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Will real estate ever be normal again?

nytimes.com

61–70 of 620 posts

Re: Will real estate ever be normal again?

#61
post #32

Not until zoning or ownership laws change. More people want to live in the places then there are places to live. There are three ways to fix this: incentivize builders to build more places to live, have the government build housing, or penalize investors. Or any combination of the three.

Or tell people no, and be happy with a place that works. Eventually people will leave when they can't be there.

The option of "growing to meet exponential need" rarely, if ever, actually works in the end. By works i mean "leads to an equilibrium that actually is any good"

Usually what happens is people push on creating housing, and think once they've done it, the rest will take care of itself. This is the easy part. The rest is much worse - now you have more people! The density and scale of population will increase until the local governments/etc fail hard enough at providing services, which often happens quicker than one would expect. Being effective at providing public transportation/police/fire/schools/health/etc in a dense, populous area is much harder and more expensive than often seems thought. Especially if you haven't been planning to do it for 50 years and setting yourself up for it. It also requires ever more careful planning as it grows (in how land is laid out, etc), and you will hit tons of problems anyway. For a random example: When your police/fire grows large enough, it ends up with lots of political power of its own.

It's also much harder for governments to stay efficient in spending at all as they grow, making services/etc even more expensive to provide. The places that i knew that were successful at becoming denser were willing to admit this. The ones that were not, often pretend they will make it back in increased taxes on their own, but they never did (and often end up in cycles of tax increase/drops/etc until the infrastructure fails)

Once you are forced to raise taxes/bonds/etc, you end up with a whole host of practical problems (politicians winning on short-term-lower-taxes-long-term-destruction platforms)

This is just a sampling. Overall, it's like scaling anything human. Having a team of 10 works really well. Having a team of 1000 is really hard.

Lots of cities that go down this path end up as basically tax revenue Ponzi schemes - they have to keep growing because they need to keep borrowing against the ever-more-expensive future

In the end, it simply isn't unreasonable for cities to not want to play the game, and to be happy with sustainable size, services, and tax revenue, even if it makes things unhappy for others who want to join in.

Thankfully population growth is slowing down, and we are below replacement rate right now.

Re: Will real estate ever be normal again?

#62
post #14

Earlier quoted context omitted.

I think ppl in your position should either follow the community, and obtain higher pay or relocate in area with people that align with your values. If working 60 hour weeks or reskilling isn’t your cup of tea, that’s fine but we can’t keep everything the same forever.

I don't think it's fair to put the onus on individual people to move everytime they're priced out of a market, especially a market that has been heavily manipulated to benefit the few via lower interest rates and poor zoning laws. You could see this housing crisis coming from years out and the government did nothing but maintain low rates, block multi-unit zoning changes, and allow the wealthy and foreign investors t…

> The real issue is poor and inept leadership.

I'd guess something like 90% of governors are property investors.

Re: Will real estate ever be normal again?

#63
post #32

Not until zoning or ownership laws change. More people want to live in the places then there are places to live. There are three ways to fix this: incentivize builders to build more places to live, have the government build housing, or penalize investors. Or any combination of the three.

here is the problem: single family homes have now been financialized--the corporations have invested in them and will want to maintain the increase in home prices...therefore corporations will do what they have always done to increase the value of their assets--they will buy politicians and get the politicians to pass laws to keep home prices up...such as? Ok, such as passing state and federal laws that make home bui…

I have been in real estate development for quite a few years, and opponents to more housing are never corporations. It is always individual home owners who do not want multi unit housing or smaller housing in their neighborhood (i.e. poorer people) or do not want roads to get more congested, etc. Not once have I seen an agent of a corporation come to a city council meeting and protest against rezoning land for more housing.

Re: Will real estate ever be normal again?

#64
post #60
post #57

Earlier quoted context omitted.

How do you define “protecting” that thing? If it involves, for example, lobbying against high-density housing, that might be part of the problem.

" land, trees, and nice quality living." are mutually exclusive, High-Density housing is terrible and I NEVER want to live in a highly dense urban settings. My home in the suburbs with 1/2 acre lots is FAR FAR FAR too dense for me... I want less density than that, but newer subdivisions are dropping to 1/4 or 1/5 acre lots, it is terrible

And this is why I do not think carbon emissions will or climate change will ever be curtailed barring the discovery of a new emission-less, highly efficient energy source. The effects of anyone who does individually sacrifice will be offset by the plenty who will opt for 1/2 acre or even 1/4 lots and the energy consumption that must follow.

