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Will real estate ever be normal again?

nytimes.com

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Re: Will real estate ever be normal again?

#121

Post by blip54321 »

wombatpm wrote: post #114
uejfiweun wrote: post #45

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…

In the early 80s a 13% mortgage rate was not uncommon. People survived. Very little blood was spilled

There's a world of difference between high interest rates (which are good and healthy) and rising interest rates (which implode the economy).

You gotta look at the derivative.

Rising interest rates are really, really bad. Anyone who relies on revolving business debt, credit card debt, or other non-fixed-rate debt goes bankrupt.

I kinda wish I entered the economy when we still had 12% interest rates. Each time a recession hits, we level it off by lowering them a bit, and we've kinda hit the floor.

I don't think we can get back to 12% interest within my lifetime without some kind of economic collapse or cataclysmic event.

Re: Will real estate ever be normal again?

#122

Post by arcticbull »

uejfiweun wrote: post #45

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…

This is only part of the problem - and a small part of the problem at that.

The real problem as always is zoning. Houses cost roughly the same on a $/sqft basis, adjusted for inflation, as they did in the 1970s. They're more expensive now because outside of town they're twice as big on average [1] - in part due to zoning rules. In town, zoning rules preclude densification necessary for supply to meet demand [2]. And, families are smaller.

Check out Japan housing CPI - a market where supply meets demand thanks to federal zoning rules, and is also centrally banked. Dead ass flat. [3] This chart alone basically debunks the theory the Fed is solely responsible for lower housing affordability.

Zoning is the issue, not the Fed.

[edit] Yes, the fed contributes a little - monthly affordability of a more expensive house is the same when interest rates are lower, but down payments are not. However, if you want to solve the affordability crisis build more houses. Any houses. Now. Compare the Japan housing CPI in [3] to the US housing CPI in [4] and weep. Housing in the US is driving inflation, not responding to it.

[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...

[2] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage

[3] https://fred.stlouisfed.org/series/JPNCPIHOUMINMEI

[4] https://fred.stlouisfed.org/series/CPIHOSNS

Re: Will real estate ever be normal again?

#123

Post by bufferoverflow »

uejfiweun wrote: post #45

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…

We have tons of inflation-proof tools: stocks, gold (to an extent), cryptocurrencies.

Just don't store your savings in cash ever. Ideally, get paid in one of the tools I listed.

Re: Will real estate ever be normal again?

#124

Post by [deleted] »

King-Aaron wrote: post #115
throwvirtever wrote: post #107

Earlier quoted context omitted.

I don't quite understand the obsession with homeownership. If a large enough percentage of people rented from property management companies, there would be more impetus to have strong tenant's rights laws to protect residents, and people would have more flexibility to move around. Moreover everyone would have an interest in increasing supply to keep their own rent down, pushing prices down toward cost-of-materials an…

Unlike paying renting, paying a mortgage is nice because you're paying for something that is eventually going to be yours.

[deleted]

Re: Will real estate ever be normal again?

#125

Post by setr »

mylons wrote: post #113
rootsudo wrote: post #109

Earlier quoted context omitted.

Then you don't have an asset. You paid for the option of living there for the duration of your leas, but you have no control on the property, or your future.

a house isn’t a particularly good investment. it’s just the one everyone, in america, makes because they’re financially illiterate. anyone can buy ETFs now with zero commission and zero gate keeping.

It’s money you have to spend (shelter is non-optional), and mortgage is definitely a better investment than renting (you’ll get at least some of it back on selling, unless it dips very far) whereas rent is guaranteed to be burnt.

And the difference between rent and mortgage as a monthly payment isn’t that far for same-lifestyle, assuming you can put up the standard up-front capital requirements.

As far as I can tell, it’s quite reasonable.

Re: Will real estate ever be normal again?

#126

Post by blip54321 »

throwvirtever wrote: post #107
uejfiweun wrote: post #45

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…

I don't quite understand the obsession with homeownership. If a large enough percentage of people rented from property management companies, there would be more impetus to have strong tenant's rights laws to protect residents, and people would have more flexibility to move around. Moreover everyone would have an interest in increasing supply to keep their own rent down, pushing prices down toward cost-of-materials an…

1) Renters are a captive audience. If you have kids in a school, I can raise rents until I hit your utility cost of moving, which can be high.

2) Home owners are more likely to maintain homes well (and efficiently).

3) We have a nesting instinct. I'm more likely to customize my own home. One I rent is a throw-away.

Re: Will real estate ever be normal again?

#127

Post by paulcole »

mesh wrote: post #117
throwvirtever wrote: post #107

Earlier quoted context omitted.

I don't quite understand the obsession with homeownership. If a large enough percentage of people rented from property management companies, there would be more impetus to have strong tenant's rights laws to protect residents, and people would have more flexibility to move around. Moreover everyone would have an interest in increasing supply to keep their own rent down, pushing prices down toward cost-of-materials an…

It seems pretty simple, I can spend money to rent a place, and after 30 years (rent), have nothing to show for the money I put in, or I can buy a house (mortgage), spend money for 30 years, and then have an asset I own. Not to mention the freedom to do whatever you want to your home / house without having to ask for permission, or being in a position of putting money into an asset that you don't own.

I think people who parrot this line try to ignore the total cost of their mortgage being quite different from the purchase price of their home, property taxes, repairs, etc.

As a lifelong renter, I’ve done quite well by keeping my rent low (my preference is studio/1-bedrooms in relatively dense urban areas) and putting extra money into the market.

30 years from when I started renting, I’ll have quite a lot to show for it!

Housing is an expense to me, not an investment.

Re: Will real estate ever be normal again?

#128

Post by vlunkr »

jschveibinz wrote: post #2

Clickbait title. Article is about the real estate prices in Austin, TX after Tesla announced the move there. Will real estate ever be normal again? I think that what's happening in real estate is perfectly normal from an economics point of view. Mortgage rates are extremely low, more people are moving because of remote work opportunities, and the younger folks wanting to buy homes now outnumber the baby boomers, all…

On top of the things you mentioned, the pandemic caused supply shortages, meaning new development was slowed at a time when it should have accelerated. Also, I don't have evidence for this, but there seems to be phycological impact where people really want what they can't have, and are willing to bid more, and go into more debt than they would in normal circumstances.

Re: Will real estate ever be normal again?

#129

Post by A4ET8a8uTh0 »

Spooky23 wrote: post #105
uejfiweun wrote: post #45

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 die was cast for option 2 30 years ago. Once policy flipped to “we will provide capital to prevent bad things”. Half the economy is based on real estate… people building buildings to avoid taxation (if you have $) and borrowing against equity (joe homeowner). You cannot break equity values without breaking the economy. The people who are getting screwed are the same people who have been getting screwed since the…

In retrospect, it rings true. I think I had my eyes opened during 2008 crisis and FED was effectively buying everything thrown at it. I remember thinking how can government own its own bonds?

Re: Will real estate ever be normal again?

#130

Post by lotsofpulp »

DannyBee wrote: post #94
lotsofpulp wrote: post #64

Earlier quoted context omitted.

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.

Why is the right answer to increase the population to unsustainable levels, try to make it up with increased density, and then blame the people who want something different? You do realize that densifying will not in fact, fix the problem either, it only buys you some time, at the cost of different resources.

>Why is the right answer to increase the population to unsustainable levels, try to make it up with increased density, and then blame the people who want something different?

I did not mean to imply that population can be allowed to grow uncontrollably and still be able to accomplish curtailing climate change. Both densifying and population control and specifically reducing consumption per person, which is part of densifying) are necessary.

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