A massive number of people who are waiting for interest rates to drop will sell their equities to buy a house when it happens. IE, many couples are waiting for lower interest rates before buying a house.
This runs counter to current equities markets where hints of rate drops from the Fed will increase stock price.
It’s definitely an interesting theory.
Unless the theory is that institutional investors are doing the same, it's not that surprising.
I wonder how long people remain in such states. I feel like for something as big as house ownership you need to decide if you really want it and if you do just go for it. How much of your life are you prepared to spend on "getting ahead"? They say "life is what happens to you while you're making other plans".
Painful for people that do not expect significant further income increases.
The best recommendation is to _know_ the fundamentals of house prices. To know when buying is cheap and expensive.
Eg. in relative terms: buying a house at 30 Price/Rent makes it more affordable to rent - in such an environment, just rent. If the P/R falls to 15-20, then buy.
Housing can also be unaffordable in absolute terms such as wanting to live in down town San Fransisco. In this case people should strongly consider if they want to pay a premium for that locality.
We don't have to go longer back than 2013 to when it made sense to buy over renting - and that will return at some point.
SF was more expensive, which is maybe why SV is the burbs.
The cool hippie art scene in SF was in the cheaper higher crime areas, as it usually is. Maybe we need to get those crime rates up to drive down housing costs.
It’s no longer really possible to bootstrap in the Bay Area unless you are doing something nuts like living on couches or cheap shitty boats. It’s too expensive even for modestly funded companies. It’s really just a place for big tech and lavishly funded ventures. If you don’t have a Saudi prince on the cap table your company is better off remote or in another city.
Ouch. Holding T-bills instead of equities for the last few years has been incredibly costly for this couple.
Put RV on it. Save.
Build utilities. Save.
Build tiny house. Save.
Expand house.
This is what poor people do in latin america, sans the RV. They just buy blocks as they can and add on to it.
This is also exactly what our family did, minus the 'expand' part. We could never afford to buy a house nor get access to credit but we could afford to build a tiny one on shithole land one brick at a time. The great thing is it also more or less works no matter how poor you are, if you die before it is complete your children can continue. Eventually after enough generations enough money is saved to have a house.
Now you could probably do this really far out in the boonies where it could be illegal, but also unenforced. My uncle lives in a log cabin built this way. But it's also extremely far away from civilization (aka: jobs with income, and luxuries like groceries and clean water).
You have to pick one of the places in the US with little to no codes / paperwork from the beginning. There are still quite a few of them left, but probably not places you have heard of.
electricity - private power company. But started on a small cheap generator.
sewage - private septic system (county allows you to DIY build them so could do this for next to nothing)
roads - For miles and miles they are all private dirt roads, but with easements to allow me to pass. The easements go miles until they connect to a county road in town. I first built my road with a shovel, hatchet, and ripping small trees out with a truck.
Nothing was provided by the government.
If you didn’t have enough finances to complete before you die the land would be lost to inheritance tax at that point in most of the western world.
Basically, as long as you allow other people to veto new construction, it is almost guaranteed that a few bitter fighters will devote their lives to stopping anything to be ever built again. Roads, trams, housing, anything at all. A veritable vetocracy, not too dissimilar from the legendary Polish-Lithuanian Commonwealth, where every noble could veto anything agreed upon by the Sejm by simply standing up and saying "I disagree".
The "community participation" ideal which looked very positive once turned out to empower the worst reactionaries.
The few countries that got this problem under control did so mostly by limiting the legal abilities of such people to throw wrenches into everything.
Like what asset could non-investment savvy people move their increasingly worthless savings into otherwise?
I pretty firmly believe that high housing prices are destroying civilization. I don’t think that’s hyperbole. I’ve been fond of saying it’s the economic problem in much of the developed world. The, singular. Make housing inexpensive and most of the other stats look at least okay.
We need to choose between real estate equity and literally all other things.
The problem is their homes get demolished by rich people!!!!
We need better laws to protect people from eviction! It should be illegal to demolish any structure where someone lives!!!!
