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Xae posted:I held off buying a house for a few years because I thought the market would collapse. The prices were insane. I started looking half-assed in '06 and realized despite having no other debt and good paying job I couldn't afford a good house. I realize there was a bubble and waited. A lot of people told me I was stupid and "housing prices never go down", and "you're wasting money in an apartment". I held to my belief and waited. I closed a couple of weeks after AIG collapsed, having locked in my interest rates before the whole poo poo storm. I live in Chicago, and post 08 all the money fled to safe (white) areas. Those areas are now more expensive than they were before the bubble. It's at the point that the only way to find something affordable is to live just past a racial boundary line and be part of the gentrification wave. The policies here are ensuring that the more desirable places will never be affordable for middle class people.
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Jun 9, 2014 01:27
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Family Values posted:I grew up in St. Louis in the 70s and moved away in the 80s in a family of those union, working-class whites (McDonnell Douglas, Chrysler, etc. factory workers) that fled the city to the inner ring suburbs, and I never thought I'd live to see gentrification make its way to St. Louis. Where are these arts and tech people working? Tower grove, soulard, bevo mill (though that's more bosnians than hipsters), anywhere in south city that have no visible black populations are undergoing a renaissance. In particular Cherokee St. seems to be the epicenter of where the hipster scum have decamped. Further north washave is now an expensive condo and loft district when twenty years ago it was apparently a hooker trawling spot. I live in debaliviere place by forest park and our neighborhood is getting overhauled with both a whole foods on maryland ave and washington university building student housing off delmar near the metro station that comes with its own grocery store. All this for a monthly rent of 500 or less for a 1br/studio apartment! You can easily live in the city here working part time at a bike shop or vegan deli sharing a 2-3br apartment with the rest of your overeducated and underemployed cohort. I know a pharmacist who rolls in six figures and apparently lives in the loving penthouse unit of a downtown highrise. Another guy I'm acquainted with is a permadjunct for washington university but he gives zero fucks since he comes from money and splits a house he owns with 3-4 housemates. A little bit of money around here goes a long way. edit: forgot the Ikea that's coming to town too. St. Louis is going places! CAPS LOCK BROKEN fucked around with this message at 02:13 on Jun 9, 2014 |
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Jun 9, 2014 02:07
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Nessus posted:My understanding is that it's probably more about borrowing on the anticipated profit of these things, or otherwise trading on that projection, rather than, you know, actually planning out a reliable system for taking in reasonable profits from renting. I suppose one advantage might be that rich people (or people who stupidly think they're rich) will move in there, freeing up some of the cheaper stuff. I've been trying to remember the name for this supposed phenomenon, because the last I read about it, it isn't real. But since I can't remember the word, I can't find the article! Edit: See my post a little lower. MickeyFinn fucked around with this message at 04:46 on Jun 9, 2014 |
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Jun 9, 2014 02:52
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Forgive this econ 101 look at things, but if you want to reduce supply of luxury apartments would a price ceiling help? The idea is that it would make luxury apartments impossible to build and push developers back to the middle class market.
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Jun 9, 2014 03:20
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Snevet posted:I realize the discussion has moved on a bit from home ownership, but I couldn't help responding. I think that there needs to be a distinction drawn between anyone's personal housing situation and the market as a whole. There are tons of people for whom homeownership makes sense due to their personal and local situation, wants, and needs. The problem is that as a society we have so tilted the scale that we are encouraging or even forcing people to purchase. Some of those people won't be best served by it and many will be utterly boned by it. That's not to mention that without the massive subsidies in place (one of which is plentiful credit enabled by the government policy such as your CMHC insured mortgage) housing prices would likely be much lower which would likely help everyone.
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Jun 9, 2014 03:28
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mastershakeman posted:I live in Chicago, and post 08 all the money fled to safe (white) areas. Those areas are now more expensive than they were before the bubble. It's at the point that the only way to find something affordable is to live just past a racial boundary line and be part of the gentrification wave. The policies here are ensuring that the more desirable places will never be affordable for middle class people. Hello, South Loop. I'm probably part of the problem because I'm unironically super excited for the China Town expansion and want to live in there.
