Not at all an expert in this area, but would love to understand the underlying dynamics here?
https://www.strongtowns.org/journal/2024/2/21-going-after-co...
If you go to local hearings and listen in on city council meetings, you start seeing a pattern of people who "got theirs" trying to stop homes from being built:
https://bendyimby.com/2024/04/16/the-hearing-and-the-housing...
unpopular political stance, I know, but you can't welcome in unlimited residents without expecting the existing inhabitants to get used to more crowding or fight over the available space
And a lot of it is actually not really immigrants anyway, but household formation in a large cohort:
https://oregoneconomicanalysis.com/2023/10/26/household-form...
Oh, also, in any case the existing housing stock would not be fine, because people migrate around the country, too, to places with jobs, or away from places in decline. A vacant house in Cyanide Springs, Oklahoma doesn't do much good if your job is in Mountain View, California.
https://www.austinmonitor.com/stories/2024/02/austin-apartme...
Modern communications + financial tech have converted homes into cash-flowing assets that can be managed at a distance at 1/10th the risk-adjusted cost of 40 years ago.
Home-owning people of the age 55+ do not sell homes when they move, they rent them out and use the cash flow as leverage to buy a new home. This has been happening at least since 2008, but is a secular trend. In my opinion, talk of "not enough housing" is a mind trick to get you to ignore the fact that we actually do have adequate sqft/people in desirable areas, but ownership of that square footage is distributed incredibly unequally.
The % of homes that are lived-in by owners is approaching all-time lows in most high-COL regions in the U.S..
Those people pass their assets on to their children, who often have no ties to the region, and to whom real estate is purely a financial asset to be squeezed for maximum cash flow to subsidize their unearned lifestyles. We live with the consequences: rent that is increasingly unhinged from reality, and allows for dismal savings rates for our youth.
IDK, it's pretty bleak as somebody who wants to be a homeowner in a community that feels like home. I keep suspecting that there'll be a populist anti-landlord policy movement in my urban area (NYC) but outside of maybe 2-3 months during COVID it remains a pretty fringe idea.
When the worm turns, and it will turn, these people are in for a surprise and world of hurt. I saw it in the 80s and in the early 2000s and will see it again.
https://ipropertymanagement.com/research/housing-starts
Not enough housing means people have to combine houses and pay more.
This problem has been 16 years in the making.
Given "Florida markets occupy three of the top five spots where rent growth has most dramatically outpaced wage growth since pre-pandemic," and "Houston saw the greatest annual wage growth of any metro — nearly double the national average — and was one of only four markets where wages outperformed rents," it seems like the cause is migration and insufficient new housing [1].
(Counterfactual: "In three areas — San Francisco, Portland, and Austin — rents actually declined from 2022 as market heat began to moderate, while wage growth in those areas continued to climb.")
[1] https://streeteasy.com/blog/rents-grow-faster-than-wages-acr...
The fact that this stated goal of American policy is out of reach for many means American policy is broken. There are now too many vested interests against new home ownership.
If you ask many current homeowners they will tell you they have debt up to their ears. Their one asset is their home which they will borrow against, reverse mortgage, or sell to fund their retirement. That is they will do everything in their power to prevent their homes from losing value.
- Prices are determined by comparables. When home owners sell, and can push prices higher, it pushes all possible future prices for all properties nearby higher simultaneously.
- Corporate interests are buying up real estate, and especially rentals. (public and private equity purchases are 6x higher than they were a decade ago here). Higher rental prices encourage people to leave rentals faster, making people more desperate to buy, increasing their willingness to take on more debt.
- (in a few areas) construction is limited and not keeping up with growth. In most of Midwest US, construction outpaces growth, but since prices are determined by comparables, new construction in an area can be priced at top of the market, resetting those comparables higher too. Paradoxically, even though we do need new housing construction to have housing, our financial system is setup such that new housing construction generally raises all prices for all housing on average -- the "more supply" benefits don't really take effect for about 30 years, when they become normal mid-market units.
