What happens when housing prices go down?

Those wealthy enough to invest or speculate in real estate incur a write-down they can likely afford - as Warren Buffett once said, don’t swim naked. The person of average or below-average means gets a chance at a standard life.

Quite simply, housing has to be either affordable, or an investment. Those two things are literally, by definition, mutually exclusive. If something is an investment it means that it must appreciate in excess of inflation over time. That means, by definition, that it will become unaffordable over time. This is why, whenever you hear terms like "affordable housing" you can safely shut your brain off. There will never be affordable housing, the whole idea is preposterous.

Saying "we're going to build affordable housing" is putting the cart before the horse: it is the building that causes the affordable, not the affordable that causes the building!

So to understand this we look to the supply-side. Basically, scarcity causes the investment mindset. This is very very complex and interlocks with much broader structural changes to the economy that have taken place since houses were considered affordable, structural changes that are much larger even than housing.

Used to be, you worked for a company for 10+ years. A company would move into a town (by building a big factory, say), and work with the town to build housing for its employees. Think the Kodak plant in Rochester, for example. In the 20s and 30s, Kodak's employees were having trouble finding places to live. So, they formed the Kodak Employees Realty Corporation and built a couple thousand houses for their employees in Rochester. There are many examples of this in cities all across America.

Nobody would think to do this any more, because the economy has changed structurally. There are less people involved in building stuff and generally we have all decided that changing our physical environment is simply a thing that we don't do any more. Our entire economy has moved to one that's based on physical things (building things, producing things, moving things, in the physical world), to one that is based on information. You can move bits around and make profit without ever needing to touch the physical world *.

We created financial capital to accomplish the actual important thing, moving atoms around in the real world. Now, financial capital has in some sense "taken over" -- moving bits is no longer a thing that you do to make moving atoms around easier, but a goal in and of itself. Financial capital has taken the head of the table, pushing out physical capital. In essence what has happened is that the United States has gone from being a complete organism (lots of muscle, a little bit of brain to move that muscle around) to being a subset of a much larger organism (all brain). That we're "all brain" is why we can't move atoms here; our inability to move atoms here causes scarcity in housing; scarcity in housing causes investment mindset in housing; housing appreciates.

Causality of all of this, I think, is far more complex than some simple economic explanation. It's deeply cultural and involves the reorganization of the entire global economy. This is why you're never going to lose money on your house.

* this, of course, is _not actually true_, but rather a geographic illusion. The physical world is touched more than ever, its just that the changes to the physical world (which are often horrific) happen in other places besides the USA. Southeast Asia, China, Africa etc.

>Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority.

Great point. Healthcare, debt, and housing affordability are interlinked issues that stem from one root: a financialized economy that benefits a tiny minority of rent-seekers at the expense of productive activity and the public at large.

Three potential outcomes of this trajectory:

1. Permanent extreme inequality enforced by a "post-liberal" surveillance state.

2. A moderating force, an FDR-like reformer, who represses capital for its own good.

3. Political instability and violence a la Luigi Mangione or worse.

But you need higher interest rates to offset the risk if your collateral might not appreciate.

Nope. It's weird because the company I worked for years ago still to this day spends a great deal of time and energy promoting anti-union stances and making sure the employees know that unions are bad for them.

But at the same time, the company adopts a lot of union practices. For example, they pay based on tenure and not performance. So it doesn't matter how productive you are. You could be the single most productive individual on your line, but the guy who has been there longer is going to get paid more. Even though that guy is likely rather less productive than you.

But these companies pay so poorly that the only people applying for these jobs are people straight out of jail/prison.

When I ran the CNC line, there were ~350 people on the floor between the two 12 hour shifts. Of those ~350, there were only two of us that had never been to state or federal prison.

So the company knows that they have these employees right where they want them. The employees are too afraid to organize or even speak out.