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Jun 9, 2014 03:38
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Arglebargle III posted:Forgive this econ 101 look at things, but if you want to reduce supply of luxury apartments would a price ceiling help? The idea is that it would make luxury apartments impossible to build and push developers back to the middle class market.
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Jun 9, 2014 03:49
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Shifty Pony posted:I think that there needs to be a distinction drawn between anyone's personal housing situation and the market as a whole. There are tons of people for whom homeownership makes sense due to their personal and local situation, wants, and needs. The problem is that as a society we have so tilted the scale that we are encouraging or even forcing people to purchase. Some of those people won't be best served by it and many will be utterly boned by it. That's not to mention that without the massive subsidies in place (one of which is plentiful credit enabled by the government policy such as your CMHC insured mortgage) housing prices would likely be much lower which would likely help everyone. At the same time though the US market is not just DC, NYC, and the Bay Area and that's what a large part of the focus ITT is on (even if you were to exclude "flyover country").
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Jun 9, 2014 03:54
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computer parts posted:At the same time though the US market is not just DC, NYC, and the Bay Area and that's what a large part of the focus ITT is on (even if you were to exclude "flyover country"). We've been talking about the tip of the spear though, Austin comes up a lot, cases where even Texas with little zoning regulation is rising. Oil fields in Wyoming and the Dakotas are creating insane bubbles. But the major metropolitan centers seeing double-digit increases in rent year on year is more widespread than it should be. We could say rents and homes are tracking four things near as I can tell: international wealth hedging their own countries/climate/whatever (such as Vancouver as the clearest case), job opportunities driving up demand, zoning/HOA limitations on construction of adequate units or public transportation, or gentrification waves. That isn't to say there are other smaller factors but these seem to be the Big Ones. The positive examples given seem to be ones that cannot be replicated by most people (such as teleworking nearly year-round, not to bash that guy). Maybe there's some good examples of cities doing great things but I haven't seen any scalable tested housing plans that didn't have the advantage of massive amounts of housing stock relative to demand.
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Jun 9, 2014 04:03
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MickeyFinn posted:I've been trying to remember the name for this supposed phenomenon, because the last I read about it, it isn't real. But since I can't remember the word, I can't find the article! Are you thinking of "temporarily embarrassed millionaires"? That's the line in the Steinbeck quote about socialism failing, and I think I remember reading that it's a false assumption.
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Jun 9, 2014 04:04
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Shifty Pony posted:I think that there needs to be a distinction drawn between anyone's personal housing situation and the market as a whole. There are tons of people for whom homeownership makes sense due to their personal and local situation, wants, and needs. The problem is that as a society we have so tilted the scale that we are encouraging or even forcing people to purchase. Some of those people won't be best served by it and many will be utterly boned by it. That's not to mention that without the massive subsidies in place (one of which is plentiful credit enabled by the government policy such as your CMHC insured mortgage) housing prices would likely be much lower which would likely help everyone. I think that's a really relevant point and I see what you're saying. Plentiful credit (and plentiful debt!) seems to be a problem affecting all aspects of society. However, my main point is that in most cases, it's actually more affordable to purchase a home than it is to rent while building equity for yourself in a tangible asset--from a monthly payment perspective. A little bit of disclosure, I am a professional in the financial services industry. It is actually reasonably difficult to qualify for a mortgage in Canada. There are many restrictions and the government continues to impose further restrictions on borrowers as the interest rates continue to dip lower and lower for mortgages so that people can't over extend themselves. Do you mean that institutionally, due to the vested interests of Realtors, banks (mortgage business isn't the most profitable business for banks believe it or not) and investors etc, we force people to purchase homes at a greater risk to themselves? Even if it were so, I would still insist that home ownership is preferable to renting because of those same institutions causing an upward pressure on prices. It may not be sustainable forever, but just because of inflation alone, the value of a home should continue to increase indefinitely. In my mind, the problem is that most people aren't capable of coming up with the down payment--which is only 5% in Canada--because of the overall debt load they're carrying.
