg higher
| taxes for lower density buildings) can get you 80% of the way
| to the effects of a LVT while being pragmatic enough to
| implement today.
| kragen wrote:
| > _realistically something like a LVT is too radical to
| implement_
|
| That's what they said about the French Revolution, American
| democracy, the abolition of Russian serfdom, the abolition
| of US slavery, the Paris Commune, the Bolshevik Revolution,
| Prohibition, the Holocaust, the establishment of the State
| of Israel, the Great Leap Forward, the Iranian Revolution,
| etc.
|
| I mean, that's also what they said about lots of other
| changes that actually didn't get implemented. And, as the
| examples above illustrate, it's easy for radical changes to
| have unintended effects...
| larsiusprime wrote:
| You could actually do a lot to adapt existing property tax
| regimes into something like a very close approximation of
| an LVT. Step 1 would just be improving the quality of
| assessments to take advantage of the state of the art of
| the latest mass appraisal methods (which requires no change
| in law, just requires you to influence the training and/or
| appointment/election of local assessors) from the last 15
| years. Step 2 would be lowering the tax rate on
| improvements and shifting the burden off of buildings and
| onto land; this is barred in certain states but is
| perfectly legal in others.
| clairity wrote:
| that's right, appraisal/assessment methods can be changed
| more easily than tax law, and could be a potential avenue
| for more equitable/productive taxation. the barrier is,
| of course, working with the ~5000 property taxing
| jurisdictions in the US, each its own special form of
| opaque bureaucracy, averse to any and all risk-taking
| (not saying this to discourage, but to show the magnitude
| of the challenge).
| ItsMonkk wrote:
| lars's article is what made it fully click for me on how
| important this topic is, so I'm going to mostly leave it
| to him here, but I just want to stress one thing.
|
| One thing the Bitcoin issue has shown me is just how
| pivotal that 'number go up' is to society. When 'number
| go up', that thing gets bought in, which brings more
| people to it. I think many look at the LVT like medicine,
| yes, this thing is good and important, but it tastes bad,
| so we can't get the collective buy-in, and never will.
| But we all know what's going to happen to Bitcoin, it's a
| bubble, and it will crash, crash hard. But so is the real
| estate market.
|
| Real estate has gone up as interest rates have come down.
| With our interest rates at 0%, there is now no more room
| for the interest rates to go down, and thus real estate
| market to go up. We've reached the end, as we come out of
| CO-VID they might go up another 10% or so, but the easy
| money is gone - but the downside is now massive. If rates
| go back to 5% we will see real estate prices go back to
| where they were at when interest rates were last at 5%.
| Investors have a huge risk disparity.
|
| And this is where the Land Value Tax can help. If we can
| implement the Land Value Tax, and at the same time
| implement a one-time tax credit equal to the price of the
| land, not only will no one lose out, but those that have
| the most at risk will now de-risk, and have the most to
| gain. All in the meantime instantly incentivizing the
| correct behavior.
| larsiusprime wrote:
| Gotta start somewhere! Change is never easy.
| deepnotderp wrote:
| Indeed! Would love to start, do you have a good email
| address to reach you? Mine's in my bio
| clairity wrote:
| yes, but like most things worth pursuing, its a thorny
| problem, largely for economic and sociopolitical reasons,
| but also technical.
|
| as you probably know, AVMs (automated valuation models)
| have been the hotness over the past few decades, but
| zillow (recently, but all along too) has shown the real
| limitation of AVMs. in theory, the likes of google and
| apple have enough geospatial data to create good land
| value AVMs, but you really still need appraisers on the
| ground for hyperlocal adjustments that just don't get
| captured in the AVM data and/or model. and that's all
| before the politicians, bureaucrats, and competing public
| interests get involved.
| sokoloff wrote:
| Lowering the tax rate on improvements would probably have
| the side effect of having more remodeling work be
| inspected. Much of the avoidance of building permits (and
| associated inspections) is about avoiding increased
| assessments and associated taxes. This in turn would
| likely lead to less totally slipshod remodeling work, at
| least by people who weren't aiming for that outcome.
| larsiusprime wrote:
| Wait why would LOWERING the tax rate on improvements
| INCREASE the amount of building inspections? Are you
| assuming that this would lead to an increased reliance on
| the cost approach for assessments?
| sokoloff wrote:
| With a high tax on improvements (as is the case today),
| there is incentive to make improvements in a way that the
| municipality won't know about (as is the case today). The
| easiest way for the municipality to learn about
| improvements is via the building department permitting
| and inspections process, so a lot of work is done without
| pulling permits.
|
| Lowering or removing this disincentive would increase the
| amount of work that gets inspected.
|
| As an owner-occupant, I _want_ the inspections and am
| willing to pay one-time for an impartial second set of
| eyes.
|
| As an owner-occupant, I _do not want_ to pay a recurring
| subscription fee (in the form of higher property tax) as
| a result of the inspection.
|
| Given how many properties have obviously recent remodels
| and no permits pulled in the last 30 years, it's fair to
| say that at least some of the market has decided that
| permits aren't worth the tax increases.
| legulere wrote:
| The current federal property tax was deemed
| unconstitutional in Germany. The new law has an opening
| clause for states to regulate the property on their own.
| The state of Baden-Wurttemberg has introduced a land value
| tax.
| rcpt wrote:
| That's what Pennsylvania did and it worked very well
| i_have_an_idea wrote:
| Well, maybe, but think of the flip side of this. I've worked
| very hard to earn X amount of dollars, however the monetary
| policies of banks around the world have pushed inflation up,
| essentially eating up my savings, all the while pushing the
| interest rate on deposits to zero and below. I would like to
| not lose the purchasing power that I've earned, so my only
| choice is to invest in something. I also want to invest in
| something as low risk as possible; if my hand wasn't forced,
| I'd be happy to keep my money at the bank at 2%.
|
| Right now, investing in public companies and tech is very
| risky, as valuations are at record highs. Many experts estimate
| near-zero returns for decades from public markets. And, as a
| small-time investor, I don't have access to private deals or
| markets.
|
| So, that leaves real estate. I don't put my money there because
| I want to drive up the cost of shelter for anyone, I do it
| because I don't have any other reasonable way to protect my
| savings.
| tedunangst wrote:
| People were posting this exact comment five years ago. Stock
| market too high, crash is coming, pull your investments. They
| have not done well.
| PragmaticPulp wrote:
| > Right now, investing in public companies and tech is very
| risky, as valuations are at record highs. Many experts
| estimate near-zero returns for decades from public markets.
| And, as a small-time investor, I don't have access to private
| deals or markets.
|
| > So, that leaves real estate.
|
| That's a huge leap to jump to real estate as somehow safer
| than public market investing. Real Estate can also be highly
| volatile and is also prone to significant drawdowns.
