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Comment by ebiggs | Hacker News Reader

As a homeowner I see little benefit for me for the insane value of my home. Do I want to pay more in property taxes? No. If I sell it’s to just buy a different insanely priced home. I suppose I’m privileged in that I have other retirement plans so my kids will inherit my home - and that’s good I guess if they ever want to afford a home. Homes being an investment is the wrong mindset for a healthy society. Have cheap homes so you have enough money to invest in something else. I couldn’t care less if the value of my home plummets if all other desirable homes did too. Heck, I’d celebrate it. Seems to me the people who care are those who invest in real estate instead of just want a nice place to live.

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Property taxes in many states are set according to budget, so your home’s value relative to other homes is important, but if all housing prices all fall or rise, the money collected is the same.

Homes are considered an investment because people want nice ones in locations that can only support so many (either via artificial or natural restriction). In turns out homes outside of those locations can get really cheap since finding buyers is hard.

Homes are and should always be an investment because they are. They dont have to beat the stock market, but a well maintained home should track inflation at least. They have real and huge replacement costs in materials and labor. If my house burnt down, it would cost $1M to rebuild.

Im all for cheap simple houses for those with less money. However, unless they are so cheap as to be disposable, they too will be investments.

Isn’t “so cheap they are disposable” Japan’s approach to homes?

Only in an exaggerated meme sense. reality is much more complicated.

The average Tokyo apartment size is 390 sqft, while the US average is above 2,000 and climbing.

Americans could have homes 10% the price, but they would mostly refuse to live in them even if they were sold at cost.

Why did you compare home size in a city to home size in a country? Average Japan home size is about 1000 square feet, smaller but not that much smaller.

https://www.statista.com/statistics/1289345/japan-average-si...

Because the meme/myth about disposable Japanese housing comes from dense urban environments like Tokyo.

It is largely a result of tax policy and construction methods between 1960-1990 where it made sense to gut apartments after they depreciated for tax purposes.

In Japan, property tax decreases to zero over time, but resets if you upgrade it. There for people gut and remodel before selling their units so they get the benefit of a higher price, but the buyer pays the taxes.

> Because the meme/myth about disposable Japanese housing comes from dense urban environments like Tokyo.

But then you should compare home size to something comparable, like Tokyo to New York city, not Tokyo to USA.

I Think I provided the appropriate comparisons given the premise:

"Why doesn't American real-estate behave like an exaggerated example of Japanese real-estate?"

The answer is of course that there are significant differences between the two groups being compared.

I think it would be the best if everyone was forced to live in a flat, which size is determined by the number of people living in that Appartement. It is cool for you that your house is valued at 1 million; that proves my point even more. A house shouldn‘t be an Investment, but your education.

good luck with that. I don't think there is a country on the planet with such radical communism. Maybe some locations at the height of the cold war.

I dont think it is cool that my house costs so much to produce, It would be great if it could be produced more cheaply.

>A house shouldn‘t be an Investment, but your education.

What does this mean? did you leave out several words?

This is incorrect. If they are an investment then they should go up and down in relation to the value of being able to live wherever the property is. The big issue now is all places (but some more than others) are artificially constraining supply with excessive regulation and restriction on what one can do with their property. We need to largely get rid of that excessive regulation (i.e. much less strict zoning allowing much higher density, with drastically restricted ability of neighbours to interfere with what is built and much quicker turn around time on permits to get building rolling as fast as possible). Doing that will destroy a lot of "value" of houses that are only constrained because of these rules. Other places will go up in value as much higher density is allowed more easily on land in higher demand areas.

What your house would cost to replace is only very tangentially relevant to what its resale value is.

I agree with the first part of what you said, but disagree with your closing comment. I think a lot of people underestimate how significant construction costs are. I planned was infinite and there were no zoning regulations, my home would only give up like a third of its value.

Materials and labor are a huge component of housing prices

if your house is currently a million dollars then dropping in value by a third is roughly the difference between needing 220k a year of income to buy it or 156k a year of income to buy it. it's a 96th percentile income house vs a 92nd percentile income house, which makes it an affordable house to many millions more people.

