Sucks for everyone else though. Especially with the artificial housing shortage.
I plan on living in this house until I croak. If I do happen to move for whatever reason, the increased value doesn't help since likely, ALL houses have gone up. My $300K house being worth $600K doesn't really help when the house I'll need to buy is also now $600K.
Maybe I’m just getting old, but when I look around at our economy, housing, the crypto fascination, etc. it all looks like scams, hype, and fomo to me.
When the big bailouts happen, I’m gonzo. Just don’t know where to yet. Maybe I’ll live on a sailboat to try and minimize the impact of the insanity.
The root issue as far as I can tell is supply is incredibly poorly managed. When I was living in Vancouver, there was a lot next to us that was waiting for permission for 2 years to build a low rise, mixed use building in an area already zoned for it. Don’t get me started on “historic” homes in dense areas.
Not at all what I’ve been reading. We have a record high 2.5 trillion in mortgage debt, and a lot of that debt (especially in the last year) is high risk.
This is the case for all forms of money making in the last couple years. It's quite depressing that actually being protective, smart and risk adverse to this idiocy is the worst situation to be in.
It's like everyone is playing with fake money and you're standing there saying it's not real, but they keep finding new ways to convince themselves it is. Meanwhile your real money is getting old and dusty.
In a more ideal world, we want mortgages to get more expensive (so that housing itself would get cheaper).
* Assuming a fixed interest rate of course. Don't put that evil on anyone.
I am a homeowner and don't want my home value to double when real income has barely moved in the same period. That's not sustainable.
Even if I could sell without repurchasing, to pocket the cash, there's another generation behind me that's going to need a place to live.
You can't just have entire generations of homeless people without it affecting society.
If only retirees, and highly paid professionals are shielded from housing increases I’d expect all other prices to become correlated with housing as workers demand commensurate wage increases or start refusing to work for negative earnings.
Note that while this is happening bad things happen. It often is the case that you have to live on less real purchases for a few months until your wages go up. However as a homeowner the mortgage not changing means it only takes one or two rounds to get ahead of this forever (that is before you never revert to worse than when you bought the house - you can go backward in purchasing power but not that much), while as a renter your rent will increase yearly and that is often a big hit against your wages that won't increase at the same time (and often not at the same rate - it will balance out in 5 year but that is a long time to live)
Don't read the above as a rant against renting. There are other pros of renting. You need to make the right decision for your personal situation.
That's already happening. IMHO you have the causality backwards - prices started rising in 2020, and then some workers have captured some of that surplus by switching jobs, and now landlords are trying to capture the workers' surplus by raising rents. Rents follow wages, which follow profits, which follow prices, and then prices follow rents & wages again in the wage/price spiral. Homeowners have an advantage because their biggest cost of living is fixed, while rents generally rise to capture all available wage surplus.
The folks who really get screwed are the ones with fixed incomes but variable expenses, either a renting retiree or someone who plans to stay at the same employer for a lifetime. You should be aggressively changing jobs and going where the money is to capture some of the large amounts of money that are floating around. People who do that usually do better than average.
I suspect what ProfessorLayton means is that they specifically own a house and so sucks for the rest of us.
0: https://www.pewresearch.org/fact-tank/2021/08/02/as-national...
I vehemently agree that those who don't own appreciating assets are worse off, which is why I said it "sucks", because it does. But it isn't most households.
Lastly, young people in particular are also less likely vote at all, let alone for their own interests. Before the pandemic, the housing shortage was entirely artificial, and the main reason housing keeps skyrocketing is political. There just isn't enough supply to keep up with demand, yet people without homes don't show up at their local council meetings demanding more housing supply the same way NIMBY homeowners show up demanding less.
Raising home prices have much worse effect of kicking away the ladders for the new generation to own their own home, while doing nothing for those who already have a home to live in and desire to keep doing so (other than possibly raising their property taxes).
edit: 89% of US homes are occupied. Of these, 58% are owner occupied. https://www.census.gov/housing/hvs/files/currenthvspress.pdf
https://newsilver.com/the-lender/millennial-home-buying-stat...
https://www.forbes.com/sites/eriksherman/2021/10/27/the-futu...
We all know labor is weak, so we start expecting wages to rise last, but that is not what happened this time, for there was a genuine tightening of the labor market.
For some definition of "own".
Most do have some amount of equity in their home and have a big fat mortgage to repay.
I am sorry, but that's not exactly "ownership" in my book.
As to your second point (inflation up => cost of mortgage down), only true if wages go up, which, unless I am mistaken ...
Yes, agreed. You are merely renting land from the govt.
That is not the case everywhere, btw, IIRC.
Ireland (I believe, to be verified) and China don't have things like property taxes.
Unless something has changed since the recent reports of the inflation surge on the non-energy side, housing hasn't been a big part of it (used auto prices were, IIRC, the single biggest component—which also doesn't hit most people regularly...)
It's not that housing prices aren't up, it's that CPI can't (yet) capture the change.
Unless something has changed since the recent reports of the inflation surge, housing hasn't been a big part of it (used auto prices were, IIRC, the single biggest component—which also doesn't hit most people regularly...)
Everyone is ahead but small bussiness owners without bubble-worthy assets who just relied on too-cheap labor to make a profit.
Inflation is the best thing that can happen to you if you owe highly leveraged debt on appreciating assets. The more debt the better.
Your debt payments stay stable, the asset price goes up, your wages go up, and within a few years the payments are negligible compared to your salary.
Compare this to a renter - your rental payments go up, your wages go up.
Yes it does shield you fron rent increases. Specifically because by owning a home you have also purchased an income producing asset that perfectly hedges your rent increase. For every dollar that rent goes up and you have to pay more, you also get an additional dollar in income from that increased rent. Ie shielding you from the affect of any increase.
It's the same thing as buying a stock, and then shorting that same stock (or buying a put). Yes the stock may go down, but for every bit it does, your other investment up down meaning you are now shielded from (or hedged against) any changes in stock price.