|
| Real Estate also has very high carrying costs relative to
| other investments. Especially if you're trying to rent it
| out, at which point it becomes a business with not
| insignificant labor requirements, either from you or someone
| you hire. It's more of a side job than an investment.
|
| If you're serious about investing, you shouldn't be choosing
| between a bank account or real estate. Those are on opposite
| ends of the risk spectrum and opposite ends of the work-
| required spectrum.
|
| Instead, you'd want to do things like dollar cost averaging
| into equities over time (nobody really invests by keeping it
| all in cash and then flipping it all into specific stocks in
| the middle of a frothy market). Or you should be looking into
| ladder if CDs, or bonds, or something like I-bonds to invest
| an asset specifically indexed to inflation.
|
| But choosing between a 0% bank account or real estate
| investing is a major false dichotomy.
| toomuchtodo wrote:
| You're trying to store purchasing power as structural macro
| economic and demographic changes occur. This is challenging,
| at best. Look to Japan for what the future holds.
| saiya-jin wrote:
| Not every country is, or ever will be, like Japan. I would
| say most of them won't during our lives.
|
| I agree with OP, if you just leave hard earned money of us
| middle class sit in the bank, it will be eaten away by
| inflation and fees. Its what our parents did, and its
| properly dumb. Risk with markets which most don't
| understand, or invest into real estate which everybody does
| at least a bit. Most folks consider only these 2 options.
|
| Also, if SHTF, in most cases you will have physical places
| or even land to live off, instead of few bank statements.
| People will still have to live somewhere, and there is
| constantly more of us.
| jbay808 wrote:
| From the '80s to I think around 2002, real interest rates
| were positive and you earned money from a savings account
| faster than inflation.
| toomuchtodo wrote:
| All countries eventually end up as Japan. India and
| Africa will race to be last. China is already somewhere
| between 1.1 and 1.3 total fertility rate. Sustained sub
| replacement rates (<2.1 fertility rate) locks in
| population momentum.
|
| https://ourworldindata.org/uploads/2014/02/World-
| population-...
| wbsss4412 wrote:
| This analysis frames the problem as though it's concurrent
| with current inflation rates.
|
| The problem goes back for much longer though. Interest rates
| hav been near zero since the Great Recession, and for most of
| that period, inflation was also below 2% almost the entire
| time. Add to that a lot of the year over year inflation we
| are experiencing is due to base effects eg the collapse of
| oil prices last year. Current oil prices are hardly elevated
| from their historical norms.
| walleeee wrote:
| not to dispute your point, because it makes sense from the
| individual's perspective, but this...
|
| > Right now, investing in public companies and tech is very
| risky, as valuations are at record highs. Many experts
| estimate near-zero returns for decades from public markets.
|
| ...is a big red arrow pointing to the fact that we're living
| in a castle made of sand
|
| if we continue to let pathological incentives drive economic
| decisions the tide will wipe it all away
|
| purchasing power is a mutually constructed fiction and
| remains a useful social technology only while material
| productivity can plausibly support the web of lies we tell
| each other
|
| now that people have noticed the foundation caving in, it
| would be nice if we could formulate and incentivize a
| positive sum response, otherwise we get zero or negative sum
| dogfights over scraps as you describe
| rcpt wrote:
| What's really awful is that this has happened before.
|
| This write up of 80s Japan (from 1990!) is worth a read
|
| https://hbr.org/1990/05/power-from-the-ground-up-japans-
| land...
| cs702 wrote:
| According to the McKinsey study mentioned in the article[a]:
|
| * Two-thirds of global paper wealth is tied up in real estate
| valuations (residential and commercial).
|
| * Paper wealth is now nearly 50% higher (!) than its long-run
| average relative to income, globally.
|
| * Paper wealth and economic growth are no longer moving in sync,
| as they had in the past for a long time at the global level,
| albeit with some country-specific deviations.
|
| _Asset prices around the world, including property prices, are
| now in unprecedented territory_ ; there is no doubt about that.
|
| There are many possible explanations for this deviation from
| long-term norms, but they come broadly from two camps. In one
| camp are those who are not sure why they should even worry about
| this, because they believe the global economy is about to shift
| to much faster economic growth, driven by new technologies like
| AI, quantum computing, cheap sustainable energy, and space
| exploration. In the other camp are those who are quite concerned
| about the financial, economic, and political consequences if
| paper wealth reverts to historical norms in relation to global
| income.
|
| Some of the smartest people I know are either in one camp or the
| other, with little overlap between camps. My perception is that
| there's no shared agreement as to what any of this means, or
| whether anything should be done about it.
|
| --
|
| [a] https://www.mckinsey.com/industries/financial-
| services/our-i...
| AussieWog93 wrote:
| >faster economic growth, driven by new technologies like AI,
| quantum computing, cheap sustainable energy, and space
| exploration.
|
| It always blows my mind a bit when people talk about the
| productivity gains of the future coming from cutting-edge "sci-
| fi" technology.
|
| I've seen with my own eyes the insane productivity gains some
| knowledge workers can get simply through the use of hacky-but-
| effective domain-specific Python scripts. We're talking one
| person producing more benefit than an entire team by an order
| of magnitude.
|
| I'm sure there are other tried-and-true technologies that
| simply aren't rolled out widely enough and constitute a massive
| amount of economic low-hanging fruit (especially in the
| developing world).
|
| I'd push for them before I look to the stars for the next
| miracle technology.
| hetspookjee wrote:
| I know that Python exists for a long time already but I tend
| to find it exactly one of those sci-if technologies in
| combination with the extremely powerful hardware everyone has
| these days. It's a matter of time until the real big masses
| start using it and contributing. I'm pretty sure that
| whatever big solution there will be, that it will be made in
| or with Python.
| cptaj wrote:
| Can you give examples of these "hacky domain specific
| scripts"? I love hearing about niche custom computing.
| AussieWog93 wrote:
| Yeah, specifically in my business (e-commerce, selling used
| video games) we have a set of scripts that can create a
| full eBay listing simply by scanning a game's barcode,
| another one that generates sales reports and breaks them
| down with exactly the information that I want, one that
| interfaces with some hardware to automatically test the
| save function in Game Boy games, and some more to come in
| future (we're new!).
|
| I saw some similar things in the accounting department at
| my previous employer, and on the flip side I've met many
| people who seem to spend an inordinate amount of time doing
| steps that a computer could do, but worse.
|
| I think the important bit is to have tight integration
| between the person writing the code and the person with the
| domain-specific knowledge that the code is performing -
| ideally they should be the same person.
|
| As we move away from seeing computer programming as a
| specialised skill for a class of elite engineers and
| towards something just generally useful like reading and
| writing, I can see this yielding huge dividends
| economically.
| montenegrohugo wrote:
| As an intern at my first job a few years ago I basically
| did something like that.
