U.S. house prices are rising exponentially faster than income
realestatewitch.com
realestatewitch.com
Until a country decides to stop making policy to support this notion that a basic need should be an appreciating asset and not a depreciating one like food, transportation, etc, this completely unsurprising trend will continue. It is a strange world we live in where we collectively believe that a basic need should increase in price over time.
You can make any graph look scary if you try hard enough haha.
For example, the U.S. is slightly below average in mortgage debt-to-income. One of the few places that the U.S. stands out is the percentage of home owners--we're second from the top at 40-50%.
in log scale: https://fred.stlouisfed.org/graph/?g=ImYV
divided by households: https://fred.stlouisfed.org/graph/?g=ImZ1
[1]: e.g., https://en.wikipedia.org/wiki/Levittown
It began when boomers entered the housing market. I.e. suddenly a lot more people wanted houses.
Before then, houses depreciated over time, like your car.
Quite the opposite of what some comments here suggest, encouraging home ownership keeps life affordable. It is one way to stave off an oligarchy of property owners.
See, for example, Fannie Mae's mission,
> Our mission is to facilitate equitable and sustainable access to homeownership and quality affordable rental housing across America. We continue to innovate and promote a stronger, safer, and more efficient housing finance system to support more opportunities for homebuyers and renters in communities throughout the nation.
https://www.fanniemae.com/about-us/who-we-are
Finance people who make loans take issue with this since they have to match prices with a "government-backed" business, although it's only a charter which isn't the same as govt-backed. Plus, tons of businesses were supported by government in 2008 and 2020-2021 so that point is moot.
A better way would be to ensure that supply can continue to increase with demand, rather than encourage speculative buying and holding of land off the market in the hopes of making a fortune flipping it to the next generation and slowing down any attempt to redevelop. "Oh at least you're locked in" is at best a patch.
>See, for example, Fannie Mae's mission,
Yes, that's what they say but that translates into making housing an investment, which (see the several other comments on this point) goes directly contrary to it being affordable. I don't see what's better about mom-and-pops milking the next generation rather than a big conglomerate -- the result is the same.
>Finance people who make loans take issue with this since they have to match prices with a "government-backed" business, although it's only a charter which isn't the same as govt-backed. Plus, tons of businesses were supported by government in 2008 and 2020-2021 so that point is moot.
Wait, what? Finance people love Fannie Mae and the like because it means they can dump mortgages on a government agency merely because they meet some ossified standard rather than being legitimately below risk thresholds by a realistic assessment. And then not have to worry about fixing a rate that's too low for 30 years.
No. They are glad the government is buying away the risks from them, enabling them to give more loans to people who might not afford to pay for them.
so should those people be given the loans then? The choices are to deny the loan, and prevent those on lower income from buying, or to give them loans (that they'd potentially default on in a crisis), and bear the cost of defaults.
I've never found agreement when speaking out against renting on HN. Empty houses outnumber the homeless 6 to 1 [0] and yet somehow it's more important that we ensure landlords can protect their effortless investments and waste more and more land on non-dense, temporary housing.
[0]https://www.reddit.com/r/CapitalismVSocialism/comments/agbo4...
Government subsidised mortgages are the cause of this. The technical implementation varies in different countries.
House prices are "levered" on mortgage interest rates.
The exception of course is if it's impossible to make a profit using the asset. Rent controls are very effective in this regard: If you ensure that being a landlord yields no operating profit, the only incentive to buy property is if there's hope of future capital gains.
What do you propose?
2. Have you never owned a house? Houses break down all the time.
And obviously I've never owned a house. I'm 33. Only boomers own houses.
It is entirely possible for a house, or even a plot of land, to cost more to repair than it is worth. It's a bit more complicated, since location isn't entirely fungible, but I'd argue most people are willing to live in more than one specific plot of land.
Yeah, they do. When the cost of repairs and renovation get too much, the house is 'dozed and a new one built. Happens all the time.
Our tax code should give benefits for houses lived in for 35% or more of the year, but classify as a completely different category investments; and tax them accordingly harshly.
Why do you think large rental firms only want to rent out corporate properties or large apartments?
The average homeowner should expect to spend between 1-5% of their house value in maintenance a year - and that amount begins to climb as the house gets older.
This is completely untrue. For a $1M house (basic small home in the bay area), you'd be looking at 10K-50K in maintenance per year! I can't begin to imagine how one could spend that kind of money even if you tried really hard.
Unless you buy a fixer upper, maintenance costs are minimal. Paint sometimes, the occasional water heater replacement, a sprinkler tube leak here and there.
In 2021 so far I've spent a grand total of $409.61 in house maintenance. As a long-time house owner (>20 years), it's a fairly typical year.
I do spend 2-3K a year on improvements, but those are strictly optional, things I do because I like.
Welcome to the UK cladding crisis: https://www.bbc.co.uk/programmes/p09myyk1
Barring a natural or human-induced disaster, houses don't "break down".
But more houses may always be built.
And I do disagree that houses are not depreciating assets. The technology and the style of a house become outdated. And much deteriorates over time. Yes, the land may not depreciate, but that is a separate matter from, or, at best, only a component of the value of the house.
Yes, they depreciate, and much faster than you imagine before you have seen it. This can be experienced in buildings in depopulated towns that have been vacant for only a few years. Houses that are not heated/vented/repainted/repaired become complete write-offs in just a few years. (and remodelling bathrooms and kitchens doesn't count.)
Maintaining a house at equilibrium is a negative cash flow that grows over time.
The same is true for infrastructure such as roads, water, sewage, and so on.
An American style home is likely built from wood panels. It takes more money to maintain but it can be built cheaper.
Like with anything you can chose from trade offs.
I've mentioned this before but it's worth saying again: 1 square foot of housing is approximately the same price - adjusted for inflation - as it was in the 1970s, on average. [1] There's a few caveats however.
(1) New houses are 2x bigger on average than they were back then, and the average American family is smaller [1].
(2) City councils, and by extension zoning rules, in major metros preclude construction meaning that supply cannot meet demand. This benefits existing landowners to the detriment of both the next generation and renters. San Francisco is a prime example [2] - SF needed to build 6X as many houses as it did between just 2012 and 2016 just to meet the job growth in the area. This pushes the price per square foot inside metros up way above what they would otherwise be.
(3) Zoning rules outside of major metros, including setback rules and minimum size rules, parking rules, etc, make houses outside metros much bigger. Also, expectations have shifted. This pushes the square footage of suburban homes up - and with it the total price.
(4) This applies mostly in the last few years - but lower interest rates make houses that are more expensive much more affordable on a monthly basis, which is totally fine as most folks end up with a 30 year fixed rate mortgage. A drop from 3% to 2% makes a house about 25% more expensive cost the same amount per month. Yes, it increases down payments, but down payments tend to be up to 20% of the price - so an increase not of 25% but 4%.
So what can we do? Easiest thing is state-wide or federal zoning rules. Build up. Allow smaller homes. [edit](Stop with the mandatory parking.) In Japan, supply and demand meet, and a new 3 bedroom house in Tokyo is like 400K USD [edited for current data] - right around the cost of construction. This is thanks to their federal zoning rules. [3]
[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...
[2] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage
[3] https://marketurbanism.com/2019/03/19/why-is-japanese-zoning...
Absolutely false in the long term due to feedback, although it is true in the short term.
With lower interest rates, people bid up the price of houses because they can afford to spend more on their mortgage. The amount spent on mortgage repayments trends towards the same figure as always (approximately as much as your wages allow).
I believe houses are a prime mover of the middle class economy, because it is something most people are willing to “invest” a lot of time working to achieve owning the property they want (often status driven).
Among other reasons, we should because the existing cities are the most resource-efficient and lowest-environmental-impact living places we have at scale, and typically subsidize the infrastructure of other places.
Seems like taking a short term hit in resource efficient and environmental impact in order to have people live elsewhere would be overall positive.
You’re ignoring two things: 1) many people don’t care about city living just access to jobs, thus a cheaper city with jobs is a good substitute and 2) sure there is a price premium, but $600k seems more reasonable than $1.5M.
> sure there is a price premium, but $600k seems more reasonable than $1.5M.
So now you've built $600k houses, not $300k houses. And if there are desireable jobs in the area, that pushes the demand for thouse $600k houses up to the amount that is paid in the area.
I love LA though but the housing situation really does suck.
So higher house prices will tend to correlate with better schools.
Schools that perform poorly are usually in poor areas. They get less funding because the property is worth less in that area. They have more students, because it's cheaper to live in those areas, but have worse facilities, fewer programs, and they can't hire as many teachers, leading to even worse teacher/student ratios. People who can afford to move to better school districts do so, or find a private school they can afford.
People get angry when you say that because it's taking a complex issue and trying to simplify it in a way that's only true from a surface level.
Beyond a bare minimum service level of functioning buildings, adequate nutrition, adequate medical care, adequate psychological testing, some basic school supplies and semi-competent, non-abusive teachers the finances do not matter.
If a classroom has a 1:10 ratio or 1:40 ratio or a 10 year old building vs a 90 year old building, big fancy gym vs an empty field, cool robotics lab or none at all, that barely matters in comparison and that what shows up as the difference in a well funded district vs a badly funded one.
A well funded good school district causes a shift in the student population, it's not the money that causes improvements in outcomes compared to population shift, so it is easy to mix the two.
Because the USA has a history of the above statement also being used for crypto-racist segregative bullshit, everyone thinks this really saying racist shit, but this applies the world over, including places without a long history of racism.
And that's tied to the school district, and is partially a function of how well funded the school is. People will money aren't going to send their children to poorly funded schools.
> Because the USA has a history of the above statement also being used for crypto-racist segregative bullshit, everyone thinks this really saying racist shit, but this applies the world over, including places without a long history of racism.
Outside of the US, funding for schools is often centrally planned, so most schools are relatively similar in funding, so you can't really properly compare.
Yes, this is tied to racism (white flight, segregationism/desegregationism), but this also applies to communities that are white and poor too.
Really, though, you're not very well educated on this subject. Your arguments don't reflect studies on the topic. You're making bold claims based on surface level thoughts; this is why people get angry when you say things like this.
Eventually, even American multi-millionaires will get bored of buying $7M houses in LA and go fuck off to Phoenix, so who needs to live there and service them?
I believe a majority in the US lives in a metro area of at least 100,000 people, but only about 30% appear to live in a city of at least 100,000 people.
I think the difference is the suburbs, and I don't think that is a recent thing.
https://en.wikipedia.org/wiki/List_of_United_States_cities_b...
https://en.wikipedia.org/wiki/List_of_metropolitan_statistic...
In New York State, a "town" seems to be not exactly a town, like a stereotypical "small town".
I've lived here most of my life and never really realized, but according to Wikipedia, a "town" in NY is more or less the equivalent to a "township" and within it are "villages".
https://en.wikipedia.org/wiki/Administrative_divisions_of_Ne...
"every piece of land in the State is part of a city or town, which, with the exception of the city of Geneva, is part of one and only one county. Not every piece is in a village or city. A village is part of a town; cities are not part of towns, but have the powers of towns. A village can be a part of more than one town. A village cannot be part of a city."
So more like a division of a county that's not part of a city than an actual town.
And where this is going, is that I think this is where a lot of people live, rather than cities per se.
An administrative division, where a lot of people live, that's neither a city nor a village, but has water and sewer and so on, sounds to me like almost a definition of suburbs.
You have:
1. Legal boundaries of cities, which are dependent on the state. Each state has a constitution that determines what the requirements are to be a city. Maybe it's only 10 signatures and filing fee. Maybe it's much more. There is also a well defined process for extending the boundaries. Outside the city you have unincorporated areas, but that's like places where you have to get water from a well and use a septic tank. That's not suburbs, it's country.
2. Because 1) is so random, government statistics office come up with their own definition of "statistical areas". There are metro-statistical area, and micro-statistical areas, and even these depend on which agency made the list.
3. Realtors keep their own definitions.
4. Things like advertisers and business have their own definitions depending on industry (e.g. media markets)
5. locals have their own definition.
At the end of the day, you have to pick a list and work with it, knowing the pros and cons and how that affects your methodology.
I think it's easy to overestimate how much you know about other states.
Small cities/large towns are actually more efficient on average in the US since everyone is a 10-15 minute drive of everything.
Rural areas can be very inefficient.
I don't like US 'cities'. I do like cities elsewhere in the world.
More about it: https://www.youtube.com/watch?v=uxykI30fS54
What's "smaller"?
It appears substantially more than half the country lives in a metro area smaller than the Columbus, OH MSA.
https://en.wikipedia.org/wiki/List_of_metropolitan_statistic...
MSAs can sometimes be rather small in area -- for instance, the Bay Area is split into 9 MSAs, all but one of which (SF-Oakland-Berkeley) are less populous than the Columbus MSA. So, everyone in the South Bay lives in a MSA smaller than Columbus (San Jose-Sunnyvale-Santa Clara).
If instead, say, you opted to take all CSAs with > 1 million people (per the 2020 census), you'd cover just over 2/3 of the population.
(Even so, affordability isn't purely a function of city size. Chicago is eminently more affordable than DC or SF despite being larger than either, whether you consider the CSA, MSA, or just the urban core.)
Not really, I was fishing for context, for whether someone who says we need small cities considers Columbus small, large, or negligible.
So to answer your question, because there's an enormous attack surface for elites to abuse the planning process to self-segregate, consume publicly funded infrastructure, and stick someone else with the responsibility for urban social problems
The board also just voted against turning a parking lot into a 500-unit apartment building, citing the recent Florida condo collapse as justification, and worrying that it will “gentrify” the corner of 6th and Market (!). https://www.sfchronicle.com/sf/article/State-investigating-S...
It's going to take some time until tech workers stop flocking to SF and price become less ridiculous, if ever. I don't see it dropping below other world big cities like NYC however.
But as others pointed out, the spot in question might not actually be right there, I was just commenting on the area mentioned by the parent, to add context for the non-SF people.
Ah, SF, sometimes I even miss it. :-)
We never exited towards 6th even then.
Uh uh, apartment, not a house.
There's a huge difference.
And sure, there is a difference, but it is only minor as we are still speaking of living spaces that you own instead of rent.
When a developer builds a housing building, they sell the apartments to people who will either live there or rent it to someone else. Then when the owners sell their apartment later, it can go from a resident owner to an investor, or the other way around.
As a result there is a mix of owners and renters in any condominium.
Renting is not owning an apartment: You can renovate an apartment you own, but not a rental. This is much the same as renting a house instead of owning it.
That's the problem. Apartment is inhumane by default. No privacy, no private space. They shouldn't accept them.
That's just off the top of my head.
I lived in concrete floored apartments for 7 years and almost never heard my neighbors. Never got any sound complaints. That said a lot of low-rise U.S. apartments are built with wood and may not be adequately insulated.
Neighbor noise is the top issue with this style of housing, but it goes completely unaddressed during building. I've always wondered why nobody has tried to differentiate on that.
I would be happy to live in a condo instead of a house if I felt really comfortable that I wouldn't have to deal with noise. But as it is now even if your neighbors are quiet at first, they could sell to someone with a new baby and you're screwed.
Still, I would think good noise isolation must exist at some condos. I imagine you could interview current residents to see how good the noise isolation is before purchasing.
So it is possible to have good noise insulation. In general the noise from outside is bigger problem than from neighbours. Only real case with issue is renovation as any drilling or hammering through travel in structures.
When I looked up soundproofing, there are techniques that involve a few layers of drywall and sacrificing like a few inches of air space to have an airgap, so it is possible to do it relatively cheaply in new construction, but then you sacrifice sqft :/
Another thing is that they would need to inspect the apartment once in a while (with notice) to make sure you aren’t damaging it. Even with notice it is intrusive.
I am sooo much happier owning a house. I got so sick of white walls I couldn’t paint and the inability to have certain hobbies (woodworking? musical instruments? Not in any apartment I’ve been in)
You can buy apartments and rent houses, so they shouldn’t be conflated.
Traditionally SFHs tend to perform much better as investments than condos. When you’re in an environment of secularly rising prices, you’re heavily pressured to get on the property ladder.
People want to buy and own an SFH as soon as they can. Otherwise if they get a condo the risk is the SFH market moves away from them and they’ll be priced out when they need it.
Buying apartments here is actually more expensive than buying a standalone house, because they tend to keep their property value more than the houses (which usually are sold for the land - people tear the houses down and rebuild). If you're trying to verify what I'm saying, the apartments you'd buy here would be called a "Mansion", which is mostly a term for upscale apartment.
Edit: oh, I should mention that the interest rate here is insanely low (around 1% or as low as 0.5%), and you can get 35 year mortgages.
Real estate is the only asset class where this isn’t true. The existence of the mortgage, which is one of the most unique debt instruments available to the general public, means that house price inflation only needs to exceed interest rates about about 0.6% to beat stock market returns.
For one party to see returns exceeding interest, another party has to pay for that (exponential) rate of return. It's unaffordable for the second party.
These prices compound, exponentially, and as a result younger generations spend much more of their money in wealth transfers to older landowners. It's unsustainable unless the wages of younger generations also start to rise at similar rates, which isn't happening.
This is just factually untrue. House prices do not grow exponentially. The rate at which they grow goes up and down, but it’s never been exponential. The entire premise of your argument is indisputably incorrect.
If you used $1,000,000 to buy $20,000,000 worth of property in San Francisco, and you wanted to get a 15% annual return to beat the market, the numbers would look like this:
You’d be paying around $600,000 in interest, say you’ve got another $100,000 in expenses, and you want to get $150,000 for your return. That’s $850,000 that needs to come from somewhere, in San Francisco I think the rent to price ratio is about 1:50, so that’s $400,000 in rent, and the remaining $450,000 needs to come from house prices increasing. So to beat the market your property assets needs to appreciate by 2.25%, or about what the fed targets inflation to be.
This is only possible because the mortgage is a very unique debt instrument. As far as access to cheap debt goes, it is comparable only to the highest credit corporate and sovereign bonds. The only type of debt that a regular consumer has access to, that is somewhat comparable, are subsides student loans.
This is good, because it means people can afford more.
>> (2) City councils, and by extension zoning rules, in major metros preclude construction
This is good because unregulated growth is a net drain on society. No one wants to buy a house if the property next door can be turned into a 30 story apartment building. More people own property now than at any time in history. How about that? Stop making babies, right now, and there will be plenty of space for everyone. I don't have babies, I own a house, everyone who has babies wants not just to pollute the world with their offspring and tax me to pay for their spawn's upbringing, they also think they deserve free property. Just don't have babies and problem solved.
Average over what, though? I'd assume that 1sq in a dense metropolitan quarter in high demand goes for a lot more than 1sq in a poor neighborhood or in the middle of nowhere.
The global average doesn't really mean anything except "somewhere in the US there is still affordable housing".
