Hacker News Reader

Comment by datadata | Hacker News Reader

I've never understood how real returns on house prices could be believed to be sustainable. If the value of a house appreciates in terms of purchasing power for some other good at a constant rate, at some point in the far future just a single house would become valuable enough to purchase the entire global supply of the other good.

The illusion of house price appreciation is due to historical population growth creating scarcity, and cheaper money allowing for higher and higher leverage. At some point the music has to stop.

View on HN

At this point, I think people of a certain age would just be happy to have a parcel of land with a roof over their head to call their own as opposed to buying a house as some sort of long term investment whose value keeps accumulating (and whose tax value will continue to increase as a result)

Exactly, I just want my own place. The land and roof to do what I want with. It’s not monopoly for most people.

Sure if you have a separate home on your own dedicated land, but what about everyone with HOAs, property taxes, etc. to deal with? For many people they still have to pay "rent" and still can't really do whatever they want with the land and roof, so they don't see much of these benefits either, right?

This is like women's pants, and women complaining about the lack of pockets.

If everyone refused to buy with a HOA, then they would vanish in new builds, and could even be uniformly voted to disband in old builds.

But apparently some like HOAs (don't ask me why).

Like most things in life: it depends. I live in an HOA. We pay about $150 a year, they keep the common areas maintained, coordinate with the county for road and other municipal work, and … that’s basically it. They’re pretty much otherwise invisible and are just my neighbors.

Sometimes I even break the rules and put my garbage bins out too early and leave them out too late and I’ve never heard a word about it.

There was even a foreclosed house in the neighborhood that was increasingly unmaintained, and the HOA hounded the bank and got them to take better care of the property until it was finally sold.

Overall, our HOA is a net positive.

I also was part of an HOA for 4-unit condo building I lived in previously. It was perfectly fine and its purpose and necessity was very apparent.

I’m sure there are nightmare HOAs out there, just like there are nightmare neighbors in places with no HOA.

An HOA is like socialism. It's great for the first two, maybe three generations. But then new owners come in and they DGAF about HOA rules and/or the HOA (what's a measly $150/year on my sr engineer salary). And finally the HOA and/or property starts falling apart^W^Wchanging.

We are witnessing this right now, having not moved from our townhome. First decade was great, everyone follow the rules, HOA cared about the look of our properties and kept everyone in check. Then HOA stopped sending letters about the dirty facades. Then the neighbors one by one all decided its okay to leave their garbage cans out even though the bylaws specifically forbid this. Then they cut back on services they offer (illegal parking is only enforced during HOA business hours, no more landscape maintenance), they stopped enforcement (neighbor has 4 pets, facades haven't been cleaned in 5-6 years, trash and toys are being left in the shared driveway). The final slap in the face, we got an email last month saying they are raising the HOA fee by 25%.

Unlike socialism, I can politic my way into the board and demand change. Which looks like something I'm going to have to do to get back the HOA (and property) that I loved

HOA is more like Democracy: you have to participate in the meetings and governance of the HOA to make sure it is run well, but people are often too lazy to vote or be informed, so it can deteriorate. The HOA isn't an independent entity, it is supposed to be collectively run and managed by all of the home owners.

It's not about being lazy. It's that (like government voting) people try to confuse and mislead you with HOA voting, too. Like they bundle a bunch of things together and try to sell you the changes you like, while burying the ones that hurt you deep inside the text so you don't notice them. Or making the rules obscure enough that you don't realize their full implications until it's too late. Or, when they come to your door and ask for your vote to changes to the HOA rules, they (at first glance, quite graciously, with a smile!) request that you hold off on voting so they can discuss your concern and find a way to incorporate it into their changes... except it later turns out the package is all-or-nothing (changing it would invalidate existing votes!), and their real intention is to prevent you from voting against the initiative until the deadline passes, so that they could gather the minimum number of favorable votes more easily.

Aren't they usually franchises of a larger national corporation?

HOA board is elected by the homeowners. Laws are clear on this.

They might hire out property management duties to an outside firm

The HOA can hire a property management company, and the builder usually sets up some kind of contract, but after the builder is out of the way, the HOAs are always run by the home owners.

Is the price rise a slap on the face? It sounds like it’s what you want. If you want letters to go out for minor issues and landscaping, towing etc, you need funding to do it. This has to happen before enforcement increases. I think that getting your ideal back is going to take several more big increases.

> Unlike socialism, I can politic my way into the board and demand change.

That sounds like the definition of socialism. What do you mean?

I think you're both talking about democracy. People in democratic systems can vote for socialist policies or not...

> An HOA is like socialism.

I have no idea what an HOA has to do at all with socialism, apart from the fact both involve groups of people.

Aside from that, an HOA functions as well as it is run. It sounds like the folks running yours aren't all the invested in it or don't have the same priorities as you. The solution is, as you stated, being the one to try and make the change by joining the HOA leadership.

In my case, I don't have that issue, and the HOA is a few years past 30 running now. I suppose I'm lucky that there's enough homeowners in the neighborhood who are both will and able to run things to an acceptable standard.

Many local municipalities actually require the developer to include a new HOA as part of the permitting process for new development.

This is because small local governments are often too cash poor to foot the additional road maintenance, utilities, etc so they want to offload the cost to the developers/ the developers customers.

As a European, this really reads like the thing with the "give them 5 more minutes and they'll rediscover taxes" situation.. Yeah if you outsource government functions to private institutions you'll have to require those to exist. Just that, being private, there's no accountability to be had..

The HOA fees are _on top_ of property taxes that would make Europeans’ eyes water.

You you share what you pay?

I don’t understand how this could be true.

I’m in Auckland, New Zealand and don’t have a housing association.

I pay about US$1500 per year in property tax. It covers rubbish collection, library access, street cleaning, park maintenance, subsidised public transport (which is an abysmal service) etc.

https://www.aucklandcouncil.govt.nz/property-rates-valuation...

