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The Shock of Sweden's Housing Market Is Hitting the Country's Currency

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Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#101

Post by christophilus »

eikenberry wrote: post #95
opportune wrote: post #14

When will we learn that a "strong" housing market is not necessarily a good thing? High housing prices are great for those who already owned houses but terrible for everyone else (e.g. the entire generations born after prices became inflated). Not to mention people are greedy and will over leverage themselves when interest rates are good. No country should let the "landed gentry" hold them hostage over interest rates…

> High housing prices are great for those who already owned houses... Not unless you are ready to sell, otherwise it kind of sucks to have your property taxes go up 10-20% every year.

Yeah. This 100%. It's a broken system for everyone except investors (and maybe even for them, ultimately).

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#102

Post by ptaipale »

alkonaut wrote: post #23
moduspol wrote: post #19

Earlier quoted context omitted.

Wow. And I've seen people here (justifiably) roll their eyes over 6 and 7 year auto loans. A 140 year mortgage can't possibly be appreciably different from renting.

> A 140 year mortgage can't possibly be appreciably different from renting. The fact that as a homeowner ("owner") you can deduct interest rates, means that by "renting from the bank" you have a 30% rebate compared to renting from a landlord, and obviously you have no landlord taking a cut on top of that. So apart from the risk of depreciation, people seem to have little interest in owning their homes outright. So pe…

In Sweden, the deduction is more limited; a deduction of 30 % of interest up until 100 000 SEK, and 21 % over that amount.

As nominal marginal tax rates are somewhere in the 40-50 % range, this typically means <15 % actual reduction in taxes.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#103

Post by tdb7893 »

dfhdfhfdh wrote: post #73
baursak wrote: post #17

I don't get it. When prices are high, it's a housing crisis. When prices are going down, it's a housing crisis. It's almost as if news articles just need to be written regardless of the reason.

Maybe housing shouldn't be a market system. Instead, housing should be free and landlords should be abolished.

Would housing choices essentially just be a lottery for who gets which house then?

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#104

Post by phaemon »

staticelf wrote: post #47
wjnc wrote: post #45

Earlier quoted context omitted.

I upvoted. I guess it's the first few words that suggest a racist / popularist post, but it's ontopic IMHO. You point to an influx of people in the age range that usually rents an apartment. Such local equilibria are quite instable. It only takes a few hundred excess renters to destabilize a local (regulated) market for housing. That leads to crowding out where those that usually would rent, but can afford to buy wil…

Well, if you are increasing the population a lot, all of those people are going to need somewhere to live. It isn't really hard to figure that out but most people don't seem to make that connection. Don't understand how it could even be remotely racist or popular. The statistics of housing prices correlates very well with increases in immigration. Of course, correlation does not imply causation but in this case I'm p…

> Well, if you are increasing the population a lot

But you aren't increasing the population "a lot", now are you?

You linked to a graph that shows around 350,000 asylum seekers over 5 years. What percentage of Sweden's population is that?

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#105

Post by mistermann »

samsonradu wrote: post #89
Gustomaximus wrote: post #57

Earlier quoted context omitted.

Homes are important to people and they tend to buy as good as they can afford. When employment is stable and interest rates are low people will spend more because they can and feel safe doing so. Early movers purchase a higher grade of home than they could have previously. Eventually this shifts the market as a whole as income distribution remains stable. Then people buy the same house they would have previously at a…

Isn't it inherently bad to buy "as good as you can afford"? Employment is rarely stable throughout a 30-year period. Shouldn't people be much more careful when maxing out their mortgage relative to 'the good times'?