That being said. I agree that labor and materials are a huge part. However, a large part of the labor and materials cost is itself driven by regulation and should decrease in a less regulated environment (everything from elimination of wasted trades time caused by regulators to it being much easier for startups in 3d printing, factory line production, etc. should drive costs down), Further, elimination of mundane but expensive required details like minimum parking requirements, multiple fire escapes in low rise smaller developments limiting floor plan design (while being unnecessary due to improvements in fire suppression), minimum suite sizes,etc, etc. should drive more right sized development to areas that are currently overheated, pushing prices down.

>if your house is currently a million dollars then dropping in value by a third is roughly the difference between needing 220k a year of income to buy it or 156k a year of income to buy it. it's a 96th percentile income house vs a 92nd percentile income house, which makes it an affordable house to many millions more people.

Another way to put this is it would set house prices back by 3-4 years, which is where I was coming at it from.

I do think there is a lot that should be done on the regulatory front, so that more people can own, and more people in general can have roofs over their head.

I think it is despicable that we as a society have enacted things like minimum unit size while there are homeless people struggling to find housing. I think there should be basically no regulations for owner occupied homes, and the bare minimum safety standards for rentals. IF someone wants to rent a 10x10ft cinderblock cell to live in, they must really be struggling, so why the hell would we want to make things harder for them.

The myth of home equity: most people are implicitly short the housing market for most of their lives.

I think that is exactly the opposite. Most people are long on the housing market.

They have borrowed cash to purchase an asset they think will maintain or go up.

Renting would be the short position.

https://www.investopedia.com/ask/answers/100314/whats-differ...

There are huge transaction costs to buying and selling a home, renting could also be seen as a way to avoid those costs if you aren’t going to stay somewhere. But I rented for cheap in Beijing when housing to buy costs were super high, who wouldn’t rent a $1 million apartment for < $1000/month, buying in that market would have been dumb even without red tape to buy something.

Sure, I don't think many would disagree. Especially in places with large agent commissions and capital gains taxes

If a buy a house today for $1m and it goes up 50%, great I've made $500k.

But if I really want to buy a $2m house eventually, that house has (probably) also gone up 50% and so it now costs $3m.

So when I bought the first home, the second home was $1m more expensive, after appreciation it is now $1.5m more expensive.

I said "implicitly" for a reason.

(I am well aware of what long and short means, my background is in trading)

I still dont understand the nuance of how this appreciation relates to shorting, implicitly or otherwise.

Does it matter what you think your cash investment would meet or beat the real-estate appreciation?

Let's say you are an airline. You are selling tickets for the next year. Jet fuel is a major input cost, largely driven by the price of crude oil. If you sell a ticket today for 6 months from now, you are implicitly short the oil market.

You haven't actually shorted the market, but if prices increase over the next 6 months, you may end up losing money on the tickets you sold. This is why you see airlines hedging, because they are implicitly short.

The same holds true for housing for most people as I explained above. People rarely downsize their homes. Their forward consumption of housing is almost always greater than their current exposure to the housing market. This leaves them implicitly net short.

Thanks for explaining. your are talking about exposure to cost increases relative to your intended purpose.

I hold that still depends on what your alternative investment opportunities are. If you buy the $1M house when you actually want the $2M house, you are still locking in 50% of the cost. Thats a good thing if the alternative investments perform poorly, and a bad thing if the alternatives are better.

Yep, you are indeed locking in part of the cost, but you are still implicitly net short and thus better off if prices fall vs rise.

There are negative benefits to high housing prices. It's the most illiquid asset type. If you sell it where are you going to live? At the same time high rents drive up the price of goods and services you need to pay for.

But you are competing with the National Association of Realtors. One of the largest spenders on lobbying in America - https://www.opensecrets.org/industries?cycle=2022

The US is a FIRE economy - https://en.wikipedia.org/wiki/FIRE_economy

https://en.wikipedia.org/wiki/Financialization

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