Most critics of rising housing prices that I know of aren't arguing that housing is becoming unaffordable everywhere but that it's becoming unaffordable in high-density places where housing would be needed.
You acknowledge this in:
> This pushes the price per square foot inside metros up way above what they would otherwise be.
Also shouldn't actions include at least having a look at building speculation in high-density areas?
So as a tech worker who's lived in the "middle of nowhere" and worked remotely for 20 years, why the hell is anyone paying a premium to live in San Francisco now?
Maybe covid now changes this now, but the ability to have stores and RL venues without having to drive will stay in demand, I' pretty sure.
The thing is, RL venues are important, but they do exist outside of San Francisco. Increasingly, very little exists in the urban cores, and yet the prices for rent are still insane.
Suppose you and I both save 30% of out net income. If I'm making far more in a city then my 30% savings will go very far in a not city location.
We can also assume if you spend 100/month on rent and I spend 500/month on rent it's the same "percentage" of the pay we make.
No matter how hard I looked or negotiated, I couldn’t manage to get any remote offers or jobs in small towns in the USA that’d pay over about $140k. Meanwhile, with my experience it was EASY to get an offer for $300k in the Bay Area.
That means that even paying $3300/month to rent a run-down shithole and $6 per gallon for milk, I’m saving $120k a year vs the $40k I’d save in a small town.
The numbers get even more insane if you buy property in one of these hideously overpriced Bay Area cities. I haven’t done it yet, since a downturn could leave me holding the bag and trapped in this nightmarish place for 5 years, but the financial incentives are incredible
Exactly this. I hate the highly populated areas of the world but I'm working in one with hopes that I can buy a house with high speed internet within driving distance of a medium sized family-oriented town with a shopping + restaurant district. If cost of living is 1/3rd then your 120k savings just got you a whole bunch of slack.
The exit strategy is to sell the ridiculously overpriced house, fully paid off, which has doubled in price in the last 8 years, and sod off to a lower COL area. Since I’m a Brit, a small castle with grounds in Scotland ought to be on the cards, for less than my 1500 sq ft ranch-style house here.
Friend, that's not what average means.
It means that more than half all houses cost less than X (because average => median). Not "somewhere in the there exists something less than X".
> "high-density places where housing would be needed."
Well you got half the country (actually much more - closer to 2/3, given that average >> median in housing).
This has been brought to you by your local RUMIA (Responsible Use of Math In Arguments) league.
Stay frosty out there, people.
But it doesn't even have to mean that. It could also mean that certain undesirable neighborhoods cost far below the median, pulling the average down.
(4) Monthly payments on new mortgages are essentially fixed for any point in time. A drop in interest rates from 3% to 2% makes housing asset prices 25% more expensive, and along with them downpayments, real estate taxes, and the amount required to pay mortgages off early.
(1) In order for a house to keep up with market appreciation, it has to be a desirable to the future "average buyer". Monthly payments are relatively fixed, less bidding competition for land outside of metro areas means that the feedback effect in my (4) isn't as strong, and so a bit more money goes into the structure.
'Local German officials, like local leaders everywhere, seek bigger budgets to provide more and better services to their constituents. What’s different about Germany is that the way to get bigger budgets is to increase local populations. And, as Professor Buettner says, “Ultimately, to get people, municipalities will need to support housing.”
The result is a system of incentives that is the opposite of “fiscal zoning”—the US practice of zoning land in ways that maximize local governments’ income and minimize their costs. In places with high sales taxes, such as Washington State, leaders zone more land for shopping centers. In places where residential property taxes are capped, such as California, they zone less land for homes and more for offices. In affluent suburbs, they often zone land for houses on large lots, excluding low-income people.
Maximizing property values is such a central concern of local government in the United States that Dartmouth economist William Fischel developed the notion into an entire political theory. His “homevoter hypothesis” holds that local governments are almost single-mindedly focused on maximizing real estate values, because homeowners typically vote their home values in local elections. German jurisdictions gain financially by maximizing population, not house values, and because renters outnumber homeowners in the country, homevoters are not the dominant electoral force in local German elections. Renters are.'
https://www.sightline.org/2021/05/27/yes-other-countries-do-...
Edit: I'm suggesting that feeding (and housing) yourself is a personal responsibility, not a collective one. And that the instrument we use to enforce basic order and peaceful coexistence (punish noncompliance with imprisonment) is far to blunt for enforcing cooperation (helping each other find food/shelter).
This would be an interesting topic if food in the US weren't already the cheapest in the entire world. [1]
[1] https://www.ecowatch.com/worlds-cheapest-food-is-in-the-u-s-...
Edit: just look at the massive harm caused by subsidising corn.
However, I agree there are probably better ways of managing access to food with less regulation, such as repealing the Farm Bill and offering UBI payments in lieu so individuals can decide what they want to eat.
Yes exactly, incentivize not mandate. People should be free to cooperate/not cooperate as they see fit, don't you think?
Why UBI? That's just more mandatory cooperation - the productive are forced to subsidize the non-productive. Can't it be optional?
> it's our responsibility to make sure everyone has some bare minimum standard of living because life is a lottery
Where do you derive this responsibility from? I personally don't agree with imposing responsibilities on anyone without their explicit consent. It's indistinguishable from slavery.
Also who gets do define this "bare minimum"? Why must it include private quarters, private toilets, private kitchens, air conditioning, television, internet, and all sorts of other modern amenities without which people have contentedly lived for milenia?
Edit: Also how would you address labour shortages in agriculture, construction, service, and many other fields?
Clearly some degree of slavery is necessary to support the peaceful coexistence fundamental to society. Namely the army, police, courts, and the commons. Beyond that, no society which purports to value liberty will mandate cooperation. The government, with its supreme power to enslave, should be restricted in scope to the administration of the peace, not ever-expanding into every aspect of our lives.
1. Manipulates interest rates directly affecting house prices
2. Changes tax rates depending on housing (mortgage interest)
3. Buys mortgages
4. Zones areas which can restrict or increase supply based on policy.
Yes, if they didn’t do any of these, people wouldn’t blame government policy and we’d see what a functioning market results in.
Just because something is traded doesn't make it an appreciating asset. In the case of commodities, they're typically traded as risk management instruments, not something that inherently provides returns.
("Homer vs. Patty and Selma", Simpsons S06E17)
H. J. Simpson was doing this back in 1995, though to be fair he was in futures, rather than the raw asset.
Regardless it's extremely affordable for most people
throughout history. society has not been kind to people who tried this. scalping staple foods usually leads to bread riots. and because food is absolutely biologically required to survive, those usually turned very violent.
This is actually exactly the issue with housing. The market is controlled by municipalities who are elected by NIMBYs. The only reasonable thing to do in these conditions is to buy as much housing as you can, since your assets are protected from competition (local densification) by the government. We've literally regulated ourselves into this crisis. The solution can't be more regulation.
Edit: see https://en.wikipedia.org/wiki/Missing_middle_housing
If their intent was to make homes more affordable they would intervene in the offer side not on the demand side.
It would simply have been better to just make a construction company and sell homes at cost.
And what would be ideal, in a healthy market, is that housing is sometimes a little overbuilt and becomes a bad investment, then becomes very affordable and a good investment. Sitting at some sort of market equilibrium if you will. Investors consistently winning is bad for affordability, and investors always losing means eventually nobody will build houses and people start having to live outside.
This. I don't understand why people think that it's their fundamental right to live somewhere where they want.
The issue is that newly created housing is already priced sky high. You can blame quantitative easing which lowers interest rates and drives comodities we usually buy with credit high.
Just add another line to the graph and you'll see it.
Problem is not the market, but the fact someone is tempering with it so bad it inevitably collapses.
If the town is expanding then the supply of housing goes up along with the demand and prices stay the same, i.e. proportional to the cost of constructing new housing.
Once you reach a certain point you have to build taller buildings which are more expensive to build and then housing prices would reflect the higher construction cost, but this only applies to urban areas and the costs only get really high when the buildings get really tall.
If you converted some of the suburbs to three story buildings that filled the lots, the cost per square foot wouldn't be much higher than it is for single family homes, but there would be ten times more housing per acre. Doing this is prohibited by zoning, which is the real reason why housing is unaffordable.
Forcing everyone to live in what they consider an undesirable hellscape isn’t good policy in either direction.
Why is it "supposed" to be this way?
It doesn't work this way in a lot of Asia. People don't want old, used homes and they lose value over time. Cities often don't have one specific point in the center (America's zoning is absolutely horrendous and forces this to happen) and so businesses, restaurants, shopping, activities, and so on are fairly equally spread across towns.
When American cities expand, they build more houses farther away but further condense business in the downtown core. But that's a problem that's politically invented and not so much a problem elsewhere.
That is absolutely not true. There's a reason why it is called center in the first place. Amsterdam, for example is completely flooded by tourists in the center and not so much outside of it.
Look at the real estate market in Singapore or Tokyo where housing prices are more reasonable
Singapore is facing the same issue every other locality is with housing prices: prices have no fundamentals any more and are just inflating upwards out of reach from the median buyer. One can compensate slightly with smaller homes, but that has an impact on fertility rates and other quality of life indicators.
[0]: https://www.straitstimes.com/business/invest/property-no-lon...
I assume a huge factor has to simply be that Japan's GDP and population growth has been basically flat for ~25 years.
https://www.theguardian.com/cities/2017/nov/16/japan-reusabl...
That's why, the most expensive part is the land and not the building itself.
If you look at the private condo market (you can’t look at public as the prices are subsidized), it’s not unusual for condos to cost >$2,000 per sq ft in desirable locations. A 750 sq ft 2 bed condo can run $1.5 to $2.0M.
San Francisco is closer to $1,500 per sq ft for a house in a prime location.
But what if they did? What if our governance said old homes must be updated? Then old homes would probably be worth less because it costs a lot to retrofit sometimes.
I may have some or many of those details wrong, just thought it was another example of how political decisions drive housing prices one way or the other.
You'll find a lot of people trapped in homes they cannot sell. The cost to update very old homes would far exceed what most people can spend out of pocket, and by the time they paid off the debt to do so, the codes may have changed again.
Also, older couples who have lived in one place many years and are now retired generally cannot take out lots of money. Instead of being able to sell and move to a senior community or nursing home, they would be stuck with a property they cannot maintain, compounding the problem.
Essentially, you would be hurting vulnerable people at the advantage of the young and wealthy.
If the updates were mandated as the code changed:
See all of the above, but now you're forcing people out of their homes even faster.
I agree there are challenges in both having homes that appreciate and homes that depreciate.
In the US ex post-facto laws are generally unconstitutional. Our law defaults to grandfathering (there are exceptions), so a change in code applies to new construction, or renovations to existing structures. My experience owning older properties is that this was not a feature. Often what would be a repair in a new property would lead to a major renovation because whatever was being worked on would have to "be brought up to code".
Here are a couple examples showing both an ex post facto change and a non-ex post facto change.
Example 1: The building code is changed to say that all electrical outlets installed in kitchens must be installed with GFCI protection. Your non-GFCI kitchen outlets were installed before this change. In this case fining you for not having GFCI outlets probably would violate the ex post facto law prohibition because you are being fined for something that occurred before the new law--the installation of non-GFCI outlets.
Example 2: The building code is changed to prohibit non-GFCI outlets in kitchens. Your non-GFCI kitchen outlets were installed before this change. Fining you for having non-GFCI outlets would probably not violate the ex post facto law prohibition because you are being fined for something that is happening after the law--having non-GFCI outlets in your kitchen.
(This is all assuming that fines for building code violations are punitive. The prohibition against ex post facto laws in the US generally only applies to changes that increase punitive aspects of laws).
My personal experience having owned multiple properties is that code changes rarely, if ever work the way you are describing. I've actually renovated a few kitchens, and had to deal with GFCI because the law around the permit for construction required us to, not because the code change was applied to pre-existing non-GFCI outlets. It would be impossible to maintain a property if the law worked as you described - the government could declare the kind of shingles on your roof illegal, and take your property for non-compliance, which is exactly why ex post facto laws are unconstitutional.
City centers exist, just look at tourism and public transport. It's more valuable when you can rent out apartment as AirBnb, it becomes more valuable when tourists can't drive, distance from museums and shopping malls increases value and possibility that the land you own could be bought out for development of high density building is what drives the value up.
Housing is not a bottle of water you can buy in groceries. Housing is one of the few things most of us buy on debt. If you increase the amount of debt people can take by lowering risks for banks, the price will rise.
Also there are many other factors like that cities that complain about high cost of housing mostly have draconian municipal building codes and zonings. Even racism has a play in it, it's truly interesting topic to study.
> Housing is one of the few things most of us buy on debt.
Hard disagree there. Most people I know buy phones, cars, bike, washing machines, computers, sofas, desks, and damn near everything else I can imagine on financing plans. I feel like a weirdo because I tend to save up for everything and not accumulate debt! But I also grew up in a very frugal household, so maybe others were raised differently.
Also in the EU country I live in schools are managed centrally and equally, so there is no such thing as a "good school district" I read happening in other countries, which seems to expand inequality and cause financial hardship to their population for no reason other than the ideological assumption that central planning is to be avoided.
Is this actually legit full true? It might be less of a gradient than other places, but in our two years in Norway our children went to two different public schools which were in immediately adjacent suburbs - both good locations, and there was a definite difference in the management of the schools which was visible through all our interactions with them.
The second school was clearly better in our experience, despite being part of the same system.
Norway isn't "EU" for those purposes, but I suspect it's similar. The same way that different hire car offices or different pizza parlours in the same "chain" can have quite different quality despite theoretically operating under the same policies.
(edited to add)
While these things, in theory, normalise out over time as staffing changes in individual schools or individual franchisees - your kids are often only at each school for a handful of years, so there'll definitely be some attempt to find the better ones based on what you hear from parents of kids a year or two ahead... and those with enough money to just move house into the "best" zone will still get their kids into the better school.
Here in Melbourne, Australia - many schools allow some out-of-district students - as a percentage of their total enrollment - but pretty much all public schools are required to make a place available to any student inside their district (which are drawn based on distances between schools, so they're sometimes pretty weird for transport)
It depends on which school you like. In case of high schools, if you choose a vocational high school (which teaches a specific craft or a group of crafts), as opposed to a gymnasium (a school that prepares you for further university studies), it also depends on your intended future profession.
> Presumably there are limits on how many places are at each school
That's what standardized entrance exams sort out.
> and you need some way to make sure that a child doesn't wind up with the only place left for them being on the other side of a city - so you'd have some degree of locality.
We have good public transport that was free for schoolchildren (and for high school students was very affordable), so this wasn't a problem for me even if my school was on the other side of town.
Do you have children of your own in the school system? I found that my expectations didn't always match the reality either in Australia or in Norway when it came down to actual experience for my kids.
Myself, I grew up in a remote area and was home schooled, and then for the final years of high school I went to the closest school, about 90 min drive away, so I lived in a lodging by myself during the week from age 16.
BTW the fact that districts limiting attendance don't exist means that you don't have to change a school if your parents move, which happened to me at least once. Or, that your parents are prevented from moving if you want to keep your school.
Czechia doesn't have multiculturalism so it therefore doesn't have this concept.
So that would be all our schools. :) (Czechs and Vietnamese, respectively)
> and children who will not be disruptive in class
In my experience that seems to depend more on the type of school rather than on location. Gymnasia would be expected to have better-behaved students than vocational schools, even if the students come from the same region. I suspect that has a lot to do with entrance examinations. If you can pass the entrance examination for a Gymnasium, you're much less likely to be someone who had been disruptive in class in the past, and consequently also not likely to be disruptive in class in your new school.
Do Czechia have social classes? If yes do they live in different neighborhoods?
In much of Europe the core of a city is much more expensive than the periferia.
In US most houses are made from wood panels and nobody expect them to out live the owner. In Europe most houses were made from bricks and concrete and people passed them to the next generation.
This is just nonsense.
I expect my house to outlive me.. a wood framed house has a 100 year life expectancy but that will be longer with maintenance. We have older homes from the 1800s too. Plenty of people buy homes from the 1920s.
My house in the Bay Area is ~65 years old, it’s timber frame & stucco. When a strong wing gusts against it in a storm, you can feel the house slightly shudder. It’s not going to fall down (I’m reasonably certain, at least it hasn’t in the last 15 years and we’ve had a few storms :) and it’s not “made from wooden panels”, but in terms of solidity and construction, it’s not in the same ball-park (to use an Americanism) as my mother’s house.
Oh, and my house cost today would cost about 10x what my mother’s would…
[edit: it’s kind of wild that your username is what I used to sign into Unix systems with when I was in college. Sjg are my initials and they changed our account-names every semester for some reason]
Those areas are also very close to all amenities like top public transport connections, quiet green spaces, entertainment, good doctors, top companies, good schools, lawyers so walkability is top noch, you don't even need to use public transportation, let alone own a car.
Buildings in those areas are also typically much more spacious and more solid than the current matchboxes being built.
I don't think that's what they were describing. They were describing new homes, not old: I think the "supposed-to-be" pattern is up for 10-30 years after first being built, as the area is still growing and becoming more desirable, then down once the growth no longer outpaces the aging.
Which policy? You mean government charters for e.g. Fannie Mae that were established in part to combat behavior like redlining, which excluded certain ethnicities from loans for certain neighborhoods based on the loan applicant's skin color?
The point of combatting redlining was to provide equal opportunity for the same income levels, and to not discriminate on the basis of ethnicity alone.
US government used $200 billion of taxpayers money to revive Fannie Mae and Freddie Mac.
Those money will lower the cost of borrowing and thus push the prices up. A new crisis will come, people will lose their houses, Fannie Mae will lose the tax payers money. The government will give Fannie Mae and Freddie Mac $400 billion this time, thinking that $200 billion was clearly not enough.
Fannie/Freddie were captured and should never have bought NINA (no-income-no-asset) loans. If they had died out as a natural result of competition that would have been fine. But they were misled into a disaster. Allowing them to crash in 2008 would have been a bigger disaster. They no longer give out such risky loans. Now the sharks have moved on to other scams.
If prices rise faster than wages across the board there will be a correction at some point: quite simply prices cannot go higher than what people can pay.
And in fact earnings from capital now surpass earnings from work in the world (or is it in the west?). So I suspect house prices will continue to rise faster than wages, until enough people got fed up.
they are not comparable things.
Capital can be deployed on massive scale, but for work, a human only has at most 24hrs to work (if they don't sleep).
So as the income from capital grow faster than the income from work, you will have more and more houses owned by capitalists (in the sense of capital-owner) and less by workers. In most modern countries, large part of the workers are also capitalists and this works OK-ish, but in countries with the same governance as the western world one hundred years ago (Brazil, Mexico, but also probably soon India and some ME countries), this create a severe imbalance.
If the population of this country stopped growing and started shrinking, a lot of real estate would be freed up. Demand for housing in the densest cities would drop, and it would be cheaper to live.
