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Why the government took home prices out of its main inflation index

fullstackeconomics.com

281–290 of 344 posts

Re: Why the government took home prices out of its main inflation index

#281

Earlier quoted context omitted.

The young men -> instability theory is one I've heard several times. It makes sense, but is there evidence or some sort of seminal article about it?

In GP's context, no. The basics of the theory is a lack of incentives for young men to play the game, which leads to either proactive destruction or passive destruction. War usually leads to a surplus of women and a lack of male competition in any other area (jobs, land, wealth, opportunity), incentivizing men to play according to the social contract rather than being violent or giving up. In fact, some would say sta…

I don't disagree with your points, but I think lordnacho's question is a reasonable one. So, in a sibling to your post, I've included one link.

But I think the same type of question could be asked about your post. For example, the idea of "surplus men": I've heard this before, but is there some statistical "systems theory" view of history that can give us plots/data from which this will jump out?

Some parts of this are obviously true:

> War usually leads to a surplus of women

There are certainly many stories after the American Civil War about this -- about women who were unable to find husbands after the war.

> and a lack of male competition in any other area (jobs, land, wealth, opportunity)

This makes some sense (jobs, mates in particular), but I'm not sure about land, wealth; that could easily remain in the hands of elites.

> starting a war is seen as a society killing off its surplus men in hopes of getting something out of it (every war is a rich man's war)

I absolutely see this -- elites gain some geostrategic prize, at the expense of other mens' lives -- but, to clarify, I don't think the mechanism by which this helps elites is reduced domestic competition among men, since they're already elites; they've already won the domestic competition.

> incentivizing men to play according to the social contract rather than being violent or giving up.

It feels like the examples of ISIS, Hikikomori, and monasticism (Western and Eastern) are all relevant here. But it would help if a clear line of evidence could be assembled for one of those examples.

I sense that your argument comes from a conservative direction, but I'm aware of queer/feminist writing to the same effect, e.g.:

https://www.amazon.com/Loser-Sons-Authority-Avital-Ronell/dp...

I haven't read this beyond the summary, and don't know if its evidence is actually any good. But it's sometimes worth noticing when opposing political orientations agree on some underlying assumption.

Actually the same idea appears in Margaret Atwood's Oryx and Crake, in which part of her fantasy is that men's value has been reduced to peeing in a circle around the village to mark the territory. She does recognize that this "utopia" cannot last though (which she deals with by having a man invent the utopia in the first place -- "of course it's flawed").

So, plenty of people on the other side of the aisle do seem to agree with you about the "facts".

Re: Why the government took home prices out of its main inflation index

#282

Earlier quoted context omitted.

You don't need to purchase a home - but historically - if you did - you've been much better off financially. It's the same as saying you don't NEED to go to college. No, you don't. You don't need much of anything... But if you did go to college - whether through correlation or causation - statistically you are much better off. So if college and housing get out of reach for most people - then maybe they will be worse…

> You don't need to purchase a home - but historically - if you did - you've been much better off financially. [citation needed] Per the The Credit Suisse Global Investment Returns Yearbook 2018 , the global return for real estate from 1900 to 2017 was 1.3%, while stocks returns 5.2%: * https://www.credit-suisse.com/media/assets/corporate/docs/ab... Rent is often cheaper than mortgage payments, and is very more often…

Real estate is leveraged - often times in the US 33:1. Stocks aren't.

You also have to factor in that it's a hedge against inflation on rent, and that part of your rent payment is going to principal, and that your mortgage interest is tax deductible.

If you think the average return for the S&P 500 unleveraged beats owning a PRIMARY RESIDENCE on 5:1 leverage, when your marginal tax rate is 45%, and interest rates are 2.7% on a 30-year fixed... I guess time will tell, but it is INCREDIBLY unlikely.

Re: Why the government took home prices out of its main inflation index

#283
post #236

Earlier quoted context omitted.