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Jun 9, 2014 04:28
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etalian posted:It's more because the new economy is more focused on moving around to seek new employment Hahaha funny joke!!!!!!!! ... gently caress off world. e: Whoops, E/N's thattaway. ... at least I'll have practice living like a motherfucking traveller. gently caress this country, I was a loving egit if I thought differently ever for a moment. Now... where are those immigration papers with my name on em... time dig my way out of this and into... a slightly nicer, merely-only-a-shithole shithole TL;DR: https://www.youtube.com/watch?v=ZSCXwHEG0_w That Irish Gal fucked around with this message at 05:07 on Jun 9, 2014 |
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Jun 9, 2014 04:37
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Arglebargle III posted:Forgive this econ 101 look at things, but if you want to reduce supply of luxury apartments would a price ceiling help? The idea is that it would make luxury apartments impossible to build and push developers back to the middle class market. The problem is too much money in the market, not too many nice houses. Cutting off the supply of luxury apartments will just push that same money into another form of housing.
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Jun 9, 2014 04:37
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Snevet posted:Even if it were so, I would still insist that home ownership is preferable to renting because of those same institutions causing an upward pressure on prices. It may not be sustainable forever, but just because of inflation alone, the value of a home should continue to increase indefinitely. No wonder why Canada is on a path to repeat the US real estate meltdown horror story, price can only go up up up just like those Dutch Tulips or South Sea shares.
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Jun 9, 2014 04:41
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eNeMeE posted:Are you thinking of "temporarily embarrassed millionaires"? That's the line in the Steinbeck quote about socialism failing, and I think I remember reading that it's a false assumption. I was thinking of the process Nessus was outlining of building high cost apartments causing people to move up the rental 'ladder.' I found it, it is called filtering. And here is the paper I was thinking of as well (emphasis mine): quote:This paper examines the filtering process and shows the extent of the forces that are gentrifying Canadian cities. The 1996 census micro data are used to develop rent- and price-age profiles of dwellings in each of Canada's census metropolitan areas. The analysis shows that the filtering process is both too slow and, at best, can have too small an effect to be a part of a government strategy for reducing the housing burdens of low-income people. Filtering is not helping lower-income households. The most important finding shows the reversal in the direction of filtering in all Canadian metropolitan areas since 1981. The rents and prices of older dwellings have been rising faster than those of the newer units. The steep 1971 rent- and price-age profiles for Montreal and Toronto are explained to show that government policies would not be able to induce the amount of filtering needed to have a noticeable effect on the welfare of lower-income households. The pressures that eventually find expression in gentrified neighbourhoods are affecting much of the older housing stock. Cities in other countries that are experiencing gentrification may be subject to the same pressures.
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Jun 9, 2014 04:43
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Snevet posted:A little bit of disclosure, I am a professional in the financial services industry. It is actually reasonably difficult to qualify for a mortgage in Canada. There are many restrictions and the government continues to impose further restrictions on borrowers as the interest rates continue to dip lower and lower for mortgages so that people can't over extend themselves. Do you mean that institutionally, due to the vested interests of Realtors, banks (mortgage business isn't the most profitable business for banks believe it or not) and investors etc, we force people to purchase homes at a greater risk to themselves? Yes, that's how you make money. If you're not a fiduciary, you're part of the problem.
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Jun 9, 2014 04:48
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etalian posted:No wonder why Canada is on a path to repeat the US real estate meltdown horror story, price can only go up up up just like those Dutch Tulips or South Sea shares. Well, that may be true. Anything is possible and there's definitely fears that the housing market is over heated and there could be a correction coming. I would argue that the principle is sound though. Inflation has averaged 3.7% since 1934 and there have been some wild economic recessions including periods of stagflation. I don't see why in the long term this trend wouldn't continue.
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Jun 9, 2014 04:51
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computer parts posted:I'm assuming you're living in a tech heavy area, in which case you probably don't have to worry about this going on for too much longer. Is the tech bubble really going to pop soon? I can't wait. If Uber is worth $18 billion then my contact list must be at least a couple thousand.
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Jun 9, 2014 05:00
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Snevet posted:... A little bit of disclosure, I am a professional in the financial services industry. It is actually reasonably difficult to qualify for a mortgage in Canada. There are many restrictions and the government continues to impose further restrictions on borrowers as the interest rates continue to dip lower and lower for mortgages so that people can't over extend themselves. Do you mean that institutionally, due to the vested interests of Realtors, banks (mortgage business isn't the most profitable business for banks believe it or not) and investors etc, we force people to purchase homes at a greater risk to themselves? First bolded portion: This is a significant part of why Canada has not experienced much, if anything, of the subprime meltdown. You should look up what NINA loans are, if you aren't already familiar with them. You should especially look up Ninja loans. No joke, those are a thing, and they are terrible. Second bolded portion: This was not true for the US. I see no reason why it somehow must be true for Canada.