|
| We had a data hunting that would go out into supermarkets
| and collect data, but oftentimes with errors. Supervisors
| would sift through all of them and spend 4-5 hours a day
| removing/fixing/joining faulty entries.
|
| I saw that, wrote two Python scripts to automate it (~2
| weeks from start to deployment). All that workload
| automated immediately, and to my knowledge it's still in
| use today.
| bityard wrote:
| Not the one you're replying to, but I'm my experience this
| means writing your own tools and automation for the job you
| do when none exist. (Or are too expensive.)
|
| I've seen many shops where the amount of code for dev and
| QA tools significantly exceeds whatever product they ship.
| elihu wrote:
| > In the other camp are those who are quite concerned about the
| financial, economic, and political consequences if paper wealth
| reverts to historical norms in relation to global income.
|
| What about the camp that is worried that paper wealth doesn't
| revert to norms? I mean, if a person doesn't already own a
| house, then inflated prices work against them.
| xwdv wrote:
| That's more of a personal problem. Paper wealth reverting to
| norms would be more of a societal problem, and thus is more
| important to prevent.
| spaetzleesser wrote:
| I guess you loved 2008 bailouts then and will be happy to
| bail out wealthy people again next crash.
| JacobThreeThree wrote:
| Translation: too bad, you'll never own anything.
| TrainedMonkey wrote:
| A class of people unable to afford a home sounds like a
| societal problem.
| sokoloff wrote:
| A class of people _unable to afford housing_ is a
| societal problem. Unable to _purchase a home in a
| specific city_ is not nearly so obviously a problem.
| (Much of Europe seems happy to rent for life.)
| [deleted]
| clippablematt wrote:
| Much of Europe has to rent for life, but isn't happy
| about it.
|
| (at least in my experience of like everyone I know).
| sokoloff wrote:
| I've got a couple close friends who relocated to Europe
| and many colleagues. All are in high-tech and all seem
| perfectly content to rent (which I don't understand but
| my close friends assure me it's the case).
| linguae wrote:
| But if economic opportunity is concentrated in cities
| that are too expensive for average working people to live
| in (even when renting instead of buying), then this is a
| societal problem. Even if the shift to working from home
| for some occupations becomes permanent, not all jobs can
| be performed from home.
|
| While some metropolises such as Tokyo seem to be set up
| well for providing housing at a wide range of price
| points, others such as the San Francisco Bay Area and Los
| Angeles do a much worse job; there are some people who
| regularly commute 2-3 hours each way from these metro
| areas because this is all they can afford, yet the job
| markets in the Central Valley (near the Bay Area) or the
| Inland Empire and Antelope Valley (both near Los Angeles)
| areas are rather anemic at best. For many of these
| people, the choice isn't between a condo in Fremont
| versus a single-family house in Tracy. Instead, it's an
| apartment in a place like Stockton or Modesto versus
| moving outside of the orbit of the Bay Area; that's how
| bad the housing crisis has gotten for many people.
|
| The chief cause of this is zoning regulations and other
| policies in the Bay Area and Los Angeles that discourage
| denser development, thus encouraging sprawl further and
| further out; hence, the "drive until you qualify"
| phenomenon. The normalization of mega-commuting has
| social and environmental consequences.
|
| Yes, there are cheaper metro areas, but these cheaper
| metro areas tend to offer fewer job opportunities
| compared to the more popular metro areas. Part of what
| fueled the social divide between "blue state" and "red
| state" America is economic opportunity being increasingly
| concentrated in a handful of coastal metro areas, while
| these opportunities have largely failed to trickle down
| to much of rural America and the Rust Belt.
|
| What's needed are two solutions: 1. Change the zoning
| policies of certain metro areas in order to accommodate
| the demand through densification instead of sprawl. 2.
| Find ways to encourage the economic development of areas
| outside of the coasts.
| seanmcdirmid wrote:
| What about a Singapore style solution? As a city state,
| they don't have the benefit of having anywhere else to
| go, so public housing schemes (government provides
| affordable apartments to rent, no short term speculations
| allowed) are the main way to go. Or we could make housing
| depreciate like in Tokyo (and allow for low end small
| rooms without central heating).
| linguae wrote:
| Sadly public housing in the United States has been a
| policy failure that's tied to our issues regarding
| poverty and race. The only way I see public housing
| working in an American context is if it was seen to
| benefit the middle class, kind of like how FHA loans and
| the Fannie Mae and Freddie Mac programs exist to help
| middle class households get mortgages with low down
| payments. I also know that some Bay Area municipalities
| have below-market rentals and for-purchase developments;
| some municipalities require all significant housing
| developments to set aside some below-market units.
|
| Disclaimer: I grew up poor and I have relatives who lived
| in public housing; the environments they lived in were
| very rough, not only in terms of the quality of housing,
| but also in terms of living in crime-ridden
| neighborhoods. Now, I'm not saying that public housing
| _has_ to be that way; I 've heard good things about
| Singapore's public housing.
| klipt wrote:
| > But if economic opportunity is concentrated in cities
| that are too expensive for average working people to live
| in
|
| Maybe an "opportunity" that doesn't provide a living wage
| isn't actually an opportunity at all?
| literallyWTF wrote:
| Ah yes, let's lock out entire swaths of people from being
| able to purchase any sort of permanent dwelling. All hail
| our glorious landlords.
| geysersam wrote:
| It's exactly the other way around. "Paper wealth" is
| nothing, everyone can get enormous wealth by adding five
| zeros to the dollar bills. It has no relation to the real
| world means of production, to the GDP. If house prices lose
| 80% tomorrow all factories will be intact, all people will
| still have the same skills to perform their work. The
| impact would be artificial. On the other hand, not being
| able to find ample living space is a real problem and a
| drag on the economy.
| shmel wrote:
| > Paper wealth reverting to norms would be more of a
| societal problem
|
| What is the problem again? Rich people getting less rich?
| Imaginary number of net wealth getting lower?
| strken wrote:
| Here are a few obvious problems:
|
| - retirement plans often rely on equity from real estate,
| and so do some nursing home admissions
|
| - as per 2008, when people have more money remaining on a
| mortgage than the underlying asset (home) is worth, some
| of them will declare bankruptcy
|
| - when rich people suddenly have a lot less nominal cash,
| they can't fund their businesses by liquidating assets,
| so they cut costs, and then those costs have to find new
| jobs, which can take years and is hugely disruptive for
| everyone[0]
|
| Overall there's an argument to be made for doing it
| anyway, but there are pretty clear downsides to causing
| an economic crisis, even if the economy eventually
| reaches a better equilibrium state.
|
| [0] note that I'm not supporting trickle-down economics,
| just warning about the _disruption_ that suddenly
| changing the distribution of wealth will cause
| flipbrad wrote:
| A fair few pension funds and charitable endowments have
| wealth locked up in property. Not saying that alone
| justifies protecting asset values, but it does have
| societal significance worth bearing in mind.