Real estate prices have gone up for the last hundred years because there are more people. This is why it has been an effective and predictable model for businesses like car dealerships to always locate on the outskirts of cities and wait for the city to come to them, sell the land and move further out.
There isn't anything nefarious or even strange about it. It's a natural result of population growth and increasing demand that consistently (so far) outpaces supply. Nor is it inevitable; look at China. Tons of empty apartments, cheap bordering on free to live in. That's what happens when supply outstrips demand.
Housing does not have to be fixed amount resource.
The relevant unit of supply/demand here is mortgages, which are indeed controlled by government policies.
Are you suggesting credit should be loosened again so you don't need 20% down to buy a property?
In communist regimes they did exactly this.
Eastern Europe is hurting in many ways due to corruption and political incompetence but the real estate market remains mostly affordable compared to the west.
Crazy times we live in in Europe.
BTW, as for "the rest of Czech Republic", things are not rosy in general: https://english.radio.cz/no-end-sight-inflation-czech-housin...
If the article about the US situation claims 118% of inflation-adjusted price increase since 1965, that's less than 2% increase per year. Not quite sure how this number is comparable to recent Czech figures, but I'm sure that Czech inflation wasn't anywhere near seven percent in the last years, so there's that. A 65% price increase since 2015 would be 9% annually on average. Czech inflation between 2015 and 2020 has been ~2.25%/y on average. So that would make the price rises adjusted for inflation 6.6%/y on average.
So if your goal is to communicate with English speakers, I'd stick to "Eastern Europe".
(Please don't respond with some argument about balancing a cutout of Europe on a needle, etc., I'm talking about using words instrumentally.)
BTW if you're concerned about "not preserving historical truths", a major contemporary truth is that Central Europe is part of the common EU market and Schengen Area, while Eastern Europe isn't. So that's quite relevant for the market situation.
East == bad
Central == better
Therefore Central Europe always extends far enough to encompass the speakers' country. Similar thing happens with Europe and countries beyond the Black Sea.
Seeing as Germany itself has a Protestant-Catholic split, nevermind the rest of Central Europe, Catholicism is probably not it. Neither Latin script, nor the extent of the historical German population, unless you consider the Baltics Central Europe.
It seems there is indeed more than one way to look at it. For some, it is about not being in the same category with Russia, for some it's their Austro-Hungarian history. For some it's Germanic languages. Is the German North Sea coast any more Central than, say, Belgium? How about Slovenia? Is Südtirol Central Europe?
Where exactly the line is tends to depend on the context. In my experience, people from the region don't care much about the Iron Curtain line, unlike Anglos or the French.
It wasn't that bad five or six years ago, but now we are screwed beyond belief.
Edit: and no, it is not just the tourist hotspots like Prague, even though AirBnB contributed to the situation, especially in the rental market. Prices are crazy everywhere, including rust belt cities that have been losing population for a generation.
I am now in process of buying a 120 sqm semidetached house in Ostrava. It is under construction right now. The price was about 270K USD. And this is in Ostrava, where good job opportunities are infrequent and which lost 40 thousand inhabitants since 1990.
And the construction corp. that is building the houses recently posted a new project of pretty much the same type of houses, only a mile away, but for 330K USD instead of 270K. This is the price growth since May!
The average salary in CZ is like 1600 USD/monthly pre-tax. The same new house somewhere around Prague would be around 500K USD at least, possibly 600K.
BTW our house has something like 160 sqm on those three floors, an attic, a cellar, and an attached three-level terrace garden (on a hill slope behind the house), all on a 250 sqm land parcel. The reason why it came for $US6k was that nobody wanted it when the town was trying to sell it (for around $US20k at the time), so the town put it into auction (with a ~$US6k initial minimum bid), where we (one of the tenant families at the time) were the sole bidders. I guess we were just lucky.
I think the areas where cost-of-living is cheaper will see an influx of remotely working people. Prices around Prague and Brno have become too insane even for middle class professionals and crossed into the "front end for mafia" territory, as these are among the last buyers who can afford them.
Governments can cause oversupply, governments can cause undersupply. Bet you can think of plenty of examples without my help of government policy resulting in supply for some goods decreasing or increasing relative to demand.
Governments can do a lot. Like, they can pretty much dictate what you're allowed to make, how much they're gonna tax you on profits from making something, who you're allowed to sell it to - they can absolutely decide to cause an asset to appreciate.
The vast increase in home prices has almost nothing to do with the housing market and is almost 100% driven by government policy combined with a slightly wealthier society.
Some interventions do, some don't. Without environmental legislation, for example, companies would export their negative externalities, e.g. pumping sewage into water systems, onto the rest of us.
Saying that, however, there have been some bad housing policies in the UK, for example, "Help to Buy" which could just as easily be called "Help to Sell".
Market manipulation or redistribution of individual (not corporate) wealth by governments -- as opposed to regulation -- is always a bad idea because (a) the people making those calls from within the government are getting rich by doing so, directly siphoning wealth from the citizenry by exercising inside knowledge and the power to tweak a market, and (b) those actions directly harm the golden goose that produces the economic uplift the government needs to survive - that is, the individual in the middle class.
But it does. The supply is partially driven by speculators who bet on the prices continuing to grow. Currently, a lot of people are buying more expensive houses than they need because "house is a good investment". This (the speculators) can be easily stopped with a policy - e.g. tax heavily all profits from real estate sales, incl. primary residences. If taxes make it next to impossible to profit on increase of house value (the profit goes to treasury and not to seller), then the market would significantly cool down.
The fact that we (for example) tax heavily income from work, but not from real estate speculation, is a CHOICE.
Look at the root causes of asset price inflation.
Tax policy that punishes large investors can help things land without a crash.
Also, if you increased the value of house (e.g. via renovation), the value increase would be tax-free upon resale, so that you can fully recoup the money you've put into the renovation.
Houses in this country are being purchased by large investors at rates never seen before. It only started happening in the last decade. SFR wasn’t previously an institutional asset class. That has increased demand for housing that used to make sense to buy on a lower income and reduced supply. They literally will buy every house they can that fits their buy box. Suddenly that $150k starter home is a forever rental.
Frankly, I think tax policy may be the only way to fix it. That or prohibit ownership by large entities.
I do think this should be addressed, either with tax policy or city ordinances against the practice, but I think the first step is to differentiate between short and long-term rentals. Long term renters have rights, for one thing. And they add to the neighborhood, they don't hollow it out. Every AirBnB is basically a dead property that takes away from the community and gives nothing back.
Corporate landlords have turn ratios near 40%. Small landlords are closer to 20%. The turnover is akin to Airbnb.
Investing is lending your money or other assets to an entity with an expectation that it will use those assets to generate more value.
One is increasing value in the world, and the other is riding coattails.
Also, I'm sure parent poster was suggesting taxing of real estate capital gains, not every dollar of every sale, and particularly not the initial sale by builder.
Things like zoning laws, property taxes, taxes on investing in property all affect overall prices, it's never going to be pure supply and demand.
For example if a region/country wants to keep prices down, heavily tax second/third/fourth homes. Or provide tax incentives to new builds.
Then there's interest rates, one of the reasons that property prices in many countries are increasing is that the interest rates are low, so people looking to invest can't get a good return on their investment in "traditional" locations, so they turn to buying property to rent out.
There are tons of tools any state has to motivate or demotivate markets. Taxes, rules on primary, secondary and investment residence ownership, same goes for rents etc.
I tend to see a clear pattern here, just like in other topics - folks who are profiting from current situation by already owning see nothing wrong - in contrary, market forces in effect etc. The more the better.
The rest not so much, ie younger generation thrown in the world where they probably will never own their residence, which can be pretty infuriating compared t situation say 20 years ago. There aren't that many more people to explain this. But the move to consider housing more and more as a speculative investment rather than commodity is definitely out there, everywhere.
Can you share what you’ve learned?
---
[1] https://en.wikipedia.org/wiki/Georgism
[2] https://en.wikipedia.org/wiki/Geolibertarianism
[3] https://geolib.com/essays/sullivan.dan/royallib.html, and prior HN discussion: https://news.ycombinator.com/item?id=7076632
Look up negative gearing in Australia
In any case, you have to realize money will go somewhere. It will go into a bank vault or it will go into a house, or it will go into the stock market; people want a return on investment. If you outright make it onerous and expensive for the middle class to invest in real estate, the only real estate investors will then be trusts and speculators. This is a simple fact any time a government goes after small land holders.
Did you also forget that the US govt created Fannie_Mae so that banks could issue more home loans, guess what happens when you issue more loans to more people, house prices go up.
Without a policy to disincentive it, couldn't large asset holders purchase freed up real estate and artificially control the supply?
Buying up a bunch of real estate to drive up the price and sell for a profit also doesn't work. For the same reason that a pump-and-dump scheme needs other bag holders: when you start selling the price will drop too quickly
Exactly, this is point I was trying to make. Policy can have an effect on the market. It is more than just supply and demand like noduerme was suggesting. An example is London. There is a large number of empty housing owned by non-residents because they can avoid a lot of taxes and its a good place to park money. If there wasn't preferential treatment for non-UK residents then the housing market there would look a bit different.
Also buying up housing assets could be a long term strategy that would benefit the owners in ways short term would not (change of policy 10 years later, increased population because of migration laws, etc.)
[0]: https://lfpress.com/news/local-news/london-apartment-vacancy...
[0]: https://www.gov.uk/government/collections/dwelling-stock-inc...
[1]: https://www.bigissue.com/news/housing/one-in-three-homes-in-...
Whoa. "By definition", investments have to go up after accounting for inflation?
I've never been convinced that any investment can go up faster than inflation forever. But you say they all do?
Also, I'm wondering what the phrase "you make housing an investment" means. Who makes it so? What do they do? How does it ensure it goes up?
Not really. It's fine to "invest" in something that just outperforms holding cash, or bank deposits. Trillions of dollars are invested in treasuries.
You can even invest in something with negative expected returns, if it hedges exactly the risks you will face in the future (eg, the risk of accommodation costs rising is offset by owning a house, because you will always need somewhere to live).
So you can make housing an attractive investment for medium-net-worth individuals, say, that section of the population that can afford to own 1-2 houses over their lifetime, without it becoming less affordable over time. You can use tax incentives to tweak this further: many jurisdictions give you a lot of tax relief on your first home.
So, what causes house prices to rise faster than incomes is not an approach of making housing an investment per se, but a focus on making it an investment competitive with the stock market and attractive to institutional investors seeking outright yield.
If it is an investment, it has to be competitive by definition. Otherwise your aim is something different than investment, which should be the case for housing ideally.
No, it just has to yield profits higher than the inflation rate. Not all investments have the same return.
Also buying anything can be or not an investment. If you buy some bananas expecting to sell them for profit, then it is an investment.
Should countries also stop buying and selling bananas for profit? After all, eating is a basic need, more so than housing.
America subsidizes homeownership specifically so now everyone does that, but people’s first and only house is definitely an investment.
Housing is a basic need, homeownership isn’t one, any more than running a farm is a basic human need.
What makes most house buying decisions speculative is how the market price is justified. And today the "residual value" (value of the asset when you sell it) dominates buying decisions. This is defined as speculation (in future market price).
Without residual value, the market for old houses would be like the market for old cars or bicycles.
Imagine if government legislation enabled lenders to lend random amounts with old cars as security: it would put a price floor on second hand cars. Since second hand cars are of limited supply, and ownership of such a car enables you to borrow at minimal rate, therefore the market price of an old car becomes the value of the getting that loan.
Every California rental I've lived in for the past five years had the owner residing in it as their primary residence, renting out the spare rooms, while doing one of two things: not declaring any of the rental income while still getting primary residence tax breaks, or declaring it as a full rental (and using another address as their primary address, despite not living there), and writing off the exorbitant Bay Area HOA fees.
Mortgages currently dominate the average person's life.
Indeed, it's sickening, and there's a very well developed structure to stop the average person stepping outside of the system via a tiny house, van life etc.
Tiny homes are the mobile home of this generation, except less widely adopted. But they will depreciate, widening the gap between those who chose to purchase a traditional house and those who chose a simpler approach.
Van life and tiny homes are not suitable for 99.99% of families with children.
It’s not that small houses are bad. Small houses (as I’d define it 1000-1750 sq ft for a 3 bedroom) are great.
But I still see it written as “if those structures were removed” that those alternatives are a suitable alternative to a stick-built house for the majority of people. I think they are all sub-optimal solutions that people should not be forced into unless they want to.
Much of that is not unreasonable — e.g. I went to a high school which had a lot of children of migrant farm workers who were definitely held back by their parents’ need to migrate up and down California following the harvest. Stability has merit.
What I would focus on are the zoning laws forcing single-family houses, lawns, vast amounts of parking, etc. since those increase the cost of housing significantly and reduce supply. There are many owners who would consider subdividing housing, tiny houses/granny flats/basement apartments/etc. but can’t because that is banned outright or requires things like street access and subsidized parking which aren’t compatible with the available space.
Unfortunately, in the United States this also inevitably involves class and racism — the laws against density, people camping or living in vehicles, etc. usually trace back to fears of poor, often brown, people living outside of “their” neighborhoods and especially outnumbering the current residents. That sentiment is long-lived and hard to shake, no matter the professed politics of a community.
"I'm stepping out of the system" is actually "I'm too poor to stay in the system".
Even with money, staying into western dense urban cities only give you one kind of life.
i document some of my adventures here. https://www.instagram.com/l_eonine/
i think thats about as anti-marx as it gets, no?
Maybe your statement is true for the American society though
Like I'm a person who is part of this system because there's literally no other option. I want to get off Mr. Bone's wild ride but there's nothing really available to me.
I’ve taken long stretches off work and done all sorts of amazing, productive stuff during that time. I have friends whom I really respect completely fall apart when nobody’s ordering them around every day though.. they stop going outside, the lack of exercise and sunlight sends their meat suits into “depression mode”, and it’s a quick downward spiral
I’m hoping that having a whole society oriented around it would result in a more positive outcome
if you make people seek calm and good social bonds (through cultural creations mostly) you may avoid capitalism runaways
We already know. Look at housewives, people on disability, young people still living at home with their parents, and retirees. Arguably college students, too.
It is not the case that all (or most) people who don't have to pay rent suddenly spend significant amounts of their time volunteering. They pursue what they desire or find meaningful, just like everyone else. And it's not clear it's a better outcome than those who pay rent (or a mortgage).
It looks like ~65% of households own a home, and about the same percentage of homes have a mortgage; the average household doesn't even have a mortgage.
A lot of housing problems result from the uneven and combined development inherent in capitalism. Physical and human capital floods to major sites of economic activity, leading to a positive feedback loop benefitting a small number of major cities. The rest of the country becomes a hinterland, sucked dry of business and anyone who has the option of leaving. In the UK, where I live, this is the major underlying cause of Scottish independence, and now the increasing calls for Welsh independence, and even Northern independence. The economy is asymmetrically built around London. That in turn makes it increasingly difficult for normal people to live in London (e.g. nurses and teachers). Zoning isn't going to fix that.
Rates are low everywhere, but housing costs are not exploding everywhere (in the West). Even with-in a single country like Canada, in the Toronto/SW-Ontario area prices are way up, but the Prairies are flat/down in most places.
> rather than a huge demand-side issue given asset price inflation consequent from QE, the expansion of private credit and the financialization of housing over recent times.
Some of the Commonwealth countries (CA, AU, NZ) have the higher rates compared to other countries (DE, CH, JP, FR), and yet have higher housing price rises:
* https://twitter.com/MikePMoffatt/status/1446515836504743956
You'd think the cheaper-debt countries would have the bigger rises in prices.
In Toronto/GTA, prices have been going rising especially since 2015, when there was no QE going on. But there was a whole bunch more immigration without corresponding construction.
In-group vs. out-group baiting, mayhem, & loss-of-life ensue. (h/t Frances Haugen)
For example the very same liberal parents who chastise conservatives for promoting racial inequality will cry murder when there are attempts to racially desegregate the school their child attends by changing admissions, and they'll come up with the perfect rational for this contradiction after the fact. They will put their child first, regardless of the fact that their child is already far ahead because of socio-economic advantages, and that the disadvantaged kid even with the better education is still going to be disadvantaged compared to their kid.
It's even worse in a culture and economic system where selfishness is deemed a virtue.
Here on HN, you can see such heavily self-serving bias in discussions like this, where the emphasis is entirely on the positive aspects and negative concerns are shot down: https://news.ycombinator.com/item?id=28924751.
I'd say it's fair to call the process by which people justify doing bad things as "evil". I just wanted to correct the notion that Facebook employees think of themselves as villains.
Facebook is connecting people with each other.
Amazon/Microsoft/Google are collecting usage data to improve their products. Amazon and Microsoft think it's such a benign thing to do that there's no need at all to allow people to see or opt out of this collection. Google thinks that providing visibility into what they're doing is more than enough to make up for it. Apple thinks that making it explicitly opt-in is enough to justify it.
Defense contractors are keeping Americans safe and making the world a safer place.
High-frequency trading firms are providing liquidity.
Landlords are "housing providers"
Etc etc
The reason shows like Squid Games is popular is that it's all about where people draw lines.
Morality is all about choices, and your true morality isn't what you say, but what you do.
The interesting things is that the people who are most committed, who are unwilling to compromise their values even if it means sacrifice*, are often invisible. They don't make waves. They just do the right thing quietly. There are very smart people who don't make a lot of money, who choose to become teachers, or find some other uncompromised occupation. Other people see them as crazy, or naive idealists. Our culture really tends to look down on those people, since material wealth is how everyone is measured.
btw, I left my career in the tech industry and my high salary nine years ago, to work on social justice, to write, and to work with children. There are costs that don't bother me at all, like my ultra simple life living in a run-down rental. There are costs that hurt, but those have to do with living in a society where eschewing the benefits of capitalism isn't popular. Some analogies I've used: Imagine being a white person having 2021 views of race and racism, but you suddenly wake up in 1850, where even Abraham Lincoln is a white supremacist (he was!). People will shun you for voicing your 2021 views. You will be an outcast in the dominant white world. You might be able to find a home among black people, except they are slaves and will be afraid to associate with you. Or here's perhaps an easier analogy: Imagine that you one day wake up and feel deeply you can't eat meat anymore. It's your conscience. You deeply feel it is wrong. So you become vegan. Now imagine this was 50 years ago before veganism started to gain any traction. Again you would be isolated. People will look at you weird.
"In-group vs. out-group baiting, mayhem, & loss-of-life " existed throughout all of human history (and in much larger quantities!) before the age of Facebook. They will continue to exist long after Facebook displays its last newsfeed item.
The longer we try to blame a technology for humanities issues, the longer it will take to address the issues.
I think it is the people at Facebook are being blamed in the comment above, and not the technology, no?
> Facebook didn’t change anyone.
