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Will real estate ever be normal again?

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501–510 of 620 posts

Re: Will real estate ever be normal again?

#501

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…

There was massive inflation in the 70ies and it appears that what you describe hasn't happened. In fact, at least in theory inflation decimates the savers and helps the borrowers (well, if you borrow before it really picks up I guess).

Also, housing-to-income ratio in the USA is (used to be?) one of the lowest in the developed world. Housing is relatively cheap, including in many non-depressing places with jobs (e.g. Chicago, SLC or San Antonio, of the ones I know thru someone who lives/moved there)

Re: Will real estate ever be normal again?

#502

Earlier quoted context omitted.

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.…

If an economy is booming in an area, and people keep trying to move there, that's a sign that the metro is doing something right, and that it's desirable. Forcing the government to get in the way and tell people not to go where they want to go is stupid and exclusionary. It's "I'm in, now shut the gates on everyone else". Like, how is indulging NIMBY attitudes useful or productive at all? It means less freedom for pe…

"If an economy is booming in an area, and people keep trying to move there, that's a sign that the metro is doing something right, and that it's desirable. "

The latter is true, the former is not necessarily. It's like saying "if a company succeeds, they are doing something right". It's never that simple, and lots of things that are not controlled by the company or city (we'll just sum them all up as "luck") play a serious factor.

"Forcing the government to get in the way and tell people not to go where they want to go is stupid and exclusionary. It's "I'm in, now shut the gates on everyone else".

Again, the former is false, the latter is true. You have this backwards - the governments aren't telling anyone anything. They are trying to maintain what they have, at a scale they can do. They are being forced to scale in ways they don't want and don't think they can make work instead.

Keep in mind your latter is applicable to other situations as well. "US/China/etc got big by horribly abusing the environment, but nobody else should be allowed to do it". They are in, now shut the gates on everyone else is literally true there. Nobody argues this is the wrong answer, which is the point. Shutting the gates, often portrayed negatively in this situation, is not necessarily the wrong answer to situations at all!

Beyond that, framing it this way is just odd. Managing and keeping a place of 10,000 in working order, and effectively serving the population, is not at all the same as 100,000. It's not 10 times harder, it's 100 times harder.

Why should cities be forced to do it, just because of the preferences, mainly of people who do not live there now? Why do they have to value future potential citizens over current ones?

The rest of your claims feel like a lack of perspective and judging others. It's a portraying of things as only two possible extremes, and saying one extreme (the denser one) is good. I'm actually suggesting cities and their citizens should decide how far and how fast they want to grow, based on what they want out of life. This will lead to some dense places, some not.

Yes, that means less freedom for people who don't live somewhere to choose to live somewhere. It often means higher housing prices for people who don't already live somewhere to live somewhere. The cost for people already in a given place reaches equilibrium on its own.

It usually trades those things for the happiness of people already there. You can do this if you want, but pretending it's the "obvious right thing to do" makes no sense, and forcing cities to do it, even less.

It also assumes all the things you want succeed at their objectives, which is really rare. Complex systems like this are never that easy to get to behave how you want.

It doesn't at all mean it's harder for businesses to grow (that's just silly), and the suburban sprawl is also sort of silly - there are lots of dense, environment destroying places. It's also orthogonal - you have the same problem either way, because realistically, densifying only works to a point anyway. If you make somewhere 5x as dense, and 5x the people go there, now what? You think you won't end up with the same problems, but with 5x the population?

(As i argue, you will actually end up with 20-100x the problem, and 5x the population)

People have always found ways to be more consumptive, no matter what the density. The faith that density is a solution to overconsumption, under the assumption you will be more efficient in a dense environment (and won't increase the consumption) seems highly misplaced.

I would wager if we really get to the density some folks want, we are pretty screwed as a planet. We will make all of the problems much harder than they are now, and have less will and ability to solve them.

In practice - population growth is the thing that drives housing prices, and the environmental issues you cite.

Raising housing prices lower population growth, and vice versa. See, e.g.:

https://www.cambridge.org/core/journals/journal-of-demograph...

You can see for every 1% of population growth, housing prices go up 1.4%

Notably, it turns out this is true even in dense places, so it's not just "they aren't densifying".