| b9a2cab5 wrote:
| Asset prices are merely a function of discounted future cash
| flows. As interest rates are lower, the discount on future cash
| flows decreases. The world is also much more stable than it was
| in the 1950s-1980s - look at the state of Asia now and then.
| That means there is a lower risk discount on future cash flows.
|
| If paper wealth takes a shit the people that will be impacted
| will be retirees and the wealthy, not your average joes.
| [deleted]
| mbesto wrote:
| > If paper wealth takes a shit the people that will be
| impacted will be retirees and the wealthy, not your average
| joes.
|
| Also the elephant in the room is that property taxes are a
| derivative of your net worth, not your income. So if paper
| wealth (due largely to RE) continues to outpace income then
| we're in for a big hurting soonTM.
|
| This is the hilarious part about critics against a wealth tax
| - we _already_ have a wealth tax. I live Texas and people are
| about to have a brutal wake up call when they can 't afford
| $10k/year in taxes because their $200k ranch they bought 5
| years ago (and cost them $40k down) is now worth $500k.
|
| Note - I have mixed feelings about the proposed wealth tax.
| The proposed implementation was misguided.
| JamesBarney wrote:
| I think property taxes in Texas are one the biggest reason
| our house prices have remained somewhat sane.
| mbesto wrote:
| You clearly haven't been to Austin... there's nothing
| sane about property values here.
| pedrosorio wrote:
| No such "problems" in California due to prop 13 (yay...)
| cs702 wrote:
| Two-thirds of paper wealth is in real estate. For most
| families that have any wealth, the biggest component of that
| wealth is the current valuation of the home in which they
| live. If the valuation of real estate in relation to income
| globally reverts to long-term historical norms, a _lot_ of
| regular people would be affected, not just the wealthy.
| another_story wrote:
| It really depends. If you're not moving or borrowing
| against the value, does the value of your house matter that
| much?
| wallacoloo wrote:
| > If the valuation of real estate in relation to income
| globally reverts to long-term historical norms [...]
|
| a lot of everyday people will tell you that just won't
| happen. that governments perceive the risk of falling home
| values to be so large that they will do everything in their
| power to prevent that from happening.
| PeterisP wrote:
| For someone for whom the biggest component of that wealth
| is the current valuation of the home in which they live,
| the fluctuations of that price affects only the theoretical
| number, but does not affect their life in any meaningful
| way; they own and use the exact same asset as before, they
| are not trading it.
|
| These price fluctuations matter for people who either want
| to invest into real estate or withdraw previous investment,
| not for people who want to live in their current house.
| djyaz1200 wrote:
| That's true except for cash out refinancing. Lots of
| middle class folks take out home equity loans to pay down
| credit card debt. This was a big component of the 2008
| financial crisis. That and banks leveraging 40-1 and
| betting big that housing would never decrease in value.
| rootusrootus wrote:
| > take out home equity loans to pay down credit card debt
|
| I'm sure I'm preaching to the choir, but this is a
| _terrible_ strategy. In a perfect world it cuts the
| interest payment a lot, but the risks are significant.
| rcpt wrote:
| > state of Asia now and then
|
| Climate change and sealife collapse is getting pretty serious
| for SE Asia and I don't know what to believe about India
| water supply.
| ttul wrote:
| I'm not sure I agree with you here. Average Joe has been
| investing in houses just as eagerly as Rich Ralph. The
| difference is that Average Joe will be brought to his knees
| if house prices should fall. Rich Ralph will still be rich,
| just a little less so.
|
| I think that in the fullness of time, it will be seen that
| today's high asset prices were directly and unambiguously a
| consequence of extremely low interest rates and the creation
| of money by central banks and nothing more than that. When
| returns on lending are low, investors have to switch to
| riskier asset classes in order to generate the returns that
| they need to service their future cash flow requirements. For
| example, pension funds have to generate a certain amount of
| cash flow to cover their future pension liabilities, which
| are fixed and unchangeable. When central banks make money
| cheaper by lowering interest rates, pension funds have to
| shift to classes of assets that generate higher cash flow,
| even if that means taking on more risk. They don't really
| have a choice in the matter.
|
| There is a positive feedback loop here. Low interest rates
| cause large investors like pension funds to shift to riskier
| assets. This stimulates the risk appetite of retail
| investors, who pile in when they see the trend of increasing
| prices in these riskier assets, such as stocks and houses.
| The increase in asset prices reduces the effective returns on
| those assets, forcing pension funds another large investors
| to shift to even riskier things, like venture capital. Rinse
| and repeat.
|
| I suppose nobody can say for sure that there hasn't been some
| kind of long-term shift in global economic growth because of
| changes in technology, but it sure seems to me like cheap
| money is a more reasonable explanation for all of the
| craziness we have been seeing in the past year or two.
| cool_dude85 wrote:
| I think you have pension funds exactly backwards. They are
| typically managed with the goal of reaching their assumed
| rates of return at minimal risk. With performance so far
| above assumed returns, if anything pension funds can afford
| to take on less risky assets and still meet their goals.
| anigbrowl wrote:
| _Average Joe will be brought to his knees if house prices
| should fall_
|
| I'm not so sure - it depends on how heavily leveraged
| buyers are and what % of them have used price increases to
| secure more capital. If your home has significantly
| appreciated in value but you haven't taken equity out of
| it, it _could_ be said that you were leaving money on the
| table but only if you knew of a better investing
| opportunity. If you just let the property appreciate and
| _didn 't_ securitize that gain, a decline from peak values
| doesn't hurt because you have no loan to service.
| nwatson wrote:
| But all the savvier investors will sell the inflated
| assets at higher prices before the dip/fall and go on to
| use their increased capital to over-inflate the next hot
| asset class to the detriment of the average Joe.
| dillondoyle wrote:
| I had the same thought but would add there aren't many
| variable interest rate home loans anymore? If any?
|
| This source [1] also says HELOCS or 2nd mortgages are
| only 8% of owners, 1/2 of what they were in 2009. But
| that was 2018 maybe pandemic upped the %.
|
| So to get another 2007 meltdown this thesis would be that
| a lot of people would have to lose their jobs first.
| Interest rates going up wouldn't matter if they make the
| same (or more) money.
|
| But could argue collapsing real estate values would cause
| weak job market.
|
| [https://www.socialexplorer.com/blog/post/once-viewed-as-
| easy...]
| dnautics wrote:
| You're not thinking far enough. Of asset prices crater,
| then we'll have an acute deflationary shock, which will
| prompt the fed to inflate, and _that_ is what will screw
| the poor.
| AnthonyMouse wrote:
| > Of asset prices crater, then we'll have an acute
| deflationary shock, which will prompt the fed to inflate,
| and _that_ is what will screw the poor.
