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This real estate bubble won't pop

jaredabrock.substack.com

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Re: This real estate bubble won't pop

#81

Post by yuliyp »

MrMetlHed wrote: post #27
yuliyp wrote: post #18

Earlier quoted context omitted.

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.

Sure they can factor it in to the prices they charge, but it'll serve to make buying more attractive as an option on a relative basis, which will make it harder to make money buying and renting housing out.

Re: This real estate bubble won't pop

#82

Post by thaumasiotes »

seibelj wrote: post #47
thaumasiotes wrote: post #12

Earlier quoted context omitted.

> The price of the average house in the USA is based primarily on the government-guaranteed 30 year fixed rate mortgage. For a given interest rate and income, the house will cost exactly the maximum amount of loan the borrower can get. This implies that very poor people can buy houses for very cheap. The price of a particular house is not set by reference to the person purchasing it. The price comes first, and the bu…

If a buyer has $100k income and ~75k post tax, then they will be able to afford (at most) $45k per year out of pocket, or ~$2k per month. Based on the interest rate, you can work backwards to see the house they can afford, and the people buying at that price point will all have similar incomes.

> and the people buying at that price point will all have similar incomes.

This isn't true.

Re: This real estate bubble won't pop

#83

Post by dragonwriter »

refurb wrote: post #58
zz865 wrote: post #35

At least the US had a small housing crash in 09/10, most of the rest of the world hasn't seen that so its been 3 decades of non-stop boom. It has to add badly. I thought the baby boomers retiring would cause a lot of downsizing but that just hasn't happened.

Exactly. I'd say the US housing market has less risk than other countries. Canada barely saw a blip during 2008. The average house price peaked at over $700,000 this summer. That's not Toronto or Vancouver, that's Canada as a whole , including places like god damn middle of nowhere BC. It did drop to the mid-600's after that. In the mean time the US average house price went from mid-$200k to mid-$300k over the past f…

> In the mean time the US average house price went from mid-$200k to mid-$300k over the past few years.

The median sales price. But this doesn't mean home values went up that much, and if you look at home value measures, they went up less. Median sales prices went up more because of a shift of which homes were actually moving on the market.

Re: This real estate bubble won't pop

#84

Post by vineyardmike »

dionidium wrote: post #4

> 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.

> we've way under-built, then you don't need any other explanation

Not only that, but the other explanations become suspect. Eg. Is it true that corporations are going to own every home and turn it into vacation rentals? Obviously not, most places aren't that desirable for tourists, and the more competition, the lower the price, so the lower the return, so the lower the value as a rental. Really this goes back to under-built too -> 1. people want to vacation at location X. X doesn't have enough beds for residents and tourists. Solution? More places for everyone by building to meet demand.

Re: This real estate bubble won't pop

#85

Post by vineyardmike »

TMWNN wrote: post #75
refurb wrote: post #58

Earlier quoted context omitted.

Exactly. I'd say the US housing market has less risk than other countries. Canada barely saw a blip during 2008. The average house price peaked at over $700,000 this summer. That's not Toronto or Vancouver, that's Canada as a whole , including places like god damn middle of nowhere BC. It did drop to the mid-600's after that. In the mean time the US average house price went from mid-$200k to mid-$300k over the past f…

>In the mean time the US average house price went from mid-$200k to mid-$300k over the past few years. This is also why Canadians continue to flock to the US. They get higher salaries and lower housing cost. Further, while it's impossible in Canada to reach the top of one's profession without living in Montreal, Toronto, or Vancouver (add Edmonton and Calgary if in energy), it's entirely possible to reach the top of…

> This is also why Canadians continue to flock to the US. They get higher salaries and lower housing cost

As an American, I would love to move to Canada, but this is a pretty bad combo which makes it hard to justify.

Re: This real estate bubble won't pop

#86

Post by vineyardmike »

thaumasiotes wrote: post #80
drfxyjhdyfrhgc wrote: post #50

Earlier quoted context omitted.

>The price comes first, and the buyer second. The price is determined by the intersection of supply and demand. With a bull market in real estate, demand is greater than supply. Buyers have a greater effect on price than sellers. In the extreme, market prices converge to the maximum loan as GP described. In practice, people with higher incomes, liquid investments, or previous home equity can out bid individuals who a…

> The price is determined by the intersection of supply and demand. With a bull market in real estate, demand is greater than supply. These two sentences cannot simultaneously use the same meanings of the words "supply" and "demand". In the sense of supply and demand required by the first sentence, the second is gibberish. > In the extreme, market prices converge to the maximum loan as GP described. What is the maxim…

> Different people can obtain different quantities of financing.

And the people that can obtain the most get the best houses, and the people that can get a little bit less get the next tier of houses... until no houses remain (or no buyers).

Here in seattle (for example) we have a lot of SDEs making ~150k. A mortgage company will give you like 500-750k mortgage for that income. Maybe 1M if you have a couple with that income each. Most houses in areas where software engineers want to live all start at 650-700k for decent homes. Because that's the top end of what the buyers can afford, so that's what sellers ask, knowing there is a cohort of buyers that can afford that as a minimum buy price.

Re: This real estate bubble won't pop

#87

Post by vineyardmike »

paulpauper wrote: post #26
tomrod wrote: post #2

Not 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.

> I don't see political instability ever being much of a problem.

Constantly in the political sphere are candidates promising to forgive tuition debt because its so crazy, and politicians promising the government will cover healthcare because its so crazy.

We're not at political instability, but I think we're crossed over into "politicians have to solve this not because its a governments responsibility, but because people can't solve it so they're asking politicians" which is often the first step to instability.

Re: This real estate bubble won't pop

#88

Post by __john »

smnrchrds wrote: post #67
__john wrote: post #52

Earlier quoted context omitted.

IIRC 15% for Campbells Tomato Soup. https://politicalcalculations.blogspot.com/2020/01/the-price...

Eyeballing the values on the graph, it looks like the price increase is around 4% YoY between 2000 and 2020, from ~0.40$ to 0.85$. If it were 15%, it would have reached 6.50$ in 2020.

My mistake, I linked the wrong thing. Here is the right one https://politicalcalculations.blogspot.com/2021/01/the-price... .

Re: This real estate bubble won't pop

#89

Post by RappingBoomer »

baron816 wrote: post #78
resonantjacket5 wrote: post #8

The author lists every reason under the sun while missing the most important one: zoning or aka restricting buildable land that is causing the housing shortage

There’s a whole lot of suspicion that these kinds of zoning laws that are upheld by leftists are cynical—they really just want to protect their property prices. But I think the left really believe what they are doing in blocking liberalization is good for communities. They’ve gotten into this mode of thinking that markets can’t solve problems of resource scarcity. Markets aren’t perfect, but one thing they surely can…

yes, but also environmental regs are used this way

Re: This real estate bubble won't pop

#90

Post by seanmcdirmid »

larsiusprime wrote: post #45
brandur wrote: post #22

Earlier quoted context omitted.

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).

Henry George's Land Value tax would be a much easier and simpler solution that would ultimately be more effective than all the stuff this guy is proposing. The reason house prices are going up is because land values are going up, and the reason land values are going up is because there's only so much land (by which I mean locations) in the world, particularly in places where people want to live, and as the population…

Pure land taxes make it difficult to fund infrastructure that scales with population (eg schools). The only way that a land use tax could work is to either fund population based services differently or just assume that all land is used for high density apartments.

Property tax and land use taxes do make speculation more expensive. In countries that lack property tax (eg China), speculation is much more of a problem than countries that do have such a tax.

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