In the SF Bay Area the property tax rate is around 1-1.25% (it varies slightly by local bonds for school districts etc.). So someone who buys a house today in a popular suburb at $1M+ will be paying $10k+ per year in property tax. My parents' home has one of these typical HOAs established by the builder. The HOA fees were $1200 last year.

The HOA does have significant common areas including a pool and park that has been there since the beginning. It also has hilly open spaces that require annual weed and brush clearing for fire breaks. These areas also have landslide potential with drainage and retaining wall engineering issues, which adds to both contractor costs and also increases insurance premiums for the HOA.

My parents bought their house new for under $45k in 1975 and are currently assessed at under $170k based on the Prop 13 logic. It's hard to say what the market value is since recently sold homes in the area have had significant remodeling compared to my parents' time-capsule, but I imagine they could get nearly $1M. They probably represent the lower limit of assessments in their neighborhood. Most neighboring houses have been resold and reset to market rates at least once in the past 50 years, or at least done some major renovations which also partially increase the assessment for tax purposes.

$1500/year? How is that so cheap? I pay around $900/month.

There are people who own condos in my region who pay $900/month in HOA fees on top of $900/month in property taxes.

Part of this may be due to differences in what taxes do? I pay 33% income tax. Some of this might go to things that local government pays in your region? For example, in NZ income tax pays for schools, not property tax. Same applies to hospitals and various other services.

As you say, that’s a massive difference.

My state lacks an income tax, so we pay high sales and property tax. But overall my tax burden should be lower than NZ, but those property taxes are ridiculously low, no wonder NZ is (or was?) a good place for foreigners to speculate on property.

We welcome you in!

And if it’s getting tricky, you can usually find a politician who is sympathetic and will bend the rules for you.

Thiel managed 12 days here before citizenship came though, but if you aren’t as rich as him I’m sure we could come to an arrangement.

If working here, you’ll be alarmed by the low wages, high housing costs (for low quality housing) and high cost of living. However bad you think it is, it’s worse.

But other stuff is great!

https://www.nzherald.co.nz/indepth/national/how-peter-thiel-...

I have enough acquaintances from NZ in tech to know the drill, but just that low or no property taxes, in relation to other taxes, encourages property speculation (eg in china, which lacks them).

You are correct. It’s crashing down now though.

33% income tax on the top band, not in total. Even though I fall into the 39% band I'm still not paying as much as 33% all up.

Thank you, yes.

I live in Georgia, City of Decatur. My house is a 1920 craftsman, 2,800 sq ft, 4 bedroom, 3 bath. We pay ~$1,200 a month in property taxes.

Decatur is usually about 1% of the home value in property taxes, right?

The size of the house isn’t as important as the value. If you’re laying $14k/year in property taxes, your house is likely appraised for $1-1.5M.

Nationally speaking, Decatur has pretty low property taxes. Especially since you’re probably a short distance from the Brick Store Pub.

That doesn’t even cover a month in Austin! I’m not going to share the exact amount, but it’s a (low) double-digit multiple of that.

So? It doesn't particularly matter _how_ taxes are collected. Just how much in total, and what you pay from that tax money. If I'm reading, that HOAs have to build their own roads, their own sewer system, power lines, etc. Then yeah.. that is a state responsibility here. That is done by a publicly accountable organisation, where you can, when you are angry with their performance, go to your elected officials and make them do something about it. Yes it's not as direct as being a customer, yes it's not as easy as you getting your own way on everything, but there is an established process for everything.

The typical argument on this site here is: Europe doesn't have a thriving tech center because of high taxes. The HOAs and stuff like that is a consequence of the different tax burden. So I guess your total taxability is lower than ours shrug

I’ve posted this before and it wasn’t well received but I love HOAs.

When I bought my first house, I was adamant that I didn’t want an HOA. Over the next ten years the neighborhood went to crap. I ended up living next to neighbors who didn’t maintain their yards, parked junker cars on their lawn and let their houses go to trash.

When I moved, I specifically wanted an HOA. After five years, I still love my HOA. Mostly for two reasons. First, other neighbors here generally have the same mind set and care about their most expensive possession. Second when someone starts letting things slide the HOA slaps ‘‘em on the wrist.

I don't understand this mentality at all. Why do you care how they maintain their property if it doesn't harm you directly? I never understood why anyone would harass someone else over their lawn. It's only a matter of time where you end up with neighbors who don't share the same mindset to start micromanaging the neighborhood.

I live in north Seattle area where non-HOA homes are priced higher than HOA homes. The area has a couple of older somewhat rundown houses and no one cares. Prices are still at least $100k higher than the new builds with HOAs on the next block. So there goes the old excuse for maintaining home value.

You don't understand why I would care about the neighborhood that I live in? My house is the most expensive thing I own, I worked incredibly hard to get it. I am proud of it. I take care of it.

I want to live in a neighborhood with others who feel the same way.

To your second point, yes, not all HOAs are great. If you frequent fark.com, you'll find multiple threads per month about some terrible thing an HOA is doing. But, that's why you do your due diligence when selecting an HOA. You carefully read the CC&Rs before signing on the house, you talk to others in the neighborhood before moving in. Much like selecting an insurance plan. For example, my HOA is setup so that leadership fully rotates every 3 years, with the rotations staggered. Worst case we get bad leadership for 1 year. Though, so far, in the in the 15 years the HOA has existed, they've done nothing but enforce rules everyone has agreed to. (Well that, and they killed off a bunch of common-area grass by hiring the cheapest lawn care they could find. )

Same! My house is the most expensive thing I own, I worked incredibly hard to get it. I am proud of it. I take care of it the way I want it. I don't care what some other un-invested party has to say about how I live.

> they've done nothing but enforce rules everyone has agreed to

But that's not really true is it? Most people buying a house in America do not have access to HOA by-laws until after signing. It's increasingly hard to even find homes that don't belong to a HOA unless you have the financial means to buy wherever you like. Plus, HOAs aren't opt-in/out either.

It doesn't matter if a majority of you decide on rules, unless the same majority is willing to fork out money to pay my mortgage+taxes, Idgaf what you have to say.

> I want to live in a neighborhood with others who feel the same way.