Re: Will real estate ever be normal again?

#65

Earlier quoted context omitted.

How exactly does this work? I thought that the fed controlled interest rates. Under what circumstances could the interest rate rise independently of the fed?

Fed controls only nominal interest rates on treasuries. The real / effective rate is set by the market at auction by adjusting the price on the bonds.

No, no it's not. USD denominated interest rates are whatever the Fed wants them to be. The Fed controls the entire USD yield curve, although that control does weaken a little as maturity goes out into the future, but not more than about 10%.

Treasury auctions are kabuki theater[1]. Thanks to the Primary Dealer system it's impossible for an auction to fail. While the nominal rate may bounce around a few basis points, at the end of the day the Fed absolutely controls rates. They will literally create reserves and lend them to primary dealers at whatever rate is necessary to assure Treasury sells as many securities as it needs to at something near the target rate.

[1] Yes, that does imply artfulness.

Re: Will real estate ever be normal again?

#66

Earlier quoted context omitted.

How exactly does this work? I thought that the fed controlled interest rates. Under what circumstances could the interest rate rise independently of the fed?

Fed controls only nominal interest rates on treasuries. The real / effective rate is set by the market at auction by adjusting the price on the bonds.

Not if they do YCC. Yield curve control. Which they are sort of doing at the tail end of the yield curve. And they did that back in the 40s as well when US had tons of debt from all the spending in the war.

Re: Will real estate ever be normal again?

#67

Earlier quoted context omitted.

How exactly does this work? I thought that the fed controlled interest rates. Under what circumstances could the interest rate rise independently of the fed?

Fed controls only nominal interest rates on treasuries. The real / effective rate is set by the market at auction by adjusting the price on the bonds.

That’s the old world. Now the Fed buys unlimited amount of any securities it cares to. So it can manipulate all interest rates.

Re: Will real estate ever be normal again?

#68

The Fed at this point controls the whole economy and they have two options: 1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets. 2. Do nothing, keep printing. Inflation picks up massively. The economy keeps humming along but young people, including myself, are permanently pr…

the problem is that if inflation continues, then interest rates will go up, whether the fed wants them to or not...once rates go up, money will flow from asset investment to bonds etc...and that will crash asset prices...checkmate...one way or another, asset prices WILL crash

Is this so? The price of other assets going up doesn't change the riskiness of the bank's ability to repossess a home, in the chance the borrower becomes delinquent. You're borrowing money for a physical, durable thing in which the bank retains the deed until the debt is paid off. If the benchmark rate remains low, it's hard to imagine mortgage rates going up due to exogenous factors, or you would have expected us to see that in the past 50 years.

https://fred.stlouisfed.org/graph/?g=ITPc

Re: Will real estate ever be normal again?

#69
post #60

Earlier quoted context omitted.

" land, trees, and nice quality living." are mutually exclusive, High-Density housing is terrible and I NEVER want to live in a highly dense urban settings. My home in the suburbs with 1/2 acre lots is FAR FAR FAR too dense for me... I want less density than that, but newer subdivisions are dropping to 1/4 or 1/5 acre lots, it is terrible

And this is why I do not think carbon emissions will or climate change will ever be curtailed barring the discovery of a new emission-less, highly efficient energy source. The effects of anyone who does individually sacrifice will be offset by the plenty who will opt for 1/2 acre or even 1/4 lots and the energy consumption that must follow.

We can build houses much more efficiently. Build the majority of the house underground and heating and cooling become much less of an issue. We can conserve energy without living in a termite colony.

Re: Will real estate ever be normal again?

#70
I'm no expert, but seems there's some sort of feedback loop going on:

* leverage existing property to get new loan (sometimes at mere 20%)

* rent goes up because "market adjustment"

* first home buyer dreams inches further way since less disposable income & higher initial deposit

* property owners accumulate equity even quicker

At least in NZ, PM Jacinda Ardern said multiple times no one's equity should go negative essentially offering protection to property investors (whose main risk is over-leverage).

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