And we need to abolish police who demolished peoples homes!!!
And BLM haters!!!!! Decolonization!!!
There are definitely downsides to renting such as landlord issues or missing out on mortgage subsidies, but maybe a higher proportion of renters could lead to improvements in affordability. And if the well-off are renting as well, there's also more hope for better legal protections for renters.
They say that because owning a home allows you to reduce your bills, but also more crucially and viscerally because owning a home allows you to be free and have a place that is truly yours to do with what you will. You can paint the walls, have a pet, host a party, knock down a wall and build an extension, do whatever you like to make your mark on it and the world. It's yours and if you will it, it always will be. It's a level of peace and security that's almost incomparible. There's a reason in most of history there was a distinction drawn between bonded peasants and freeholders.
This allows someone to quite concretely limit their housing costs in retirement (a large portion of anyone’s expenses!) in a way that is impossible in almost any other way. The only other similar types of deals are specific types of rent control in very limited metro areas.
That is huge.
"People don't say home ownership is important because it's an asset for retirement; if you sold it, you wouldn't have a home in retirement!"
It's very common in the USA. A married couple has some kids and buys a house big enough to accommodate them comfortably. 20ish years later, the kids have moved out and the parents don't need such a big house. They also are about to or have recently retired, and they would like to stretch their retirement money. Sell the big house, make a lot of money, and then buy a smaller, cheaper house. In the USA this pattern is pretty common.
He is doing very well.
Currently rental prices have to compete with how much effort a boomer wants to put into profiting from their second or third homes, a fair amount but most realize a stress free tenant is better than maximizing profit.
If you remove these independent landlords then it falls to a tiny group of giant orgs that then control the market and can charge whatever price they want.
https://www.populationpyramid.net/united-states-of-america/2...
Seriously, the fact this comment is, so far, at the top is mind boggling.
It isn't, but it seems that way. If you pay your house off before/when you retire that means you live rent free (you still have property taxes and maintenance, but they are far cheaper than rent). Social security is the same either way. Your 401k and IRAs have maximum contributions and so again not having to pay rent means your retirement income is effectively higher.
A house as an appreciating asset is only good for retirement if/when you sell - but then you either need to invest that money and pay it out in rent which has also increased, or you need to buy a new house. There is also risk - if you go to a nursing home the house is treated special, but if you sell it the additional money is used to pay the nursing home before government kicks in. Which is to say that for retirement planning house values are meaningless.
An appreciating house is useful if like many people you "cash out refinance" I've seen many people refinance their house every few years to the current house value. They take very nice vacations paid for by the house increase in value. This is all good until they retire and now owe what the house is worth and so they are paying rent with their limited income.
Condos should be a lot more popular, especially for the young and old, but the fees are pretty much always ridiculous. The whole point is to spread out the maintence costs among many residents so they are trivial, instead condo fees are usually in the hundreds or thousands per month per unit for no apparent reason other than the landlord wants a big payday. It doesn’t cost millions per year to maintain some parking spots, a small unstaffed pool, a front desk, and building maintenance. It’s like paying rent on top of your mortgage.
Home ownership in the 1950s got you a shoebox. It was affordable. That's why so many got into the equity game. Larger expectations and larger returns have changed the landscape.
There marginal cost of a home with 2 full bathrooms compared to just 1 bathroom is negligible, and the value and security gained from the convenience and redundancy is immense.
Also, even today, there are tons of small 1,500 sq ft homes on 2,000 sq ft lots built and sold in the western US. It just depends on the local market for land priced and demand for small homes.
With urban areas routinely approaching or, even worse, outright exceeding 50% of net income going away for housing, that's setting a pretty high floor on wages and salaries, and that in turn drives up the price for domestic Things and Services.