|
| The problem with this is in what the Fed does with the
| new money. They currently use it to buy back government
| debt, which goes to the rich, i.e. existing bondholders.
| What they should do is to give it out to all citizens
| equally, which is the opposite of screwing the poor.
| Panzer04 wrote:
| Inflation screws the rich, not the poor. Statistically,
| the wealthy have way more cash than the poor, while the
| wage-earning population will get increased income along
| with inflation.
| sceew wrote:
| Cash-flow producing assets become more valuable during
| inflation.
|
| The rich own assets, they financed these assets with
| debt. Debt becomes less burdensome with inflation,
| increasing their equity.
|
| At the same time, lendors lose with inflation. But who
| are the predominant lendors now? Life insurance
| companies, pension funds, mutual funds, household /
| nonprofits, state and local govts., etc.
|
| All of these institutions seem to be an aggregation of
| middle-class / poorer people vs. elites.
|
| If you're Elon Musk you own Telsa. You're main source of
| liquidity is likely cash from a revolver[1]. During
| inflation, your debt becomes relatively smaller to your
| Tesla equity. Your _net equity_ becomes larger.
|
| I think this just leads to more inequality, more
| corporate control, and weaker labor bargaining power.
|
| We'll see - hope its ok.
|
| [1] form of debt, where Elon is the lendee and is using
| Tesla stock as the collateral
| xwdv wrote:
| No it doesn't, most of the wealthy do not keep large sums
| of cash on hand, it's invested in other assets that grow
| with inflation.
| dnautics wrote:
| The wealthy are also the hands into which the printed
| money goes, and it also makes the real cost of leveraged
| investments lower. Triple threat!
| [deleted]
| dnautics wrote:
| > will get increased income along with inflation.
|
| By magical means of course.
|
| Inflation is a sneaky way to give the poor a wage cut.
| How else do you suppose the fed is supposed to be able to
| increase employment using inflation?
|
| Edit: down voted, ok here is a citation from an economics
| Nobel laureate:
|
| https://krugman.blogs.nytimes.com/2010/02/13/the-case-
| for-hi...
|
| > when you have very low inflation, getting relative
| wages right would require that a significant number of
| workers take wage cuts. So having a somewhat higher
| inflation would lead to lower unemployment
|
| By its very nature, giving laborers inflation-matching
| pay raises counters the explicit, intended policy effect
| of using inflation to increase employment. Or, your
| employment model _could_ be relying on "let's use
| increasing prices to light a fire under people's asses to
| get them to look for jobs". Which, if you ask me, as a
| neoliberal programme is far crueler, far more pernicious,
| than any slash-public-services scheme that fiscal
| conservatives dream up.
| linguae wrote:
| That's funny; my wages didn't increase to match inflation
| this year when I received my performance review. None of
| my family members or friends also received such raises.
| Yet the prices of everything else went up around me,
| especially housing. Heck, even the Dollar Tree wants 25%
| more.
|
| In a bout of inflation, not all prices increase at the
| same rate at the same time; this is known as the
| Cantillon effect
| (https://en.wikipedia.org/wiki/Richard_Cantillon).
| cwp wrote:
| The world was more stable 1990-2020 than it was 1950-1980,
| yes. I don't think it's a good bet to assume that stability
| will continue. The pandemic will peter out, sure. But the US
| is shifting toward isolationism, China is heading for a
| population crash, Japan is rearming, and Europe is rethinking
| its strategic position in light of all that. That doesn't
| necessarily add up to increased conflict, but it does point
| to a lot of uncertainty.
| andrewmutz wrote:
| > As interest rates are lower, the discount on future cash
| flows decreases
|
| That is one of the causes of high asset prices. Another is
| that cheaper debt allows more people to borrow money to buy
| assets.
|
| > If paper wealth takes a shit the people that will be
| impacted will be retirees and the wealthy, not your average
| joes.
|
| If paper wealth drops average joes will also be affected.
| Employment depends on consumer spending, and a big drop in
| asset prices can have a significant impact on spending
| through wealth effects
| (https://en.wikipedia.org/wiki/Wealth_effect)
| missedthecue wrote:
| Money doesn't disappear when you buy real estate. It goes to
| the person that sold you the real estate, and they can choose
| where to put that resulting capital.
| DebtDeflation wrote:
| > they come broadly from two camps
|
| One camp is the "this time is different" camp and the other
| camp is the camp that has been proven correct (eventually) in
| every historical instance of an asset price bubble. It should
| be noted that the first camp ALWAYS has a very good argument
| (usually involving technological change) about why this time is
| in fact different, but it always turns out to not be different.
| skybrian wrote:
| "Paper wealth" is an odd term that's not used in the study. It
| seems particulary odd to call real estate investments "paper
| wealth." After all, land and buildings are pretty darn real,
| hence the name.
|
| These investments may be overvalued and if prices change,
| owners will find they're not as wealthy as they thought, but
| they'll own the same thing.
|
| Also, what does it mean to say that wealth is "tied up" in real
| estate? Prices going up doesn't change anything real. The
| effect might be more resources going into construction and
| renovation, though.
|
| Debt and financial derivatives backed by inflated asset prices
| might be the problem, as in 2008. Those income streams might be
| less solid than they look.
| analyte123 wrote:
| If you have to spend 5x your net worth on a house, that's
| capital that is not spent on building businesses, whether
| through direct investment (buying tools or paying workers at
| your own business) or indirect (through stocks or other
| securities).
| stareblinkstare wrote:
| >[...] they believe the global economy is about to shift to
| much faster economic growth, driven by new technologies like
| AI, quantum computing, cheap sustainable energy, and space
| exploration.
|
| >Some of the smartest people I know are either in one camp or
| the other, [...]
|
| And you believe them?
| servytor wrote:
| Did you know that the "Life, Liberty and the pursuit of
| Happiness" from the Declaration of Independence is said to be
| inspired from John Locke, who said that "life, liberty, and
| estate" are the essentials a political body has to protect for
| each citizen[0]?
|
| [0]:
| https://en.wikipedia.org/wiki/Life,_Liberty_and_the_pursuit_...
| tejohnso wrote:
| https://archive.md/REmb8
| mercy_dude wrote:
| > Now, wealth and growth are completely disconnected. This is, of
| course, behind much of the populist anger in politics today.
| Affordable housing in particular has become a rallying cry for
| millennials who can't afford to buy homes and start families as
| early as a previous generation did.
|
| I am one of those millennials that is forever priced out of the
| housing market. And that to a large extent has shifted my
| political belief away from hard left that I once used to be.
| Especially seeing how the local mostly leftist politicians in SF
| have basically helped fuel the crisis even further and basically
| have done nothing. And many neoliberal leftist economist and
| media outlets even defending the status quo monetary policy that
| is clearly behind this wealth divide.