- In some areas, new Hotels entrants are escaping basic regulation by lying about who they are. (see AirBnB, Vrbo and similar hotel chains). This removes housing supply, and can't be market corrected by other competitive hotels (since they would have to follow basic hotel regulation, but AirBnB and Vrbo are allowed to break the law)
- Unlike in 2008, corporate interests are willing to just eat massive losses to prevent property prices from falling. And the federal government is willing to extend massive amount of lending to them to allow them to do this almost indefinitely. So even in places where there's a massive supply of empty units, those units aren't making it to the market at any reduced prices because it's too affordable to simply sit on them instead and hope they're eventually able to rent out again at ultra-high pricing. I suspect we'll never see a gentle market reset back to real-world-based numbers like we saw in 2008 for that reason.
Any one of those problems would raise property prices for everyone. But we're dealing with all of them, simultaneously.
Something like this https://ny1.com/nyc/all-boroughs/news/2024/01/05/hedge-fund-... would be a gentle start to attempt to address the above problems, but it remains to be seen if they actually get this through.
The entire American Midwest exists, and proves this point severely wrong. Supply can be infinite and unlimited, and it's still profitable for companies to exploit housing.
Except they are buying lots of housing. Even in nothingsville-small-city Midwest, we're experiencing exploding housing prices, despite no real barriers to construction at all.
- build a platform that tells landlords, algorithmically, how much they can feasibly afford to raise rents YoY, based on what other landlords in their area are charging for similar properties
- write terms of service that require them to use your pricing suggestions most of the time
- target large-scale landlords in big metro areas, to get a lot of market penetration relative to the size of your customer base -- so that when you tell your customers it's based on the behavior of other landlords in your area you actually mean that it's the behavior of their other users, who are also bound to these same terms
I keep losing track of which ones are where, but there have been several price-fixing lawsuits over this -- they range across a couple of AGs, private parties, and I think DoJ
- are informed that their data is being collected for this
- offer it up voluntarily to join the scheme
- and are in fact paying them for it
Prices are determined by supply and demand. What you're describing is only true because supply is so choked relative to demand.
https://www.propublica.org/article/senators-introduce-legisl...
It's not difficult. Prices are determined by supply and demand. When local and state governments restrict supply via zoning and other laws, prices go up. If you want prices to go down, increase the supply.
I can speak to the 'mom and pop' landlords. The best you can hope for is that your properties are paid for. If they're leveraged, it's a razor thin margin where are one roof replacement, furnace replacement, or state/local government deciding failure to pay isn't grounds for eviction away from losing money.
If you do an actual cap-ex spreadsheet for a property and compare it to what it's renting for, it's almost never worth it.
Some might say deposit regulation and reform is a driver, but all that really did was set up a scumbag market of fintechs that replaced outrageous renters deposits with slightly less expensive non refundable premiums.
Not that it matters. We are building plenty of apartments you can't afford for other reasons. Paid parking, pet fees, 3 figure application fees, move in fees, and common area fees not to mention Arizona's renter property tax all raise the bar.
Even if you can afford it you'll likely not qualify. Credit, criminal and prior landlord checks all have to come back spotless. You'll need to submit 2 pay stubs after that.
Anything they can do to set the future on fire in order to maximize their returns while they live, they will do. Whether that's bail out failing businesses with government-owned debt that future generations (including their grandkids) have to pay back or destroy the planet and environment.
The only solution is to get younger people to vote or to wait for them to die.
There are other means, perhaps less palatable for the HN crowd though
- at the end of each round, "who gets a chair" is determined by a "rent auction"
- after each round, 2 players and 1 chair are added
- auction losers are sent to the local homeless shelter, freeway overpass, or whatever
That annoys people and makes houses go underwater; if you instead hold house prices mostly steady whilst inflation goes up, most everyone is happy. People who bought think they're financial geniuses for locking in a low rate, and non-owners see their affordability slowly improve.
The problem is it's slowly; even 5% inflation would take a few years to be really noticeable.
The "older generation" mismanaged the economy for 40 years, and now their children are paying for it.
This is what happens when you base an economy purely off of what equities trade at in two exchanges.
EDIT:
Downvote me all you want, but it's true. I'm 32. I have no debt, a good paying job, no spouse, no kids. I live in the same county my parents did at my age, in a major-ish American metro in the lower Midwest.
I cannot afford the same standard of living they did at my age.