If you really believe this, you can go ahead and disband the HOA. You don't need to enforce with a stick if this is really the case.

> Most people buying a house in America do not have access to HOA by-laws until after signing.

This is not true

In most states, a buyer has the legal right to rescind the purchase contract for some number of days after receiving these documents.

But you generally have to ask for them when you make the offer, or the law doesn’t protect you.

In contracts I’ve been part off the buyer is required to sign the HOA covenant

Redfin, Zillow disclose HOA fees. Nothing prevents the buyer or their agent from requesting docs or calling the HOA directly

Right, what I’m saying is that the HOA is not allowed to say no to the request, and you have the opportunity to look over the docs once you get them (and decline to move forward if you don’t like what you see - and get your earnest money back).

But the main thing, is that you have to ask for the docs at the very start, or those laws don’t really protect you.

> Most people buying a house in America do not have access to HOA by-laws until after signing.

I know John Oliver mentioned in his HOA segment that this is sometimes the case, but it's definitely not "most" locations and I actually don't know where it is true (wish he had clarified).

It's definitely not true in Massachusetts, New Hampshire or California because I'm familiar with the real estate laws of those states.

The only reason to be focused on those things is if your main concern ins your resell value.

HOAs are the only legal mechanism for a development to assess fees to maintain common amenities.

If your neighborhood hires landscapers, or has a pool, or you share literally any part of the building structure, then an HOA comes into play. Often new developments have private roads that need maintenance, snow clearing, etc.

In many places, the HOA is the only entity that will do anything about bad neighbors like a dog that barks 24/7 or someone playing music all night—things that don't necessarily break city law but do affect your life, or things that do break city law but the city won't bother enforcing.

It all comes down to luck of the draw.

Those things should break city law though! To me, this is another of privatizing what should be the government's job, resulting in less accountability and less democratic control.

Why not have both? City law sets a baseline for the city, but that will be a one size fits all solution.

Someone who wants a place quieter than the noise level the city enforces can find a development with an HOA that sets a lower level. Someone who is particularly sensitive to smoke can find a development that bans outdoor fires on more days than the city does.

As long as an HOA is only limiting things that actually affect other people and maintaining common property, and it is legally structured in a way that prevents scope creep (or ensures that existing owners are grandfathered if new restrictions are imposed), I don't see anything inherently wrong with having an HOA.

I don’t know if HOAs are great or not, but I live in a mid-size city with a lot of more important problems than taking care of my neighbors’ unsightly home situations. I can’t realistically expect city government to handle it, and moreover different neighborhoods have different very comfort levels with that sort of thing. Moving that sort of “minor living arrangements” governance out of the big city government into the neighborhood actually works much better.

If the HOA is entirely elected by the people who live in it, it sounds as if it would be more democratic and more accountable than a town or city government. Your vote will have more power and the people elected will literally be your neighbors.

The problem is that cities encourage/force HOAs to exist. The city gets the HOA to maintain the infrastructure indefinitely. So you can’t really vote with your wallet. Developers often don’t want to make HOAs, it costs more money and it’s a pain.

But that’s the big thing with all construction. It’s super, super regulated. It’s probably the most heavily regulated thing there is… what gets built is the small subset of things that can both work financially and get approved. If you got on the right merry go round early enough, it’s great. It’s probably the biggest thing creating inequality.

The irony is that long term, many HOAs hurt property values. But supposedly they exist to enhance property values.

My HOA is pretty nice. They manage the common areas and maintain a community pool and tennis court. It was one of the positive reasons I bought my house.

But they also aren’t allowed to monitor grass height and whatnot.

Not without the HOA's permission, though.

Not every house is under an HOA.

Which age do you mean? (In the US) GenZ has outpaced both GenX and Millennials in rate of home-ownership by age 25 (30% vs 28% and 27%).

https://www.forbes.com/sites/katherinehamilton/2023/04/21/ge...

https://www.census.gov/housing/hvs/data/charts/fig07.pdf

So i think the trendline in terms of homeownership rates seems to be gently decreasing for all age groups, but there's a big spike during the 2 housing bubbles we've seen when rates were at historic lows.

The overwhelming majority of habitable land in the world is uninhabited. The problem is most people want to live close to cities, where land and housing is expensive.

We need to decentralize.

We need to decentralize.

Hard disagree here. Decentralization might reduce housing costs, but makes many other things more expensive. More roads to pave and maintain. Higher delivery costs. More time in the car to get to work, shopping, entertainment.

What we need is more/smarter infill development. And the elimination of R1 zoning (single-family only). Let the market decide what housing density should exist on a given block (within reason).

> Hard disagree here. Decentralization might reduce housing costs, but makes many other things more expensive. More roads to pave and maintain. Higher delivery costs. More time in the car to get to work, shopping, entertainment.

I think when people talk about decentralization they usually mean people moving from the big cities to existing less big cities. Those less big cities are usually built on the road and/or rail networks that are used to supply the big cities.

Decentralizing to such exiting smaller cities wouldn't necessarily be costly, especially if not done too fast.

I think there are probably serious limits on the extent to which decentralization is viable in North America. The lifestyle that comes with rural life for example is not one that the majority of the population finds attractive, with how far removed from not only creature comforts but also employment opportunities and essential services it makes one.

There's also many things that don't work out economically for towns below a certain size. This is why little towns of 1k-10k tend to have only megacorp chain shops and restaurants — despite the cost of operations being so much cheaper than they are in more urban areas, things like little family owned bakeries, delis, etc are mostly found in cities in the US.

The latter of those paragraphs could perhaps be changed, but it'd take an earth-shattering level of infrastructural redevelopment that I don't see happening any time soon.

There is a reason these places are uninhabited.

The reason why the US is the number 1 producer of greenhouse gases is because of decentralization.

Our cities are built unlike any other city in the world. We live in vast swaths of suburban sprawl that is so decentralized you get cities like LA where it takes over an hour to get anywhere within the city.

The problem is opposite. We aren't dense enough. No plot of land should be single family.