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Jun 9, 2014 05:18
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Badger of Basra posted:Is the tech bubble really going to pop soon? I can't wait. If Uber is worth $18 billion then my contact list must be at least a couple thousand. We may have reached peak ads, but it seems like tech's ability to eat away at the rest of the economy is only just beginning.
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Jun 9, 2014 05:19
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Snevet posted:Well, that may be true. But houses require a steady stream of money both to exist (via physical repairs and insurance) and to remain under your ownership (via property taxes) which is not accounted for in raw market price tracking. That the values merely tracked inflation despite that cash flow (until recently) is a pretty good indication that they are, on average, net negative investments in the same way as a hypothetical savings account with a $75 annual return but which pulls a $100 annual fee out of your checking account. Now that might be OK for people, and certainly a paid off house or one purchased with a large down payment will free up considerable monthly cash flow which may have its own value. But it is important to recognize that in doing so the owner is tying up a large chunk of money in an asset which requires continual small injections of money to stay viable and which comes along with long delays and fairly massive transaction costs if there is a need to recover that money for another use. While there are certainly those in the FIRE (Finance, Insurance, and Real Estate) sector who are quite up front with the pros and cons, there is a very large chunk that either have convinced themselves that it isn't true or are willing to ignore the risks being imposed on unwitting clients in search of the next commission and "caveat emptor" with the help of popular media and extremely active marketing from those who make money off others buying and selling houses. Blindeye posted:The positive examples given seem to be ones that cannot be replicated by most people (such as teleworking nearly year-round, not to bash that guy).  Its pretty much the best! Not a panacea of course; without a DC salary there is no way I could afford to live in Austin. I guess I'm part of the problem, but at least I don't add to traffic. On that note that is one HUGE reason why city centers are exploding in price: nearly everyone agrees that commuting sucks.on the left posted:We may have reached peak ads, but it seems like tech's ability to eat away at the rest of the economy is only just beginning. An interesting take on the state of the industry. The interesting part about the state of internet advertising starts right past the guy standing on the radioactive waste barrels, but I highly recommend reading the entire article. There is even a good chunk at the beginning which ties into housing and the present recoil against suburban sprawl, as well as some cute animal photos to keep you from getting too depressed.
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Jun 9, 2014 05:35
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Buried alive posted:First bolded portion: This is a significant part of why Canada has not experienced much, if anything, of the subprime meltdown. You should look up what NINA loans are, if you aren't already familiar with them. You should especially look up Ninja loans. No joke, those are a thing, and they are terrible. One of the disclosures I have to provide my clients when they invest with me is that "past performance does not guarantee future performance." I am not asserting that housing is going to grow exponentially year over year. My point is that there is inflation in our economy and that inflation is going to affect a home in much the same way it does bread, gas, clothing etc. There are going to be times when home values drop and I think it would be foolish to argue otherwise. In this respect, housing is similar to a long term investment in that the value really only matters when you're ready to sell. In the long view--ie: 10, 20, 30 years, why wouldn't we think that housing would continue to increase in value despite short term fluctuations? PS: I did take a second to look up NINA and NINJA loans and wow.... lol. I know there's lenders out there in Canada who take on riskier clients with less documentation, but these are small lenders who don't have much of a share in the marketplace and the client almost always pays with lovely rates and less entitlements on their mortgage.
