Doesn’t this contradict Robert Shiller who shows that housing returns are flat in the long term?
Wouldn't be the first time someone was wrong about something.
The Rate of Return on Everything, 1870–2015 (2019)
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Re: The Rate of Return on Everything, 1870–2015 (2019)
#42Doesn’t this contradict Robert Shiller who shows that housing returns are flat in the long term?
Housing prices may collapse over the next 50 years as the population pyramid inverts and buyers demand decreases due to fewer individuals. What is the definition of long-term though?
I'm not sure, population already plummeted in many places while prices went up, as people prefer to live less densely then they used to.
Re: The Rate of Return on Everything, 1870–2015 (2019)
#43Earlier quoted context omitted.
Housing is only a true investment vehicle if you count all the costs. Even bare land has to be maintained somewhat. You can't just subtract purchase price from sale price and call it done.
Yeah, it would be interesting to have more transparent costs, especially with inflation. New siding every 20 years is $40k, a new roof might be $30k every 25 years, a new driveway, etc.
Biggest of them all: interest. On a $1M mortgage, you’ll almost pay $2M as interest over 30 years even at 7%.
Historically interest was never as low as during the pandemic. And most people bought houses using mortgages. The average “cost” of owning a house is much more than the selling price, even before you account for the upkeep.
Re: The Rate of Return on Everything, 1870–2015 (2019)
#44How can an entire economy have a growth rate? Is it not measuring how much "new money" was put into the system?
You live alone in the forest and chop wood during the winter. The next winter you're much better at the task and chop more wood. There's no difference in money supply, population or any such. But your economic output has increased.
Re: The Rate of Return on Everything, 1870–2015 (2019)
#45Earlier quoted context omitted.
I wonder if this is still true once population growth reaches zero or negative. It seems like the baked in assumption of housing is that someone else is going to need it more tomorrow than you do today. I think this is an experiment the U.S. will begin running in earnest in the near future.
Buy housing in hyper desirable areas that rarely become more dense. Everyone always loves the beach, whether there are 1% fewer humans next year or not.
The hyper desirable areas are no longer affordable to even millionaires.
Re: The Rate of Return on Everything, 1870–2015 (2019)
#46Earlier quoted context omitted.
The population growth rate has consistently declined for 50+ years. It's around 0.8% from a peak of 2.2% in the 60's. There's no reason to think this trend will reverse.
Why should we use peak as a benchmark? Even 0.8% is insanely high, at such rate population will double in ~150 years.
The parent is not wrong:
The total number of children in the world has already peaked (2017?) and is now dropping.
The population growth should still continue for about a human lifespan from here (50-80 years depending on who you ask).
That last growth is just those children growing up and becoming adults. I.e. They are the “last big generation”.
We will see the population drop again, if we dont fuck up the planet before that happens.
I think you would have difficulty finding countries in the world where fertility rates (children born pr woman) are not dropping.
Bangladesh went from 5.5 kids pr woman in 1985 to 2.1 in 2017. This is a global trend.
Re: The Rate of Return on Everything, 1870–2015 (2019)
#47I don't understand how housing can increase in cost in a stable steady manner, as a fraction of household income over long periods of time like more than 100 years. It seems to defy logic, so it makes me suspect how it is being calculated when people claim that housing costs have gone up by massive amounts. Since only a small increase would price a large number of people out of the market- it seems logical that housi…
right out of adam smith, when people get more money they typically spend it on better housing.
I'm talking about in proportion to income... for example, if people spend 30% of household income on housing, you cannot have an order of magnitude increase in housing prices over any time scale as it will always have a hard cap at 100%.
Re: The Rate of Return on Everything, 1870–2015 (2019)
#48I don't understand how housing can increase in cost in a stable steady manner, as a fraction of household income over long periods of time like more than 100 years. It seems to defy logic, so it makes me suspect how it is being calculated when people claim that housing costs have gone up by massive amounts. Since only a small increase would price a large number of people out of the market- it seems logical that housi…
People get much larger houses today because they can afford much larger houses. This comes from both increased prosperity and having fewer kids.
1950s: The average new home sold for $82,098. It had 983 square feet of floor space and a household size of 3.37 people, or 292 square feet per person.
2010s: The average new home ($292,700) offers 924 square feet per person (2.59 people per household, 2,392 total square feet) — three times the space afforded in the 1950s.
https://compasscaliforniablog.com/have-american-homes-change...
Re: The Rate of Return on Everything, 1870–2015 (2019)
#49I don't understand how housing can increase in cost in a stable steady manner, as a fraction of household income over long periods of time like more than 100 years. It seems to defy logic, so it makes me suspect how it is being calculated when people claim that housing costs have gone up by massive amounts. Since only a small increase would price a large number of people out of the market- it seems logical that housi…
There have been two major real housing price jumps that I know of, and both are correlated with significant household income increases (at least nominal). Almost everything else can be factored into changes in what the "nominal house" is - from a one room cabin without plumbing to a McMansion with a three car garage. One was the great urbanization post-world wars and the other was the great increase in dual-income ho…
Fair point, in that sense it seems like some fairly fixed step-ups are possible where people culturally decide to spend more of their income on housing, but it cannot be a steady trend to profit from as an investor, because it will always have a hard cap at 100% of household income. It can't steadily beat inflation over long time scales.
Re: The Rate of Return on Everything, 1870–2015 (2019)
#50I shall continue to quote 7% as the acceptable long term rate of return in aggregate and look at apple, telsa, Nvidia, Google askance, wondering when they will return to baseline.