There is more to high house prices than constrained supply • Hacker News Board

Re: There is more to high house prices than constrained supply

#181

Post by cynicalkane » Sun, Nov 25, 2018, 2:19 AM UTC

rsync wrote: post #91

tonyedgecombe wrote: post #74

Earlier quoted context omitted.

Yes, we could be in for a lot of pain if inflation and interest rates rise over the coming years.

"Yes, we could be in for a lot of pain if inflation and interest rates rise over the coming years." This is true, but I think unlikely ... All macro trends - especially demographics and birthrates - point to large deflationary headwinds. The little bit of inflation that we experience currently is the result of massive manipulations like quantitative easing and related policies. Just look at the price of oil ... even…

I’ve noticed with doomsayers it’s always deflation or hyperinflation. It never occurs to them that the Fed can do something that’s in between the two, such as what they’ve been doing for almost forty years since Volcker stamped down inflation.

Central banks in practice can print as much or as little money as they want. In the third world, they often do. Well-functioning banks like those we have in the Western world can do better, such as the way Iceland was able to deal with their entire financial system collapsing in one day. But it’s always intrigued me the way people talk about QE as though there’s something artificial. Artificial is exchanging pictures of George Washinton for goods and services. Everything else is an implementation detail.

Re: There is more to high house prices than constrained supply

#182

Post by titanomachy » Sun, Nov 25, 2018, 2:37 AM UTC

djrobstep wrote: post #167

CalRobert wrote: post #156

Earlier quoted context omitted.

I just agreed to buy a house. It's very cheap. It's very small and strange, so thankfully banks wouldn't give a mortgage on it. It was built around 1800, most likely when several people nearby got together and gathered a lot of stones to erect walls, and peat from a nearby bog and oat straw (which was grown locally) to make a roof. Over the subsequent hundred years it had a couple rooms added until it reached its cur…

> Why can't I just gather materials and build my own house? Indeed. This is why discussion of "supply" misses the point. - Many people would quite happily build their own house in the middle of Central Park. But they cannot, because government intervention prevents them. - Many homeless people would happily sleep in unused climate-controlled office buildings at night, but cannot, because government intervention preve…

Are you suggesting that anyone who wants to should be permitted to build a house in Central Park? And that the "government" is unreasonable for preventing them from doing so?

Re: There is more to high house prices than constrained supply

#183

Post by smileysteve » Sun, Nov 25, 2018, 2:59 AM UTC

noitsnot wrote: post #106

phkahler wrote: post #13

Home prices vary inversely with interest rates. Here's how that works: 1) person tells bank they'd like a mortgage to buy a house. 2) banker asks for info on income, expenses, etc. 3) banker estimates persons maximum monthly payment. 4) banker figures out max loan amount based on #3 5) buyer is encouraged by everyone to spend the full amount from #4 Everyone - the seller, their agent, your agent, the bank, and maybe…

I question it because this is how our worked for me. Maybe other people want something they can barely afford most of the time? 1. I go to banker for mortgage. 2. Banker asks how much I would like to spend and gets financials. 3. Approved 4. I go to real estate agent and say this is what I was approved for. Never was there any pushback. I was far below my max limit.

Most people seem to do #4 first; which includes a "how much do you want to spend" but then is easily passed to "how much can you afford" then to 1,2,3.

Re: There is more to high house prices than constrained supply

#184

Post by BoiledCabbage » Sun, Nov 25, 2018, 3:00 AM UTC

RA_Fisher wrote: post #177

space_fountain wrote: post #129

Earlier quoted context omitted.

I don't understand how that would work. Are you saying the fed printing money has meant that things like Bitcoint have gone done in value? Shouldn't it be the opposite since there's more or less a fixed supply of Bitcoin? Or are you saying that Bitcoin went up because they printed money and is now falling again as people get used to the increased monetary supply? That doesn't make sense to me either as I've never hea…

I'm saying this one, > Or are you saying that Bitcoin went up because they printed money and is now falling again as people get used to the increased monetary supply It's pretty amazing, but it's true. The Fed can alter the countable Dollars in existence ("money supply"). They have a gov granted monopoly on 'em.

Yah this is ridiculous - 99% of the price change in bitcoin is entirely unrelated to the money supply. At most 1% and almost certainly significantly less is related to it. Bitcoin's price change is due to speculation plain and simple.

There is a good amount of what's posted here about the financial system that is true, and a good bunch isn't.

Bitcoin has gone up thousands of percent in a few years, gold has barely moved. Trying to claim Bitcoin's movement is due to money supply reasons makes zero space.

Re: There is more to high house prices than constrained supply

#185

Post by mikekchar » Sun, Nov 25, 2018, 3:02 AM UTC

charlesdm wrote: post #117

mabbo wrote: post #20

Earlier quoted context omitted.

> Ultimately your payment is determined in step 3 and has nothing to do with interest rates. This presumes a single purchase. You've got to go 'macro economic' to see where this breaks down. When prices start rising because of increased max loan amounts, you get things like bidding wars. Toronto has been terrible for those in the last 5 years. Both the bank and the seller win when people start paying (and borrowing)…

Until the music stops. See how much those condo's sell for during the next downturn, if you can even sell them.

If interest rates go up causing people not to be able to afford their payments, those condos will sell -- after the mortgages have been foreclosed. Was in London in 1992, just before the pound was removed from the European exchange rate mechanism. Very instructive.