Sb-9 and adus are designed to help relieve this problem, but ultimately residential areas should all be apartment units 10 stories high when there's a population mismatch with housing and people. Singapore, Shenzhen, Tokyo, Shanghai and any other city evolves their urban infrastructure with a change in population. The western US chooses not to do shit.

You can go an hour in Beijing or Shanghai and not get anywhere in those cities. They are sprawling also, but well, those places in Pudong eventually became popular as Shanghai became more popular.

LA traffic is way way better than Beijing traffic. They aren't even comparable, really.

That's different. Shanghai and Beijing are still cities that are built really densely. LA is suburban sprawl which means everybody lives on a parcel of land and has a backyard. That same parcel of land in shanghai probably has 30 people living there in a tall building.

> LA is suburban sprawl which means everybody lives on a parcel of land and has a backyard.

Having lived in LA before (Westwood actually), I know that is false. While Shanghai is pretty dense, Beijing is much less so, although the notion of a city in China includes rural areas as well. Both are denser than LA, but I’m not sure Americans are ready to live in 30 story concrete boxes.

Yes, China has lots of people, but the infrastructure to support their density still isn’t that great. It has improved, driving still sucks but subway is a real option now vs in 2007.

Having lived in LA all my life including westwood and outside of westwood I know it's true. LA is a huge suburbia. You are biased if all you've lived in is westwood.

If you lived in westwood that means you likely went to UCLA and the neighborhood there is uniquely apartments because its for students. The majority of LA with the exception of downtown, ktown, westwood and some other neighborhoods is mostly suburban sprawl with apartments sprinkled in little pockets everywhere.

Did you have a car? you can't really completely understand the city of LA without owning a car and exploring everything. If you lived in westwood without a car as many students do then you don't really have a good perspective of the entire city.

Heck go a little south of wilshire and you'll see the apartments turn into little plots of single family houses. Go north past sunset and it's single family mansions. The westwood area is just this microcosm of transient students.

Most of california is like this because it developed after car culture. If you go to the east coast which began developing before the automobile you will see that the cities there are much more dense and much better suited for public transportation.

I literally lived in an apartment, in an area with lots of apartments, so I know not everyone in LA lives in a house with a backyard. I wasn’t even a student, it was just too expensive to rent a house even on a tech salary.

We looked at lots of places around LA before renting in Westwood, lots of apartments. The apartment came with a parking spot, we owned a car.

Now, ya, there were lots of SFHs, just that not everyone or even nearly everyone was living in an SFH.

Westwood is the way it is because of students. That's one of the largest concentration of apartments due to the proximity to the school.

Not "everyone" lives in a parcel of suburban land. Of course not, home ownership even in suburbia (LA or not) is not affordable by everyone. So LA like every other suburbia out there in existence has many pockets of areas zoned as multi family apartments.

When I say "everyone" I mean the general way of life for someone who's not transient/starting out and living in popular areas. Obviously there aren't suburbs with zero apartments. LA is still overall suburban cul de sacs. You stay there long enough you will be able to afford a home, just not in Westwood.

Westwood is one of the most expensive areas in LA. There are plenty of areas that are cheaper and much much more affordable. You likely only looked for things west of UCLA due to proximity to your job or desirability of the neighborhoods. That area is extremely expensive and just a small (although popular) part of LA. Go south and go east (skipping past Beverley hills) and you'll see places where things get cheaper and youll get a better view a larger section of LA.

I come from a large area east of DT LA which encompasses even larger swaths of suburban sfh that rivals the size of the neighborhoods close to the coast. Starting out people live in apartments. Over time they graduate into buying a sfh and paying a mortgage. Owning and living in a sfh is the typical life path of someone living in LA or suburbia.

China is, by far, the number one producer of greenhouse gases. Most estimates have it at about the rough sum of the following three countries, it’s really not even remotely close.

You have to measure per capita. That means greenhouse gases per person.

China has a huge population. So it's more reasonable for them to emit more gas given population size.

If we want to be pedantic, the tiny middle eastern oil rich cities are the biggest emitters per capita but their impact is small given the small population. Australia also beats the US but they are also much smaller then the US.

In terms of any reasonable impact measurement the world stands to gain the most if the US cuts down usage. Hence why I chose the US as the number one emitter. We stand to benefit if China cuts down too but they are at roughly half our emissions per capita meaning such cuts will be viciously closer to the bone if you know what I mean.

Why would one have to measure per capita? The Earth isn’t measuring per capita, crap in the atmosphere is crap in the atmosphere, nature does no discerning how much of it came from one person vs a larger group.

I understand the spiritual idea of trying to measure per capita, but I think for something as severe as climate change, the only relevant metric is the absolute one.

Why would you measure per country? Countries don't actually exist. You think measuring it by artificial borders drawn by the imagination makes sense? No it doesn't. It makes less sense then per Capita.

Following your line of logic, Antarctica emits the least greenhouse gases of any country or continent. Per Capita doesn't matter so whatever Antarctica does, they're doing it right.. nothing to do with the fact that the country is practically empty.

It's not spiritual at all. The realistic measure is per Capita. If you aren't measuring it this way... and I say this to be factual and with no intention to offend .. but if a person isn't measuring it this way when they have awareness of the per Capita factor then that person is concretely (not spiritually) stupid.

You are not definitely not stupid. For something as severe as climate change the per Capita measurement matters absolutely.

Why on earth would I do that when I could just rent and put the money in index fund which will appreciate.

It’s my belief that in a few generations in the US “owning a home” will no longer be the default dream people have.

You can kind of see a similar shift today in how teens/young adults are losing interest in driving — something their great-grandparents would have thought crazy. “But a car is what makes you free!”

Maybe I'm just sandwiched between those generations but I don't see how those are equivalent. The desire for stable housing isn't a social construct. If you can't secure that you'll always be stressed.

Stable housing isn’t limited to owning a single family home. Renting a small apartment can be very stable (I’ve done this for the past 15 years). Owning a small condo can be very stable. There are also many stressed homeowners who worry about making mortgage payments.

