Maybe treating housing as an investment was a mistake • Hacker News Board

Re: Maybe treating housing as an investment was a mistake

#801

Post by dan-robertson » Mon, Mar 06, 2023, 9:47 PM UTC

fnordpiglet wrote: post #275

mjr00 wrote: post #10

> While the rich are more likely to own homes, tons of middle class and poor people also bought homes and planned their lives under the assumption that housing prices would go up. Tanking housing prices would destroy their trust in the system that they bet everything on. This is pretty much the crux of it. High housing prices could be "fixed" almost overnight, but for almost every citizen of the first world, their ho…

I don’t understand this. There are a lot of places in the US, and certainly globally, where housing prices decrease. There are also plenty of folks who got soaked in 2008 and lost everything, and no one helped them. How precisely does “the government” do this house price propping up? Via loan guarantees to ensure liquidity in the mortgage market? These make houses affordable and accessible to most people. Without loa…

I think you make a good point about places in the US seeing falling prices.

It is obviously incorrect to say that prices are guaranteed to rise but I don’t think that’s what anyone claims.

I think the general claim is that policies around housing tend to prop prices up by restricting supply (zoning, permitting, higher building costs due to various regulations like stricter codes or safety standards as well as stuff like parking requirements, giving old properties lower taxes) or subsidising demand (loan guarantees, buyer assistance, etc). That is, governments choose housing policies that keep prices high at cost to taxpayers instead of policies that reduce house prices, which is what is meant about governments not wanting them to fall. Also, if house prices fall and the people think the government is responsible, the government probably gets voted out.

The reason that loan assistance for people (ie not including companies) causes house prices to go up is that it means for a given house price, mortgage payments will be lower so more people will be able to afford that price. Instead people tend to pay for the most they can afford and (for a non-silly definition of afford) and so they end up paying more because they are competing for the same houses.

Re: Maybe treating housing as an investment was a mistake

#802

Post by PeterisP » Mon, Mar 06, 2023, 9:47 PM UTC

petsfed wrote: post #707

bityard wrote: post #625

Earlier quoted context omitted.

I don't mean to be blunt, but if modest homes in your area are $1m, then you are in a VERY high-cost-of-living area and what you see here is not at all typical of the rest of the country. Where I live, a charming 1200sqft starter home in a blue collar neighborhood goes for $150-$200k.

Great, if only there were adequate jobs in those places, so we could all own homes without needing $300K annual family income. The dissonance comes from the fact that a lot of hackernews readers make apparently high incomes, but the cost of living in their areas keeps them squarely working class. The best example I can give is in the Bay Area. I lucked out with $2850/month to rent a 1400 square foot house in San Lean…

In effect, your example demonstrates that a key effect of USA tech industry is taking vast amounts of customers' and tech investors' money and handing it over to California landlords / real estate investors.

Re: Maybe treating housing as an investment was a mistake

#803

Post by cronix » Mon, Mar 06, 2023, 9:48 PM UTC

narrator wrote: post #706

bityard wrote: post #625

Earlier quoted context omitted.

I don't mean to be blunt, but if modest homes in your area are $1m, then you are in a VERY high-cost-of-living area and what you see here is not at all typical of the rest of the country. Where I live, a charming 1200sqft starter home in a blue collar neighborhood goes for $150-$200k.

[flagged]

> The reason that I think the Bay Area and other tech hubs are so expensive is that asians with PHDs who fly in for their $500k/year machine learning tech job want to live around other asians. They do not want to live in rural Utah where you can get a nice house for $200k and remote work, but there are no asians around and there's probably more discrimination.

You can probably safely extrapolate that to all races who move to a foreign country. They tend to want to live amongst themselves. Not necessarily for racist reasons, but because it's a bit more familiar and you have an easier time communicating with others speaking your dialect, as well as having similar customs and social norms.

Re: Maybe treating housing as an investment was a mistake

#804

Post by nobaddays » Mon, Mar 06, 2023, 9:48 PM UTC

avmich wrote: post #793

vel0city wrote: post #738

Earlier quoted context omitted.

Ever thought about maybe not living in California? You don't need to be on the West Coast to have a tech job.

This is the thought which comes around often. The problem is, for an intellectual, it's important to live in an environment rich with mental talent. Bay Area is the intellectual capital of the world, and while Einstein could maintain his patent clerkship and have famous physicists visit him in Bern ( http://norvig.com/performance-review.html ) for the lesser minds in another era settling on another place is a loss.

> Bay Area is the intellectual capital of the world,

Lol. Damn, the 0 interest rate era/tech bubble really made you guys cocky didnt it

Re: Maybe treating housing as an investment was a mistake

#805

Post by vel0city » Mon, Mar 06, 2023, 9:50 PM UTC

avmich wrote: post #793

vel0city wrote: post #738

Earlier quoted context omitted.

Ever thought about maybe not living in California? You don't need to be on the West Coast to have a tech job.

This is the thought which comes around often. The problem is, for an intellectual, it's important to live in an environment rich with mental talent. Bay Area is the intellectual capital of the world, and while Einstein could maintain his patent clerkship and have famous physicists visit him in Bern ( http://norvig.com/performance-review.html ) for the lesser minds in another era settling on another place is a loss.

So your argument is the only place to find intellectual people to hang out with is the Bay Area?

I grew up surrounded by literally rocket scientists and some of the top minds in biochemistry and mechanical engineering as neighbors. Incredibly intellectual people. I did not grow up in California.