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Jun 9, 2014 05:41
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This is a great OP, thanks for doing this. It seems to me like the New Housing Crisis (as opposed the one in 2008) along with the Student Loan Crisis are the millenial generation's first chance to actually show some political muscle. The lack of affordable middle class/entry level housing along with the explosion in what is, practically speaking, unservicable student loan debt is an issue that really only impacts the 22-35 cohort. Yet I've seen no politicians actually spend any time on this, the sole exception being SF where things have finally reached a boiling point. The biggest local issues right now in DC/NOVA are a mix of "the Silver Line is opening/WMATA is useless," whatever new corruption scandal is going on with the DC City Council, the VA DMV banning Uber/Lyft, and the building of more bike/bus lanes along with streetcars. No one is talking about housing at all. Young people don't vote, but young people are way more likely to slash the tires of a Google Bus because they see no other option for fixing this problem. It seems like there's a huge political vacuum here and if someone tapped into it they could do very well for themselves. axeil fucked around with this message at 05:48 on Jun 9, 2014 |
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Jun 9, 2014 05:45
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Shifty Pony posted:An interesting take on the state of the industry. The interesting part about the state of internet advertising starts right past the guy standing on the radioactive waste barrels, but I highly recommend reading the entire article. There is even a good chunk at the beginning which ties into housing and the present recoil against suburban sprawl, as well as some cute animal photos to keep you from getting too depressed. I somewhat agree that we are at or near "peak ads", but there are lots of businesses with solid revenue that don't rely on ads. Tech is pushing its way into physical products that will dramatically transform our way of life. Amazon has complex robotic supply chain/inventory management, Google is building self-driving cars, IBM has Watson, and so on. A lot of tech does not rely on ads to be viable.
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Jun 9, 2014 05:49
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The other problem with rentals is units tend to be biased towards single or studio units in terms of construction. So pretty much once you get married and have kids you pretty much need a house since most apartments become prohibitively expensive for a 2/3 bed unit. Snevet posted:One of the disclosures I have to provide my clients when they invest with me is that "past performance does not guarantee future performance." I am not asserting that housing is going to grow exponentially year over year. My point is that there is inflation in our economy and that inflation is going to affect a home in much the same way it does bread, gas, clothing etc. There are going to be times when home values drop and I think it would be foolish to argue otherwise. In this respect, housing is similar to a long term investment in that the value really only matters when you're ready to sell. In the long view--ie: 10, 20, 30 years, why wouldn't we think that housing would continue to increase in value despite short term fluctuations? Also only recently the CMHC which sort of the Canadian version of the FHA concept even backed loans for second homes.
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Jun 9, 2014 06:14
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Snevet posted:One of the disclosures I have to provide my clients when they invest with me is that "past performance does not guarantee future performance." I am not asserting that housing is going to grow exponentially year over year. My point is that there is inflation in our economy and that inflation is going to affect a home in much the same way it does bread, gas, clothing etc. There are going to be times when home values drop and I think it would be foolish to argue otherwise. In this respect, housing is similar to a long term investment in that the value really only matters when you're ready to sell. In the long view--ie: 10, 20, 30 years, why wouldn't we think that housing would continue to increase in value despite short term fluctuations? If the price of something only tracks inflation, then its value stays constant. If something maintains constant value, but costs money over time to maintain (as houses do), then it is a money sink, not an investment.
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Jun 9, 2014 06:24
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Lead out in cuffs posted:If the price of something only tracks inflation, then its value stays constant. No, a large capital asset with attendant cash flows is pretty much the definition of an investment. An investment can be a money sink and a money sink is not necessarily an investment.
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Jun 9, 2014 07:08
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axeil posted:It seems to me like the New Housing Crisis (as opposed the one in 2008) along with the Student Loan Crisis are the millenial generation's first chance to actually show some political muscle. The lack of affordable middle class/entry level housing along with the explosion in what is, practically speaking, unservicable student loan debt is an issue that really only impacts the 22-35 cohort. Yet I've seen no politicians actually spend any time on this, the sole exception being SF where things have finally reached a boiling point. The biggest local issues right now in DC/NOVA are a mix of "the Silver Line is opening/WMATA is useless," whatever new corruption scandal is going on with the DC City Council, the VA DMV banning Uber/Lyft, and the building of more bike/bus lanes along with streetcars. No one is talking about housing at all.