Why? Because of inflation. Why is inflation high? Because we had to print a bunch of money out of nowhere to keep the economy from collapsing during COVID. Why did we have to keep the economy from collapsing during COVID? Because the average American household is living paycheck-to-paycheck and has no emergency savings. They're living paycheck-to-paycheck because the average wage has not kept up with both the costs of living and the value created by labor for the last four decades. The value created by labor went to earnings-per-share on stocks, bonds, and other investment instruments issued by companies. The average person cannot afford to have the returns on such investments factor into their five-to-ten-year financial goals. More and more, they cannot afford to have returns on such investments factor into their 20-30-year financial goals, either.
This shift did not come from nowhere; it came from human behaviors, modalities, and policies. There were people alive and in a majority to make this happen during that period of time.
I think the lack of housing supply is still the core culprit and that major reforms need to be made to the US’ approach to building.
The lack of housing supply happened because some geeked-up bankers 15-20 years ago decided to gamble the nation's economy on its ability to pay for mortgage rates that had gone out of their teaser rates. That destroyed the residential construction industry. We never caught up, because catching up means that the people responsible for the whole mess to begin with would have faced real financial consequences. The fact that building codes and zoning laws are what they are doesn't help, but it all comes back to money, and remember, there's a reason those zoning laws and building codes were there to begin with.
You didn't have a spouse or kid well before the covid/inflation boogeyman, as did all of your peers.
COVID just made things much, much worse.
I have long told people what degree you get matters. There are a lot of interesting areas of study that are not valuable in the workplace. If you want your degree to get you a good job - which is the implication of the statement - you need a degree that is valuable. If you can afford to not have a good job (either because you are rich or you already have one) then go ahead and study something interesting to you that the market doesn't value.
I think you have to carefully define "standard of living", because I doubt your parents had a better cell phone, more reliable car, larger TV, and a more energy-efficient dwelling than you do.
(I also don't know enough about my parent's exact finances to be able to determine if I am "better off now than they were at my age" though I suspect I am.)
Technological advances in luxury goods do not make up for outpacing increases in inelastic necessities, even if off set by some abstracted purchasing power parity.
Come to think of it, the UK didn't. It borrowed instead. Why didn't GBP massively increase against USD?
Very few did. A quick snapshot is the Dollar Index, which is a basket of six "major" currencies (pound sterling, yen, Euro, Swiss franc, Canadian dollar, and Swedish krona), which remains higher (stronger dollar) today than even the Covid crash peak, during which basically everything that could be traded did so in a huge range due to extreme market volatility.
The Swiss franc is stronger against the dollar since 2019, and so is the Mexican peso, both by roughly 9-10%. That's about it for what I can think of in terms of globally relevant currencies. Most everything else is weaker against the USD than back in 2019.
The US dollar, by virtue of being the global reserve currency, can likely absorb more abuse than others. It's often called the cleanest shirt in a pile of dirty laundry.
> the UK didn't. It borrowed instead. Why didn't GBP massively increase against USD?
It looks like the UK spent roughly ~5k per capita as a response to Covid[0]. When the spending comes from budgetary deficits (that is, absent a commensurate increase in taxes) financed by new bond issuance ("borrowed", as you said), and a large part of said bonds were absorbed by the central bank[1], it's effectively printing money.
[0]: https://commonslibrary.parliament.uk/research-briefings/cbp-...
[1]: https://tradingeconomics.com/united-kingdom/central-bank-bal...
Add to that "investment" in rentals and the like.
it all adds up. I assume it's going to get worse.
What you need is more supply, and without that prices will continue to go wild because the number of people who want to live in the area outstrips the supply of spaces.
In the past, you'd have new cities pop up and take some of the pressure off, but that's slowed down (though places like Austin have gone wild).
"more supply" which is why I included places like CA that have had DECADES of shortages because of regulation, corruption, NIMBY, etc.
When you add the need for "more supply" to the need for investors to recoup costs, increased costs to build (IE: More safety features, solar requirements, etc), increased interest rates, etc?
It's easy to say supply and it's easy to say "towns used to pop up"... it's harder to admit that there's only so much space and those easy to pop-up areas are becoming fewer because there's fewer places to put up "towns" out of nowhere.
The only simple broad-stroke answer is that the government is incredibly powerful so violent uprising/revolution by the working class is essentially impossible.