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Comment by paulgb | Hacker News Reader

I get that people like blaming Wall St. for prices going up, but isn’t it just as much the other way around?

Wall St. invests in homes for the same reason they invest in anything: because they think the price will go up. Housing policy in the US seems designed around the idea that housing prices should only go up, since it’s the largest asset of the majority of voters.

If we want to fix the housing crisis, housing will have to become a bad investment, and that will fix the Wall St. problem too.

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I think this argument ignores Wall Street's outsized influence on government policy; look at the 2008 recession, in which Wall Street's bad bet on a real estate bubble got bailed out while the actual home owners were thrown out onto the street and financially ruined. The government may not explicitly protect home prices, but it does protect Wall Street from its own risky behavior, which inexorably turns any drop in home prices into an opportunity for Wall Street to "buy the dip" while regular citizens struggle to keep a roof over their head.

Wall Street's influence pales in comparison to the influence of the American homeowner.

What we have is the result of decades of making owning a home the main way to accrue wealth and then giving homeowners outsized power.

Wall Street is just following the money.

Perhaps we could say what the goldbugs have been saying for years: it's the money that's the problem.

And yet homeowners got fucked and Wall Street got bailed out. Where was the mythical homeowners' political power when prices were plummeting (in my neck of the woods by 30-50%) and they were threatened with the possibility of foreclosure on an upside-down mortgage?

You're only threatened with foreclosure should you fail to pay your mortgage. Your mortgage being upside-down has nothing to do with it.

Having said that, the major banks shouldn't have got bailed-out either. Smaller banks that were responsible would have had the opportunity to grow when the larger banks faltered due to their bad decisions.

As another commenter here quipped, the first houses Wall Street bought were in Congress.

> The government may not explicitly protect home prices,

It absolutely does by offering 30 year fixed rate loans with no prepayment penalty and all the underwriting waivers for people to be able to pay more than they can afford, such as no money down and 5% down mortgages.

And despite all that, home prices did, in fact, go down during the 2008 recession. And while the government does -- as you point out -- establish policy that biases the market in favor of home prices increasing, the government does not protect home prices the way it protects Wall Street from bad investments.

“Wall Street” investments go down in price too (in real and nominal terms). Many businesses fail and cause equity owners to lose money.

Just like home (land) prices in certain parts of the country.

But the prices in the overall market, just like “Wall Street” is backed (and juiced) by the federal government.

Oh for sure, the gov is willfully looking the other way on this one. Increasing home prices drives up tax revenues.

Politicians don't give a flying fuck at a rolling donut about tax revenues, see also several decades worth of tax cuts. What they do care about is access to the finance they need to campaign effectively.

Those tax cuts are different from the local taxes on property though. The tax cuts you're referring to are federal taxes. Property taxes are local to the state, and those tend to always go up and let the homeowners do their annual protest to those increases. In recent years, the local taxes have increase in increments larger than the state allows, but yet "oops" was the typical response if you got anything at all.

Absolutely correct.

The best way to fix the problem is to keep interest rates high and work against inflation.

The last 25 years of essentially free money has people with their heads screwed on backwards.

Increasing mortgage rates is a poor mechanism for countering inflation. It only directly impacts a minority of the economy and private companies (banks) earn the profit.

Unfortunately the other available lever is congressional action in the form of tax increases and wildly increased public housing funding. Both of which are never going to happen.

Isn't housing a bad investment already? I mean at least for individuals renting has always been pushed as a better alternative.

Careful. My house has been appreciating at $50K per year over the past 10 years. That's over $4K per month. I'm essentially being paid to live in my house. Obviously, there are a lot of caveats. I bought my house in 2009 when the housing market hit bottom due to the crash, the seller just wanted to get out and sold it below market value - even the market at that time!

Everyone said it was a bad time to buy a house.

It was a great time to buy a house! You know when it's generally a bad time to buy a house? When everybody is buying a house! It's like the stock market. When the market crashes those are the best times to pick up stocks on the cheap. Same with houses. That's how you make money.

Or it could be regulated too.

Regulations can only do so much here. By definition, you can either make housing affordable to young people entering the market, or make housing a path to wealth appreciation for homeowners. They are diametrically opposed goals, despite that most politicians will be happy to tell you we can have both.

> By definition, you can either make housing affordable to young people entering the market, or make housing a path to wealth appreciation for homeowners

By whose definition? Certainly the massive suburban expansion in the 60's and 70's resulted in affordable homes to young Baby Boomers entering the market and also to wealth appreciation for the same.

By definition that every trade has two parties. Those boomers are now sitting on house wealth for the same reason that millennials without family wealth are priced out of home ownership.

If we built more housing, prices would go down for millennials, and those boomer’s investments wouldn’t look as good.

One way of putting it: pick a number of hours the average person should have to work over time to buy a house. If you want that number to stay the same, housing can only appreciate as quickly as wage inflation.

I see what you're saying. What I mean is right now, I think regulation is the only thing that is capable of making homes a bad investment, which would allow young people to own a home over their heads. The types of regulations are very debatable. All I know is doing nothing will continue this death spiral where the wealthiest individuals/corporations will continue to gobble everything up for every generation.

But if houses don’t go up no body will want to own them anymore.

People will want them for the original reason to want a house: so that you have somewhere to live.

Worth extending that to: somewhere to live where you have more control over your tenure there (can't be kicked out year by year), and ability to make more than basic changes to your living environment (knock down a wall, add an extension, etc).

I remember as I approached 20, I was watching the real estate market weekly and bought my first property at around 22 (which felt two years later than I wanted). I expected that the market would grow slowly, but that aforementioned control over the home was the main factor for me at that time. Now I bet it feels like you buy ASAP or get priced out of the market for the duration of your working life.

You can live in an apartment.

I want a house as a place where I can remain, do meaningful changes to, like install permanent air conditioner; and, have a stable mortgage for several decades without having to keep hopping to keep payments low.

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