For over a decade pundits have been calling for the housing market to fall, yet prices keep going up to no end. Even Covid could not derail it. Although homes are more expensive than ever before , thanks to historically low 30-year mortgage rate and low inflation, real estate is probably a better investment now than ever before, although the down payment is more expensive. But despite this, the returns are very good, assuming you can afford the downpayent. One thing I have observed reading these articles is that it's way easier to explain why prices keep going up than propose any viable solutions. I think the best answer is building outward, expand the economy outward.
This real estate bubble won't pop
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Re: This real estate bubble won't pop
#22One aspect of articles like this that I've noticed is the absolute certainty the author seems to have that these terrible outcomes are inevitable, with no expression of a confidence interval or possible less world-ending alternatives. I just... can't take articles like this seriously. It's the political equivalent of gore porn, and it feels like a waste of time to think about. When Nassim Taleb wrote about "Black Swa…
I would suggest reading until the end. The author makes a number of recommendations on how this outcome can possibly be avoided (see header starting with "The solution is simple" and all the way through until the end of the piece).
Re: This real estate bubble won't pop
#23> 5. Housing construction isn’t keeping up This is sufficient to explain why prices are much higher than they used to be. All the other stuff is window dressing for things the author already believes about the world. Once you've admitted that we've way under-built, then you don't need any other explanations.
Which is a direct result of restrictive federal lending policies, which make it difficult for builders and investors to finance building rentals or spec-houses.
It all goes back to Dodd-Frank. "Fixing" one regulation with another just makes unintended consequences more likely.
Re: This real estate bubble won't pop
#24I've always thought the solution to this was exponentialy increasing property taxes beyond the first property you (or whatever legal entity you create to horde properties) own. I'm dumb, so I'm sure there are reasons this won't work, but it seems like it should.
Well apartment buildings is one. Is rented out real estate really ‘hoarded’?
It seems like if it's zoned as a single-family home or residential or whatever and you're not a single family it's hording. I'm willing to be talked out of that. Seems wrong to have to compete with a corporation to buy a house.
Re: This real estate bubble won't pop
#25For over a decade pundits have been calling for the housing market to fall, yet prices keep going up to no end. Even Covid could not derail it. Although homes are more expensive than ever before , thanks to historically low 30-year mortgage rate and low inflation, real estate is probably a better investment now than ever before, although the down payment is more expensive. But despite this, the returns are very good,…
> thanks to historically low 30-year mortgage rate and low inflation, real estate is probably a better investment now than ever before
Would an investor taking advantage of those low 30 year mortgages prefer low inflation or high?
It seems to me they prefer high. They pay the mortgage back in future dollars which are worth less.
Re: This real estate bubble won't pop
#26Not a bad overview, but misses some things (1) political instability (2) $10M/home as sticker price wouldn't happen. Apartments and row homes would be more common substitutes (and already have sopped up demand in the starter home markets) (3) what inflation measures show 10% inflation?
5-10% for many things: tuition, healthcare, cars, homes, transportation, etc.
I don't see political instability ever being much of a problem. Trump was considered 'unstable' by pundits yet prices surged during his term.
Re: This real estate bubble won't pop
#27Earlier quoted context omitted.
LLCs are cheap. It's not uncommon to form separate holding companies for each property. Not impossible to write a law that pierces the corporate veil for taxation purposes, of course.
Doing it in reverse (give a credit / deduction against real estate taxes for an individual who owns and lives in their own home) works fine.
Wouldn't the corporation just factor in the credit loss as a cost of doing business and adjust the rent accordingly? Seems better to stop them from owning more than a few properties to begin with, but I suppose both would be cool with me.
Re: This real estate bubble won't pop
#28I've always thought the solution to this was exponentialy increasing property taxes beyond the first property you (or whatever legal entity you create to horde properties) own. I'm dumb, so I'm sure there are reasons this won't work, but it seems like it should.
This would just get passed on to the renters.
Re: This real estate bubble won't pop
#29I've always thought the solution to this was exponentialy increasing property taxes beyond the first property you (or whatever legal entity you create to horde properties) own. I'm dumb, so I'm sure there are reasons this won't work, but it seems like it should.
This would just get passed on to the renters.
Eventually an exponential-style tax would be too prohibitive for them to buy the nth house and they'd have to tap out, no? Can't pass off those costs forever, eventually it's too much for even the most well-off renter.
Re: This real estate bubble won't pop
#30For over a decade pundits have been calling for the housing market to fall, yet prices keep going up to no end. Even Covid could not derail it. Although homes are more expensive than ever before , thanks to historically low 30-year mortgage rate and low inflation, real estate is probably a better investment now than ever before, although the down payment is more expensive. But despite this, the returns are very good,…
> thanks to historically low 30-year mortgage rate and low inflation, real estate is probably a better investment now than ever before Would an investor taking advantage of those low 30 year mortgages prefer low inflation or high? It seems to me they prefer high. They pay the mortgage back in future dollars which are worth less.
Yes. With enough inflation your house would become worth 10x and your mortgage now represents at most 10% of the new value. Fixed rate leverage is a bet that inflation is understated.