Directly owning real estate, on the other hand, doesn't scale that well. You need to hire property managers, and deal with municipal tax and assessments for each property. If you own several properties, you have to deal with hurricanes and earthquakes and fires and local zoning officials more often than you'd like.
Before the stock market took a knock over the past two years, people were talking the same way about index funds as they were talking about property. The same thing with bitcoin really.
It's not that real estate is safe per se.
Index funds usually recover to before-crisis levels in about 5 years, so they're not terribly risky in that sense.
The Bitcoin believers were always lunatics. That people will believe in stupid shit is nothing new.
http://www.finra.org/investors/dangerous-game-using-your-por...
I believe the better explanation is the Federal government. Both in the form of extraordinary easy monetary policy and in the form of extraordinarily generous mortgage lending terms in its role as far and away the largest owner/guarantor of residential mortgages.
And there the prices are only going up due to NIMBYism about building for density. There is sea change in our cultural dynamics that is following in the wake of widespread adoption of technology and the Internet - we aren't isolating ourselves on quarter acre copy pasted plots an hour long commute by car from the office, we want to live in 500 square feet of space a few miles by bike or one station away from our office. We marry less, we have less kids, but there is absolutely nobody building anything for this demographic.
In an even more broader context we should be incentivizing people to live as close to peak urbanization because its the optimization of the cost to house and maintain people. People are cheaper for all of society and for nature abroad if they live closer in denser housing with more public infrastructure to support them than to have them living in repeated stick and glue mcmansions on HOA mandated lawns that require a thousand liters of water a year to keep green in the midwest.
We are literally doing the opposite of what we should, and its going to cost economic growth for our entire lives in all likelihood.
I agree with the comment about lack of density in housing leads to these prices (cause people keep freaking moving here). And the point about not much housing being built for people leaving in smaller apartments like 500 sq ft in the dense area applies here. There seems to be mostly refurbished old housing in that range. I guess developers don't think there's a market for that (single person?) or they can't make money or both.
I think we need all these kinds of housing (higher density, also smaller places closer to work and transit). People don't priotize transit enough in purchases I think, but of course you can only buy what's built in condos.
It is the former that are more likely to have kids in school, not the latter.
That wouldn't explain why young people in previous eras bought houses sooner.
It could. Moving across the country is cheaper and less risky now than ever before. That certainly factors into my preferences around home ownership.
Is it? Rent itself was much cheaper in the past, even in New York.
As for the risk, back in the 50s to 80s, a worker had many options of finding work in tons of places. Now, much less so.
This is certainly the case with me, and absolutely every other person I know in their 20s/30s who isn't in a upper-management position at a large company. I'm currently making above the median family income in my country and have no hope of owning a home anywhere near I can get work.
Meanwhile my old co-worker that I used to work with at Safeway as a teen bought a house in the 70s working as a shelf-stocker. In fact both of my co-workers at the time were 40-60 and bought a house working part-time as shelf-stockers early in life. You think a shelf-stocker at Safeway has any hope of buying a house today?
It looks like a good diversification from bonds if chosen judiciously but there could be regulatory reasons not to do it.
Having a big house is nice. Living in a major city is nice. The combination of the two is very nice, but expensive.
That's an extremely favorable reading of the Chinese(Russian, African, South American, etc.) buyers and of the markets they're buying into. These are often, and I would argue largely, the corrupt connected elites who dominate corrupt economies trying to move money out of their countries before losing power, being caught, or before disasters in their local economies cause their investors to attempt to cash out. They are helped by a west that has lost manufacturing capacity and largely survives economically by circular credit scams that need a constant influx of these colonial resources to maintain the illusion of growth.
The best thing about real estate is that it never goes to zero; the best thing about western real estate is that your networks of accounts and holding companies will never be seriously investigated, because skimming from and taking commissions from transactions between those things is the only inflow of wealth, source of new investments, and source of political contributions. You can also let your kids live in it while they're going to school in London and NY.
I still expect companies with lots of cash to borrow for some expenses and anyway keep large lines of credit open, but it would be strange to borrow to pay a divident if you already have more than enough cash on hand.
Any other house in any other market where they don't personally want to live get's a different assessment.
So too are really luxurious apartments in the world's elite cities.
They will continue to buy stocks.