|
| To my disappointment though as much of a victim clearly as
| millennials and GenZ are, their political beliefs don't
| acknowledge they want a change. It's as if they expect the same
| group of people that are largely behind some of the bad policies
| causing the wealth disconnect are suddenly going to reverse
| course. A case in point is SF where they keep voting the same old
| eggheads who have virtually made it possible for the boomers to
| retire extremely wealthy at the expense of prices out millennials
| like me. If you vote for the same people expecting some sort of
| change will happen then spoiler alert. It won't.
| 88913527 wrote:
| It's less a political delineation and more of a class one. In
| nearly any city, whether it's left- or right- leaning, there's
| a class of landowners who intentionally reject rezoning to
| artificially restrict the supply of homes. If we followed the
| logic in your comment, a millennial in a southern red city
| would reject the right, and choose the left, for your
| reasoning: their conservative leaders failed their ability to
| get on the housing ladder. Make no mistake, it's about wealthy
| protecting their wealth.
|
| Conservatives and liberals in cities nationwide block the
| construction of new housing. And it's perfectly rational for
| people to do so, without it being a judgment of their broader
| political beliefs. People like their private property and they
| want it to appreciate. You have to realize that ideal is
| present in both well-to-do left and right leaning areas.
| mercy_dude wrote:
| No you totally missed my point. Places I was giving example
| as are places where you as a politician literally have to do
| nothing and you would still be winning elections. So my point
| was if millennials and GenZ are the victims of the policies
| or lack thereof and want these politicians to do something,
| why do they keep voting for them when these same politicians
| have fueled the price growth and continues to do nothing? The
| example I gave was SF which happens to be left (much like
| most of the HCOL cities) but the same would be applicable to
| right as well.
|
| My point is the moment politicians realize they don't
| actually have to make any efforts to improve the quality of
| life for their constituents, and can rather keep them busy
| driving culture war outrage and making them single issue
| voters is the moment people as a whole lose. For example I
| don't like Joe Manchin or Kristin Synema. But they are hell
| of a better choice for the people they are serving than Nancy
| Pelosi or Ted Cruz. Knowing your action can cost you
| elections is how democracy is supposed to work.
|
| > If we followed the logic in your comment, a millennial in a
| southern red city would reject the right, and choose the left
|
| If it means that the right is virtually winning every
| election cycle and not doing anything to improve their
| quality of life and major pressing issues, then yes they
| should. Democracy is all about keeping people in power in
| check so when it comes to re-election we can vote them Out if
| they didn't do a good job. at least in my book.
| akiselev wrote:
| With all due respect, it seems you're so deep into the
| culture war that you can't see the forest for the trees.
|
| The left vs right distinction hasn't existed in San
| Francisco for decades at this point - it barely exists in
| California metros at all anymore beyond the old party
| fundraising machinery. The Republican party is already
| practically irrelevant state wide. The same can be said of
| Democrats in rural California or even many states. In those
| scenarios, the second you make it about political ideology,
| you shut yourself out of the process, either by refusing to
| engage with it because they're the "others" or failing to
| understand what the constituents actually care about.
|
| For example, you're negatively comparing Nancy Pelosi, the
| House Rep of one of the wealthiest districts in the
| country, to three senators of diverse states. I don't see
| what led you to that conclusion other than a ideological
| blind spot - all the SF homeowners who put her in office
| for nearly 40 years have benefited wildly from the national
| policies she has supported. She has so much power in
| Congress _because_ she represents that district so well
| that she can spend all her time fundraising for other
| members of Congress and fighting the culture war (which, in
| my experience, rarely bleeds into her actual campaign
| because her constituency doesn 't give one shit as long as
| their two bedroom condo is worth 7 figures). These are the
| "wealthy" that the GP is talking about and they've stuck
| with her for nearly four decades through several boom and
| bust cycles. Say all you want about her politics, but her
| constituents overwhelmingly chose her over and over again.
| Are they idiots?
|
| Most striking is that all of your complaints seem to be
| about the local politics of San Francisco - so what do
| Pelosi, Cruz, Sinema, or Manchin have to do with it? If
| they had any more than a passing, indirect influence on San
| Francisco decision makers, it would be a major breach of
| the Federal/state/local separation of powers. Likewise with
| monetary policy. A focus on national politics makes one
| completely blind to what's actually going on at a local
| level.
| ProfessorLayton wrote:
| >So my point was if millennials and GenZ are the victims of
| the policies or lack thereof and want these politicians to
| do something, why do they keep voting for them when these
| same politicians have fueled the price growth and continues
| to do nothing?
|
| That's actually the problem! Spoiler: They _don 't vote_
| (enough, compared to older cohorts). Older people are
| generally wealthier, and they also tend to vote in greater
| numbers and for their own interests, but younger people
| don't. It really is tragic, but not for the reasons you
| listed.
| tarsinge wrote:
| > there's a class of landowners who intentionally reject
| rezoning to artificially restrict the supply of homes
|
| I don't understand this, where I live rezoning means your
| land becomes 3x more valuable overnight and every house
| landowner dream of it. Opposition is either sentimental or
| for environmental concerns (which can be justified).
| 88913527 wrote:
| If you'll indulge me, I have a concrete story on this. In
| San Diego County, in the city of Del Mar, there is one
| final plot of 17.45 acres of oceanfront land. What was to
| happen to it? The proposal was the "Marisol Specific Plan".
| It was to developed into a resort, easily a high 9-figure
| project, producing revenue, creating jobs, economic
| activity. When voters unsurprisingly rejected it, the land
| was subdivided into 5 ultra-luxury lots, each going for
| $10-20 million. The inadequate zoning is leaving hundreds
| of millions dollars gone because the land can't be put to
| its full productive use.
| zionic wrote:
| There are no "southern red cities". Every major population
| center is blue, even Alaska.
| 88913527 wrote:
| There are exceptions. In a blue state: you have San
| Clemente and Newport Beach (Orange County), Huntington
| Beach (Los Angeles County). In red states: Bismarck, North
| Dakota (2nd largest city in ND); Provo, Utah; and Cape
| Coral, Florida. and if you dissect further you'll find red
| neighborhoods in blue cities like University Park in
| Dallas.
| danny_codes wrote:
| I don't think this is true whatsoever. Young people are voting
| for progressives, who are running on platforms of expanded
| social welfare and reducing wealth/income inequality. I mean
| look at the last democratic primary super-Tuesday exit polls.
| Ages 18-29, +46 to Bernie. Ages 30-44 +19 to Bernie.
|
| It's not that young people aren't voting for their interests
| (which in my biased opinion is in the best interest for the
| country overall), it's that we don't have the numbers yet. I
| presume the story is similar in local SF politics.