You’re right that human nature is not Facebook’s fault, however, you cannot logically use that to conclude that Facebook bears no responsibility. Facebook is changing people, and there’s evidence of it. You don’t get to claim human nature when feeding drugs or alcohol to an addict, or when being a bookie for illegal fights, or when pimping. Advertisers don’t get to claim human nature when advertising cigarettes to teenagers. There are plenty of laws on the books to prevent companies from trying to leverage the negative sides of human nature, and there are plenty of companies that are currently using our worst impulses to goad us into spending our time and money with them.
Facebook intends to normalize incredulity at all times, in order to maximize their own profit, and because of the scale of Facebook, it’s causing a net negative in human behavior. Fewer people would be choosing outrage, and less often, if Facebook wasn’t pimping it. Allowing people to form companies with this intention should be illegal, no? Or if you see this as purely human nature and think Facebook is not complicit, how are you suggesting we address the issues?
We're all constantly tempted to engage in sociopathic but well-remunerating work. (No doubt there is plenty of pro-social well-remunerating work - i.e. I'm not painting that as a zero-sum choice)
The question becomes, 1 - what choice does each of us individually make when faced with such a role, and 2 - more importantly, how easily can a company identify & recruit a sufficiently-qualified-yet-sufficiently-desperate individual for the same role who will go ahead and make such a moral compromise.
I think Facebook usage is fundamentally different from drugs/alcohol. A heroin addict can understand heroin is destroying their life, but be physically unable to prevent themselves from shooting up. I am not aware of instances (at any scale, I'm certain examples exist but exceptions don't disprove the rule) where people are aware that Facebook usage is ruining their lives but are incapable of discontinuing their use.
I noticed I wasn't getting anything out of Facebook years ago and decided to stop using it. Similarly, Instagram was fun and engaging until it was not and then I stopped using that too. My experience mirrors that of many people I know. Still more continue to use Facebook and Instagram, and while I personally don't understand how someone could enjoy using either at this point, they are autonomous adults who can choose to use/waste their time with whatever method they prefer. If there emerges a substantive quantity of people who begin to think using Facebook has a negative impact on their lives but who find themselves incapable of putting it down, I think a conversation about the broad approaches society could take to help people detach from these technologies would be appropriate.
>Facebook intends to normalize incredulity at all times, in order to maximize their own profit, and because of the scale of Facebook, it’s causing a net negative in human behavior. Fewer people would be choosing outrage, and less often, if Facebook wasn’t pimping it. Allowing people to form companies with this intention should be illegal, no?
I'm not completely averse to the idea of making something illegal if a majority of people find it to be a net negative. We just have so many aspects of society (broadly in many cases, but I can only speak specifically to American society) where profits supersede general welfare that it comes off insanely hypocritical to point to Facebook specifically while not addressing any of the others.
If you're an advocate of making Facebook illegal because it intends to maximize incredulity/outrage for profit then you would also need to make news programs (both national and local) illegal. You would need to make Twitter illegal. You would need to make YouTube illegal. Most (all?) large scale internet platforms depend on milking outrage for profit. News programs do the same. I'd be interested in having conversations about making all of them illegal. I would not be interested in a conversation about making one of them illegal.
But if we are going to be honest about why Facebook is becoming the public whipping boy, it's because Boomers who voted for Donald Trump used Facebook to talk loudly about why they like Donald Trump.
"Ruining their lives" is likely a bit too strong of language, but the potential negative influence of Facebook and complete lack of privacy is certainly becoming something of common knowledge, and yet people continue to use it. As a society you can make a pretty strong argument that it's been a net negative, and yet we're apparently unable to do anything about it. The whole enterprise of maximizing engagement positions some of the smartest minds in tech to maximize qualities of addiction.
In other words, there seem legitimate parallels to draw.
> But if we are going to be honest about why Facebook is becoming the public whipping boy, it's because Boomers who voted for Donald Trump used Facebook to talk loudly about why they like Donald Trump.
This seems a dishonest oversimplification. You can point to the 2016 election as a tipping point perhaps in how we view Facebook, but it was not because boomers were talking about why they liked Trump, it was because we began to realize at scale just how powerful manipulation (by state actors) on these platforms can be.
People using something that you think has a bad influence on them does not mean it's an addiction. They are simply making a different choice than you have made.
You can't (or, shouldn't, I suppose) make something illegal purely because you don't like that people use it.
The network effect is part of the drug. I know it's bad for me. I know it's bad for society. That provided the push for me to delete it, but it didn't make it less painful.
I still have instagram, for similar reasons as to why I had facebook. It's going to be difficult to delete that for the same reason, especially since I still somewhat actively use the product itself.
Like drugs, it's easier for some people to quit than others. You shouldn't lessen other people's experiences and assume that everyone can quit as easily as you.
Most people aren't advocating for Facebook to be illegal, but want some of their practices to be illegal. Yes, this should also apply to Youtube, Twitter, etc. My feeling is that the recommendation systems should be removed, and that they should only be allowed to show you content you've explicitly subscribed to.
Facebook is the whipping boy because they've expanded knowing they're doing harm, having internal research that shows they're doing harm, and ignoring the consequences. Twitter is as much to blame for Trump as Facebook. Youtube is as to blame for QAnon as Facebook. All of them have algorithms that make people more politically extreme.
It certainly does. Humans are as much a function of the environment as they are of their genes. Different generations have clearly different value systems.
If what you said were true, parents wouldn't try so hard to put their children in healthy environments, because an environment "doesn't make a good person into a bad person."
> The longer we try to blame a technology for humanities issues...
Again, by this logic, parents should not ever restrict how much screen time their children have. Nor never blink an eye no matter what websites their children spend lots of time on.
If an adult wants to spend all day in front of a computer screen, they can choose to do so. If an adult wants to spend all day on Facebook, they can choose to do so.
If you believe Facebook would turn you into a bad person, you are well within your right to not use Facebook.
I don't use Facebook, but that's because it's an unenjoyable experience. Not because I think it's some evil hypnosis device.
A dollar is presently worth half as much as in 1990. A 100,000 a year job in 1990 is equivalent to a 50,000 a year nowdays.
Every year the noose gets slightly tighter, the slack is slightly reduced, the competition is slightly increased, society become slightly more cutthroat, people are forced to do slightly crazier and crazier things to make ends meet and sacrifice their morals just a little bit more, work just a few more hours to make the same money.
Then new generations are born into a world that's much more competitive than their parents world 20 years previous, and start out thinking this level of competitiveness and craziness is normal.
And the water in the frog pot inter-generationally continues to get hotter.
We're literally on a slow unstoppable pathway to a third world country and no one even realizes it.
Or possibly creating the conditions for war.
That would have been insane a few decades earlier, and it's not just because of improving third world countries, but also because as you said the noose tightened - everything became more expensive, especially rent, working hours increased, two salaries became necessary, etc..
Take a look at the median US household income over the last 40 years.
https://en.wikipedia.org/wiki/Household_income_in_the_United...
Median household income can mean two parents are working...
Take a look at inflation adjusted wage growth for a singular person over time.
https://www.google.com/amp/s/www.pewresearch.org/fact-tank/2...
Good catch.
So apparently the fed allowing inflation rates to increase is also paralleled by wage increases somehow? I'm guessing due to the stimulation of the economy by the inflation?
Current businesses don't want a competitive labor market in the sense they have to compete for your time, they want drones to do whatever they want and want to pay bottom dollar for it. Just look at the massive outcry right now claiming labor shortages. Maybe there is some shortage but it's a well justified shortage in my opinion.
If you had a labor force with a real basic sense of security, people not worried they may get sick and their entire life's accumulation of assets from work will be washed away in an instant or they may be out on the streets looking for a warm bed, then you have a strong labor force that can negotiate reasonable working conditions. We don't have that.
We largely have a growing precariate class of people that seem to be sweeping in low to lower middle income that seems to be growing into the middle income brackets. A large bit of middle and upper middle are fine but even there, pressure seems to be growing.
To me it's mostly a sign of dislocated/fractured society with no coherent purpose. No calling for communism :)
Change education, add more pragmatic knowledge of everything to people's lives so they don't chase shiney and don't rely on money exchanges for things to happen in their day.
Maybe internet will help a bit here. Lots of people are learning about stuff through videos, we need to make it more tangible day to day I guess.
How many people out there are doing the 9 to 6 because of that? I am one of them. I have a software business idea, but I either need to:
1. Save a ton of money to pay the ludicrous levels of private health insurance.
2. Get married to a city or federal employee, so I can be on their health insurance.
In my case, it will be #2, but it's a total coincidence that she is one of those.
In the meantime, those of means have plenty of cushion to fall on, trying and failing over and over, until they hit it. Most of us don't have the option of failing even once.
The root cause of this specific issue isn't related to a lack of healthcare, but regulations propping up real estate as an investment category and preventing supply growth, in both countries. A lack of wage growth comes from fed policy to raise interest rates and slow down the economy just at the point where wage growth starts occurring, because they think it's inflationary in a major way, and the fed is public about this policy.
Bring full socialized medicine to the USA, and the housing & wage issue will definitely still remains, as it does in Canada. Entrepreneurship is probably worse overall in canada because of culture, some banking policies and overall lack of investment capital available for non-resource entrepreneurial activities compared to the usa. But yes, health insurance is a dampener on entrepreneurship too.
Local government (US): Low-density zoning, burdensome review processes on new development, "historical building" preservation, minimum amenity regulations (e.g., parking spaces, "set back"), etc.
Federal government (US): Subsidizing the cost of 30-year mortgages for lenders; subsidizing mortgage interest for homebuyers (mortgage interest deduction) at the expense of all other taxpayers (e.g., renters).
> Are there countries with policies that effectively make it a depreciating asset? What do those policies look like?
I can't speak to the specifics of what other countries do, but many of the obvious steps are to just stop the bleeding that we already know about, mentioned above. Eliminating the federal mortgage interest deduction, removing local government authority to impose arbitrarily burdensome processes on new development, upzoning, deregulating (no minimum parking, reduced minimum setback), etc.
If the mortgage interest deduction disappeared tomorrow, the landlord's cost to own that house would go up, and every penny of that increase would have to be passed on to the renter.
So while it's true a renter doesn't have that tax deduction, eliminating it isn't going to lower any rents, only raise them.
> Killing housing values will take money away from hundreds of thousands of people who worked hard for what they have.
Making housing more affordable will allow hundreds of thousands of hard-working people to own their own homes, rather than being at the mercy of a rental market that can kick them out on short notice. For context, I consider significant increases of rent to be equivalent to kicking somebody out, and short notice to be anything less than half a year, as moving is a stressful and time-consuming prospect.
> Why can’t we champion hard work?
That's exactly why the housing market needs a correction. Because currently, hard work is not sufficient to get into the housing market.
> Why should anyone get anything for free?
To answer the question at face value, because we are all human, and every human deserves to have their basic needs for food, shelter, clothing, and health-care met. To answer the question in context, that's why propping up the housing market to the benefit of real-estate speculators and homeowners need to stop, because that is given a benefit for free.
I say these as somebody who is in a similar position, having recently purchased a house to live in. What I got out of it is a place to live that I can modify and improve as I want. It isn't an investment opportunity, it's a place to live.
> That's exactly why the housing market needs a correction. Because currently, hard work is not sufficient to get into the housing market.
Work smarter not harder. You were able to work smart and afford a home. Many people have. Not all people are equal, your ability to navigate life and the world has a direct input on your quality of life.
(Also, my apologies for this becoming a longer reply than I had planned. I have a cat sitting on my lap, and cannot move.)
* Stable home life, with active teaching from two educated parents. At no point growing up did I need to expend effort worrying about what I would eat, or where I would sleep. Instead, I could focus on education and hobbies.
* No financial need for a job during secondary education. My family's finances were stable enough that I didn't need to expend effort on a job. Instead, I could focus on advanced courses.
* Didn't need to take on college loans. One of my parents is a professor, and so I had free tuition at their university. As a result, I could focus more on coursework during the school year, and STEM research programs during the summer.
* Receiving a stipend while working on my terminal degree. This is typically only the case in STEM fields. I was lucky that my interest and talents led me to a more in-demand field.
* Reasonable health insurance at all points of my life. From being covered through my parents' insurance (thanks Obama), to being covered through graduate student insurance (thanks to the student union), to being covered through my employers (thanks to being in a field where this is typical). I haven't had any major medical expenses, but I've had the safety net of having reasonable periodic care.
* Interest in an industry that built desirable skills. My PhD ended up requiring me to build custom analysis software to perform large amounts of data analysis, which built skills that have been tremendously useful and in-demand. But I couldn't have predicted either the skills required or their broad applicability when I started on that path. Back in high school, I just knew which subjects I enjoyed more and focused on getting even better at them.
I'm not saying that you and I haven't worked hard. It isn't that we didn't make plans, didn't strive toward those plans. Where I was damn lucky was in circumstances outside my control, allowing that hard work to translate into results.
But is it? There are plenty of cheap areas to buy houses. As a recent grad in the 90s I wanted to live in Manhattan. I searched for a few years but was never able to find anything I could afford. Was I screwed out of home ownership? For my then-dream of living in Manhattan, yes. But in absolute terms no. I gave up and moved to California which was then cheap and bought here. The bay area has now become manhattanized in cost, so it's tough for a recent grad today but there are cheap areas today just like California was the cheap area back then for me.
Even when there's plenty to go around for everyone, it seems we'd rather not let that happen.
He would look at our weak but non-zero safety nets and say, "You can do so much better," and note that if they didn't exist then Capitalism would have ended a long time ago.
So I don't know what he'd predict from here. We're in a semi stable state, looking at a potentially more stable one but very afraid of it and even more afraid of upsetting the status quo. But if things got worse -- and they keep threatening to -- that would turn the semi stable state real unstable real quick.
He might be surprised at the extraordinary high level of false consciousness given the relative freedom of access to information (belief in the American dream, etc.) but he likely wouldnt look at it and think "there's a country on the verge of communism" just because of the high level of material wealth.
He wrote about America at some length, and accurately pointed out that America's ties to Europe would only last as long as there was free land west of the original colonies to take and give to its growing population, after which America would develop a factory working proletariat just as Europe had after the decline of feudalism, and then be far less welcoming of European immigrants as it sought to preserve the wealth the existing residents had built for themselves. In that respect his theory was proven true. Capital, not any sort of continental or feudal allegiance or concern for the future, would be the driving ideology.
"Money, then, appears as this distorting power both against the individual and against the bonds of society, etc., which claim to be entities in themselves. It transforms fidelity into infidelity, love into hate, hate into love, virtue into vice, vice into virtue, servant into master, master into servant, idiocy into intelligence, and intelligence into idiocy.
Since money, as the existing and active concept of value, confounds and confuses all things, it is the general confounding and confusing of all things – the world upside-down – the confounding and confusing of all natural and human qualities."
-- Economic and Philosophic Manuscripts of 1844, "The Power of Money"
In a post-scarcity world capitalism would make no sense, because there would be no need for an economy, since everything would be infinitely abundant.
In the stock market, there is an evergrowing pool of securities getting sequestered away into pension schemes and RRSPs. You can change what security you are in, but people/funds seldom get out of the market. When you cash our of your retirement (before actual retirement), there are huge tax disincentives to do so. For housing, people generally have a progression as they move to larger houses (as they have more kids, or kids get older). If all houses continue to get expensive, you just always stay in the housing market (well, until you go to a retirement home or expire).
Both seem to remind me of the classic definition of a ponzi scheme, except housing is a basic necessity. We are basically saying there is an evergrowing mountain of wealth - you just can't spend it till you retire.
Growth is natural, given that there are more people born, more money is printed and the economy expands to add jobs to meet those needs.
So yes, if tomorrow, no one else was born, a lot of systems would fall apart. Because growth would stall and liquidity would soon disappear as the last sellers find the last buyers.
There are disincentives around divesting your retirement funds because at that age you probably won’t have the physical capacity to work anymore. So encouraging investment into a vehicle that has shown generational abilities to generate growth and returns and beat deflationary effects seems only logical. The government creates this behavior by agreeing not to tax some income if you invest in your retirement.
However, this isn’t scarcity, stock markets are probably one of the most liquid assets on the planet besides literal cash.
If an economy is inherently inflationary then asset prices will literally always have to increase. In my mind this is less about house prices rising and more about the centralization of well paying jobs within specific economic hubs. There are millions of homes and hundreds of thousands of acres of lands that are practically worthless, but aren’t actually viable candidates because until recently you had to commute and the land lacked investment into the necessary infrastructure to support those jobs.
I’ve seen some arguments that no one wants live in small towns. And I don’t necessarily disagree, because the centralization of talent, competition and investment is often what makes large cities attractive. However, I would be remiss if I didn’t recognize the fundamental aspect that all large cities were once small towns.
If companies or individuals aren’t willing to take a risk and move to underdeveloped areas, then it seems only logical that scarcity will be created in centralized pockets and prices will be driven up doesn’t it?
Lastly, this idea that an object that for most people will be the most expensive purchase they ever make should be a static or deflationary asset is not something I understand. Home ownership isn’t cheap between maintenance and property taxes. Ideally those costs should be recouped somehow.
Eventually the government can only intervene with middle class public housing (eg in Singapore and a lesser extent Hong Kong).
Yes and no. Does that mean houses have to get bigger? Cars more "luxurious" and complicated (read: expensive)? Or higher education - for the same degree - also disproportionately more expensive?
Or are all these "givens" simply bad assumptions that have been nomalized?
Honda and Toyota built an absolutely massive market building low cost, reliable cars that have sold by the millions. Low end cars get more complex, because we find ways to make them safer which requires more technology.
You won't find an argument from me on education. I'm a firm believer in public education and that education is a cornerstone to providing economic mobility in any society. I wish our public universities were the crown jewels of the country and provided a low cost tuition to any student.
My only push back on the first two, is that it's not just growth in terms of the absolute size or quantity. It's just growth in terms of the monetary system which results in "growth" of the asset price.
The stock market? "Appears to show" - FIFY. I'm reminded of the periodic 401(k) presentations at our company before I retired; the pitchperson would always put up the same, tired, old, vague graph of the stock market rising at a 45-degree angle from the Great Depression to the present time. But that's not really true, is it? Indexes like the DJIA are mathematical models that get reformulated periodically and the suite of companies included in an index also changes over time. I believe this is called cherry-picking the data.
Actual investors in individual stocks or mutual funds have no guarantee of generational growth, of course. In NYT's Justin Fox's book about the stock market, IIRC, he said that equity mutual funds had an annual average growth rate a little above 2% between 1984 and the early 2000s, while the S&P 500's annual growth rate averaged about 12%. (Dates and growth rates are approximate as I don't have the book at hand). 401(k)ers didn't exactly make out like bandits.
That certainly sounds wrong, but even if it isnt, its a weird comment. Pretty much every 401k or other investment program will have the option to invest in a SP500 fund, or some other broad market US equity fund. If you want the returns of SP500, you can buy SP500. Maybe it was more complicated than that in 1984, but its not now.