The reason many see these as unstable today is because of the default-ness of single family housing as the default goal. Similarly how driving a car was the default goal for 16 year olds for several generations.

It’s hard to imagine not wanting to purchase a home because we’ve been sold it as the smart and obvious thing to do for quite awhile now.

Also, renting from a private landlord and owning are not the only two options that can exist. Social housing can be incredibly stable as well, and there are lots of different possible models for social housing.

I read an article recently (can't find it immediately) proposing a social housing mechanism where you pay into it via rent and gain equity not in the specific housing unit itself, but rather in the social housing program as a whole. Kind of like a REIT, only at a certain point you get an entitlement to a housing unit and no longer have to pay rent, as if you'd paid off a mortgage.

Renting might be stable but it's very dependant on whoever owns the house and what type of regulations and protections your government has in place. Owning a home (house/apartment/land/etc) gives you more rights over where you live and more stability in most countries.

I've seen rents go up with inflation where inflation grows at 25% yoy, and I've seen people kicked out of an apartment 3 months after moving in because the owner found a buyer with a good deal.

But I agree with you, single family housing is the goal for some cultures and generations, and it was carefully crafted by governmental policy, propaganda, marketing and third party interests. We are now seeing the consequences of such.

Yet, not all people have that goal, but a lot are content to just owning a place to live even with relatives, a community or others.

I feel it's hard to not wanting to own something if it grants more rights and protections against injustices. In the countries I've lived, having a property deed of any sorts with your name on it makes your life so much better and stress free.

For a counter perspective, think about home ownership as not stable, but inflexible. It doesn’t quite have the same ring to it, does it?

A lot of this comes down to what an individual values and my argument is that what individuals value when it comes to housing will change drastically over the coming 50 or so years.

You would be surprised how adaptable people are, everybody owning their house and this being some yardstick of success is very US-centric construct.

Here in most of Europe its luxury with 2 faces - it costs significantly more of your money, time and energy to own it. Is it worth spending the little free time you have in your life with just plain stupid property maintenance? For me its a skill I happily delegate to (much) less earning fellows, and I spend that time with family, doing sports and adventures or just relaxing.

Ie in Switzerland, due to way property taxes are setup, its very ineffective to fully own your house. To inherit is sort of curse or at least a burden, you usually immediately have to sell. Nobody apart from few whiny expacts complaints about it, people have actual lives to take care of and focus on much more important matters.

Home ownership rates in most of Europe are higher than in the US.

Rates in European countries [1].

Rates in the US [2].

[1] https://www.statista.com/statistics/246355/home-ownership-ra...

[2] https://fred.stlouisfed.org/series/RHORUSQ156N

What required maintenance are people doing all the time that is taking up their free time? Everything I can think about are things that renters still need to deal with, like cleaning. The only big US thing I can think of is lawn mowing, which, as crazy as it sounds to a lot of Americans, is not a requirement to have outside of very strict HOAs. And you can also just pay someone to do it if you still want a lawn.

This might be due to misunderstanding of the economics involved on my part, but I don't see this happening unless the cost of renting in desirable areas drops substantially enough that yearly price increases can no longer present a substantial risk to the average individual's financial stability. Needing to periodically move to keep rent affordable and the anxiety that comes with always having to think about where you're going to have to look next gets old really fast.

From my perspective as a mid-30s millennial, much of what's fueling desire to own a home right now is the ability to turn housing costs into a semi-fixed and mostly predictable expense, even if mortgages aren't all that much cheaper than renting in the short term. That assurance is worth quite a lot.

I find that it’s difficult to change anyone’s mind on this subject, but the issues I often see are:

1. Overestimating the predictability of the costs of owning a home. As a renter, I know exactly what I will pay for the next year. A homeowner doesn’t have that same knowledge.

2. Comparing rent to mortgage for equivalent properties. Yes, renting the same property will generally compare unfavorably to purchasing it. But compare a 2-bedroom apartment to a 4-bedroom home and the apartment becomes much more competitive financially. However then it comes down to personal preference for the place you want to live, not a rational cost analysis.

3. Underestimating the stress of owning a home and overestimating the stress of renting - but this is also mostly a personal and perspective thing.

The calculus is naturally going to differ depending on the individual, but for points 1 and 3, if you can find newer construction within budget that's more likely to have been built to code and not in need of critical maintenance, things will likely work out in favor of homeownership.

Having previously been renting in the SF Bay Area, ownership worked out much better in my case. With the rate that rent had been increasing there it'd take several bad unexpected house repairs each year to equal the increases.

Factoring in planned improvements might make money spent over time more of a wash, but the big difference there is that I can save and plan for improvements… point in case I have planned major bathroom renovations that I've been sticking money into a high yield savings account for. If push comes to shove, don't actually need to do the renovations though, and that money can go towards other more important things helping mitigate or prevent financial disaster. On most peoples' salaries that's difficult to do when renting unless you're renting something so small that it's difficult to use as anything but a place to sleep.

> On most peoples' salaries that's difficult to do when renting unless you're renting something so small that it's difficult to use as anything but a place to sleep.

This is kind of getting at my point and prediction. Cars were once seen as Freedom Machines that people were dying to operate when they turned 16.

I believe in future generations will see housing as more than a place to sleep but won’t continue to drool over a 3 or 4 bedroom single family home. People are having fewer kids and the climate is going to make maintaining a yard a bigger hassle and cost in many areas.

> a semi-fixed and mostly predictable expense, even if mortgages aren't all that much cheaper

Sorry I break the bad news - As a homeowner, this is not an advantage of owning a home. Houses are MASSIVE money sinks. The cost of rent is MUCH more predictable.

Well, two years in that hasn't been my experience. Costs have so far been minimal and well below what rent increases would've been. Things can and will go wrong but it'd take something pretty crazy to nullify the money saved on rent increases already, let alone if things continue as they have been.

Even when a big unexpected house expense inevitably happens I will have had the benefit of having been able to invest the cash that would've otherwise have been spent in the meantime somewhere where it's making some interest instead of going into the black hole of rent with no returns at all.

