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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?

#371

Post by neilparikh »

RappingBoomer wrote: post #51
jedberg wrote: 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…

> single family homes have now been financialized--the corporations have invested in them

Single family homes have been financialized for decades, well before corporations started investing in them. And corporations own less than 1% of the single family housing, so not enough to make a difference.

> they will buy politicians and get the politicians to pass laws to keep home prices up

Politicians aren't listening to corporations when they pass laws to keep home prices up and keep supply down; they're listening to the "average homeowner", because that's the much bigger political bloc (> 50% in many cities), compared to a few corporations. If corporations had much influence, we'd have a lot more construction years ago when corporations didn't own many SFH, since many (like developers) do want more construction.

Re: Will real estate ever be normal again?

#372

Post by thomasedwards »

drdec wrote: post #173
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…

Inflation can be good for young people. If you really think there will be significant inflation, go buy a house, borrow more than you are comfortable with it necessary. Inflation will make the debt easier to deal with in time.

This is borderline romantic at this point. What bank do you think would ever possibly agree to this? Most people can’t even prove to their banks that they can afford a mortgage that’s less than the rent they’re currently paying.

Re: Will real estate ever be normal again?

#373

Post by PeterisP »

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.

Quite often the landlord will just be paying off an equivalent mortgage, and price the rent as the mortgage payments + maintenance + profit. In areas where living space is in demand and people are building or buying units that were not rentals to rent them out, the rent will be strictly higher than the mortgage including the equity-building principal part.

Re: Will real estate ever be normal again?

#374

Post by thomasedwards »

alexose wrote: post #74

I know this may be sacrilege to some, but: Consider moving to a less desirable place if you can. I got priced out of my hometown of Seattle. So I moved to a small town in rural Oregon and I couldn't be happier. The combination of spending comparatively little on housing + a tech salary is hard to beat. I have my own shop! It feels like freedom, even if it comes at the cost of being near my extended family.

Just need to convince all my life-long friends to move with me and this sounds like great advice!

Re: Will real estate ever be normal again?

#375

Post by redis_mlc »

A4ET8a8uTh0 wrote: post #129
Spooky23 wrote: post #105

Earlier quoted context omitted.

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?

> I think I had my eyes opened during 2008 crisis and FED was effectively buying everything thrown at it.

I haven't looked at the US in detail, but what you wrote is literally true for Japan - the govt. owns around 80% of any capital market there.

It's valuable to look at what went wrong in Japan so other countries can avoid that situation. When your own govt. has to buy company paper, it means that paper is not worthwhile for the private sector to buy - that's the worst kind of inflation (or deflation) imaginable.

There's a similar but mirror problem of China listing 1,000 companies plus bonds on US capital markets with no intention of ever providing accounting data or making bond holders whole.

See the ongoing Evergrande debacle, where only domestic holders get compensated, while over 80% of the bonds were floated internationally (since Chinese institutions wisely didn't want the risk exposure.)

Re: Will real estate ever be normal again?

#376

Post by sokoloff »

runarberg wrote: post #337
TulliusCicero wrote: post #193

Earlier quoted context omitted.

> 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.) This is like saying that Toyota would rather sell Lexuses than Camrys. Yes, it's true, but they sell Camrys anyway. Why? Because the market for luxury is only so big. They can make more money total addressing other parts of the market. So…

This is a poor analogy. People rely on cars way differently then they rely on housing. If the only car you could buy was a Lexus, you might stretch you budged, take out a big loan and buy one, or you might simply not buy a car, get a bicycle instead, take the train, a cab, or pay a coworker to carpool. Housing doesn’t give you this option. If you don’t want to be homeless you may be able to rent, but that is pretty e…

It seems to me like your list has analogs in housing without squinting too hard: spend more of your budget on housing, get a mortgage (big loan and buy one), get a smaller place (bicycle), rent a place (train), or move in with roommates (carpool).

Re: Will real estate ever be normal again?

#377

Post by lmm »

option_greek wrote: post #367
lmm wrote: post #342

Earlier quoted context omitted.

They invest in housing specifically because there's a bunch of tax avoidance loopholes for small-time landlords. There's nothing wrong with honest investing, but tax breaks are for leeches.

If tax breaks are there to be availed, why wouldn't anyone avail them. Does anyone pay more tax than they are legally obligated to ? It doesn't make much sense because the house prices already account for tax breaks, low interest rates and high rents. If one is to voluntarily to reduce rent or pay more tax or take higher interest loans, they would just be making losses and won't be in business for long. Many of these…

The tax breaks are popular because they're advertised as making it easier for people to buy homes; in fact as you say they get priced in and so end up pushing up prices and making it harder for people to buy homes.

"No sane person would voluntarily refrain from exploiting tax loopholes" is the same kind of argument as "no sane person would voluntarily spend money to avoid damaging the environment". In fact there are plenty of people with a decent moral compass who do exactly that.

Re: Will real estate ever be normal again?

#378

Post by neilparikh »

marktangotango wrote: post #150
goodpoint wrote: post #111

Earlier quoted context omitted.

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?

In financial terms:

- https://www.strongtowns.org/journal/2021/8/4/the-question-ev...

- https://www.strongtowns.org/journal/2020/11/11/poor-neighbor...

This series goes into more detail about the unsustainable aspect specifically: https://www.strongtowns.org/the-growth-ponzi-scheme

Re: Will real estate ever be normal again?

#379

Post by sokoloff »

pigscantfly wrote: post #290
saghm wrote: post #270

Earlier quoted context omitted.

> 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 I could definitely see that being how it works in a lot of cases, but it seems like a stretch to assume that's some sort of natural law of prices. If I have a market of te…

The price of a house is not fixed. Likewise, in your example, you would have to lower the price from $10 to sell your goods.

If they priced at $6, they’d sell 5 units for $30 and 5 people would still be unable to afford to buy housing while the seller held onto 5 more units waiting for another person to come along with $6. If they priced at $7, they’d sell 4 units for $28, which still might be better for them.

This might not be that far off from what’s happening.

Re: Will real estate ever be normal again?

#380

Post by polskibus »

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…

Fed printing operation is affecting the whole world, not just USA. Because international trade is denominated in dollars, every other country is priced out by USA when buying something just because they are farther from the main printer. IMHO, there will be bloodbath with p.2 too.
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