I prefer small town life, and I'm sure many others do too. One upside of the pandemic is that with more companies getting comfortable with remote work, centralization of talent is not quite as big a deal as before.
Just if everyone wanted to live in a small town, there would be a ton of medium size towns instead.
That's scary.
[1] I have a strong feeling that economists have missed the memo from Popper regarding what is modern science. There seems to be quite a lot of unfalsifiable assumptions lying at the bottom of economics, starting from the utility maximizing agent.
There are other solutions that have been seriously considered or proposed. For example in copyright one idea is to allow things to be freely copied and have some rich entity pay creators. This was how it was done a long time ago, with the rich entity usually being a king or a ruler of a city-state or a wealthy lord.
Another idea is to pay creators via some tax on something that is roughly correlated with copying. An example would be a tax on blank tape.
A problem with these approaches is deciding who gets paid and how much. In the tax approach not many people seem to like the idea of the government deciding which artists should get funded. The usually way to avoid that is to have it based on how many copies are made. But then you need some way to get that data.
You could do it via some kind of polling. That was probably the only way back when copying was mostly physical, such as copying a record to a cassette tape. Nowadays when it is mostly digital you could do it by server side monitoring on download/streaming sites and/or device-side monitoring of playback--but then you are getting into areas that will worry many people for being an opening to more general surveillance.
For ordinary physical goods we don't have these problems--a free market (even the poor approximation of a free market that we have) works pretty good for determining what to produce. But that only works if the goods have certain properties, which copies of art do not have. (If anyone wants more information, look into excludable vs non-excludable goods and rival vs non-rival goods).
The approach of current copyright law is to legally give copies those properties so that the market can determine what art gets produced and how much the artist makes. This is a tradeoff, because it does mean that the consumer pays more for copies than the "correct" free market price (marginal cost of copying).
The other approaches mentioned above tend to make the tradeoff the other way--the consumer pays marginal cost of copying, but less art gets produced than consumers would like.
There's not really any way to avoid having either underproduction or underutilization when it comes to easily copyable art. Once you realize this things make a lot more sense.
One way to do so with IP/information/open source software, would be to give everyone access to just about all IP, but then when a surplus value is not known and needs to be accessed, you give people an option of what they value it. Get a statistically significant sampling group, then pick some percentage of the sampled group should get access, say 95%, and then query them using a Vickrey auction system what their true value is. The people who have the lowest 5% value don't get access to that item for some period. For everyone above 95%, they all pay that bottom 5% price for access to it, not their bid, like a Vickrey auction.
In this way only 5% of the sampled group, which may be 1% of the population lose access, and yet you still get to figure out the range of values throughout the population for that thing because Vickrey auction's incentivize that you bid your true value. Take some weighted average of the bid values and subsidize the IP owner with those funds.
One can infer a smaller supply of art, assuming standard economic assumptions. Some human activities seem to me not to be driven by these assumptions. Stories of artists who create what they seem to be driven to create, not what potential customers want at that moment.
Time is a scarce resource, both for creators and consumers. Some of us get more time than others, but we each get 24 hours per day; in that respect there is equality.
Under what conditions or assumptions might there be "enough" art created and copied?
Important to keep in mind that it's not just a tradeoff because it increases marginal cost, it's a tradeoff because it outright restricts the creation of new content.
In creative industries, it means that creators are sometimes unable to build on or adapt creative work to apply to new situations or to expand on artistic ideas. Many market consequences extend from this restriction for better and for worse -- there's a reason why Nintendo games don't work on PCs or have certain accessibility features, there's a reason why backing up save data for many of their games is still a giant pain in the neck, and it's because it's illegal for other companies to create those features for Nintendo games.
IP law also has the consequence of drastically raising the barrier of entry to creating new IP, since assets and universes can't be reused or repurposed without contracts.
And of course, this also has the consequence that certain utility innovations can't happen -- E-Readers in particular have been hobbled for a long time, not just because of patent law but because existing platforms are allowed to make it illegal to transfer legally purchased books into different ecosystems. This reduces market competition in the space, artificially driving up the cost of not just the content itself, but also much of the hardware used to consume that content. There are a lot of things we could build in the E-Reader space around universal annotations, accessibility features like live-reading, etc. IP law restricts a lot of that stuff, you may not build a competing E-Reader that reads EBooks purchased on Amazon.
This obviously has consequences for the market itself; by embracing IP law, we have chosen to effectively kill off and completely eliminate competition in several areas of the free market, while making it illegal to build some meta-layers on top of platforms without enormous amounts of capital and negotiation power.
But it also obviously has cultural consequences since building on top of existing work and sharing cultural experiences (including stories) is something that is basically built into our DNA as human beings.
So we can debate whether there are advantages to IP law and whether they're wortwhile, but I do want to push back a little bit on the idea that marginal cost is the main consequence of Copyright. It's not, Copyright is a choice we've made to artificially eliminate certain parts of the market and to make certain projects and innovations practically impossible to build by anyone other than the biggest players in the market. It's not just about books getting more expensive, Copyright is a system with real tradeoffs, it increases the production of a specific kind of art at the tradeoff of drastically reducing the production of other kinds of art, and at the cost of shaping how art gets distributed and consumed and what things we can do with it, even privately.
It doesn't seem like that bad of an idea, if we take as given that a government service could actually provide as a good of a product as the modern streaming platforms do.
This is what proponents of IP claim. Many even think it is so obvious that there is no need for evidence, but anyway, I'd be keen to see some evidence for the claim.
I can think of a handful of immaterial goods that are not under IP (e.g food recipes and financial innovations). What is common on those is that I am quite happy with the amount available of those immaterial goods (what comes to financial innovation, one might argue that there have been a bit too much of that at some point of our history)
It’s not a bit more scientific than your argument. I do believe it’s true. But that is precisely my point. Whatever theory underlies IP and it’s benefit to society is entirely based in speculation.
Understanding this fact has led me to a thousand and one horrible "that's a feature, not a bug" realizations.
If resources truly do not have scarcity, there is no need to manage them. The need to manage a resource comes about only when it is scarce.
In fact, I can't think of any resources so abundant that they need no management. Even the oceans and the sky must be managed now, eh?
That's not abundance at all, its just scarcity.
> In fact, I can't think of any resources so abundant that they need no management.
Yes, scarcity is universal, which is why the idea of “post-scarcity” or resources that need managed in a categorically different way because they don't experience scarcity are nonsense.
Digital data.
That and other elements of rational choice theory are not unfalsifiable. In fact, some of them were from the outset not merely falsifiable but known false but tentatively held as useful approximations over large populations. In fact, in the scientific part of economics (and other social sciences; rational choice theory has wide impacts), the debate has long been over whether the rational choice model is a still even useful reference point against which to mark variations, given the extensive degree to which it has proven false. (OTOH, a number of higher-level phenomenon predicted by they model have proven predictively useful even though the lower-level model is known false.)
Of course, some of economics (e.g., the Austrian school) is overtly driven by a normative ideological agenda rather than pursuing descriptive, empirical science.
>Of course, some of economics (e.g., the Austrian school) is overtly driven by a normative ideological agenda rather than pursuing descriptive, empirical science.
This is actually one reason the Austrian school criticises the neoclassical school. The neoclassical school is just as much founded on ideological assumptions as the Austrian school (main difference is cardinal vs ordinal utility), as it's impossible to have a "theory of value" without some underlying philosophical notion of value. However the neoclassical school hides this value system under so many layers of maths in an attempt to convince people it's a real, objective science like physics or chemistry.
There is a form of economics that makes testable predictions with a reasonably high degree of accuracy, and isn't based on any underlying ideology: it's called "quantitative finance".
But mainstream empirical economics, including (but not limited to) the neoclassical school, does not have a theory of value. It makes predictions based on hypotheses of how individuals act given the existence of individual subjective value systems. There are plenty of valid criticisms to be made, but this is just projection by the Austrian school.
You can layer an infinite number of possible idealized value systems on top of any mainstream economic theory to get a policy theory (and there's almost as many of those that have been layered on it as people making policy recommendations incorporating mainstream economic analysis, but that is a separate layer.
> There is a form of economics that makes testable predictions with a reasonably high degree of accuracy, and isn't based on any underlying ideology: it's called "quantitative finance".
QF is to economics as meteorology is to climatology.
It does; it assumes utility exists as some concrete thing that can be compared between individuals. The fact you weren't aware of that just shows how good mainstream economics is at hiding this. https://en.wikipedia.org/wiki/Utility#Discussion_and_critici...
Can you give an example what could you do to prove me that you do not maximize your utility? I mean, regardless how stupid thing you come up, I can always say "but that's what you chose to do, so that obviously was your preferred course of action and obviously you were then maximizing your utility"
I really hope there is discussion whether rational choice is useful, but the problem is that that discussion does not (yet) descend to the level of MBA economics and below. And that is unfortunately the level where politics are made.
Sometimes I oversleep accidentally, as an obvious example.
Or when I make short-term decisions like being lazy and laying on the couch watching trash, that hurts my long term utility and prevents me from maximizing it.
Or all the times where I'm not smart/awake enough to choose the option that will maximize my utility.
I have an economics degree. I'm not claiming to be an economist here at all, but I'm mentioning it because it's relevant to what I'm about to say here: What I learned throughout my undergraduate education is that economics is a social science built upon the _presumption_ of scarcity.
Classical economics doesn't apply if you break that invariant. We need something else if we achieve post-scarcity, and I'm not sure that it'd be another existing mainstream economic school of thought.
Note that I'm not disagreeing with you - your point is valid. I'm agreeing on the "create artificial scarcity" response that you're observing. I suppose what I'm trying to say is, whatever other unfalsifiable assumptions you're pointing at in economics shouldn't matter because the broken scarcity invariant breaks the rest of it. Trying to use an economic argument in a post-scarcity scenario is, to me, applying the wrong tool for the job in order to preserve a specific interest. That's my opinion, anyway, and I'm sure someone else who has more experience or education in the field beyond my 4 year degree 20 years ago could tell me I'm wrong.
I don't think anyone is intentionally putting their finger on the scale when it comes to real-estate prices.
Maybe, and this is not from any data I can pull up, it is those with deep pockets buying additional properties as investments/rentals. And now we have huge corporations flipping, building rental homes on a massive scale.... The only solution I can see is to tax the living hell out of 3rd, 4th properties (etc.).
Sure it is, because the jobs are everywhere internet is.
Semi-rural and rural property values should roughly follow fiber and Starlink rollouts.
How does an ICU nurse take care of a patient over the Internet? How does a cashier ring through groceries of a shopper over the Internet?
How many jobs in the U.S. can be done from the internet?
We should recognize from time to time that not everyone is an "information worker" like us and all our co-workers. In fact, we are few and are among an elite.
There's plenty of we who want to see change. But not enough of us. There are still too many who buy into the web of the narrative spun by The They.
Creativity was its own reward.
Just need the AI robots to feed us and we can stop worrying about the monetisation of digital assets.
The reward was the fact that something you did had permanence in a way that allowed others who knew how to see or interact with "it".
Now anyone with a phone can create and consume (and acknowledge). Taking that for granted was the 2010s. I suspect the 2020s will be about getting paid for it - and what better fuel than a COVID imposed lockdown to stoke the young blaze?
I'm waiting for those robots too!
When my kids want Robux I try to explain that they are paying real money to see their screen light up in a certain way and nothing more.
All software and media purchases can boil reductively down to "paying money to see a screen light up in a certain way".
If you have Blackrock and Vanguard buying up 20% of homes in the US at above market rates, that would do it.
What “you” did is oppose higher-density construction, which means the homes that exist today are the homes everyone in the future has to compete for, if they want to live near population centers. NIMBYism makes the profit that attracts the sharks.
https://www.gamedeveloper.com/business/digital-real-estate-a...
Which isn't new (neither is mistaking a clear case of natural scarcity in an unfamiliar structure for natural abundance; the metaverse is limited by all the traditional dimensions of computing/information capacity—energy, processing capacity, storage, etc.—and it won't take long, if it actually exists in a usable form, before exploiting the superficial abundance results into usage running headlong into the real natural scarcity; artificial scarcity will be superfluous.)
Which is essentially what Bitcoin does. There is a natural abundance of numbers but crytocurrency protocols make some more scarce/valuable than others.
1. A company can create more shares but the number of shares has nothing to do with the value of your holdings. The shares are not scarce, but the supply is controlled by the company in response to its need raise capital. It's not arbitrary.
2. Fiat money, by definition, has value by decree. It serves to provide liquidity to loans and other obligations within the economy. The amount of money relative to demand for payments, loans etc. in the economy determines how much a $ is worth. It's not scarce or printed willy-nilly, but rather to keep the economy going and maintain relatively stable prices. Again not arbitrary and therefore not artificially scarce.
Bitcoin is scarce because the number in existence is arbitrary/predetermined and doesn't change in response to demand, hence its extreme volatility.
> Did you know that the first Matrix was designed to be a perfect human world? Where none suffered, where everyone would be happy. It was a disaster. No one would accept the program. Entire crops were lost. Some believed we lacked the programming language to describe your perfect world. But I believe that, as a species, human beings define their reality through suffering and misery. The perfect world was a dream that your primitive cerebrum kept trying to wake up from. Which is why the Matrix was redesigned to this: the peak of your civilization.
I bought a house recently. Dealing with the mortgage and properly industry really brought home to me how deeply entrenched the housing as investment mindset is.
When houses were shown to me their likelihood of appreciation was highlighted before qualities of the house like it’s construction or the social health of the neighborhood. It was a bit frustrating because the latter types of things were what I wanted to know about. I bought the house to live in and it all goes well our family plans on staying indefinitely.
IMHO it will never change without a brutal prolonged housing crash and recession that wipes out the savings of millions, and the government will not allow that because homeowners tend to vote at the highest rates. 2008 showed that the government will burn down the rest of the economy to save property prices. The history of this power dynamic is actually quite deep. In many ancient societies and even early America property owners were the only ones with a voice or in some cases were the only true citizens. Civilization has always revolved around property owners at least since the agricultural revolution.
There is only one rational response that I see, especially for younger or lower income people: leave areas with absurdly exploding real estate costs.
The phenomenon is nationwide but it is definitely worse in some areas than others. When we bought our house we took advantage of the virtualization of software and left California for Ohio where we grew up. Now housing is exploding here, but less than it is on the West Coast.
Not everyone can be this mobile but more people probably can than you would think. If you are in a blue collar profession there are good jobs to be had (and sometimes a shortage) in rural and small city areas with industry. Many such areas also have shortages of lots of professions due to the many decade trend of everyone flocking to top tier cities.
Politically America really needs a rural renaissance and this could help drive it. The geographic concentration of wealth is a major driver of our political lunacy.
I am a bit older but if I were starting out I would include the real estate cost constraint in planning my career path. Yes there are great jobs in big cities but the RE cost means that when you want a family you must be either get rich or leave and while you are there all your surplus will go to the landlord.
It would make sense to avoid career paths that shackle you to high cost real estate. For techies that means maybe choosing industrial IT or coding for industrial or mining or farming concerns over Silicon Vallet cloudhipster stuff, or refusing to work for companies that are not remote first.
That's how it ever was and will probably always be.
In the 90s I wanted to live in Manhattan, wanted it so bad it hurt. But never found anything affordable, so it didn't happen. I moved to California instead, which was then still fairly cheap.
The solution isn’t that hard. Raise the real rate. Let’s see how many people can keep buying their third and fourth homes once the rates go up by 5%.
Oh but we can’t have that. That will cause the economy cough cough stock market tank. So we have to keep making the bubble bigger.
This statement is equivalent to saying that rents will never go down. And that's the core problem. Fiddling with interest rates or whatever is fine, but if your broader strategy results in every generation having to pay a larger fraction of their income on housing than the previous one, that is a problem...
It's exactly housing becoming an investment. In your post you precisely explain why it's a profitable investment, why that makes it unafordable, and the solution you propose is to make it an unprofitable investment. I think you and the OP agree completely.
First off, I don't think a typical investment thesis is: this thing will be less affordable in the future. People invest for many other reasons other than simply capital appreciation. With housing specifically, it might be cheaper for you to buy vs rent.
> country decides to stop making policy
So, yes... US policies towards housing are all centered around the notion of taking out a massive loan for a home. You get paid to do it in some ways, through interest deductions for example. And yes, this policy will never change and this is probably the main reason you need to buy a house with a mortgage if youre in the US.
However, as a counter-example I know handful of countries where mortgages are not easy to get and not a traditional way to finance a home. Yet, home prices in these regions are also skyrocketing. So cheap leverage alone is not a necessary factor for home price appreciation.
Finally: Food and transport can be "replenished" - land cannot. So basic supply and demand concepts would say that land prices will increase, and by proxy so will housing.
Land taxed appropriately would incentivize higher density housing in order for the economics to work.
We’re in a weird incentive trap (in the Bay Area anyway) where owners protected by prop13 have massive wealth and are incentivized to restrict supply. New owners that manage to over pay for a home are further incentivized to restrict supply to keep prices high so they’re not underwater.
This is a bad feedback loop that creates real property scarcity. It’s also arguably a problem of regulation constraining the market’s ability to meet demand appropriately.
Say I bought a house on a half acre for $500k. Then someone buys it for $750k and builds four houses on eight acre lots and sells them each for $300k. Owner occupied housing as an investment has produced a positive return but the cost of housing has gone down.
In your example, if local government instead forbids that development (via zoning), maybe you can sell your house for $1M instead of $750k, because those 8 prospective buyers are now bidding on the only available property.
Homeowners that view housing as an investment would prefer to see housing costs rise further (beyond benefiting solely from land value increases), and so they advocate their local governments to constrain housing supply via zoning. On the west coast, and particularly in California, they've been very successful.
The scarce asset is not actually land but infrastructure such as roads, water, sewage and electricity. These are usually financed publicly, but the increase in land value usually befalls the lucky house owners. Here is one of the justifications for property tax.
Policy though can help prevent the asset price from being driven further by speculative investors, using tax penalties that heavily favor owner occupiers. It’s difficult to get right because there’s an argument to allow investors to participate, as it drives investment and effort into new house building.
But right now, 0% rates for businesses has flowed into large scale purchases of residential homes by Zillow, Redfin and others, who used their data positioning to capitalize on the flight to the suburbs due to Covid. That is what has devastated affordability. There’s no broad social benefit there, I hope it stops.
The increase in housing price is probably a derivative of shifting or shrinking opportunity to earn a high income outside of centers of commerce and population growth x scarcity in metros. The rise in home prices is just a premium on income opportunity.
If there's too much demand for money (because there's not enough) - the value goes up.
Do you mean income is distributed extremely unequally?
Plenty of areas have seen depreciation in housing but it’s because the entire area is doing so.