Well, it's easy to have two good years. It's also easy to have a bad two years with multiple major repairs.

I went one year where I spent at least $16,000 on repairs.

But that's the point - having $16,000 in repairs unexpectedly is the opposite of "semi-fixed and mostly predictable."

In the 10 years I rented I always rented from small landlords. I had three apartments during that 10 years. Because of that I've never had my rent increase without moving.

As far as black holes go - I spend more than $600/month in just property taxes and insurance. Add to that $360/month currently in interest.

But if your rent is equal to your mortgage (very doable in many places, albeit for different properties), you do not need to uninvest that money for unforeseen expenses.

Those two things are only related culturally, not inherently.

I do own an individual house in Tokyo and don't have, need or want a car, so it is definitely possible when the society wants it and politics allows it.

This is already the case for people my age unless one gets a significant parental handout. Certainly for anywhere within an hour or two commute of a city where most jobs are.

Meanwhile other people are pretty happy with the (r>g) gradual decline into feudalism driven by asset and land ownership accumulating in fewer and richer hands.

I love Piketty for bringing the data, but it's clear that r incorrectly lumps together land and capital. R can be decomposed into returns to land (rent) and returns to capital, and the former is much more pernicious.

https://equitablegrowth.org/land-rather-than-capital-the-lon...

The house doesn’t go up in value, houses depreciate. Hence why the IRS let’s you take a tax break for depreciation if you use one for business purposes. It’s the land that goes up in value and land will never be a sustainable resource.

As the saying goes- they aren't making any more land. Land (in an area with a growing population) is a finite resource, like gold or precious metals. Nothing about it is an illusion, if you re-zone for dense housing, it will actually further accelerate the increase in price for a single family home since the land underneath is now has more utility.

Land is effectively infinite. But it's a non-fungible ranked good. For something like real estate your entire lifestyle depends on your ranking, including ability to work. It's a community wide constant auction.

It is naturally a race to the bottom. As long as a community is getting wealthier, the competition will be more fierce.

You can develop more land as fast as possible. Unless you're lowering the ranking of the whole area, then again as the community develops competition will become more fierce.

How much does a home cost? $(however much the second buyer can maximally afford) + $1.

Land may be "effectively infinite", but desirable land isn't.

Land in the middle of a desert in Arizona may be ridiculously cheap, but few people ever choose to live there (or can actually pull that off). OTOH land on Manhattan, or on the Miami beachfront, is for some reason quite limited.

"desirable" isn't fixed. Once pheonix was "a desert in Arizona". (I'm not arguing that all land is equal).

> How much does a home cost? $(however much the second buyer can maximally afford) + $1.

Which, as a corollary, also means that with double income now being the norm, prices are basically doubled on their own. This also means everyone who doesn't participate in comphet can get fucked.

I've thought about this a lot, and this is happening in real time where I am in Saudi Arabia. The break neck transition from single income households to double income households.

Employment is never a choice. You either can't work, or you must work. Choosing not to work means getting priced out by everyone who does work for all ranked goods.

If you could put a value on a stay-at-home spouse's labor, you can work out whether this was a positive or negative to the family's economy. You see that at the low income end, a double income society forces the family to have a lot less just to compete for rent. Educated professional couples earn more, while outsourcing house labor to the low income families. Capitalists are very happy because they doubled the supply of their labor.

Essentially you see a person go from full time cooking for their family and raising their kids, to working at a fastfood restaurant and babysitting other people's kids for minimum wage, while their own family gets no support.

I mean I'd like you to have a word with the local appraisal district on that.

The appraisal for my land value is pretty fixed, but the value for improvements changes wildly.

Building vertically in essence creates more land.

They aren't making more land, but in many places, they are making habitable, service-able land - and vice versa.

> The house doesn’t go up in value… it’s the land that goes up

There’s a lot more to price of a house than land or the house itself. A good schooling district, lower crime, access to good commercial businesses, and a bunch of other things dictate the value of a house.

The value of the land includes the benefits from living in the community. There is land you can't build on and it has much lower value. (Restrictions on agricultural land, for example.)

This is where it would make sense to differentiate between land value and property value and go all Georgian on this. You should benefit from value you added by improving what's on the lot. However, we should limit or erase what someone gains from the land itself going up in value. That we aren't doing that, results in empty lots being a fine investment, even though it's a massive lost opportunity for society.

Most people stay in houses (statistically) for 7 years. so it really is appreciation of their capital. for a common person its the most leveraged investment one can do because its deem 'safe'. let leverage is 5x-10x depending upon your down payment. so from ROI terms it works out so long as prices steadily march upwards.

I agree its just larger buyer pool chasing slowly increasing supply. but you have to understand the population growth is only needed locally so so long as a metro remains financially viable growth will continue & hence housing prices. Also thanks to some spectacularly BS regulations/nimbyism we cannot build fast enough so that creates extra pressure in coastal centers.

Physical space in desired locations is limited. Aka each marginal spot will be higher in price with the last spot having a price of infinity.

So yes as long a location is desirable (think Manhattan or Shanghai) , sky is the limit in terms of prices.

Skyscrapers can help a bit by making this 2d problem to 3d but still there are limits.

Skyscrapers are very expensive to build. What would actually help is allowing ~10 story buildings everywhere in the five boroughs with a fast and simple permitting process.

Not if you keep allowing investors to buy up all the new housing. Vancouver did this: build, build, build and investors bought, bought, bought.

Nearly 50% of all new housing built in Vancouver is bought up by investors. To purchase a place in Vancouver you 10x the local median salary.

There are not nearly enough homes yet.

> These 12 cities alone say they will need a total of more than 250,000 new homes built over the next five or 10 years to meet demand from current residents who are inadequately housed and future residents who will move to Metro Vancouver.

https://vancouversun.com/business/real-estate/many-new-homes...

Investors are the ones who finance new housing. You want the investors to be purchasing land and financing new construction.

Unfortunately there tends to be a lot of interventions which make building adequate housing difficult. But remote work has allowed more developer friendly places like Texas and Florida to attract net migration.

