Will real estate ever be normal again? • Hacker News Board

Re: Will real estate ever be normal again?

#141

Post by arcticbull » Mon, Nov 15, 2021, 2:45 AM UTC

noahtallen wrote: post #138

arcticbull wrote: post #122

Earlier quoted context omitted.

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,…

Part of the problem with the first item you mentioned is that developers don’t really want to build cheap housing (I guess this is an assumption, but it makes sense financially.) They can make way more money catering to the people who can “afford” to build a $500k home, and people who want a very custom design and lots of space. On the renting end, “luxury” apartments will make more money than really basic cheap unit…

It doesn't really matter if you add new stock at the top end or at the bottom end, people from the bottom move up, and make space at the bottom for new entrants. Any new stock you add increases supply, which leads to lower prices across the board.

[edit] and btw, I think builders aren't tripping over their shoelaces to service the low end of the market because they know the city is so aggressively capping how much they can build. This means they will only build the most profitable units, the high end today. But once the high end is saturated, the low end ones will be the profitable ones anyways.

Re: Will real estate ever be normal again?

#142

Post by chii » Mon, Nov 15, 2021, 2:48 AM UTC

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.

rent is often lower, or the same, as the interest payments. The mortgage consists of both interest and principle payments, which is higher, but the principle payments can be considered equity, so it cannot be compared with rent.

Re: Will real estate ever be normal again?

#143

Post by _3u10 » Mon, Nov 15, 2021, 2:51 AM UTC

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 may or may not be but rent is an even worse investment.

Re: Will real estate ever be normal again?

#144

Post by chii » Mon, Nov 15, 2021, 2:51 AM UTC

setr wrote: post #125

mylons wrote: post #113

Earlier quoted context omitted.

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,…

interest payments from the mortgage can be directly compared with rent, but not the principle repayment portion of the mortgage.

> assuming you can put up the standard up-front capital requirements.

which is also a cost - just more difficult to imagine as a cost. This cost is called the cost of capital, and is non-zero. If you take the minimum return, which is the risk-free rate from buying treasuries, this can be considered your cost of capital for this upfront deposit. More, if you consider this capital could be invested in the markets for some risk.

It isn't always clear cut which wins out, mortgage or renting. For the past few decades, mortgages have been winning out due to declining interest rates, but that might not last.

Re: Will real estate ever be normal again?

#145

Post by ab_testing » Mon, Nov 15, 2021, 2:55 AM UTC

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…

Canada already did #2. Average home prices in almost all metro areas are around 10x yearly income. There is no blood on the streets and it is still considered a destination country.

Re: Will real estate ever be normal again?

#146

Post by shephardjhon » Mon, Nov 15, 2021, 2:55 AM UTC

I am surprized no one me tioned we could just limit home ownership to 2-3 for individuals and lets say 20 or so for a company. The actual limits can be decided based on discussion and metrics but just having a limit, any limit could stop companies or rich assholes from buying real estate as "assets" as opposed to a place where people live. Also a limit on just holding property that is meant to be rented out. Either use it, or rent it out to someone who will use it and keep increasing the fine until they rent it out to encourage a real free market.

Re: Will real estate ever be normal again?

#147

Post by listenallyall » Mon, Nov 15, 2021, 2:57 AM UTC

blip54321 wrote: post #121

wombatpm wrote: post #114

Earlier quoted context omitted.

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 reces…

> Anyone who relies on revolving business debt, credit card debt, or other non-fixed-rate debt goes bankrupt.

This is hyperbole. Rising interest rates aren't fun, but they aren't cataclysmic. Rates have gone up and down for decades. Further, if you signal that you're taking the option to raise rates off the table, risk tolerance and asset prices will explode (some would say this has already happened due to Fed signaling).

Re: Will real estate ever be normal again?

#148

Post by _3u10 » Mon, Nov 15, 2021, 2:58 AM UTC

chii wrote: post #142

King-Aaron wrote: post #115

Earlier quoted context omitted.

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

rent is often lower, or the same, as the interest payments. The mortgage consists of both interest and principle payments, which is higher, but the principle payments can be considered equity, so it cannot be compared with rent.

Rent is easily comparable to a mortgage, my old rent is $3750, my new “rent” including property taxes is $3040.

Re: Will real estate ever be normal again?

#149

Post by Plasmoid » Mon, Nov 15, 2021, 2:58 AM UTC

toss1 wrote: post #102

mikem170 wrote: post #82

Earlier quoted context omitted.

I agree. I believe zoning is a big impediment. People wouldn't be priced out of their communities if there was more supply of housing at varying prices. Instead current regulations restrict the supply of housing and seem to prioritizing uniformity and property values.

Right, so destroy the village to save it. >>People wouldn't be priced out of their communities if there was more supply of housing Many of the communities you find attractive would not exist at that level of attractiveness if the supply were massively increased by abandoning zoning. People live in communities and make their sets of zoning regs to design, build, and maintain the quality of life that makes that communi…

Why do you think communities shouldn't change? If the population growth rate is 1.8%, why should a city be able to decide that 0% growth is completely acceptable?

Would you be willing to pay an uncapped land-value tax on your nicer area? A lot of people are vehemently opposed to paying the full externalities of their choices.

Re: Will real estate ever be normal again?

#150

Post by marktangotango » Mon, Nov 15, 2021, 2:58 AM UTC

goodpoint wrote: post #111

sushsjsuauahab wrote: post #56

I don't have any economic theories to offer. All I know is I love my house, with all of its land, trees, and nice quality living. I will protect this thing to my death, because it is so much better than living in an apartment. I don't care if it costs me $4,000 a month.

It's well established that low density housing is completely unsustainable.

I'm curious what this statement is based upon, does anyone have specific references?