Living in New Hampshire in one of the most desirable historic villages, where in the village house prices are quite high, it is not lost on me that I have seen 20-30 strip malls and innumerable cul de sacs built in my life, but no new villages. Despite everyone agreeing that they are the one of the most desirable places to live.
There are no shortage of coordination problems yet to be solved, here.
Housing can increase price and also become affordable.
Right now, living in a suburb with people from the nearby city fleeing for greener pastures in my area or further out still, the paper value of my home is up 10% in a year-- as you say, making any loan on nearby homes effectively a negative rate.
Whereas using the interest rates my parents paid, a mortgage today for the same amount as they had, at their interest rates, would have 3x the monthly payment. The house itself is about 3.5x the original price, making the gap between effective living costs much smaller than the nominal sticker price on the house would make it seem.
The "don't buy a home mortgage for more than 2x-3x you annual salary" was advice formed at a time of much higher interest rates.
The prices of houses adjust very quickly to changes in interest rates because housing prices are based on what an "affordable" mortgage payment for the market is. Housing prices change to make that math work.
Interest rates and housing prices only matter to people who are buying a house that aren't selling one at the same time. Low interest rates are bad for first time home buyers and investors.
> The "don't buy a home mortgage for more than 2x-3x you annual salary" was advice formed at a time of much higher interest rates.
Also, when that adage was coined, the cost of the "essentials" required to live hasn't gone up as much so people have more of their income to spend on housing.
In fact, I'd prefer a lower sticker price & higher interest rate to get to $X. That way when interest rates inevitably drop at some point I can refi at the lower rate and get the partial benefits of both lower sticker $ and interest %.
It's almost as if macroeconomics is a real topic after all! /s
Buying a house when rates were 10% and watching them drop to next to 0 over 30 years must've been fun.
Of course Re: college there are other reasons, like government derisking lending by backing the loans, supporting higher and higher costs.
But it should be no surprise that debt fueled expenses are much much higher now. You can certainly say that carrying costs may be similar due to lower rates, but personally I'd much rather buy an asset at a high rate, and have the option of paying down quickly to become debt free.
Nowadays it's almost nonsensical to pay down your debt from an opportunity cost perspective. But even if carrying cost is low, there's an uncomfortable feeling when you live life by financing everything, and with high level of debt.
The question is, will we ever normalize, or will we follow Europe to negative rates?
The current Fed is too politicized to normalize policy. I think partly due to the greater public scrutiny of their moves. Almost everybody will vote for easy money if you give them the choice. Easy money is always the right choice in the very short term. The longer term distortions are the thing to worry about.
Lowering rates effectively initiates a one time transfer of wealth from the future generations to the present.
Tighter monetary policy will lead to lower levels of inflation, thus higher real rates.
Central banks are also doing QE and distorting nominal rates on treasuries by shrinking their supply in the market. e.g. Fed buys a 10yr treasury, now it sits on their balance sheet for the next 10 years, rather than floating in the free market.
If the Fed hadn't bought trillions of treasuries over the last two years, what would the nominal yield on treasuries be?
Beyond the mechanical, the Fed has created a psychology that the treasury market is no longer a free market, which discourages investors to sell or go short.
Similar to equities. People believe the Fed will backstop any turmoil, so valuations begin to matter less.
So current Fed policy pushes both variables in the equation towards lower real rates, both in mechanical and in psychological terms.
Tighter monetary policy will also lead to higher nominal rates. Nominal rates, inflation and the quantity of money cannot be set independently of one another.
But speaking to the immediate circumstances, the fed primarily influences the short end of the rate curve. (Once QE is ended)
If the fed were to surprise hike interest rates this week, you can bet yields on the long end of the curve would come down.
Because the market would anticipate a hike in short term rates leading to end of inflation fears, and potentially triggering a deflationary event due to the surprise nature of it.
E.g. recall the times when the yield curve becomes inverted.
You can see over the past two weeks the yield curve has started inching towards an inversion. Actually the 20yr and 30yr inverted for the first time ever last week.
It's only speculation to say what this means, but to me seems a pretty obvious signal that the market expects the Fed to have to tighten faster than they're saying to curb inflation.
E.g. look at how quickly the 2yr has risen, while the 10yr has been in decline
Of course this inversion move is almost entirely due to how slow the Fed has moved. If they had moved faster, there would be less concern with a tightening. Now they may be late to the game if inflation pressures don't begin to ease soon.
We may actually be at full employment already, due to lifestyle changes leading to permanently lower labor force participation rate. In which case the Fed is years behind the curve on tightening. We'll know after a few more employment reports.
realRate = nominalRate - inflationRate
Raising nominal rates increases real rates due to higher nominal rate.
Raising nominal rates decreases inflation, also raising real rates. Decreases inflation by reducing availability of credit, thus reducing effective money supply/demand.
Please explain how the relationship works otherwise
nominal_rate = real_rate + inflation_rate
where the real rate is set exogenously. This implies a positive correlation between the nominal rate and the inflation rate, which is consistent with what we observe, e.g. https://miro.medium.com/max/1400/1*b3RDeRT7rPxYEdoFnZEJRg.pn...
This is an obviously true observation and easily borne out by looking at history.
Long term rates are distorted by QE right now. The market will price long term rates higher, when inflation is higher, sure.
Short term rates typically set a floor on long term rates, outside of rare yield curve inversions.
So not sure how your data relates. Short term rates set a floor on longer term rates, thus raising short term rates increases real rates on both fronts.
Not in US:
https://www.worldometers.info/world-population/us-population...
The US Population growth is due to immigration not from citizens having more children. Immigration, and US Born children to immigrants account for 75 percent of annual population increase for the US.
https://www.whitehouse.gov/cea/blog/2021/09/09/housing-price...
It is, but the upthread reference to “housing” actually meant “home ownership”, not the “housing” that is part of inflation (residential rents, actual and imputed).
Why do people keep saying this? No, it doesn't. If house prices went up 1.5% per year they would be a perfectly good investment but would not become less affordable.
Investments are graded based on their expected real rate of return, over time... In simple terms, that would be the increase in the nominal value of the asset, minus inflation. The higher the increase in real value, the better the investment.
If an asset's value increases faster than inflation, then over time the real price of the asset is rising. That means less and less people will be be able to afford it, each year.
Remember, inflation is basically measuring how much purchasing power we have... So if the price of something is rising faster than inflation, by definition that thing is becoming more expensive, which means less people will be able to afford it.
Even though 1.5% real (above inflation) appreciation seems like a small number, the total appreciation will eventually grow quite large after several years... Each year, housing will become affordable to fewer and fewer people. It may take a while to notice, but that's the definition of a rising real asset price.
I don't care if it's much worse than the stock market. All a house has to do is hold your money pretty steady against inflation and it will be an acceptable investment.
If the intent is "houses can't beat the stock market and remain affordable" then that's what people should say, because that's very different from just being "an investment".
And for what it's worth my intent was a number slightly below inflation, because it doesn't really matter if it's half a percent over or half a percent under.
> Remember, inflation is basically measuring how much purchasing power we have... So if the price of something is rising faster than inflation, by definition that thing is becoming more expensive, which means less people will be able to afford it.
That's only true if you assume wages stay steady with inflation, and they don't have to do that.
If house prices would grow faster than inflation but slower than wage growth then everyone could be pretty happy with the result.
The thing you said about inflation is objectively false either way, so I wish you the same.
Sadly this has become a meme response, always repeated in every housing topic. Can we dig deeper? What would it mean?
A house has value, one can live in it, a basic human need. It also takes raw materials and skilled labor to create. Both of those go up over time, so building an identical house in the future will nearly always cost more than today.
Thus, that house can't help but appreciate in value. At a minimum, with inflation. Even that makes it a decent investment with minimal risk.
So you propose a house should depreciate? How, exactly? And would you want to live in those conditions?
One way to have housing depreciate is to have the economy of the region collapse (e.g. Detroit). But clearly that's not a good solution.
Maybe another way is to build houses with such bad quality that they disintegrate before the mortgage is paid off. But that's not an attractive solution either, I don't want to live in such a structure.
So what exactly are you proposing?
Plenty of reasons why a home should not increase in value,just because. Where this becomes really irksome to me is for rentals. Unfortunately most landlords do the bare minimum with regards to upkeep (financially this just makes the most sense I bet), but they can easily upsell it to the next investor, if they're in a good area.
It's not just because. It is because the cost of a brand new identical house is higher in the future (more expensive materials, higher labor cost), so that will pull up the value of the existing comparable houses.
Older houses are often more attractive so may price above the new ones. The new house comes pretty bare (unless it is a luxury builder but then you're paying that premium), often with zero landscaping etc. An established house gets you a nice yard, mature trees, etc.
At it's heart it is an attempt by someone who makes their living selling a thing (real estate) to instill a since of FOMO in order to motivate you to buy something now rather than perhaps later. You can't really fault them, it does tend to work.
I happen to live in the "red hot" Bay Area and twice wince I've been living in my house its value has gone DOWN year over year rather than up. I have never considered it an "investment", rather it is a fixed cost that I have to pay to live indoors. My parents live in Las Vegas, and that housing market, which has been largely unconstrained, demonstrated exactly what that means. Houses in Vegas for a long time depreciated after you bought them, just like cars. They did that because there was so much new housing being built that you could buy a "new" house for the same price as a "used" house. Guess what, people opted for "new" and used houses needed to sell at a discount if they wanted to sell.
One of the truisms for years was the value of a house was intimately tied to its location. This because it was close to jobs, or schools or what not. It is my hope that remote work really takes hold and you can work just as reasonably in a $100,000 house in Missouri as you can in a million dollar house in the Bay Area. That would really create some downward pressure on prices because of simple market dynamics.
Buy during crisis when no one wants a particular asset, sell after the crisis when it becomes hot.
Rinse and repeat.
Prices are down! Buy now to get a great deal!
Hurry up and buy now, in a few months a new crisis can come and we'll lose the opportunity to make nice profits.
At some point, someone has to make or do something physical. With very few exceptions, like entertainment, all of our remote jobs eventually tie in to some good being produced. Even pure services jobs ultimately feed some machine that produces physical products, and those will always need to have access to cheap labor and good shipping lanes to succeed. You can be a cloud engineer, but the people buying cloud services are eventually selling something to people making things.
The impact so far has been more people with more money getting to live in places where their previously "city" salaries give them an edge in cheaper areas. It's also been that some companies have started to adjust salaries for remote work downwards, both of which will flatten out the temporary advantage being a remote worker brings to society.
The only answer is basically socialism, and most of us (myself included) don't like that answer because human nature is to compete.
Socialism is an interesting angle because that term has a lot of different meanings and it's loaded in the U.S. because Americans try to use it as synonym for communism, despite many counter examples. I wouldn't, for example, consider Europe or Canada devoid of competition and those examples show how much money we could be saving with more socialist policies in ways which actually improve competition. For example, unlinking health coverage from employment removes a significant risk for small businesses, improves job market competition, and significantly lowers one of the factors driving prices up. Similarly, subsidizing childcare both helps parents work — with costs in the $20-30K range per child there are a lot of lower-income people who could work but are unable to make the finances work. I'd prefer to pay that out of general tax revenue than expect every coffeeshop to be able to pay baristas that much more since that's a big expense to spread over a small pool of workers.
The thing with U.S. healthcare is that it’s very unevenly distributed. If you’re in something like the upper 10-15% income wise and live in a major urban area, you can definitely get quite good care but many people have worse coverage, especially given how much more they have to pay and the time required to wrangle insurance and providers. I’ve known a number of people from outside the U.S. and they’ve generally commented on the greater cost & much greater inconvenience compared to Europe, Canada, Israel, Japan, etc. but a few who needed specialists mentioned that was easier as long as you could afford it.
I'm talking about health care, as in staying healthy. Regular visits, monitoring conditions, things like that. You have to schedule anything like that months in advance, you never see the same doctor twice as they tend to import temporary doctors from other Scandinavian countries, and every time you see someone it's starting over. Something as simple as hypothyroidism can be an uphill battle that the patient basically has to monitor themselves. Simple surgeries like hernias, etc. you can end up waiting months to get. Test results are hidden from patients, many very good prescription drugs simply aren't allowed in the country, and in many cases, we're using two generation old cures when much better ones exist.
The hospitals are also IMO disgusting. Yellowed dirty walls, people walking around in socks due to custom (which is a great way to spread around foot fungus, something a TON of people here have). That paper that you pull down between patients on the beds only gets changed if someone gets it wet or bloody. I could go on, but it feels like low quality care every time I go.
You're also right that being in the top 15% (I'd argue it's more like 30%) in the US means you have excellent health care in the US.
Do you seriously believe this?
Both cooperation and competition has been advantageous and disadvantageous at different times and in different contexts..
Personally, I’m at least happy that my mum didn’t decide to compete with me for survival…
Primarily, they keep mentioning "average house-price-to-income ratio" but appear to be using average home price and median income. Both housing price and income distributions are enormously skewed. In the Unites States average income is almost double median income and that difference has been increasing over time. So right there, even if median house price to median income has stayed constant, you would notice the pattern pointed out.
I don't doubt the central premise that housing prices are rising faster than income within household, but unfortunately the article does nothing to show it.
homes cost 5.4x what the average
person earns in one year
In Germany, which is the richest country in Europe, the average working person earns €2000 (after taxes) per month, so €24000 per year. Times 5.4 that is €129600. You can only dream about buying a house for that price here. The price of a house is ten times that. Even if it is not in a big city.
Am I missing something?
5.4 times that is about 200k. Avery’s Dutch houses are now 400k (and growing 10%+ y/y). So there’s definitely a gap, but more like 2x than 10x.
This still means the median person can’t afford to live in the city center one of the big cities, but rural areas can be relatively affordable.
Taking Cambridge, MA as an example (though it's certainly more expensive than average) - median house is ~1.4M in 2018 (probably higher now), and median _household_ income is ~75K USD per year - for Cambridge, giving a multiplier of something like 20x (household income, not counting taxes - not individual)
But houses there are also very expensive. Basically unaffordable if you don't get help from either a second high income or money from parents etc.
Also, parent said it is the richest in EU which of total value (GDP) is correct, but by GDP per capita isn't. But, Switzerland isn't first on the list either if you take GDP per capita because that spot is taken by Luxemburg. (Which is 27th on the GDP list)
But parents point still stand, on a median income it is really hard to find a proper place in Europe.
Source: https://en.wikipedia.org/wiki/Financial_and_social_rankings_...
So his point kinda stands.
A more meaningful difference is what individuals do not have to pay for in Germany.
They realized they speak with an American so they tried to adjust.
People are using after tax income in Europe because it's easier to assess the purchasing power.
Good job putting labels on people you know nothing about though.
This is a tax on the income of workers which almost no one in the UK even realises exists.
The “gross” salary number is post this tax.
As of 2019, there were 8 Europan OECD countries with higher average wages.
https://en.wikipedia.org/wiki/List_of_countries_by_average_w...
For example, in 2018, 45 single super-rich germans possessed the same amount of wealth as the poorest 50% of germans [0]. Using the median of distributed wealth would not express that, and if you cut off outliers by looking at percentiles and then averaging would also not express that.
[0]: https://www.spiegel.de/wirtschaft/soziales/vermoegen-45-supe...
There are houses for cheaper, but they tend to be in less desirable locations. Same in America, there just happens to be way more “less desirable” places. Lots of land in the 90 minute commute radius.
In my experience Germans tend to outright dismiss options that are less than ideal, always searching for the eierlegende Wollmilchsau.
German houses are not, on average, 1.2 million euro.
https://www.immobilienscout24.de/Suche/de/baden-wuerttemberg...
Looking at these prices, €1.2M seems like a good ballpark number.
Tübingen is an infamously expensive outlier. Most average costs for houses I saw online are around 250-400k€. My own hometown, Ulm (not too far from Tübingen, and a bit larger) has Houses around 500-600k in good positions (although 1mio+ houses exist as well).
On a square meter basis, there are maps like this: https://www.immowelt.de/immobilienpreise/deutschland/hauspre... giving an average of 2.6k€/m² (Tübingen being around 5k€/m²)
The average house price seems to be € 376 000 [2]
That means 13 years worth of salary which is kind of much.
As to why is this the case I see two reasons but I am sure there are more:
Houses in Europe are built with better standards and built to last more. You can pass the house to your kids, no problem. It will be in very good shape and probably worth more than you've paid for it.
The biggest issue is land. Europe is small and crowded and it becomes more crowded due to increasing migration. So the land is scarce. Also many EUsians like to live in the city, close to center if possible in contrast with USians which might be glad to live in suburbia. US has good roads uniting the suburbs with the city and the price of gas is small. US is a vast place so land is not exactly a problem.
Another issue is socialist policies (even from the CDU) which means high taxation, resulting in lower incomes and less investments in developing real estate.
[1] https://housinganywhere.com/Germany/average-salaries-in-germ...
[2] https://www.iamexpat.de/housing/real-estate-news/where-can-y...
Land might be somewhat scarce, but that isn't the huge cost driving point. The problem is the process by which land is assigned for building - there is a lot of land which just cannot be used for building. New building areas are sometimes opened, but always trailing the demand, keeping the price up. Also, the density of new buildings could be higher. It is grotesqe that in an area with lacking housing new single homes get approved. Also, why are cities allowed to approve additional office buildings without ensuring that the housing capacity is extended for all those new office workers? Easy way to enforce that would be mixed use buildings, where you have a comparable work and living capacity.
a. Are not incomes for just a single-wage earner, they include the combined income for a household (of 2.53 people on average)
b. Are referred to in pre-tax figures, not post-tax.
c. Are not just wage income, but include non-wage income like dividends, capital gains, small business income, fed/state/local government transfers, etc.
d. Are using the median, not the average (mean).
[1] says median household income is apparently 4.8k€/month, so around 58k€/year (before tax). Average housing prices seem to be between 250k and 400k (couldn't find a good source). That would be 4.3~6.9 ratio. (edit: Quality of this estimate is probably still low.)
Personally, I believe (affordability of) average housing prices to be a very useless statistic, due to the extreme regional and local variation in housing prices (and incomes). But maybe I am wrong about that and it is a good indicator.
[1] https://de.statista.com/statistik/daten/studie/261850/umfrag...
Yes, a few things. For one, Germany isn't the richest in Europe. But that's besides the point.
Typically price to income measures not prices per person, but per household. After all, the average house isn't lived in by one person. particularly homes that are bought (average buyer is a family, or an investor renting to multiple people), leading to an income that's the sum of typically at least two adults.
Second, these figures are virtually always pre-tax.
Third, these figures often reference to price to income of buyers, depending on the study. The average income in the Netherlands for example is about 37k leading, 5.4x would for example get you to 200k. But the average income includes unemployed, students, retirees, disabled etc. The average salary of working individuals (i.e. the home-buying population) is substantially higher, particularly if you filter out the population which is eligible for cheap subsidised social housing (about 1/3rd of all housing stock in the Netherlands). At that point you get to >50k salaries, with families of two earners often bringing in 100k and able to afford 540k homes at price to income levels of 5.4x.