Yes, college enrollment, high school enrollment, and labor participation are all down, starting last year. People can't afford new houses with a mortgage with rising interest rates. Fewer young adults ("Gen Z") are choosing, proportionally, to go to college. The plummeting birth rate and the highly strict immigration controls as well as our political instability have all sent the message to international students tha…

Nursing school enrollment is higher than ever. https://www.aacnnursing.org/News-Information/Press-Releases/...

Yeah, let's keep treating nurses, physician assistants, and doctors worse than grocery employees. High nursing enrollment means squat. Who'd you rather have treating your loved ones? The nurses with decades of practical experience, or the nursing school graduates who will quit after 3 years of burn out and stress? We're starting to treat nurses as badly as we do teachers. What do we expect? A few fun links for your perusal.

https://www.forbes.com/sites/jackkelly/2022/04/19/new-survey...

https://www.ajc.com/pulse/survey-shows-90-of-nurses-consider...

https://www.benefitnews.com/news/nurses-are-planning-to-quit...

Re: Why the government took home prices out of its main inflation index

#284

Earlier quoted context omitted.

> If people stop believing housing is a good investment then prices will fall. People need something to live in though, and as long as the demand for places to live is higher than the supply, rents and purchase prices will keep going up.

The population hasn't increased much (or maybe at all) in the last 2 years yet prices have sky rocketed - why is that?

Inflation manufactured by the FED to prevent an economic collapse.

Re: Why the government took home prices out of its main inflation index

#285
post #159

Earlier quoted context omitted.

> The government lets you deduct your mortgage interest from taxes This is effectively not true anymore. > Also, what am I going to do instead, rent? My rent can go up $50 bucks a year where my mortgage payment is locked in. For most people, home ownership is the safest and best way to build a retirement nest egg and a tangible asset to borrow against in times of trouble. I'm going to push back a touch on this, it's…

>> The government lets you deduct your mortgage interest from taxes > > This is effectively not true anymore. Care to explain? Is this because the standard deduction is so high, it's generally not worth itemizing for most people since the Trump tax system adjustment? Genuinely curious; I'm a current renter, hopefully purchasing in the next couple of years. But this is an important part of the buying calculus.

The other commenters covered the reasons just fine.

> But this is an important part of the buying calculus.

I would argue it probably shouldn't be.

Anyways, like I mentioned, sometimes renting is cheaper, sometimes buying is, I'd recommend buying whenever owning is cheaper. It likely will change while you hold the property, but no sense in over-spending on a property if you don't have to.

Buying property tends to take a good while, don't get so fixated on a particular house so much that you bid ridiculous amounts for it. It might take a few years once you start shopping.

Try to put 20% down if you can, and try to limit your purchases to a single house for your lifetime. Transaction costs will likely eat you alive if you transact all the time. Illiquid transactions are always such a pain.

Good luck on your house hunt!

Re: Why the government took home prices out of its main inflation index

#286

Earlier quoted context omitted.

There are luxury condos right where I live that are sold by a property management company. They are unoccupied, and have been unoccupied for months. The prices have not gone down. There's no super strong market force to push the price of a house down, while there is a large market force to keep it valued where it is or make it go higher.

Respectfully, this doesn't prove that the law of supply and demand no longer applies. Any individual seller may choose not to decrease their prices -- but if they do it long enough, they run out of money and are forced to sell. It's also difficult to tease out the effect of general price inflation. If house prices stay stagnant but currency is devauled, prices are decreasing in real terms.

Some places have tax breaks for unoccupied property rentals. Instead of lowering prices they leave them high and break even on the losses (or close enough such that they weather the short term until demand at their preferred price is reached)

Re: Why the government took home prices out of its main inflation index

#287

Earlier quoted context omitted.