Austin is number one (or close to) for new housing permits and every few months I see the city council changing ordinances to make it even easier. Imagine San Francisco did this 20 years ago instead of stifling every effort to build something?

Blaming developers is one of the reasons housing is expensive. Yes, they make money, but they do it because they’re providing a good that’s in demand. Thats how a market based economy works. When things are in short supply, price goes up which incents new supply/competition.

Investors buy housing because there's not enough of it, making it valuable. It wouldn't be a good investment if we built enough.

Because they're not building enough.

Living in Vancouver, 10x seems like a very low multiplier.

Geology factors into this. There is a reason only downtown and midtown have skyscrapers.

There is a reason, but it is not geology. https://www.6sqft.com/the-bedrock-myth-the-evolution-of-the-...

To elaborate; downtown and midtown are the two transport nexuses in New York City where most if not all suburban labor markets are easy to access, and employers want to have their pick of employees.

NYC is an archipelago separated by large bodies of water, and it is hard to avoid going through Manhattan to go between the western suburbs, the northern suburbs/Bronx, and the eastern suburbs/Brooklyn/Queens. What few links exist are always horribly congested.

That wasn’t always the case - there used to be street cars between Brooklyn and Queens for example.

Geology is the reason there aren’t skyscrapers in the west village etc though.

The streetcars were equivalent to today’s buses, and were about as fast. Brooklyn and Queens is still only about 4m of the 21m total population of the metro area, so it’s still a small share. Even Nassau to Brooklyn or Queens takes overly long and/or is too expensive.

The West Village is actually not very well connected transport wise, and historically the waterfronts were docks-oriented. Downtown is the historic core where pre-bridges, all the ferries went, and where many bridges still exist. Midtown is the location of the rail terminals, so a suburbanite can walk to their job without having to pay a second fare. (IIRC Grand Central is where it is because at some point the city banned surface-level steam trains below.)

Yes, but why has downtown and midtown always been the two main population centers? Because that’s where the exposed bedrock is. Geology.

Transportation.

Downtown is where all the ferry landings were, and where a lot of the bridges were built after.

Midtown is where the rail terminals stop, so suburbanites can quickly walk to their jobs instead of paying a second fare for subway/bus/taxi.

There is no correlation between bedrock depth and height in Manhattan, as explained in the article of the grandparent comment. In fact, most of Downtown is landfill.

Manhattan is not the world. Also downtown/midtown were the center of New York before skyscrapers.

I know. I’m not from NYC anyway. But it was the grandparent that started talking about the five Burroughs.

I think your causality is backwards. Why has downtown and midtown always been the two main population centers, and not one continuous city? Because that’s where the exposed bedrock is, with some swampy midlands in between in the West Village. Geology.

> If the value of a house appreciates in terms of purchasing power for some other good at a constant rate,

Houses don't appreciate, they just (often) depreciate less in absolute terms than the land they sit on appreciates.

Yeah, and that's also the reason that far more people are complaining about housing prices specifically in high-demand cities vs ghost towns in the rust belt...

Talking about housing prices without talking about demand being a non-static thing is only talking about half the story. And development, by its very nature, is intended to increase demand and make land even more valuable, so it can easily have unanticipated results.

We moved demand around in the past, such as with the federal government and defense contractors spreading out a bunch of work in the Cold War to smaller developing cities. It could happen again.

> I've never understood how real returns on house prices could be believed to be sustainable. If the value of a house appreciates in terms of purchasing power for some other good at a constant rate, at some point in the far future just a single house would become valuable enough to purchase the entire global supply of the other good.

This is likely on me for misunderstanding your comments, but if housing costs increase in line with inflation then everything else will get expensive too. The relative cost of other goods will be constant, and we would never reach a place where a single house could be so relatively valuable.

Unfortunately, house prices have been outpacing inflation. This can't continue forever. It's being propped up by laws and policies and special tax exemptions, but eventually the majority of voters will live in rental accommodation, and they'll vote for policies to bring house prices back in line with inflation.

GP is talking about housing appreciation in excess of inflation — the terms they used “real return” and “purchasing power” are specific economic terms that mean inflation-adjusted rate of return or price levels respectively.

This is what GP means by “real” (after accounting for inflation) returns, as opposed to nominal returns.

>but eventually the majority of voters will live in rental accommodation, and they'll vote for policies to bring house prices back in line with inflation.

For most developed countries with declining birth rates, the opposite will happen, older generations will be more than ever represented politically and they will vote to favour home ownership bcs they inherited valuable assets from previous generations and/or had the possibility after decades of renting to get on the property ladder.

Stein’s Law - If something cannot go on forever, it will stop.

Isn't this the illusion our economic system gives us though, for everything from goods to companies in general? There is no "top" of the value of a company, so seemingly everyone is OK believing companies can grow forever and always get bigger/more profitable, so shareholders gets more profit.

If this is to believed, why cannot you believe the same for the housing market? Seems to fit with how most people understand the underlying economic model anyways.

house price appreciation is due to historical population growth creating scarcity, and cheaper money allowing for higher and higher leverage

If was just population growth and cheap money, you might expect housing prices would rise everywhere, but prices have dropped in places like Buffalo, Detroit, Cleveland. The housing price bubble is in large part because there is a been a highly uneven distribution of high value job creation. Also, a side effect of the influx of high paying jobs is that local amenities spring up (restaurants, grocery stores, coffee, breweries - typical gentrification), and that reinforces the demand and pushes prices even higher.

Drive across the country and it is clear land scarcity is not a problem, it is just that too many people want or need to live in the same small areas.

> The illusion of house price appreciation is due to historical population growth creating scarcity, and cheaper money allowing for higher and higher leverage. At some point the music has to stop.

The music did stop in the 90s, we just forgot what a low point in the cycle looks like.

> historical population growth creating scarcity

Is that really down to a single factor? Would it be impossible to improve the situation by creating more developed land and/or rezoning the land we already have to allow higher density in more desirable locations?