Fourth, interest rates in certain EU countries is substantially lower than in the US. I just bought a house at sub 1.5% rates (Netherlands), about half of what you see in the US. Denmark had negative rates, I believe. This pushes up the max mortgage / home price to higher figures than the US, at the same monthly fees (and thus same affordability). In that sense it's not any cheaper per se, once you figure in that the US has more expensive financing costs than some EU countries, including Germany.
Fifth, the average buyer isn't a 25 year old fresh from college with a new job, but instead actually 45 years old. In fact, the average buyer isn't a first-time buyer, but has bought and sold a home before and has some equity, some savings, a retirement fund, perhaps a small inheritance from his parents, buying with a partner in the same situation. In other words, people are typically bringing in quite a bit of equity and are able to afford more than they can borrow.
https://www.numbeo.com/property-investment/rankings_by_count...
And by city:
https://www.numbeo.com/property-investment/rankings.jsp
You have to scroll very far down to get to any U.S city. Price-to-income ratios in top Chinese cities are about 40; ratios in top Californian cities are about 8.
Much of this is because of Federal housing policy that's very deliberately designed to subsidize homeowners. America has a cultural belief dating to the immediate post-WW2 period that everybody should be able to own a house; this is unique to this period and country. In most other countries (and time periods throughout history), there is a landlord class and a renter class.
This trend, if not explicitly reversed, has a long way to run.
I live in Vietnam and it is exactly the same here and always has been.
Just go to Wikipedia's page on home ownership by country and you'll see that pretty much every country is the same. People think they should be able to own their own house. It's a human thing.
The US isn't even in the top 40 when it comes to home ownership rates.
And we hope more go the path of land reform, destroying the parasitic landlord class and returning property to the people.
Paying more for housing means less for other expenses, so it's a net drain on the economy. If we can lower costs to people the economy could be more competitive.
Well.. it didn’t age well, fracking was invented in the context of a policy framework that only exists in the US, and now America has 7x lower gas prices than the EU/APEC and can’t export fast enough due to liquification capacity.
This is to say that there is likely a technology/policy innovation pathway to disrupt this current situation, but people aren’t thinking on a large enough scale yet… and investors, unfortunately, aren’t aligned to fix this because they own existing assets.
This means, the policy framework required to fix this tragedy of the commons looks something like making it profitable for investors to make money by 10x’ing the housing supply, 10xing the manufacturing speed, etc.
Note: I should have said 5x :$ thanks for asking about a citation!
https://www.statista.com/statistics/252791/natural-gas-price...
The dominant costs in housing are land values, construction costs, which are dominated by labour, and highly regulated (for good reason).
There is little room here for innovations that would cut costs.
There is presumably some inefficiencies and red tape in the building code, but so much of it is safety oriented, efficiency gains are probably limited.
The obvious answer of course lies in building denser, though larger, denser buildings are more complex and costly to build.
This is not to say that people aren't trying. People have been experimenting with prefab homes and such for decades, but it hasn't become any sort of game changer.
If anything the costs of construction have been going dizzyingly upward along with the underlying land values.
In any other industry someone would invent a new widget that makes processes faster and cheaper etc, but it's hard to see how someone makes home development cheaper through technological innovation.
In such a scenario, there are wild things you could imagine from a materials and construction side that could plummet building costs.
Additionally, if 2D agriculture is ever disrupted, we would recover a lot of land (ever driven across me NE?).
Don’t forget, we can fit 2x the global population in a city the size of Texas with a typical city population density.
I think the most exciting thing is Mass Timber buildings which have enabled the development of taller wood buildings. In British Columbia the new building code will enable Mass Timber buildings up to 12 stories.
I'm not sure if Mass Timber will enable cheaper, faster (and thus hopefully more affordable) development, but I certainly do know that it will emit lower CO2 than concrete and steel, and so it's a positive change there in the context of pushing back against climate change.
Previously, you had to physically go in to a RE office and look at a binder of homes that are for sale. It was much more difficult to find comps and price houses correctly, resulting in a lot of opportunity to make a living.
Then pre-zillow / post-internet, home buyers still had to talk to a RE agent to get emailed houses.
Now anyone can sign-up, peruse houses and with 1 click, schedule a tour immediately.
Suppose your disposable income is 10% of your total income of 50k, so you have costs of 45k and 5k to spend. Let's say your total income rises by 10%, but your cost of living rises by 5%. You now earn 55k, and have costs of 47.25k (5% increase on 45k spending).
Your total income went up by 10%, but your disposable income went up from 5k to 7.75k, that's a 55% rise. More than 5x leverage!
I first noticed this early in my working life when a small increase in pay made a dramatic change to my disposable income. This means as your pay and career advances you can devote rapidly increasing resources to the highest priority spending in your life. For a lot of people, especially those with children, that's housing. Since a lot of people have that as a priority, and we're competing for a static or slowly growing housing stock, we're constantly bidding up prices against each other.
Yes there are other factors too, like low interest rates, of course, but I think this is the main dynamic driving it.
All the well paid white collar professionals have dumped a fat pile of money onto the housing market in any given urban area.
Before you needed to be fabulously wealthy to own real property in Manhattan. Now you need to be fabulously wealthy to own real property within an hour of Manhattan (though there's probably a few edge cases)
1965, you say? Real subtle:
https://en.wikipedia.org/wiki/Civil_Rights_Act_of_1964
https://en.wikipedia.org/wiki/Civil_Rights_Act_of_1968#Title...
Here in California where I can't afford a home we amended the state constitution in 1964 to specifically overturn a 1963 state-level fair housing act and reinstate racial housing discrimination that wasn't overturned until a 1967 decision by the US Supreme Court: https://en.wikipedia.org/wiki/1964_California_Proposition_14
Obviously what you can afford with 50% down and a rate of 6% is very different than what you can afford with 3% down and a rate of 3%.
That extra borrowing power meant house prices were bid up, and with that houses became much bigger[1], roughly twice the size today than in 1965, and with more features (more bathrooms, more bedrooms, better wiring, more forced A/C, better insulation, etc).
I really wish people's knowldege of U.S. history would go a bit beyond civil rights.
For example, in inflation adjusted terms, new automobiles cost $23K in 1965 (today's dollars) but today it's about 40K, or nearly twice as much. I am hoping that this is also not explained in terms of the civil rights act, but rather it's understood that cars have a lot more features today than in 1965 and it is much cheaper to obtain credit for buying them.
[1] https://www.newser.com/story/225645/average-size-of-us-homes...
Have you ever heard anybody talk about how the 13th Amendment (outlawing slavery) has the exception for prisoners, and how our prison population is totally coincidentally comprised of one certain group of people over all others? https://sites.lib.jmu.edu/civic/2020/09/17/slaves-of-the-sta...
The 1973 Equal Credit Opportunity Act has an exception where it's still totally legal to deny someone a home loan if they're judged incapable of affording the home: https://en.wikipedia.org/wiki/Equal_Credit_Opportunity_Act
I would love to believe the modern day state I call home doesn't still reflect all of its founders' beliefs, but idk the more I learn about this stuff the worse it gets. It's pretty wild to read California's first gubernatorial address where they take the entire last third of the speech to basically say "no darkies tho": https://governors.library.ca.gov/addresses/s_01-Burnett1.htm...
===============================================================
"Our Constitution has wisely prohibited Slavery with the State; so that the people of California are once and for ever free from this great social and political evil. But the Constitution has made no provision in reference to the settlement of free people of color within our limits, but has left the Legislature to adopt such legislation upon this delicate and important subject as may be deemed most essential to the happiness of our people. The Constitution excludes this class of persons from the right of suffrage, and from all offices of honor or profit under the State."
"For some years past I have given this subject my most candid and serious attention, and I most cheerfully lay before you the result of my own reflections. There is, in my opinion, but one of two consistent courses to take in reference to this class of population, – either to admit them to the full and fee enjoyment of all the privileges guaranteed by the Constitution to others, or exclude them from the State. If we permit them to settle in our State, under existing circumstances, we consign them, by our own institutions, and the usages of own society, to a subordinate and degraded position, which is in itself but a species of slavery. They would be placed in a situation where they would have no efficient motives for moral or intellectual improvement, but must remain in our midst, sensible of their degradation, unhappy themselves, enemies to the institutions and the society whose usages, have placed them there, and for ever fit teachers in all the schools of ignorance, vice, and idleness."
"Our position upon the Pacific, our commercial and mineral attractions, would bring swarms of this population to our shores. Already we have almost every variety of human race among us; a heterogeneous mass of human beings, of every language, and of every hue. That period is rapidly approaching, when the natural increase of population in the States East of the Rocky Mountains will render Slave labor of little or no value, and when investments in that species of property will cease to be remunerative. If measures are not early taken by this State, Slaves will be manumitted in the Slave States, and contracts made with them to labor as hireling for a given number of years, and they will be brought to California, in great numbers. Our State is now in a position to take an efficient stand upon this subject. A few years’ delay will make it almost, if not quite, impossible to do that which can be so easy accomplished now. If California will take a decided stand now, and firmly maintain it, a few years’ experience will demonstrate the practical utility of the measure. That weak and sickly sympathy – that misplaced mercy – that would hesitate to adopt a salutary measure to-day, but would suffer all the inevitable consequences of to-morrow, may consider the policy I propose as harsh in its character; but if it is calculated to produce the greatest good to the greatest number, it is the best humanity."
"It could be no favor, and no kindness, to permit that class of population to settle in the State under such humiliating conditions, although they might think otherwise; while it would be a most serious injury to us. We have certainly the right to prevent any class of population from settling in our State, that we deem injurious to our society. Had they been born here, and had acquired rights in consequence, I should not recommend any measures to expel them. They are not now here, – except a few in comparison with the numbers that would be here, – and the object is to keep them out. I, therefore, call your most serious attention to this subject, believing it to be one of the first importance."
RE: this, check out the cover story of the 1954 edition of the The Negro Travelers' Green Book travel guide, "The Golden Gate": https://upload.wikimedia.org/wikipedia/commons/1/1c/The_Negr...
"San Francisco however, is fast becoming the focal point of the Negroes’ future. Before World War II this city had fewer than 5,000 Negroes. High war wages attracted these people from all over the country to this boom town. More than 45,000 Negroes are squeezed into two areas of, San Francisco today, with an estimated thirty-five percent unemployed."
And then check out the inflection point on this graph: https://www.forbes.com/sites/priceonomics/2016/05/11/the-afr...
Criminals?
I'm not sure what you're trying to say here. We should force loans to be given to people who can't afford their homes?
Wasn't that a big contributor to the 2007-8 crash?
If you have a segregated population, make housing really expensive, and set up the tax laws to incentivize people to pass down housing to their kids and/or never ever ever sell, then what do you get except Segregation With Extra Steps?
http://radicalcartography.net/index.html?bayarea
https://en.wikipedia.org/wiki/1978_California_Proposition_13
Some of this did change very recently with https://en.wikipedia.org/wiki/2020_California_Proposition_19 to be fair
Communists were against property and exercising rights related to the property but after provoking huge disasters in many countries they were banished from most of the countries they managed to subdue.
I think there are some people who try to move the mankind in that direction again, after all socialism is cool and trendy again, but I do not seriously expect them to win the fight because the conditions are not the same as 100 years ago.
Feeding, housing and health care of convicted criminals cost tax payers money. It would only seem reasonable to ask criminals do some work and repay a part of those money.
Equating it with slavery is very strange.
https://www.cnet.com/roadshow/news/average-new-car-price-202...
But this is new cars, and you do get a lot -- collision detection, blind spots, adaptive cruise control, etc. And this includes all the SUVs as well as luxury cars, all going into "average".
But prices, borrowing power are just relative. What matters, if you want to do a comparison, is how many houses or how large of a house could an average person buy in his productive adult life in 1965 compared with what can he afford now. So if the average person can buy in 40 years a larger home than in 1965, we are better. If not, not.
When the 15th amendment was passed, Southern states didn't simply allow former slaves to vote; they passed laws that had the intent and effect of denying them the vote. You can't deny a black person the right to vote, but you can deny the vote to everyone who cannot prove that his or her grandfather was a voter, or who cannot pass ambiguous poll tests.
Zoning laws were used to make a similar end-run around the Fair Housing Act. You can't make it illegal to sell a home to a black couple or explicitly exclude them from housing, but you can make it illegal to build any new homes and give the residents and city planning/zoning commissions the political power to block new development and "preserve neighborhood character."
Of course this issue is far murkier nowadays, since everyone has their own reason for opposing new development. Some people erroneously believe that the government limiting the supply of housing when demand is (almost) always increasing will halt "gentrification"/displacement and stop or slow the rise in prices. Others believe their neighborhood should be encased in amber: never changing from the moment they bought in, and believe that they can make traffic better by simply blocking new development, like new residents won't live in further suburbs/exurbs and commute through their area anyway. In areas that passed pants-on-head property tax hike-cap laws (California, Texas), residents now have every incentive to have their local (and very responsive!) government ban all new development and increase their property value since they will no longer have to pay a corresponding increase in property taxes.
Unfortunately, even cities where 60% of the residents are renters can't seem to out-organize or out-vote homeowners, nor does there seem to be an awareness that housing prices are a political choice rather than some immutable fact.
The owners have so much more at stake financially, it makes sense they would be much more motivated to organize around housing policy.
The impact of a small windfall or a pay raise put towards the mortgage gets levered by your rate.
IMHO high rates / low values was a better situation for working stiffs.
(I'm not 100% confident in this analysis; it seems like there should be an equivalence... but I don't think it's as symmetrical as it seems).
Student loans, mortgages, or "how to make money with lower interest rates", convince people to loan more and pay more interest (with a longer period)
By lovering interest rates and raising prices, not only the people who had to take loans aren't in a better position, but people who did not need loans are also hit.
The only winners are the ones speculating real estate.
Then people should learn that price impacts payment too, not just the interest rates.
By subsidizing borrowing the government is pushing the prices up and making life worse for both the people who have to borrow to get a house and the people who previously didn't have to borrow to buy a house.
Also the prices rising because anyone can borrow and letting anyone to borrow whether they can afford it or not will make another crisis more probable.
But at least some politicians got votes because they appeared to be siding with "the people".
Inflation adjusted the monthly payment for a home is about what it was 40 years ago in most places. Jack interest rates up to 10% and suddenly everything will look cheap and those income to price ratios will drop, but the monthly payment will be the same.
https://cdn.dqydj.com/wp-content/uploads/2021/08/median-home...
Of course, as you mentioned, this doesn't normalize for interest rates, so some could argue housing is still fairly valued. But what about when rates rise?
It will be interesting to see how it trends, and whether the move to a more uniformly geographical spread of population becomes inflationary or deflationary. There are strong arguments for both sides, but it will come down to the weighting of those variables.
It seems to me the short term impact will be inflationary, but longer run impact deflationary.
What happens when interest rates rise? If it happens too fast then people will be underwater with their loans. In essence, trapped in their home. However if rates rise slowly and there’s sufficient inflation then existing mortgages might not be clobbered. It’s a balancing act.
My prediction: interest rates will continue to trend down indefinitely. The entire global economy is built on that.
We're already at 0% fed funds rate. I don't think the financial system can continue to function beyond slightly negative rates, which limits how much further they can go from here, but we'll have to see.
Intuitively, why would somebody make a loan where they have to pay the other person? It only really works if you assume rates will go even more negative, thus increasing the value of the debt in relative terms. Or if lenders can still net a positive return via fees etc.
But I need to study how it's working in some European countries. Doesn't seem logical or sustainable on the face of it.
Also, keep in mind, rates were around 2% in the 1940s. The long term trend in the past few decades has been down, but the trend was up for a few decades before that.
It could very well be that remote work leads to higher inflation by unleashing all the coastal high earners on lower cost of living areas, creating secular price increases across the country. But need to analyze the effects more.
But with rising rates the monthly payment will be the same, inflation adjusted, but now more goes to interest than principal. Seriously, look up housing prices and interest rates over the years and calculate the monthly payment. Then adjust for inflation. Hasn’t changed in most places.
Interest rates could go up, sure. I just doubt it. I don’t think remote work will have too big an effect on leveling cost of living though. Most places are simply not attractive enough for high earners to desire. A high priced, lovely suburb of NYC is going to always be expensive because there will always be demand to live near NYC for example.
Of course interest rates going up + deflation would be disaster for most everyone in the market.
A $500k house today with a 30 year mortgage at 2.5% paid off on time will have paid $711k total. With only a $75k salary, this would be a 31% DTI.
Granted, taxes an insurance are going to be more now than they were then, but housing doesn't seem significantly more expensive.
> the point is that even after just 10 years you could've changed your interest rate to be just a third.
That is not true.
A third of 13.5% would be 4.5%. Mortgage interest didn't dip to those levels until around 2011-2012, by the time that 1985 mortgage would've just about paid off.
Ten years after 1985 interest was still around 7.8%
OP makes a great point in that one can't compare the price of a home from the past without looking at what the monthly payment would've been given the (often very high) interest rates of the time.
Land value has been increasing, because land in desirable locations is in limited supply and is not able to be added to (with minor exceptions). This means that land is a monopoly, which is why land-owners are able to extract economic rents from the land far beyond what other investments can afford, compared to the work you put in.
There's a fantastic book which explains this, and Scott Alexander's blog has a book review (by someone else) which is an easy summary: https://astralcodexten.substack.com/p/your-book-review-progr...
It helps explain why we have poverty in the midst of extreme wealth.
[1] https://astralcodexten.substack.com/p/your-book-review-progr...
It could pair with a UBI for children, giving families a competitive advantage against investors for housing.
The USA essentially has open borders with Central and South America right now, and a Democratic party itching to give tens of millions of people citizenship as part of a country-wide gerrymandering idea.
UBI with cash handouts would not be a good idea in those circumstances. There will be a huge amount of fraud, at least.
1. Abolishing landlords is not the answer (I see a lot of people suggest this). Ownership is a barrier. Rental properties are useful. If there are no landlords there are no rentals unless you want the government to be your landlord. Nobody wants that;
2. Investment funds should not be landlords. Landlords should be local to the area. Likewise, no one entity should be allowed to have too much beneficial ownership of housing stock in any one area;
3. Real estate has special treatment for asset reporting. This needs to end;
4. If you own real estate in NYC, for example, then the city and state should deem you a resident of that state for tax purposes and tax you accordingly;
5. Properties without a clear beneficial owner (eg owned through layers of LLCs) should be taxed punitively in property taxes. You can have your anonymity if you really care but it's going to cost you;
6. Residents of trailer parks and mobile home parks should have the right to collectively purchase that park. There is a quite frankly disgusting effort by investors to buy up these properties and then extort the poor people who live on them (eg [1]). This shit needs to be illegal; and
5. This protection should extend to apartment buildings too. This is essentially the origin of the cooperative ("coop") in NYC. Today, coops still account for ~80% of apartments in Manhattan.