And no, building housing will not solve the problem. At all. People keep whacking their cucumber over urbanisation because they deem it to be "cheaper" to provide essential utilities due to effects of scale/density - the problem is, space is still finite and denser housing costs more money to construct, especially once you build higher than the maximum usable height of a fire truck's ladder because now you need to invest into independent rescue/evacuation paths, and once you build above 10-ish (or less, depending on soil type and geological risks like earthquakes) stories you need to dig deep into the ground to build a foundation strong enough to keep the building from damaging during settling. Can't compromise on the fire safety regulations (otherwise all you get is a new Grenfell Tower style disaster), and you can't compromise with physics eithr.
Western countries need to build out essential infrastructure like broadband Internet, mobile phone service and public transit in rural and suburban areas. That's the only path that doesn't rely on utterly insane investments.
How can it be that people can enslave the young generation by the motivation that they were born first and therefore own all the land, but they can't do that with water? Ie: "We were born first and own all the water rights and you have to go into debt slavery the rest of your life if you want to drink water!" Makes just as much sense as the current situation.
softwaredoug•53m ago
In my town we spent 8 years of public involvement in rezoning to increase supply and density. Including several city council elections of pro-housing council members elected over more NIMBY ones.
Only to have it all screwed up by 2-3 households that sued, pausing the zoning and throwing a wrench into a lot of new housing construction.
I feel like there has to be an effort at all layers of government to solve this structural problem where a few homes can derail a democratic process.
grafmax•39m ago
LastTrain•25m ago
softwaredoug•11m ago
IE:
The Impact of Zoning on Housing Affordability https://www.nber.org/papers/w8835
> we argue that high prices have little to do with conventional models with a free market for land. Instead, our evidence suggests that zoning and other land use controls, play the dominant role in making housing expensive.
grafmax•1m ago
I found an argument in your paper but no such examples.
softwaredoug•15m ago
I think I another huge constraint is construction labor. Which is very tight right now.
I’m reminded we built the Empire State Building in 9 months. I see delays for single family homes causing it to take years.
lotsofpulp•9m ago
Otherwise, tract homebuilders in the US have metrics of building a brand new house within 100 days.
The labor costs are high, but not that high that construction is delayed due to lack of labor. Land prices and clearing legal hurdles are the bigger problem.
CGMthrowaway•26m ago
Isn't the the case throughout human civilization? And when it's not the case we often call it "conquest" or "colonization"
mothballed•20m ago
PessimalDecimal•18m ago
mothballed•14m ago
andsoitis•7m ago
Laws generally don’t apply retroactively; they don’t affect actions or events that occurred before the law was enacted due to principles rooted in fairness, legal stability, and practical governance.
Non-retroactivity protects individuals from arbitrary government power, ensures trust in legal systems, and promotes economic and social stability. Without this principle, people could be penalized for past decisions made in good faith, eroding confidence in governance.
> If you're going to impose some $10,000 sprinkler system on the new guy you better be willing to renovate your house too.
What about home building codes affecting structure, e.g. against earthquakes?
enraged_camel•2m ago
What you describe is not a structural problem. On the contrary, it is precisely how a constitutional, rule-of-law system is meant to work.
Democracy does not mean pure majority rule. Our system is a constitutional democracy. Majorities make policy, but minority rights and legal limits constrain how they do it. Courts are there to enforce these limits even when a policy is popular.
Judicial review is part of the design. Reviewing legislative and administrative actions for legality is a built-in check and balance, not a veto by randos. The courts exist to ensure the other branches do not skip required steps or exceed their authorities.
More specifically, the legal concept of "standing" prevents this from being arbitrary. In most contexts, you cannot sue just because you dislike a decision. You must show concrete injury, such as living next to an affected area. That's why a "few households" can file: they're the ones with legally cognizable stakes.
Now, I will grant that in places like California with decades of existing laws, NIMBYs have done an excellent job figuring out exactly what buttons to press and what levers to pull to get their way. But this is not a flaw in the system. It just means that they have read all the manuals (because they are very strong incentivized, financially, to do so) and are now using it competently, even if it is self-serving and sometimes even in bad faith. But other locales have figured out the solutions to this problem. The article gives one such example: Austin, TX.