The supply was fine before multi-home owners and property management companies took up most of it and jacked up the prices. Increasing the supply would only increase the wealth of the homeowners, it won't lower prices. Increasing the supply means building new buildings, and that often means building huge lots of five-over-ones, priced as luxury apartments in a growing market. The people building the new supply expect…

But eventually the vacant apartments will get rented out because they're costing their owners money (in taxes, mortgages, maintenance) and not bringing any in, and you can't spend more than you make forever. Rents go down when landlords go bankrupt. That's what happened in 2009-2010. It took about 4 years after peak homebuilding, and 2.5 years after peak home prices, and about 12-18 months after the financial crisis…

> But eventually the vacant apartments will get rented out because they're costing their owners money

Owners make money leaving properties vacant all the time. In fact, in many markets capital gains have been much more significant than rental income for a long time now.

Re: Why the government took home prices out of its main inflation index

#288

Earlier quoted context omitted.

I live in a popular vacation destination. The locals didn't panic when wealthy multiple-home owners started buying up houses because ... their property values were increasing! Now local business can't find workers, towns can't find employees all because housing is out of reach for the working and lower-middle class. Like boiling a frog, most people won't care until it's too late.

Except that frogs, as (all? not a biologist) amphibians, have very good sensitivity to external temperature. Unlike humans.

It is just an expression. Frogs are actually smart enough to jump out of a gradually heated-to-boiling pot of water.

Re: Why the government took home prices out of its main inflation index

#289

Earlier quoted context omitted.

> towns can't find employees all because housing is out of reach for the working and lower-middle class. Why not simply increase the supply?

That's always the answer. For some reason it's makes some people on here angry, but the only long term viable solution to expensive housing is to end NIMBYism and draconian zoning laws. Anything else is a short-term half-measure, including affordable housing, rent controls, etc. If you want to actually solve the housing crisis, you just have to build more housing. It really is that simple.

Or maybe there's an ideal size for a given area based on geography and maybe many areas are already at that size.

Re: Why the government took home prices out of its main inflation index

#290

Earlier quoted context omitted.

The people in charge have houses and want house prices to go up. That's the beginning, middle, and end of the thinking.

I live in a popular vacation destination. The locals didn't panic when wealthy multiple-home owners started buying up houses because ... their property values were increasing! Now local business can't find workers, towns can't find employees all because housing is out of reach for the working and lower-middle class. Like boiling a frog, most people won't care until it's too late.

I don't agree with your way of thinking. I know it's extraordinarily popular, but I think there is a different, more productive way to think about this.

Think of houses sold to outsiders as a form of export. It's the best form of export: the good you are selling does not leave the premises, and the local community continues to collect taxes on that. The outsider does not consume government services as much as a local, so, what's not to like? Even better, when those outsiders visit, they spend much more on local businesses, because they are tourists.

The more houses that are empty most of the year, the better for the local community. Because that's tax money that gets collected at very little cost for the local government.

The problem, of course, is the artificial barriers to build more. People have this idea that the land is fully built up, there no way to build more.

That is so far from true. I live in one of the most densely populated neighborhoods on Earth (17k people per km2). Recently a 67-story tower was built across the street from my building. The neighborhood does not feel any more or less crowded than before. If they want to build some more, they can build more. There is (almost) no lot that's not built up, but you can take down a 12-story building and erect a 50-story one.

So, here's my thesis: let builders build as many residential units as they can (provided they are safe, or course). This way the house prices will come down to earth. People will be able to move from the rural areas to the big metropolitan areas, where the jobs are. They can't move right now because the housing costs are just so damn high.

Such a migration would result in both increased GDP growth, and lower impact on the environment. Much lower. I used to live in a very dense city before (3600/km2) before I moved to my current incredibly dense neighborhood. My energy footprint went down maybe by a factor of 10. Easily. Grocery is across the street. Before it was a 15 min drive.

Can you believe that? More affordable housing, higher GDP growth, lower environmental impact? There's no closer thing to a free lunch in our modern society.

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