People have in the last 100+ years gravitated to cities for employment. Cities have a lot of advantages. But this has constrained supply of suitable housing stock artificially. There is a lot of cheap housing in the US still but not where it's useful. My hope is that the pandemic is a catalyst for a change that will allow people to move away from a few urban centers. Having more medium-sized cities in various regions is generally better for everyone.
[1]: https://www.newyorker.com/magazine/2021/03/15/what-happens-w...
Of course, they should pay market rates for it. Think of it as a private application of eminent domain. As far as I'm concerned, the rights of people to live in the homes they technically own without being extorted by a REIT who owns the land those houses sits on trumps property "rights" of REITs.
Worldwide this sort of thing does happen. Example: the UK system of leasehold/freehold.
I'm suggesting going further than that: owning property in that place makes you a tax resident. That means all your income is subject to state and city taxes. You'd still get credit for taxes paid in other states (as you do now for the most part) so you don't get double-taxed.
But let's stop giving tax breaks to people who reside in Monaco for tax (ie no tax) purposes and park their money in real estate in London, SF, Vancouver, NYC and Hong Kong.
I am so baffled by this. Seems like a mental smokescreen for NIMBY homeowners to protect themselves from the realization that they are the problem.
If every landlord was murdered today and replaced with a homeowner, there would not be the slightest impact on either the home price crisis or its root cause, the artificial restriction in supply caused by NIMBY zoning and regulations.
In fact, the supply pinch would probably get worse. Big landlords can benefit from expanded supply if they own that expanded supply. Single-home homeowners see only the risk of disruption to their environment. A city full of single-home homeowners might never build anything, anywhere, ever again.
(Just in case anyone asks, I am not a landlord. I'd have to be a multi-millionaire to even contemplate it in my area.)
The stock market is overvalued and risky but so is real estate. I'm sure there are still lots of better-than-nothing companies to invest in.
You want to put money into things that are going to be making money in the future. Real estate is one, but businesses are another.
In general I would much prefer to not deal with real estate, but it simply would mean a lot bigger risk of a few unpleasant decades at the end of life.
If that's what you care about, it would be wise to consider the impact on society as well. Society doesn't do well when resources are only accessible to a wealthy elite, and a stunted society will hurt your childrens' future. So maybe it's not such a good idea for real estate to be a scarce, rapidly appreciating asset, if it leads to unaffordable housing and economic desperation for the masses, political instability, etc.
I'm not saying don't invest in real estate, only that the political conditions that make real estate a good investment may be bad for society at large.
This is circular.
A big part of the reason ownership is a barrier is that landlords—usually large corporate ones—own all the available properties in an area, and have exactly zero intention of selling individual units. This, of course, raises prices.
1. You ignore the big problem that buying a house shouldn't be the only way of finding somewhere to live. Like, that's just not realistic. You're 18 and you want to move out of your parents' house. Is your only option really to buy a house while working at Dairy Queen?
2. The idea that a market can be cornered like this is overly simplistic and history is littered with the bodies of those that have tried. Like anything, the pendulum swings back and forth on this. You only have to go back to 2008 to a time when the market was flooded with available units. What you have now is people who 100% have legitimate concerns that I support but tend to overstate the doom and gloom as being forever. Obviously that doesn't help them now but the idea that someone can forever lock people out of the housing market just doesn't hold water. Structural changes in the market will come along and change the equilibrium.
IMHO one of the most damaging things to the housing market has actually been AirBnB.
Why shouldn't there be houses—or apartments—you can afford to buy while working at Dairy Queen?
You know you could buy a home with 0% down. The government could back the loans and have very low interest rates on these loans. It’s all possible - but we’re stuck in such a strong capitalistic mindset that we ignore other possible ways of running the country and imagining home purchases.
There’s also no reason we couldn’t have the government building beautiful and delightful buildings that are also attainable for everyday workers. It’s because we are stuck in our capitalistic mindset and so anti-government that we cannot imagine other ways of doing things.
But it's totally doable btw. See China. They use eminent domain like a mofo.
1. We have expensive housing because we don't build enough.
2. We don't build enough because of anti-growth city regulations enacted by NIMBY politicians elected by NIMBY homeowners.
Corporate interests and billionaires aren't the ones that keep anything from getting built. They're your homeowner neighbors with lawn signs that say "NO ON EVERYTHING" each election season.
In a supply pinch, government subsidies just inflate home prices further, pouring more money into home sellers' pockets, the same way government-subsidized college tuition has poured more money into colleges' pockets. You can't solve a government-caused supply problem with government subsidies. Instead, you have to ask yourself the hard question - do I want much more housing? Do I want economically dynamic cities to grow, with all the problems that can bring? Most voters in these cities don't, and that's why we have the expensive cities we have. There's not enough to go around, so what supply there is goes to the highest bidder.
Now, regarding China - it relies heavily on private developers. The CCP learned decades ago that people just aren't motivated to work unless they own the rewards. This led Deng Xiaoping to transform China into an effectively capitalist economy ruled by a one-party corporate technocratic autocracy. The end result is that China is still owned by rich people, they're just rich people in the Communist Party. If you think money and power are uncomfortably close in the US, wait until you learn about the CCP! If the US government had the power of the corrupt Chinese political elites, Jeff Bezos could be disappeared for months (or forever) without any explanation whatsoever from anyone, and everybody would have to take it in stride. They can build infrastructure, yes, but it comes at a heavy price. And most people are kept out of the cities by the hukou system, which is NIMBYism on steroids.
The largest price run up has been in cosmopolitan urban locations that are thriving economic and cultural centers, where the size of homes tends to skew smaller, not larger.
Also remember that most recently built large houses became larger in part by reducing the quality of construction. The 1990s through 2010s were infamous for that type of construction.
In a free market, this wouldn't be an issue: renters would tell landlords to eat crap and walk. But there are two major issues: first, housing is a tightly regulated market controlled by a cartel of realtors who have lobbied to pass multiple laws to prevent people from selling their houses "without a realtor". The second is a series of leasing Cartels that all collude to use the same lease, giving renters very poor choice.
Here's the thing: in this market, there is no way in hell you can tell a buyer we'll close in 60+ days. This further exacerbates the housing market traffic jam, meanwhile the landlords and realtors are the only ones winning.
The only way out to is de-regulate the absolute crap out the market and releasing the market from the cartels that control it.
A much easier way to look at this entire discussion is simply to look at monthly fees as a percentage of income. The main fees to look at are either fees to rent the home directly (rent), or fees to rent the money to buy the home (interest rates).
Rent in particular is increasing as a percentage of income, but it's much less crazy than some people seem to think. For interest rates it's even been dropping despite increasing home prices. [0] I'm definitely not seeing any data that indicates exponential decreasing affordability which is what we should care about.
[0] http://www.doctorhousingbubble.com/wp-content/uploads/2016/0...
But leaving all of that aside: if this is a debate about affordability, people can always choose to live in different places with different costs of living if they do not like their current location. That’s what is supposed to happen - a response to prices that then cools demand and causes prices to level off. No one is entitled to live in a high demand high cost of living desirable urban center at whatever price they want, doing whatever job they do. People have to either work harder or smarter to earn more and afford their dream house, or adjust to the realities of life as we all do.
A house around the corner from me was listed for $350,000 CAD.
It was an absolute dump. Looked like your typical crack house. Completely falling apart and abandoned.
The area is half decent though, and a friend of mine was looking to move here recently, with a budget of $400k. So I suggested this house to him.
Apparently the house sold for $640,000 CAD. Almost double the asking price. For a teardown that's going to cost another $300,000 to turn into a decent house.
I could not believe it.
That same house would have sold for $50,000 in this area 10 years ago.
We've had more demand than supply since WW2. Which follows that price will be as high as the people can afford at a maximum. And with "people", I mean not the general people. If supply is low, you only need a small subset of people to be able to afford a house.
I want to stress how the supply/demand dynamic is leading, and how a lot of well intended policy has a counter productive effect.
For example, when we bought a house 20 years again, there was whopping 8% "transfer tax". That's tends of thousands of EUR in pure tax. The government figured that it would make housing more affordable by reducing this tax to 2%, and sometimes 0. The market immediately seizes this extra price room.
Hmmm, another try. Old people have capital and it should be possible for them to transfer a tax free amount to their children, to aid in purchasing a house. The market immediately seizes this extra price room.
An idea not yet executed is to raise the standard mortgage period from 30 years to 40 years. I think you can guess what that will do to prices.
It's not an issue you can fix with a tax tweak. You can't even fix it with the nuclear option of drastically increasing interest rates. I repeat: If supply is low, you only need a small subset of people to be able to afford a house. You can raise it to 10%, it doesn't matter.
Increasing supply is very difficult and no permanent solution in already dense areas, which is why I believe managing demand is the answer. We should stop organizing society around these "black hole" cores of very crowded countries or cities.
I think it's extremely likely we'd still see a significant gap, but possibly one that is much smaller. Anecdotally, I know the house I mostly grew up in only appreciate by about 18% accounting for inflation, compared to a wage increase of about 14% for the same period of time.
As for right now, we're seeing rising prices partly due to urban flight, specifically from cities that were epicenters of covid infections but in general as WFH becomes much more acceptable. My workplace was 100% "no, never, not at all" on WFH for the past decade. When given no choice though, things worked alright, and that stance is now untenable in this job market, so there is now a very accommodating policy, making it much more tenable for people to move an extra 45-90 minutes away where housing is cheaper. That has the effect of raising prices in those areas though.
Anyone interested in real estate should check out the CalculatedRisk blog (or substack for only realestate). Guy has been doing this stuff for a very long time.
https://calculatedrisk.substack.com/p/real-house-prices-pric...
In NYC, there's a 6% broker's fee, and another 2% in taxes - and some buildings charge another 1-2% flip fee. So transaction costs eat 10% of the value, meaning people need at least a 10% appreciation to cover for this.
At the very least this leads to a much less liquid market, but I could see it leading to run away price increases as everyone tries to break even.
> Accounting for inflation, house prices have soared by 118% since 1965, despite the fact that income has only increased by 15%.
They use the median for that, which seems to have actually increased by 60%:
https://web.stanford.edu/class/polisci120a/immigration/Media...
I'm not sure why nobody else seems to have brought this up- it's a serious flaw in the article.
So, we're used to prices going up forever but what happens when housing demands stops growing and housing supply starts growing due to more people dying than get born? Interesting question to answer if you are making long term investments in real estate. Of course part of the world are still going to have significant growth. I don't have the answer but a good wisdom shared by pilots and system administrators is that everything that goes up must come down.
That's not entirely clear. In terms of births it's correct, but at any point in time there's millions of people ready to migrate to wealthy countries if they'd let them, and these countries spend billions a year on all kinds of measures to (except for some), keep most of them out.
At the moment it looks like most rich countries such as US/Canada, western-europe etc, will keep growing due to migration from places with birth surplus.
Apart from that, we're seeing substantial increases in housing demand simply from preferences alone.
The number of single-person households grew by 7x while the population grew by 2x since 1960, for example. The household size (persons) has halved despite household size (square foot) having doubled. Even if we had fewer people, we'd still want to live larger and share our homes with fewer people. That's directly linked to fewer marriages/children etc. In that sense, the drop in births is also correlated with an increase in single-person households and fewer people sharing a home, increasing housing demand, and at least partially compensating the smaller population.
In other words, I doubt we'll be seeing any drastic price drops from this demographic change alone, there's too many other factors, some of which correlate in the opposite direction.
https://www.npr.org/2021/01/20/958854717/modern-monetary-the...
https://www.wbur.org/onpoint/2020/09/02/rethinking-americas-...
It would have been a better strategy if, at some point in the last decade, the powers that be had stopped printing money and let some bankers go broke.
Now that we're discovering (again) that printing money doesn't help there is a painfully transparent history of handouts to the wealthy, making it hard to justify politically why everyone else can't get in on the lurk.
If you are talking about 2008's TARP, the US gov actually turned a profit from that as the bailout was mostly in the form of loans (with interest) and investment (the US gov now own shares in your company).
It is difficult to argue against creating money and handing it out to everyone with that sort of history. Asset owners aren't special people.
Yes, the economy is booming, and wages are rising. Your purchasing power isn't lower unless you HAVE to buy some of the goods and services growing faster than your wages, which given the categories of items experiencing above-average price increases, is a huge proportion of the population.
I bought a land (950m2) to build a house in 2016 for 38k €, now after just 5 years its value is 110k €. (Nothing has changed since then)
My house cost me about 120k € to built in 2017, and now that house (with price of land included) is 350k. (Thats the official quote from bank)
And this is in eastern Slovakia, near big city.
The local trends are...unclear in meaning. They use the ZHVI, which should be more representative of housing in general, but its not clear what it is against. They describe rather than cite data, and the description “estimated family income” from HUD doesn't say much—it should be household, not family income, but a bigger issue is it isn't clear what summary statistic of family income their source uses (median? mean? something else?). The local trends
Let's say you own your house and want to hedge against it losing value, or you are an outsider just interested in taking this side. In the financial market you would buy a put option or short the stock (among other possibilities) but I can't see myself borrowing a house to sell it and buy back when the market is lower. REIT stocks maybe ?
The flaw in the price to income ratio is the cost of borrowing (interest rates). Most home buyers consider what they can “afford” by comparing their monthly income against their monthly mortgage payment.
For this reason, a more accurate way to consider the cost of home ownership is through various affordability indices which take interest rates and other borrowing conditions into account. Calculated Risk [1] and First American [2] do an excellent job of this.
A rise in interest rates will likely stifle current home price appreciate unless wage growth offsets this increase at the same time.
[1] https://calculatedrisk.substack.com/p/real-house-prices-pric...
[2] https://www.firstam.com/economics/real-house-price-index/
* For home-seekers: less buying power -> less demand -> cheaper house
* For home-owners: cant afford mortgage -> need to sell -> cheaper house
Heck even govt is giving incentives to increase transactions. Why US different?
I happen to be unfortunate to be a Canadian who lives in a postal code where housing prices have gone up by 70% within last 2yrs. I am not kidding. When my tech salary isn’t even able to keep up with the housing market growth you have to question the reality of the situation.
We made peace we are going to be the forever renter. There is no way we will pay 1.1M for a 2bd condo. A side effect of that is to have to either delay having kids or have no kids at all which is sad but again a reality.
I wish I could move to US where at least it is not this out of control. There are still places you can buy in Washington state for 700k. Our liberal government has done nothing but propping up the housing market for boomer votes at the expense of the future of millennials and GenZ.
I bought a house at the end of 2014 for 130k in London Ontario. Prices have indeed gone up, worth about 350k now, but that's still affordable
[0]https://homesforlife.ca/london-ontario-real-estate-market-st...
Medians are better than averages
Lot of houses like this: https://www.remax.ca/on/london-real-estate/199-fairway-avenu...
Maybe I could sell my house for 400k. Neat. But there are places below 400k, like https://www.remax.ca/on/london-real-estate/69-marlborough-av...
Lending standards are significantly higher than leading up to 2008. Are they still too loose? Debatable.
But we are not seeing the flagrant disregard of DTI, abuse of ARMs, and flagrant dereliction of lender due diligence like in the years leading up to 2008.
Whatever the next crisis or crash is will look different and have different causes than the last. IMO, that ownership is out of reach for an increasingly large portion of the population will be part of the breaking point, not a death spiral of defaults and securitized junk loans that shouldn't have been issued in the first place.
The title should be "US house prices are rising faster than income".
I bet it's also not just Black Rock that's doing this, and other 0.01%-ers with access to cheap, effectively unlimited, QE funds are pulling similar moves.
The institution will have a realistic expectation of return and will usually carry-out it's responsibilities in a professional manner and, if not, can be held accountable in the courts. I also doubt the CEO of Lloyds will popping round on Saturday mornings to meddle with something or other?
of my friend group who are all in the early thirties age range nearly everyone owns a home. pay has gotten so high that you can get a starter home for ~$1.5M and live comfortably. it’s just concentrated to specific jobs. i hire engineers straight out of school who are making 3x compared to me a little over a decade ago. the prices still have room to go up
As housing prices rise at a faster rate than their annual earnings they watch their ability to ever own a home get further and further away from them.
Pay has gotten so high for one tiny group of people in one or two areas they can afford high housing prices.
The most common profession in the US is a truck driver. The largest employer, I believe, is Walmart.
In a segregated bubble, this would work. Hell, it's worked for a few decades.
The problem now are the people who relied on 'cost of living high wages (wink wink)' are flexing their money all over the US. And truck drivers and Walmart employees are priced out.
No, house prices don't have room to grow. Unless we are trending towards a feudal state, which it increasingly feels like is happening.
and because the top end jobs are still going up so much, housing prices will continue to climb
The SF engineers keep raising, and right now, everyone else is calling.
Eventually everyone else is going to fold, and it's going to be ugly for both sides.
I refer to this as "concentration fallacy". Mere pointing existence of "largest group" (or "largest legal entity") doesn't provide us with enough information to make trustworthy reasoning. If you want to prove your point, you should use income distribution curves and how they changed over time.
Providing a median works as well, yes? The fact is, a truck driver's wage is slightly above the median wage. So the largest group is also in the upper half of US incomes. And they are getting priced out of housing. That should paint a bleak enough picture.
Once people realise what's happening with their income and savings, perhaps there might start a large movement towards crypto currencies. Also, with crypto ETFs available soon, I suspect institutional investors will also want to divert part of their holdings into crypto, if legally possible to do so.
But I always find it funny that after the money printing in 2008 folks say there was no inflation. Yeah, not in everyday goods that the common folk would notice. But it's getting harder and harder for them to not notice the immense inflation on non everyday assets. The common folk are starting to realize it's impossible to make investments, they've effectively been priced out. I can't imagine it's going to end well.
The second part of your comment is unrealistic. "Crypto" trading in general is one law away from being banned by every single government on the planet. If the dollar crashes, the Federal government will absolutely go after crypto trading.
Banning crypto sounds to me like banning gold. Kind of ridiculous. Ask China how that is going.
Regardless, I think crypto is not there yet. It's not mature enough for us to have that runaway effect.
I also do not believe that the US will see _hyper_ inflation. Just ridiculously high inflation.
Pretty sure the US government ceased people's gold at some point in the first half of the 20th century.
https://en.m.wikipedia.org/wiki/Executive_Order_6102
And there is a interesting point on reddit about it:
https://www.reddit.com/r/AskHistorians/comments/25wjvv/when_...
I guess if the US were to ban crypto, it would go down somehow similarly. Not convinced that crypto would drop to 0 though. And the practical challenges of enforcing a crypto ban are... unique.