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Making housing more affordable means your home's value will have to come down

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Re: Making housing more affordable means your home's value will have to come down

#151

Post by clircle »

dave333 wrote: post #148

Government policy is hugely biased towards homeowners and against renters. It would be more equitable to help renters more, perhaps by helping them become (first-time or partial) homeowners. Two schemes: 1) Government could put up down payments for first-time buyers in exchange for say 50% of the home equity. Buyers obtain a normal mortgage loan. Such buyers can optionally pay back the down payment over time and get…

Why do i feel like increasing the amount of government intervention won’t be a fix

Re: Making housing more affordable means your home's value will have to come down

#153

Post by s1artibartfast »

qeternity wrote: post #150
s1artibartfast wrote: post #87

Earlier quoted context omitted.

I think that is exactly the opposite. Most people are long on the housing market. They have borrowed cash to purchase an asset they think will maintain or go up. Renting would be the short position. https://www.investopedia.com/ask/answers/100314/whats-differ...

If a buy a house today for $1m and it goes up 50%, great I've made $500k. But if I really want to buy a $2m house eventually, that house has (probably) also gone up 50% and so it now costs $3m. So when I bought the first home, the second home was $1m more expensive, after appreciation it is now $1.5m more expensive. I said "implicitly" for a reason. (I am well aware of what long and short means, my background is in t…

I still dont understand the nuance of how this appreciation relates to shorting, implicitly or otherwise.

Does it matter what you think your cash investment would meet or beat the real-estate appreciation?

Re: Making housing more affordable means your home's value will have to come down

#154

Post by rickydroll »

yterdy wrote: post #139
rickydroll wrote: post #72

Earlier quoted context omitted.

Lowering housing prices will put many mortgages underwater. We are seeing the fallout from this today in CRE and across all properties in 2008. Today, affordable housing means someone takes a loss. In new housing, the builder or the lender could take the loss but they won't start a project unless they are guaranteed to make a profit, which means the property owner takes the loss. Deflating prices on existing housing…

>Deflating prices on existing housing means either the lender (ha!) or the homeowner takes the loss. Okay. (Expand or they're going to flag you for snark.) The cohort that is currently at prime home-buying age (and, really, most people under the age of 50) have had the wealth that was generated by their labor and productivity systematically siphoned to mostly-older higher-earners, in order to shore up unsustainable c…

I tried to edit my original comment, but the editing was turned off. My comment was not intentionally snarky but based on my experiences in 2008. At that time, there were many subprime mortgages floating around that should've never been written. Those taking the risk (financial institutions) should've taken the fall, but instead, they pushed the losses onto the homeowners.

Your last paragraph needs more nuance because the real world is messy. There are many factors ranging from inadequate income for savings and personal scale disasters like divorce and medical bankruptcy that prove your claims are inaccurate. However, I think your last paragraph is a passionate disapproval of people living in ways different from you. Some of your points are valid on income inequality, power structures, and transit, but the reality is what we live with today. If you look at the practical realities, widespread transit changes and housing densification are not likely to happen any time soon.

If you want to make change now, join your city government. Promote a plan to destroy old properties and replace them with denser, more environmentally sound buildings. Fix the core of the city before you try to change the way anybody else lives.

An easier path is engineering and product development of solutions that make what we have now less destructive.

If that's too big, here is a simple change that significantly impacts people and natural life: Turn off the lights. If you can't do that, make them fainter and warmer (2800K) and point them at the ground. Light pollution substantially negatively impacts the environment and the health of people and animals.

Another small change is nudging people to rewild their lawns. This would have a huge impact on insects, birds, and small mammals. It's a simple change: change a little bit of the zoning laws to reward native plant use and punish the use of invasive and other non-native plants.

It's important to recognize that if you can't make a small change happen and stick, the big stuff is a non-starter. This is true for personal change as well as societal change. A small change is a big change.

--- Your friendly country mouse

Re: Making housing more affordable means your home's value will have to come down

#155

Post by rickydroll »

jjav wrote: post #142
rickydroll wrote: post #72

Earlier quoted context omitted.

Lowering housing prices will put many mortgages underwater. We are seeing the fallout from this today in CRE and across all properties in 2008. Today, affordable housing means someone takes a loss. In new housing, the builder or the lender could take the loss but they won't start a project unless they are guaranteed to make a profit, which means the property owner takes the loss. Deflating prices on existing housing…

> Lowering housing prices will put many mortgages underwater. But it's important to realize that if a mortgage goes underwater, nothing happens. If you buy stocks on margin loan and that goes underwater too much you get a margin call and are in deep trouble. A mortgage is nothing like that, it can happily go underwater and nothing happens. My mortgage has been underwater twice during its existence. No big deal.

In 2008, banks called in some of their mortgages. Sometimes, this was under the cover of a foreclosure. It was not pretty.

Re: Making housing more affordable means your home's value will have to come down

#156

Post by jjav »

rickydroll wrote: post #155
jjav wrote: post #142

Earlier quoted context omitted.