Its not like the Bay Area is the only place with smart people.

Re: Maybe treating housing as an investment was a mistake

#806

Post by advisedwang » Mon, Mar 06, 2023, 9:53 PM UTC

logifail wrote: post #775

advisedwang wrote: post #774

Earlier quoted context omitted.

Q1: because 7% is roughly the current rate for a 30 year mortgage right now. https://www.bankrate.com/mortgages/mortgage-rates/ Q2: Anyone you see who is buying a house right now is paying that rate.

Errm, fixed != floating. Who is fixing at 7% for 30 years?

Per the source I quoted "For today, Monday, March 06, 2023, the current average interest rate for the benchmark 30-year *fixed* mortgage is 7.08%"

Re: Maybe treating housing as an investment was a mistake

#807

Post by jahewson » Mon, Mar 06, 2023, 9:53 PM UTC

acabal wrote: post #460

Indeed, and the article is right in saying there isn't really a way out. Humanity paints itself into these kinds of corners fairly frequently over the course of history: entrenched systems where many suffer, but where too many powerful people benefit for it to be able to change. Traditionally, the solution has been violent revolution. That's really the only way to (for example) tell 66% of Americans that their bigges…

> Traditionally, the solution has been violent revolution.

No that's not a solution, it's a means. A means to what end exactly? Magical economy unicorns?

Re: Maybe treating housing as an investment was a mistake

#808

Post by ff317 » Mon, Mar 06, 2023, 9:54 PM UTC

tablespoon wrote: post #78

mjr00 wrote: post #10

> While the rich are more likely to own homes, tons of middle class and poor people also bought homes and planned their lives under the assumption that housing prices would go up. Tanking housing prices would destroy their trust in the system that they bet everything on. This is pretty much the crux of it. High housing prices could be "fixed" almost overnight, but for almost every citizen of the first world, their ho…

> This is pretty much the crux of it. High housing prices could be "fixed" almost overnight, but for almost every citizen of the first world, their house is the single biggest investment they will ever make in their life. You'd be destroying everyone's retirement plans and there'd be major economic repercussions. I wonder if one way out would be to 1) build government rental-housing projects again, to fill the immedi…

Seems like it would be simpler to fix this with regulation on housing "investment". Don't allow large corporations to buy up giant counts of single family homes (taking them off the market and jacking up real estate bubbles). Basically we need to stop the predatory act of spending billions to buy many thousands of houses out of the market just to turn around and rent them to those who can no longer afford to buy in the market they're effectively cornering. Some builders are now building whole neighborhoods full of single-family homes that are being sold directly to rental investment companies from the outset.

My off the cuff (and thus probably naive) thought would be to charge progressive federal taxes on home ownership which progresses based on the unit count owned by an entity. Whether you're an individual or a corporation: your first house is free (0% federal tax). If you own two houses, you pay 3% on the value (of both houses) every year for the right to own them. Maybe at three houses it's already at 10%, and by the time you get to ~10 houses owned, it caps out at 100% tax on the value every year, making large-scale home investing completely unprofitable. The funds from this new tax could be set aside specifically to fund affordable housing programs of some kind.

Under such a scheme, we'd still have rising prices from true single-owner-occupiers under the existing system, but it would slow down and be less-bubbly, at least in the national average, and builders will eventually build new homes to equilibrium, where regulations allow them to. Some moderately-wealthy people could probably still own a second vacation home, or 2-3 rental properties. Some extremely wealthy people might still own 10+ different homes for personal/family use at exorbitant tax cost, but at least the taxes from such scenarios go towards fixing things.

Re: Maybe treating housing as an investment was a mistake

#809

Post by cornholio » Mon, Mar 06, 2023, 9:54 PM UTC

pdonis wrote: post #781

cornholio wrote: post #769

Earlier quoted context omitted.

The upper levels of government can and should correct the failures of the lower levels which are captive to local homeowner interests. The ideea that you can eject the state from regulating the use of a resource with so many externalities is a pipe dream, you either get some sort of favela or the residents re-invent a much more exclusionary and bigoted version of the state, for example the HOA.

> The upper levels of government can and should correct the failures of the lower levels which are captive to local homeowner interests. They have been, for decades. That's where things like the Community Reinvestment Act, which played a significant role in causing the crash of 2008, came from. Not to mention the decades-old policy of encouraging mortgages by funding them with money printed by the Fed's printing pres…

Governments fix market failures all the time. For example, there is not a single country on earth with unregulated environment policies, a high standard of living, and where the air is still breathable and water potable. Or one with no food safety regulations where street-food is somehow magically 100% safe to eat by virtue of the invisible hand. Or where banking is reliable despite no financial regulation. Or where justice is equitably delivered by for-hire private judges.

Those things take coordination and effort to achieve, and some governments do achieve them, some to such a large extent that we come to take them for granted.

Re: Maybe treating housing as an investment was a mistake

#810

Post by highwaylights » Mon, Mar 06, 2023, 9:54 PM UTC

Grimburger wrote: post #743

bmitc wrote: post #236

Earlier quoted context omitted.

I agree with that. Investment homes, second or maybe just third homes, etc. should be taxed rather extremely aggressively.

So you punish renters for the benefit of prospective homeowners? Not everyone wants to buy.

Sadly I don’t see any better way to help renters.

If you make the costs of real estate investment so onerous that it’s only attractive to owner-occupants then it becomes far harder for your landlord to exploit you as a tenant, as the option for you to buy much more cheaply will be there even if you choose never to do so.