Now is a particularly dangerous time to overextend yourself on a mortgage. For any realistic scenario, interest rates will never be lower than they are now. People ridiculously short terms on their mortgages (like 5 years or less). On top of that they are encouraged to take floating rates to shave a little bit off. If you end up with $1 million in debt and the interest rate jumps up to 5% (or 10%... or like London at the time I was there -- 18%!) what will you do? Of course you will have no choice but to default on your loan. House goes into a fire sale, but nobody can afford it with the higher rates, so it's sold for 10% or 20% or even 30% less than the original mortgage... And now, that's the price of houses -- Virtually everybody is more than $100K underwater at that point meaning that if you miss a payment, personal bankruptcy is probably your only hope.

Of course, it may not happen in our life times. That's the tricky bit.

Re: There is more to high house prices than constrained supply

#186

Post by snidane » Sun, Nov 25, 2018, 3:04 AM UTC

paulddraper wrote: post #98

Retric wrote: post #68

Earlier quoted context omitted.

That’s not just a question of loans. Schools can always discount prices down to what people can pay. So, they charge families making twice as much more money each year.

It's insane what schools can get away with for price discrimination. Remember the uproar over Orbitz (and others) price discrimination based on Mac/iOS usage? [1] Schools have been doing the same thing in broad daylight for years and years with far greater consequence, basing their price on your parent's income levels.* And near zero public blowback. It's confusing. * This is all done through school scholarships, but…

Why isn't there any public blowback regarding unequal pricing for public goods and services? They are mostly funded from income taxes which are not proportional to the amount of service thr payer gets at all.

Property taxes would actually be different. The more you own, the bigger the effort the state has to gear towards you to guarantee you your ownership. Laws, law enforcement, judges, fire department in case it catches fire etc.

Income taxes are the largest most discriminating schemes ever.

Re: There is more to high house prices than constrained supply

#187

Post by conanbatt » Sun, Nov 25, 2018, 3:13 AM UTC

BoiledCabbage wrote: post #184

RA_Fisher wrote: post #177

Earlier quoted context omitted.

I'm saying this one, > Or are you saying that Bitcoin went up because they printed money and is now falling again as people get used to the increased monetary supply It's pretty amazing, but it's true. The Fed can alter the countable Dollars in existence ("money supply"). They have a gov granted monopoly on 'em.

Yah this is ridiculous - 99% of the price change in bitcoin is entirely unrelated to the money supply. At most 1% and almost certainly significantly less is related to it. Bitcoin's price change is due to speculation plain and simple. There is a good amount of what's posted here about the financial system that is true, and a good bunch isn't. Bitcoin has gone up thousands of percent in a few years, gold has barely mo…

But stocks have gone down considerably also. There are many things that cause volatility in crypto, but bear in mind stocks lost more than 2 trillion dollars in october. Several times the entire "market cap" of BTC.

Re: There is more to high house prices than constrained supply

#188

Post by conanbatt » Sun, Nov 25, 2018, 3:16 AM UTC

mattm wrote: post #51

phkahler wrote: post #13

Home prices vary inversely with interest rates. Here's how that works: 1) person tells bank they'd like a mortgage to buy a house. 2) banker asks for info on income, expenses, etc. 3) banker estimates persons maximum monthly payment. 4) banker figures out max loan amount based on #3 5) buyer is encouraged by everyone to spend the full amount from #4 Everyone - the seller, their agent, your agent, the bank, and maybe…

It's crazy how this isn't more common knowledge that the Economist needs to write an article about it. We're also seeing the same thing recently with tuition prices. There is more money available for student loans so schools just jack up the tuition to meet the supply of money available.

Its just that that's not how markets work. Prices go down in a competitive market ,and they go down over time. Cases where it doesn't go this way are usually monopolistic/rentist positions.

Re: There is more to high house prices than constrained supply

#189

Post by djrobstep » Sun, Nov 25, 2018, 3:41 AM UTC

titanomachy wrote: post #182

djrobstep wrote: post #167

Earlier quoted context omitted.

> Why can't I just gather materials and build my own house? Indeed. This is why discussion of "supply" misses the point. - Many people would quite happily build their own house in the middle of Central Park. But they cannot, because government intervention prevents them. - Many homeless people would happily sleep in unused climate-controlled office buildings at night, but cannot, because government intervention preve…

Are you suggesting that anyone who wants to should be permitted to build a house in Central Park? And that the "government" is unreasonable for preventing them from doing so?

No, I'm saying that the problem isn't "supply", but that access to existing supply is violently (and unevenly) restricted.

I'm interested in why you put government in quote marks. Do the cops who prevent people engaging in construction in Central Park not work for the government?

Re: There is more to high house prices than constrained supply

#190

Post by joejerryronnie » Sun, Nov 25, 2018, 4:11 AM UTC

gammateam wrote: post #144

RA_Fisher wrote: post #123

Earlier quoted context omitted.

Close! The Fed printed many more dollars. Society gradually learns to revalue things and it starts with assets. The same reason Bitcoin and liquid assets are falling, the Feds destroying dollars. It's not that these things are falling but that USD are becoming more scarce.

Almooooooost The fed printing more dollars is done in a way designed to push people into riskier products. The literal point is so that people put their money into the economy instead of parking it in a savings account. So even though your favorite personal finance guru is having you celebrate 1.75% in an Allied Savings account in exchange for referral commissions, the point is for that to be an unattractive use of y…

I was with you until you mentioned crypto in the same sentence as market forces, as if the price of bitcoin or any other crypto currency is due to any factor other than rampant speculation (or blatant price manipulation). At this point, I look at die-hard crypto converts the same as evangelical Christians. Not that either are bad, they just believe in made up things.