| 908B64B197 wrote:
| > Especially seeing how the local mostly leftist politicians in
| SF have basically helped fuel the crisis even further and
| basically have done nothing. And many neoliberal leftist
| economist and media outlets even defending the status quo
| monetary policy that is clearly behind this wealth divide.
|
| I laugh every time I hear that. Especially proposition 13 which
| is basically age-based redlining.
| nradov wrote:
| I cannot fathom why Millennials of modest means would ever
| choose to live in San Francisco. It's a city run by incompetent
| elitists for the benefit of childless wealthy people. Maybe it
| shouldn't be that way, but that's the reality and it won't
| change any time soon. So why subject yourself to that kind of
| punishment?
|
| It's a big country. There are plenty of cities where it's
| possible to buy a home and start a family on a regular salary.
| Have you been to Cleveland lately?
| reidjs wrote:
| Oh sure, we'd all like to flee to the cleev
| https://www.youtube.com/watch?v=tfAHbZg_Az0
|
| As someone born and raised in the bay area it's not that
| easy. All my friends and family live here. I have a well
| paying job that I like here and I like my co workers. I have
| accepted that for as long as I live in SF, I will have to
| rent. I will never be able to own a home remotely close to SF
| or to my office.
|
| I don't want to just run to a low COL city and start over. I
| would rather fight for lower housing prices so that one day I
| might be able to own a home and start a family where I grew
| up myself.
| nradov wrote:
| Nothing worth doing is easy. My grandparents moved from
| another continent and left all their friends and family
| behind in search of a better life. Sometimes you have to
| leave your comfort zone and take a risk.
|
| It's great that you want to fight for lower housing prices.
| But what happens if you fail? In 30 years if you're still
| stuck renting a tiny apartment will you have regrets? Pick
| your battles wisely.
| shrimpx wrote:
| You can buy a decent starter house for under 100k in
| Mississippi, Missouri, Virginia, Kansas, and a bunch of other
| places. Real estate is mostly only inflated in top cities and
| competitive vacation/retirement towns.
|
| Look at Laurel and Hattiesburg MS for example. Decent towns
| with families, schools, breweries, hipster cafes, largely all
| the jazz people clamor over in expensive towns. And look at the
| real estate prices over there.
| stocknoob wrote:
| I don't know if you're joking, but most people in CA don't
| want to move to places that are still deciding to keep
| confederate monuments in front of courthouses.
|
| https://apnews.com/article/mississippi-referendums-
| elections...
| president wrote:
| I live in CA and have never met a single person who has
| ever given a single thought to the idea of confederate
| monuments. This is an idea spawned by a fringe group and
| amplified by the media for tribal political reasons.
| wallacoloo wrote:
| eh, some truth, but media bleeds into IRL. to the
| contrary, i have met people who care about statues and
| monuments. perhaps somewhat surprisingly, the number of
| retirees around me who have initiated discussion around
| such things (or even taken action like
| parading/protesting local confederate-related statues)
| exceeds the number of millennials who have done so.
|
| but yes, overall only a small proportion of people i know
| really care about these things
| zionic wrote:
| That just quantifies the costs of their political beliefs
| then.
| throwawaygh wrote:
| Yes, political belief is the only possible reason I can
| think of that someone would be weary of moving to a state
| that celebrates the confederacy... no other personal
| attribute could possibly explain that preference... /s
|
| Also, as someone who grew up in the rural midwest: the
| statue thing is kind of silly and a distraction. The real
| problem with the southern midwest is that you get what
| you pay for.
|
| The schools are god-awful; often you can't even buy a
| good education with infinite money. Even the "good"
| schools are only parochially good; transfer them to a
| coast and they're embarrassingly bad.
|
| The local employers don't provide interesting work, and
| professional networking opportunities are niche to non-
| existent.
|
| (Crime too. Contrary to popular perception, the wealthier
| coastal cities have a far better handle on crime at least
| in the areas where wealthy tech workers typically live.
| SF might be an exception, not sure. Thinking mostly of
| the northeast and PNW. In the rural midwest, you'll get
| meth heads with shotguns even in nicer suburbs. Cheap
| housing is a great equalizer, for better and for worse.)
| ransom1538 wrote:
| The wealthy SF landowners are geniuses. They collect billions
| in rent each year - they suck up all those sweet sweet tech
| dollars. All they have to do is show up to city meetings and
| vote down more building (except commercial zoning of course!!).
| SF landlords are super progressive too (lol) -- they want to
| keep that "rent control" going. Rent control ensures no new
| housing, massive demand, no need to renovate, and sky high
| rental prices.
| ec109685 wrote:
| Traffic is horrible in the Bay Area. Is the answer really
| "more people"? If it is, it needs to be coupled with
| infrastructure investment.
| Tiktaalik wrote:
| It's an easily addressable issue. We've had the technology
| since the 19th century, but just as there are the nimbys
| disingenuously working hard to their benefit to ensure that
| new housing for workers isn't created, you have people like
| Elon Musk and others in the car/oil industry working hard
| to defeat rapid public transit and other public works.
| nradov wrote:
| Peter Thiel recognized that problem in 2018 and cut his SF
| Bay Area investments: "One thing I've been thinking about as
| a venture capitalist in Silicon Valley is the vast majority
| of the capital I give to the companies is just going to
| landlords. It's going to commercial real estate and even more
| to urban slumlords of one sort or another."
|
| https://finance.yahoo.com/news/peter-thiel-vast-majority-
| cap...
| ksec wrote:
| Not from US, so forgive me.
|
| >And that to a large extent has shifted my political belief
| away from hard left that I once used to be.
|
| I thought you would be left because you want government
| intervention for the housing market? I know SF has some weird
| rules about something called zoning? But shouldn't you still be
| on the left side of the spectrum?
|
| Could someone ELI5?
| mejutoco wrote:
| I am so confused by this use of political labels. I understand
| your argument, just not the political labels. Not siding with
| any specific label, I just want to make sense of these labels.
|
| I understand that left and right mean very different things in
| Europe or in the US, for instance.
|
| Inequality on access to housing has shifted you away from hard
| left. And neoliberal leftist economists and media are defending
| the status quo.
|
| What are leftist politicians for you? the Democrat party? What
| are some examples of neoliberal leftist economists? I cannot
| think of anything neoliberal that it is not center-right to
| hard-right.
|
| Probably it is because I am not from the US, and would be
| curious to know. To me, hard left is anarchist/communist and
| neoliberals are always right/hard-right/center-right depending
| on how much one likes them :)
| boredtofears wrote:
| Leftist politics in the US is completely dominated at the
| moment by a certain brand of zealous progressive agenda that
| has done very little practically for wealth inequality and is
| solely focused on specific social issues. It still appears
| that neoliberal politics still drive most of the meaningful
| economic agenda on the left. I agree this is not really what
| people usually consider to be the "hard left", but when
| you're essentially left with two choices and one of them is
| leaning so heavily into a particular brand of politics it
| distorts your view of what "hard left" means compared to
| typical political ideologies.