I can cite you similar papers showing the raising housing prices lowers population growth.

You want slower population growth, not higher, if you want to solve environmental issues, most of which stem from having too many people.

In practice, the raising house prices, while painful for freedom to live, helps ensure a sane equilibrium for the cities and the population. There is always pain in that, no matter what you do. Destroying that equilibrium seems unlikely to have the only-positive effects that folks seem to think. We already know this is true of almost all other things in nature (IE destroying the annoying mosquitoes would be bad), and i'm totally stymied why people think it will not happen here.

So there you go, this is why "indulging in NIMBY attitudes" as you call it can be helpful and productive, even if you ignore the actual "happiness of people" issue that pervades the debate. In the end, i'd urge you to see that not everyone who thinks forced densification is a bad thing is an idiot, or doesn't understand the costs/benefits. They may just think you are wrong whether it's going to succeed or be worth it.

Re: Will real estate ever be normal again?

#503

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…

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. There's zero historical indication that this would happen based on interest rates from the past. In '74 the interest rate was 12%, in '81 it was 19.8%, in 1990 it was 9%. Even going as high as 6% nobody is getting out thei…

Yeah and what was the level of government debt that had to be serviced back then?

Here I'll save you the search https://fred.stlouisfed.org/series/GFDEBTN

And the last relevant number is the WAM (Weighted-Average Maturity) and it's around 5 years for that.

Now imagine how the numbers change when you go back to 12% interest rates and that debt gets rolled over at the new rate? Starting to see why no one thinks rates are going back there?

Re: Will real estate ever be normal again?

#504

Earlier quoted context omitted.

There is another option: The government could buy/build/offer public housing as an alternative to the free market. It was done in the past and in other countries and I see no reason not to do it now. The way I see it (and the way you put it) the free market has failed to provide housing to people, to an extend that there is no free market solution going forward. If the government (federal/state/county/municipal/etc.)…

That $400K house the county is selling. Is it a direct comp to the $1M house the other seller is offering? If it is, where’d the county get the land so much cheaper than the market? If they had a bunch of county-owned land from original incorporation, great, but is giving it away at that price (presumably via a lottery process) the best thing for residents of the county, or is $750K a more prudent use of the people’s…

Note that I’m weighing this up as an alternative to the GP’s doomsday scenarios. Given those scenarios spending on fixing the housing crisis seems like the most prudent action for a government.

If public housing was done on a mass scales (like it has been in the past/other countries) you wouldn’t need a lottery process, just a wait period. A lot of people are renting and can afford to wait a year or two. In the status quo we simply can’t buy at all, we forsee renting for the rest of our lives, and are at risk of not even affording that as rent goes up exponentially.

Re: Will real estate ever be normal again?

#505

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…

> permanently priced out of home ownership The baby boomers will all die off during your lifetime. There aren’t enough people left to absorb all of their houses. I assume at some point there will be a tremendous glut of empty houses on the market which should dramatically lower prices.

That's what Ivy Zelman and crowd are predicting as well [0]

Predicting future demographics is hard through, because there are so many variables. Current birthrates in America are down but immigration is compensating. However, if the economy starts faltering we could see the desire to move to America go down as well.

https://notoriousrob.com/2021/11/ivy-zelman-demographics-and...

Re: Will real estate ever be normal again?

#506

Earlier quoted context omitted.

If the Treasury lends out ~700B for ~MBS and is repaid ~700B for MBS, and the Fed buys $1-2T (low end of the repayment you mention) in MBS, who is really doing the bailout?

Treasury made loans with repayment schedules to specific businesses. The Fed purchased certain kinds of assets to hold temporarily on their balance sheet. They both filled different roles - one was meant to manage inflation and the other to secure the stability and function of the markets. The Fed's dual mandate is to maintain maximum employment and low, predictable inflation rates over medium term. Spotting Ford in…

> low, predictable inflation rates

It seems to me that tripling the monetary base and investing two parts of it in MBS is going to have an inflationary effect on house prices. Am I being obtuse here?

Re: Will real estate ever be normal again?

#507

Earlier quoted context omitted.