Stretching as far as you can and then some has been the optimum strategy in Canada for a very long time now.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#107

Post by lisper »

opportune wrote: post #14

When will we learn that a "strong" housing market is not necessarily a good thing? High housing prices are great for those who already owned houses but terrible for everyone else (e.g. the entire generations born after prices became inflated). Not to mention people are greedy and will over leverage themselves when interest rates are good. No country should let the "landed gentry" hold them hostage over interest rates…

> High housing prices are great for those who already owned houses

Not really. Rising prices (not high prices) are great for people holding houses as investments. But for owner-occupied houses, rising prices are as bad for the owners as they are for everyone else.

my wife and I own a house in Northern California, which we bought during the sub-prime crash. Since then it has nearly doubled in price. It is also too big for us, so we'd like to sell it and move to a smaller house. But we can't. Why? Because by the time you factor in:

1. Capital gains tax

2. Real estate agent fees

3. Higher property taxes (even a smaller house costs much more than the prop-13 basis in our current house)

we can't afford to move!

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#108

Post by saosebastiao »

tom_mellior wrote: post #28
opportune wrote: post #14

When will we learn that a "strong" housing market is not necessarily a good thing? High housing prices are great for those who already owned houses but terrible for everyone else (e.g. the entire generations born after prices became inflated). Not to mention people are greedy and will over leverage themselves when interest rates are good. No country should let the "landed gentry" hold them hostage over interest rates…

I agree. The article isn't very clear on what the problem would be, though it does mention deflation. Deflation is bad by axiom, and we must be pathologically afraid of it. If housing prices sink enough, that may mean that the overall inflation rate turns negative, which is deflation, and thus bad. Even if this "bad" thing, in this case, would just mean that people could consume, save, and invest more.

The fact that you take that as an axiom is frightening. Moderate deflation is no more scary than moderate inflation, and the idea that an "overall inflation rate" determines people's behavior is laughably wrong.

I mean, which of the thousands of inflation rate definitions are you talking about? The FRED database tracks 34,000 different series of some 10,000 inflation measures. More importantly, people don't sense overall inflation at all, they make decisions on domain specific inflation. Prices dropping for farm equipment or homes does not mean businesses stop buying computers and homes stop buying washing machines. It is entirely possible for housing prices to tank while prices for nearly everything else increase...in fact, we've already seen it happen.

Think about what you are proposing: you're saying that even if prices are irrational and we are in a bubble, the only response is to maintain those irrational prices for that bubbled item and inflate everything else until we reach equilibrium. That is insane. If we did that, we'd still be trying to catch up with railway mania. And it puts us at far more of a risk of runaway inflation problems than letting housing prices drop would ever put us at a risk of a deflationary spiral.

It's time to start questioning your axioms. Don't get me wrong, there are plenty of blowhard macroeconomists out there that share the idea, but there are far more economists that have far more nuanced views and understanding of inflation and how it really affects people's behavior, and it is nowhere near axiomatic.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#110

Post by bluGill »

samsonradu wrote: post #89
Gustomaximus wrote: post #57

Earlier quoted context omitted.

Homes are important to people and they tend to buy as good as they can afford. When employment is stable and interest rates are low people will spend more because they can and feel safe doing so. Early movers purchase a higher grade of home than they could have previously. Eventually this shifts the market as a whole as income distribution remains stable. Then people buy the same house they would have previously at a…

Isn't it inherently bad to buy "as good as you can afford"? Employment is rarely stable throughout a 30-year period. Shouldn't people be much more careful when maxing out their mortgage relative to 'the good times'?

That depends. Location location location. The right answer changes based on what side of the city you live in. As such nobody can give a definitive answer.

In all but the smallest cities you have options for a different job. They might not be as good, but there is an option. If you lose your job you can find a different job close enough to your current house that you don't have to move.

Remember this is NOT an rational economic problem. There are good reasons to live near by the same neighbors that you know well for years. There are good reasons to live near your family. When you own a house you can make modifications to support your hobbies which in turn make your house a better place for your to live than anyone else. These all mean there are good reasons to accept a job that pays less than you could earn elsewhere and thus stay in the same house. With inflation you can probably afford the house on a lesser paying job after a few years.

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