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

theglobeandmail.com

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

#81

Earlier quoted context omitted.

Utility is not an asset. When you grow up with your parents they provide shelter, you get a utility of it. No asset for you. Majority of assets produce cash flow (e.g. licensing software - IP asset, renting real estate to someone - you get monthly rent, bond - coupon payments, stock - you get dividends, etc)

Assets don't have to produce any cash flow. Most popularly, gold. Stocks that provide stable dividends are also less and less usual. Assets can just hold their real value compared to inflation and that's useful enough - even losing value slower than inflation is still good.

FASB defines an asset as:

“A present right of an entity to an economic benefit”.

“Essential to the definition of an asset is a right to an "economic benefit" —the capacity to provide services or benefits to the entities that use them. Generally, in a business entity, that economic benefit eventually results in potential net cash inflows to the entity. In a not-for-profit entity, that economic benefit is used to provide desired or needed goods or services to beneficiaries or other constituents, which may or may not directly result in net cash inflows to the entity.“

It also says “incurring a cost to acquire an item does not in itself qualify an item to meet the definition of the asset”

https://www.fasb.org/Page/ShowPdf?path=Concepts_Statement_8-...

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

#82
post #30

As a homeowner I see little benefit for me for the insane value of my home. Do I want to pay more in property taxes? No. If I sell it’s to just buy a different insanely priced home. I suppose I’m privileged in that I have other retirement plans so my kids will inherit my home - and that’s good I guess if they ever want to afford a home. Homes being an investment is the wrong mindset for a healthy society. Have cheap…

Homes are and should always be an investment because they are. They dont have to beat the stock market, but a well maintained home should track inflation at least. They have real and huge replacement costs in materials and labor. If my house burnt down, it would cost $1M to rebuild.

Im all for cheap simple houses for those with less money. However, unless they are so cheap as to be disposable, they too will be investments.

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

#83

Earlier quoted context omitted.

Assets don't have to produce any cash flow. Most popularly, gold. Stocks that provide stable dividends are also less and less usual. Assets can just hold their real value compared to inflation and that's useful enough - even losing value slower than inflation is still good.

FASB defines an asset as: “A present right of an entity to an economic benefit”. “Essential to the definition of an asset is a right to an "economic benefit" —the capacity to provide services or benefits to the entities that use them. Generally, in a business entity, that economic benefit eventually results in potential net cash inflows to the entity. In a not-for-profit entity, that economic benefit is used to provi…

Not sure how is an accounting book relevant. I'd rather ask a tax consultant - the definitions are slightly but significantly different.

Anyways, even by your book's definition - later sale for a higher price is economic benefit, protection against inflation is one too.

This link considers your viewpoint too: https://www.investopedia.com/terms/a/asset.asp

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

#84
post #42

Earlier quoted context omitted.

> Increasing median income and economic growth both increase affordability, even if housing costs track inflation. Given 1% growth a year that would take close to a lifetime to just halve current home prices per income. It isn't a solution for the people living today.

"just halving" is a radical change that will never happen on a short timeline. With a more realistic number of 2% (for the US), you are talking about a 35% reduction in Price/income in 20 years. I think that is a very optimistic case to shoot for socially and politically.

If home prices can rise 5% or more per year, why can't they also fall 5% per year?

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

#85

Earlier quoted context omitted.

People don't want to be part of founding new places. They don't want to go to small places.

The exception to that is retired people. Everyone else needs to worry about job opportunities and schools for their kids.

Even retired people want to be near major hospitals.

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

#86

Why do new homes have to be built in competition with existing homes? With remote work and the digital elite moving wherever, why not just pop up new developments wholesale, complete with shopping and services somewhere out of the way and cheap?

People do not want to live out of the way. In fact there are quite possibly lots of homes already available out of the way and cheap; I've heard some countries like Italy and Japan give them away for nearly free.

You can get perfectly good 2000 SF, 4 BR homes in places like Fargo or Little Rock for $200,000.

There are reasons housing prices in expensive areas are what they are. Some of it is poor zoning and land usage that suppresses supply, but a lot of it is also demand. People want to live in dense, vibrant areas, even if they could live cheaper elsewhere.

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

#87
post #30

As a homeowner I see little benefit for me for the insane value of my home. Do I want to pay more in property taxes? No. If I sell it’s to just buy a different insanely priced home. I suppose I’m privileged in that I have other retirement plans so my kids will inherit my home - and that’s good I guess if they ever want to afford a home. Homes being an investment is the wrong mindset for a healthy society. Have cheap…

The myth of home equity: most people are implicitly short the housing market for most of their lives.

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...

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

#88

Earlier quoted context omitted.

"just halving" is a radical change that will never happen on a short timeline. With a more realistic number of 2% (for the US), you are talking about a 35% reduction in Price/income in 20 years. I think that is a very optimistic case to shoot for socially and politically.

If home prices can rise 5% or more per year, why can't they also fall 5% per year?

I dont know what point you are trying to make, but housing prices fluctuate all the time. I am talking about long term averages.

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

#89
post #33

Earlier quoted context omitted.

Can you explain how?

I thought I did, but can give an example. If the median income increases from 50K to 100K (adjusting for inflation), and houses stay at 500k (adjusting for inflation), they have become more affordable without losing value.

But isn't money losing value then? Implicitly making the houses worth 500K also lose theirs?

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

#90
post #33

Earlier quoted context omitted.

Can you explain how?

I thought I did, but can give an example. If the median income increases from 50K to 100K (adjusting for inflation), and houses stay at 500k (adjusting for inflation), they have become more affordable without losing value.

Well that begs the question, how are you going to double income beyond the rate of inflation?
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