Ditto housing. I just can't believe that people are able to afford the prices of the past 1-2 years and many must be paying beyond their means? I know Blackrock and other parasites are scooping up housing too, but that's not the majority of buying.
In my experience people aren't paying beyond their means, but their means are high, and have been for a while. Where I live, in a small suburb of Silicon Valley, new FTHBs have been 100% tech for about the last 10 years.
Existing homeowners have a pretty critical role in spreading high prices throughout the country, though. If nobody traded out of their existing homes prices would be sky-high in the Bay Area and Seattle, like they were in 2018, but this pool of buyers would have little effect on Boise and Charlotte. But because someone in the Bay Area can get $2M for their home and now has it available to retire to Boise, prices in the Bay Area end up marginally lower and prices in Boise go through the roof.
Only about 5,000 of them sell in a given year. Suppose Facebook shows up all at once, with >5,000 new millionaires from the Midwest. They run an auction with each other for those 5,000 homes. The price they settle on is $1.5 million. This becomes the comparable for every existing home.
So the system started with $40bn in home equity value. We injected $7.5bn worth of tech money. And we wound up with $600 billion in home equity value. 395,000 people got $1.4 million in home equity out of thin air. And they can use it to trade with each other, generating many more than 5,000 transactions at the "Facebook millionaire" price.
Along the same lines, in theory, Blackrock could purchase strategically such that it drives up the value of other inventory it owns in the same area. Not quite a pyramid scheme but you get the idea.
Most people are foolish and greedy and blind.
The seller prices off that. The buyer gleams value the same way. Housing prices are subjective. Very much so. And this is why sale prices are so effective.
As someone who bought a house in the Bay Area last year, no. I think I could have spent 2x what I paid but I hate spending money and settled for something more reasonable.
Now I have a large safety net and more money to put into retirement. This is on top of having kids and paying for daycare.
I can’t imagine I’m that unique. I think there is a disconnect with people who don’t work at these companies and understanding how much you can be paid.
"Poor people just don't understand how rich I actually am."
If I were single and didn’t have kids I’d keep renting in SF and probably not own much.
Firstly, if prices crash people stop selling unless they absolutely have to. The supply of houses greatly diminishes which limits your choice. You might be able to afford a cheaper house, but it might not be where you want it.
Secondly, unless you're buying in cash you might find it hard to get a mortgage. Lenders tend to be reluctant to lend when the market is crashing.
Thirdly, (and this is me speculating), if the market crashes the investment companies who are buying houses will buy a lot more houses, very fast, in cash. You'll be competing with the ideal buyer.
I don't believe a housing market crash would be good for consumer buyers at all.
[0] https://en.wikipedia.org/wiki/Canadian_property_bubble#Histo...
The best thing that could happen is that apartments become cheaper because no one gives a shit about those getting cheaper besides developers. Homeowners are generally SFH owners - not condo or apartment or townhouse owners.
Thus, I think the decrease in cost will only ever come for apartments, townhomes, and condos. SFH prices are here to stay.
A large landlord is not a "parasite". He makes money by fulfilling a vital need for housing. Blame housing regulation, not landlords, for high rents and home prices.
> I know Blackrock and other parasites are scooping up housing too, but that's not the majority of buying.
This is generally a good thing because it drives prices down
How do you define whether someone can “afford” a car? Surely by definition the people can afford the cars, otherwise they would be repossessed?
If you mean they cannot afford to buy the cars outright, why is that an issue?
At a certain % of income, owning an asset doesn't make much sense due to how it affects your financial security.