> Lowering housing prices will put many mortgages underwater. But it's important to realize that if a mortgage goes underwater, nothing happens. If you buy stocks on margin loan and that goes underwater too much you get a margin call and are in deep trouble. A mortgage is nothing like that, it can happily go underwater and nothing happens. My mortgage has been underwater twice during its existence. No big deal.

In 2008, banks called in some of their mortgages. Sometimes, this was under the cover of a foreclosure. It was not pretty.

Foreclosure is when you stop paying the mortgage.

If you keep paying it because you like the house and want to continue to live there, being underwater doesn't mean anything.

Can you point to articles describing banks in 2008 calling in underwater mortgages? That makes no sense, since it'll only hurt them (the bank doesn't want to own your house, they want the income stream from the mortgage). Also, at least for all mortgages I've signed, there is no provision in the contract for the bank to do that as long as I keep paying.

Re: Making housing more affordable means your home's value will have to come down

#157

Post by ryanwaggoner »

clircle wrote: post #151
dave333 wrote: post #148

Government policy is hugely biased towards homeowners and against renters. It would be more equitable to help renters more, perhaps by helping them become (first-time or partial) homeowners. Two schemes: 1) Government could put up down payments for first-time buyers in exchange for say 50% of the home equity. Buyers obtain a normal mortgage loan. Such buyers can optionally pay back the down payment over time and get…

Why do i feel like increasing the amount of government intervention won’t be a fix

Ideology?

Re: Making housing more affordable means your home's value will have to come down

#158

Post by sys_64738 »

r0ckarong wrote: post #20

I really don't give a shit about the financial value of my home to someone else. Sure, my mortgage is calculated on it and I'll be paying that for the rest of my life but the true "value" of my home is the quality of life my family and I can enjoy here. What you're talking about is how much money some investor can make off of the desire of people to have this quality of life value for themselves. And quite honestly i…

Not caring is foolish. If you lose your job and are foreclosed on then you’ll be bankrupt.

Re: Making housing more affordable means your home's value will have to come down

#159

Post by grecy »

jjav wrote: post #145
grecy wrote: post #18

This is so fundamental to the issue. It is impossible for housing to be simultaneously a good investment and affordable. Policymakers simply have to decide if they cater to those that already own homes, or those desperately wanting to buy one. I feel strongly housing is a basic human right, and so we should stop viewing residential property as an appreciating asset.

> It is impossible for housing to be simultaneously a good investment and affordable. This is one of those meme-phrases that no longer really means anything. > Policymakers simply have to decide if they cater to those that already own homes, or those desperately wanting to buy one. What exactly would you propose this means? A house is always going to appreciate over the long haul on average, simply due to inflation.…

> This is one of those meme-phrases that no longer really means anything.

It means exactly what it says it means. You can either making residential housing something that regular people earning regular salaries can afford to purchase, or you make it a vehicle for investment to grow money, so that rich people, and companies and brokerages and all the rest want to park their money there so that it will grow rapidly.

> What exactly would you propose this means?

Policymakers could decide to implement laws to limit how much of an "investment" housing can be. Obvious choices are limiting houses to only be owned by humans, limiting how many each human can have and penalties (tax or otherwise) for trying to "make money" from owning residential housing.

> A house is always going to appreciate over the long haul on average, simply due to inflation.

Residential property appreciates WAY faster than inflation. Since covid most Canadian houses are up at least 50%.

Has inflation been at 50% during that time?

Re: Making housing more affordable means your home's value will have to come down

#160

Post by grecy »

jjav wrote: post #144
grecy wrote: post #108

Earlier quoted context omitted.

> Think about what conditions would need to be true for housing to be a bad investment The most simple of all - It goes down in price.

> The most simple of all - It goes down in price. I mean yes, of course, tautologically. But can you at least attempt to explain how something that has a lot of value and can last for centuries, is realistically going to go down in price given inflation? In general the only scenario where housing can go down in value is if the area/city is decaying. But then you don't want to live there so that's not a useful solutio…

OK, so it can appreciate with inflation. So it doesn't go up or down, it just stays the same.

This can be done by changing who is even allowed to own them, and what they're allowed to do with them. Make it unbelievably unattractive to have "investment properties" - massive taxes, extremely high interest rates, very restrictive rental laws, and all of them go up by an order of magnitude for each successive residential property owned.

So now suddenly nobody (especially not corporations) want to actually own residential property for the purpose of making money. It won't be a good place to put money, because it doesn't make money in the same way bonds or the stock market will. So now demand has gone WAAAAY down. And then prices come down, because the only people who really do want to buy residential property are people that need a place to live, not people (or companies) looking to make a profit from that property.

We wouldn't let a couple of private companies buy all the drinking water or air and then sell it back to us for the purpose of making a profit. Those are as essential to a good life as a place to live.

Obviously rich people, and people (and companies) making profit from residential property don't like this idea. But we need to provide people a place to live, not companies a way to make profit.

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