> If the real problem was always zoning, wouldn't dense cities like NYC and Shanghai be cheaper than average, not way over average? It's not about supply by itself, it's supply vs demand. Big cities have big populations and economies, which means a lot of demand. But as far as zoning goes, note that like other metros, NYC has actually effectively downzoned areas over time; in fact, a huge proportion of buildings ther…

NYC housing has pushed outwards into Queens and the Bronx, manhattan is less populated these days because it lacks full time residents (the apartments are still sold, but their owners list upstate/Connecticut/long island properties as their permanent addresses, and they have many less occupants in them even when full, not like the turn of the century when more than a few people were crammed into small apartments). >…

> My only point was that making cities more dense seems to make them more desirable

You have it backwards, it is making the spot desirable that leads to them becoming dense. More people keep moving in, you build denser to accommodate them. Can you imagine how expensive NYC would become if 77% of current residences suddenly stopped being unavailable?

Yes, you will have some non-linear effects, people do want to live in big cities where the action is, but the reason those cities exist in the first place is because the action's already there. New York is a massive hub of commerce and culture which is ultimately a consequence of it's position as a major port. You won't make it undesirable by decreasing density so long as its still the center of the financial world.

Re: Will real estate ever be normal again?

#508

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.) 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…

> 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…

> So why doesn't this apply to housing?

Because selling a Camry doesn't reduce the selling price of Lexuses built in proximity to it by more, in aggregate, than the profit from the Camry. Which is why developer-founded and controlled HOAs have much more restrictive rules than public zoning rules.

Re: Will real estate ever be normal again?

#509
post #415

Earlier quoted context omitted.

I'm 25, and I live in The Netherlands as well. My parents managed to buy a house for 110k with government subsidies back in the 90s, they didn't need a deposit, they didn't even need any money. All they had to do was earn just above minimum wage, and they could include any costs from the buying process into the mortgage. Their house sold for 475k last year, a 90s starter home for low incomes. My grandparents had it e…

Yeah I'm happy I have a nice home but we also have some annoyances (minor compared to yours), we have been ready to move on to a bigger property for about 5 years now, very little comes up though. And when it does, we are often too late (they cap at 80 viewers for example, this is talking about 500k+ properties, I swear, 10 years ago you got a couple of viewers for each property, the realtor told me back then he nego…

dead-middle millennial here. Many of my friends been buying house circa 2016-2018 back when you can still get a 5-10k euro discount, even in Randstad/Eindhoven area. Not anymore. I was just start looking to buy a house and I was just giving up after 4 months and several attempts at bidding with crazy competitors.

I think most people were simply owning 1 house and doesn't benefit much from this housing crisis. Like you said, people who want to go out can't get in to a new house either. We're at the lowest point in NL history with fewest vacant properties available. So taxing all the property owner wouldn't do justice. However, I hope the government start to impose a progressive tax on entities owning multiple properties (hello Chinese/Prince/BlackRock investors?). They're the ones who benefitted the most from this situation. Though realistically, seeing how the current government track records, I kinda feel helpless that they'll help the younger generation. I even feel bad for Gen Z whose racking up student debt on top of it.

Re: Will real estate ever be normal again?

#510

Earlier quoted context omitted.

Demand isn't unlimited, and you have the causation mostly backwards. Cities being successful causes people to flock to them, which means there's demand for density. The problem is that it isn't just those on the right opposed to density -- the left is little better. Sure, progressives are largely okay with what density already exists, but propose upzoning and they flip out. Just look at the California state legislatu…

Demand is pseudo unlimited. The real problem is betting on a single location. All 300 million Americans won't fit into new york. Why not build more new yorks?

New York became a hub for commerce and culture because it was a very successful port city. With the completion of the Erie canal, it connected the American heartland to the Atlantic Ocean. This naturally led to it being the main port for immigration as large numbers of people came to the US in search of economic opportunity. Decades of sitting at the center of the northeast corridor, the richest metropolitan area in human history, has made it a solid contender for the financial capital of the world. You can't simply build more New Yorks, the geography and history that produced it are unique.

Of course not everyone wants to live in New York, indeed there are many cities that each have their own unique circumstances drawing vast numbers of people, and all of them experience great demand. But there's a reason you can't just through up a bunch of skyscrapers in South Dakota and get everyone to move there.

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