If it's all just population growth, then all you've done is shifted to a new "unsustainable" metric with all the attendant problems you've just flagged.

Shelter is a unique and essential commodity. To me, it makes sense that it appreciates faster than your average good which is rarely essential. At the same time, if housing was made universally available, I think the great lift in burden on the average citizen would render the need for appreciating assets to diminish. As it stands now, my house has to appreciate for it to be worth it

Food is also essential. If housing appreciated at a constant rate against a commodity like wheat for example, eventually you would be able to sell a house for the entire global supply of wheat (assuming wheat supply grew slower) .

Food in general is essential but not any one specific form of food. If wheat was the only food then I would agree. The same could be said for housing but housing in a particular location is mostly fixed and limited unlike the flow of food and other resources

Shelter is essential, but "real returns" means returns to housing as an asset above inflation, which includes the cost of shelter. Even if the cost of every other good drops to zero and all that is left is rent, the house asset would need to keep going up faster than the rent charged to live there. Maybe that's possible in the case of increasing population and population density, but it can't be possible everywhere, especially with a flat or declining population. Unless interest rates fall forever, that is.

the scarcity is more a property of the concentration of people in urban areas than population growth in general, but yeah. homes are depreciating assets with some bonus land speculation

In north america, housing has outpaced other costs because of a shift to near universal low-income families, then multi-generational families, plus capital flight from other countries (china etc). There's some other factors (population growth, move to cities) but there are less important.

Low-income should be "two-income"

The upper limit is when the middle class has the entirety of their retirement accounts invested in their homes. As long as investments in primary residences continue to maintain their unique tax advantages, people will keep dumping their life savings into their homes.

And then sell to someone who is willing to trade away $ sufficient to retire on for just a home. I'd say this seems crazy but we're already there. People in SF and NY sit on homes and keep working when they could sell the home and jet set for life.

> I’ve never understood how real returns on house prices could be believed to be sustainable

Isn’t this the entire point of the article?

That everybody knows this is unsustainable. They just care about sustaining it until they benefit. Then after that who gives a shit.

Especially considering the house structure itself is usually depreciating in real/material value (whether or not the price is still going up) due to aging. At a certain point, just the land needs to cover those real returns.

The land is the part that appreciates. Proximity to good schools (and well paying jobs at one time) were the driver.

It's amazing how we've managed to set up an economic system where schoolteachers drive up their own rent and declared it fair.

That's true for anyone that provides a positive impact on the community. You make something better, it increases in value. Could be a store, could be a trash person, could be a police officer, could be street performer, could just be the person that maintains a nice lawn.

It‘s not like the structure rots or crumbles every year. It can last 100 years or more so it doesn‘t really affect the price that much. In any case the same house in a great location is valued far, far higher than in the middle of nowhere which is a good indicator where the price comes from. Not from the structure primarily.

Have you priced housing in middle of nowhere lately? I would be more then happy to live an hour off the interstate and have a couple acres of trees for neighbors. No problems with maintaining a well, having a septic system, and a propane tank. Doesn’t bother me that DoorDash doesn’t come there, StarBucks is a trip, and Amazon doesn’t do next day delivery. Houses like that now start around $350k and go straight to the moon. Most of them were purchased in the last 2-3 years and the sellers are trying flip them at 2-6x the price having made no improvements at all. The purchase history is public record and very telling.

At some point the banks should step in and say hey, there is no way this property is worth $300k, $600k, $900k - it will never sell at that price again, none of the local industries pay well enough to have a $7k per month mortgage payment, if the loan defaults we are going to take a bath. However the banks don’t do that, they just say California idiot has money to blow, give him the loan.

And of course the California idiot is going to have problems also when he wants to move in 2-7 years and finds out nobody can afford his house.

but the real appreciation is actually in land prices. at least in highly contested markets.

though I agree with larger point that its not productive growth. In fact I have been saying in past that land prices are the perfectly useless sink for the worthless money created by central bankers out of thin air.

Real returns from home price appreciation are sustainable to the extent that only some homes see such real returns. And indeed, national housing data shows that averaged over time and distance, U.S. home prices don’t climb faster than inflation. Even though some hot markets do.

Here's are a few charts tracking home prices vs the consumer price index:

https://www.longtermtrends.net/home-price-vs-inflation/

https://www.bankingstrategist.com/housing-prices-hpi-vs-cpi

They historically go up in line with wages. That means city center property may go up in real terms as wages go up in real terms. Non city center, people tend to build bigger better houses as they get richer so you have to invest more to keep up.

it's based on an expectation of long-term economic concentration that has held for centuries so it's not expected to reverse anytime soon

the concentration is two-fold: of capital toward assets as the monetary mass keeps growing outpacing human labour/capital, and geographical as location near economic activity continues to matter a lot for most people

i don't think there are any instances of these trends reversing without the money simply moving elsewhere

> long-term economic concentration that has held for centuries

This reminds me of the article someone posted on HN that, from ancient Roman times till today, a nice house has always cost roughly 10,000 grams of gold. It wasn't quite true and is an over-generalization, but it was an interesting point.

I see this recent housing boom mostly through the lens of monetary expansion, since the US population has not actually skyrocketed over the last 2 years.

while you are right this hasn't strictly happened over a 2-year period, the US population has concentrated significantly during this generation, creating a supply crunch on economically desirable locations

supply crunches create volatile markets in the short term

Scarcity does exist and will always exist in desirable locations. The music only stops when the location is no longer desirable.

Remember: location, location, location.

Well, that could just mean other goods are getting cheaper (in real terms). The actual issue is if returns on house prices outpace wage growth.

> far future

Voting demographics and policy makers will be dead by then.

Home owners are a big voting block.

Bubbles can pop but actual scarcity doesn't cause the music to stop.

Wait what happens when it collapses a bit. Less improvements will be done on existing properties, even less will be built. Sustainability requirements and quality of new housing goes up, as usual. Prices will rise again to reflect this.

edit: Seems to be a controversial opinion given the votes. But what‘s controversial about a pork cycle? Housing markets create a pork cycle.

Reply on news.ycombinator.com