|
| I think your understanding is generally correct, it's
| American politics that is tipped a little bit sideways at the
| moment.
| [deleted]
| mercy_dude wrote:
| Yes I was mostly talking about the US. And at local level.
| Federal govt can do very little if anything to things such as
| zoning laws and nor they should. The example I provided was
| to do with California and it is much like the same way in
| many other parts of the country.
|
| Neoliberal economists would be any mainstream economist who
| are still living in their la la land thinking QE is done for
| greater good of middle and working class and lower interest
| rate has nothing to do with investor class using their
| inflated market value of assets to borrow more and buy more
| assets that in turn also keeps going up. Meanwhile credit
| card interest rates are still averaging 10%+.
| mejutoco wrote:
| Gotcha. Thank you for taking the time to clarify
| hyuuu wrote:
| you are priced out of specific locations, not the whole housing
| market and those people who are pricing you out of those
| locations, they themselves are also priced out from other
| certain high priced locations.
| [deleted]
| mercy_dude wrote:
| This the classic "pack your bag and move" type of argument
| much like "learn to code". For many this is not an option due
| to job, family and a host of other things.
|
| The point in the article I was highlighting was about prices
| outpacing growth. And that's a problem. When you have prices
| doubling almost every 5-10yrs and no chances of slowing down
| then why even work?
| kazen44 wrote:
| Also, in usual capitalistic fashion, it completely removes
| the human aspect of living somewhere. You belong to a
| certain community. People are being priced out of their
| community and social neighbourhood by speculation and rent
| seeking.
|
| This is a deliberate political choice, and it shows,
| especially if we account for the mass individualisation of
| (american) society.
| throwaway984393 wrote:
| I like how when this happens to poor black people, we
| don't care because we middle-class white people deserve
| to live wherever we want. When it happens to middle-class
| white people, suddenly it's unfair.
| closeparen wrote:
| It's not specific locations, it's cities as a whole. There is
| so little urbanism in this country. You've got Manhattan, the
| Loop, and a few dozen downtown blocks across the rest of the
| top ten. Of course they're going to be insanely expensive.
|
| If even one city embraced Manhattanization the way America
| has embraced sprawl for the last 75 years, you could direct
| the complainers there. But there isn't one.
| qdog wrote:
| CA has prop 13 and we currently have incredibly low mortgage
| interest rates. SF has an amplified effect, but housing is
| going up faster than wages pretty much everywhere. Prices are
| up more than 40% in the desirable cities and town outside of SF
| (Austin, TX for example).
|
| I don't see any simple ways to fix this, interest rate hikes
| will slow price growth, but payments will still go up. Some
| incremental changes (additional taxes on empty houses,
| rezoning, etc.) may have small changes, but do not seem likely
| to bring down affordability. Any small dip in affordability in
| the desirable places will likely see more migration there,
| unless we hit a huge recession, which based on my experience in
| 2008, still means most of us will miss out, as the price won't
| dip enough and the major asset holders just get to buy at a
| discount.
| mercy_dude wrote:
| > I don't see any simple ways to fix this, interest rate
| hikes will slow price growth, but payments will still go up.
| Some incremental changes (additional taxes on empty houses,
| rezoning, etc.) may have small changes, but do not seem
| likely to bring down affordability.
|
| That's not how asset owning class uses low interest rate
| environment in their favor. Say you bought a house in SF in
| 2010. Well your market value of the house has already doubled
| if not more. So 5yrs later you borrow against that asset to
| buy another rental unit in even lower interest rate. Which in
| turn has doubled.
|
| Meanwhile if a first home buyer like me wants to get in I
| have to not only have 20% down payment, but also clean credit
| and a secure job. Do I get to use the low interest rate in my
| favor? Let's see credit card interest rates are still 10%+.
| poulsbohemian wrote:
| >I have to not only have 20% down payment, but also clean
| credit and a secure job
|
| Have you talked to a mortgage broker lately? In my locale,
| very few first time buyers are going to be in a place where
| they have to put down 20%. There are so many state programs
| available for first-time buyers and so many different loan
| options. I understand you are in SFO, but a lot of the
| frustrations you are expressing in your posts above are
| very localized to California and to SFO and don't really
| match the left/right politics of the rest of the country.
| qdog wrote:
| I mean for primary residence buyers, payments will still go
| up with interest, even though the asset price increase may
| slow or even decrease in value. So no, low interest rates
| are not really in your favor unless you already own the
| asset and are seeking new financing. Yes, people owning
| units and using them to buy new units while still being
| able to cover all their payments is seems like a problem,
| but it's almost a self-sustaining loop as long as they are
| able to keep increasing rents. It seems like this loop only
| stops in recessions. Some moves to make rents less
| attractive long-term might be helpful, but then you get the
| problem of who builds new housing if there isn't much
| profit in it?
|
| I think phasing out mortgage interest deductions over time
| beginning with a cap would be one positive, but as we saw
| with the recent SALT cap, that effect is mostly overridden
| by other factors at least today.
|
| I don't think there is a single entity or action that can
| be pointed at, there are many inputs, with only recession
| (in one city or the whole country) seeming to have a strong
| enough signal to override all the other inputs for the most
| part. Hiking interest rates to 15% ala the 80's also might
| work, but I don't expect to see anything near that.
| nradov wrote:
| There's a simple solution: move to a less desirable area. But
| for some reason people don't want to compromise and think
| they're entitled to live anywhere they want. I don't get it.
| JamesBarney wrote:
| > And many neoliberal leftist economist and media outlets even
| defending the status quo monetary policy that is clearly behind
| this wealth divide.
|
| I don't think it's clear at all that loose monetary policy
| causes a wealth divide. Most evidence points to the fact that
| the bottom quartile's income is the most sensitive to labor
| market slack.
| paulpauper wrote:
| Correlation does not equal causation. Real estate boomed in the
| 80s and 90s and 2000s despite much higher interest rates.
| anthony_barker wrote:
| No one mentioned that governments benefit it 2 ways.
|
| 1) All the unemployed autoworkers who got automated away can move
| to make something that has had almost no productivity gains
|
| 2) Debt payments by government are basically nill.
|
| Another view:
| https://americanaffairsjournal.org/2021/11/vampires-at-the-g...
| cblconfederate wrote:
| I think it's a generational thing. Old generation wants to sell
| its wealth at the highest possible prices. Newer generations are
| not biting completely (and have no problem living in small
| spaces), hence crypto.
| chrischattin wrote:
| It's not just real estate. It's all assets. This is Finance 101.
| As the risk free rate goes to zero asset prices go to infinity.
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