Why the government took home prices out of its main inflation index • Hacker News Board

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

#341

Post by josefresco » Tue, May 31, 2022, 12:26 PM UTC

908B64B197 wrote: post #198

josefresco wrote: post #195

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.

> 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?

It's a geographically limited space which limits sprawl and there's a lot of density laws and zoning that limit height. Lastly, NIMBYs block and delay affordable housing developments for a variety of reasons: "traffic" "change the character of the neighborhood" etc. Just getting "accessory dwelling" allowances was a battle for each town in the region.

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

#342

Post by TimPC » Tue, May 31, 2022, 5:44 PM UTC

chii wrote: post #334

TimPC wrote: post #324

Earlier quoted context omitted.

In a world of zoning and NIMBYs I very much doubt the market adjusts in any way that resembles an efficient market. At most the portion of the rent I get from my capital is the difference between deploying the capital in the market and the return to housing. Since housing has historically beat the market that suggests a zero or negative rent for investing in housing.

> Since housing has historically beat the market this is not true unless you only start counting from the past 10-20 years, and only include regions that _did_ beat the market, rather than globally. see https://www.youtube.com/watch?v=7rvY2rIxdsA

If you measure the capital returns of housing as buying a property and letting it sit empty it doesn't beat the market. But renting a property returns roughly 6% of capital in most markets, and Canada-wide housing prices have gone up 7.5% a year over the last 20 years. Even if it costs you 2.5% of the home price to rent the property (this is a high estimate) that suggests making 11%/year over the last 20 years. If you go back longer, the capital curve for housing gets slightly lower and you might eventually get only 9% returns counting capital income and rental income. But markets still haven't returned 9%/year.

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

#343

Post by lazide » Wed, Jun 01, 2022, 3:58 PM UTC

everybodyknows wrote: post #339

lazide wrote: post #121

Earlier quoted context omitted.

A common problem with rent control (can’t raise rent to match market) in cities is the landlord stops doing maintenance or starts moving in folks who are dangerous or threatening to tenants to get them to leave.

> starts moving in folks who are dangerous or threatening to tenants to get them to leave Seems a high risk, desperate maneuver. What's the end-game for the landlord? A building full of drug dealers, in perpetuity? Keeping maintenance up to city code could be a burden, and the insurance company might start to get wise.

Usually the dangerous folks are people on the payroll, and the end game is selling the property to someone else to be turned into something higher end once the normal tenants are out.

Sometimes it’s just to have tenant churn to allow them to get higher rents. Rent control for long periods of time can cause very large disparities between current market rents and what a tenant is paying (thousands/mo). The dangerous folks aren’t usually obvious when first checking out a unit.

At least in NYC, there is a lot of reputed Mafia involvement in real estate.

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

#344

Post by mtoner23 » Thu, Jun 02, 2022, 5:37 PM UTC

jdashg wrote: post #305

mtoner23 wrote: post #202

Earlier quoted context omitted.

the 30 year mortgage was one of the greatest financial innovations of our time. Allowing anyone to pay off 2022 costs in 2052 dollars. I understanding hating credit card debt, buy now pay later, and other horrible "financial engineering" but the 30 year mortgage is overall a great thing for everyday people.

If everyone gets the benefit, does anyone really get the benefit? In a zero-sum game of prospective home owners bidding against eachother, if both of two opponents the option of longer mortgages, does affordability actually increase? The sticker price just gets bigger.

Markets are not zero sum!