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Jun 9, 2014 07:50
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I think it needs to be mentioned that there are a lot of small things that go into an owning an house that seem to be forgotten or not placed in a larger aggregate. The transaction fees of getting a house in the first place are one of them, this is a big deal considering how poor and unpredictable the US job market is. If you need to spend 4-5 years to get "out" of paying those fees, it may mean you might have missed another opportunity. In addition, there is the maintenance as another poster mentioned which can be extremely expensive over time. It really isn't a 1:1 comparison between rent versus mortgage payments/property taxes. In addition, owning a suburban house versus a urban apartment has its own issues: HOAs and HOA fees (which can be quite expensive), more expensive utility bills, the necessity of owning 1-2 cars, and the higher price of insurance. Of course, the other issue is your making a speculative investment, and you better hope you buy at the right time and the right neighborhood because you could be putting your life's earnings into a lemon with high overhead. Otherwise, you could just buy some REITs which are far more liquid and without the associated costs. It doesn't mean it doesn't make sense but before you even think of purchasing real estate then you really need to pencil out the pluses and minuses including the costs beforehand. If you want to raise a family and are planning on staying in an area for a long-time then it makes it obviously makes more sense, however those attitudes are obviously changing. quote:What sort of policies do you think a group of this sort would/should advocate? Anything that is explicitly designed to bring house prices down will be opposed by existing owners, who outnumber you substantially and already turn out to vote. Anything designed to make renting more attractive is likely to be opposed by the same crowd as well as the "get your gubmint out of my markets" types. Not much can be done for a while in the US anyway because generational wealth is so slanted, boomers already bought into the system and how the money to make it count. Ultimately it would probably be higher urbanization and density in cities coupled with actual investment in public transportation. To some degree this is happening, but often the actual investment in infrastructure isn't actually spent and apartments are usually targeted on the "luxury" side of things leaving a real gap for middle/low earners. Ironically, the solution would probably be something that the Soviets would be more comfortable with. I know I know. Ardennes fucked around with this message at 08:17 on Jun 9, 2014 |
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Jun 9, 2014 08:08
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You know I have been skimming the thread. I learned a lot about what influences home prices, the OP was informative and so are the replies. But, isn't the single biggest driving factor demand? It seems to be under-commented on in this thread, although it suppose there isn't much argument that can be had about it. We have more people than ever before competing for the same space. Sure there are assholes and entities gaming the market a bit more to keep pushing it up, but prices are just plainly going to rise as the population rises when you want to live in places that other people (that have more money than you) also want to live. I mean I'm 33 and I rent a 2 bedroom beachfront apt in Redondo Beach (suburb of Los Angeles) for $2,200/month, where any house would be $2.5 million. I'm never buying (exactly) where I'm at right now. Never. I met a 21 year old girl from northern Indiana that just bought a house as big as any $2.5 million home I mentioned... but for $75,000... in northern Indiana. And it's nice. Good luck ever catching me moving to northern Indiana though I like my all year long summers and hot locals :/ There is nothing surprising me about the above. I suppose lower cost housing in rich areas means less traffic bc the folks that do the minimum wage (or close to) jobs in rich areas don't drive too far to get there, but why would property owners want to sell themselves short otherwise? Maybe the only reason this isn't brought up a ton is the discussion will naturally evolve into anti-immigration and stop having too many babies you Catholics/Mormons/other naturally more prone to reproduction groups :/
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Jun 9, 2014 08:22
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Runaktla posted:Maybe the only reason this isn't brought up a ton is the discussion will naturally evolve into anti-immigration and stop having too many babies you Catholics/Mormons/other naturally more prone to reproduction groups :/ At some point, the location where you live becomes more of a consumption choice, rather than a human right. It seems pretty absurd to keep out immigrants in order to preserve the perceived right of a native to live in a desirable neighborhood as a lifestyle choice. On the same line of thinking, it's really silly to defend living in the city center as any sort of right. Obviously it would be nice if it were possible but it's obviously not possible, and wouldn't be for many years even if we decided to make it a priority.
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Jun 9, 2014 08:31
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Arglebargle III posted:Forgive this econ 101 look at things, but if you want to reduce supply of luxury apartments would a price ceiling help? The idea is that it would make luxury apartments impossible to build and push developers back to the middle class market. The first serious confirmation for this (that I saw) was the Citigroup leak. (The legal teams still pull it off the internet, but it shows back up every time. For anyone that missed it over the last years google for "citigroup plutonomy report".)
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Jun 9, 2014 08:32
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on the left posted:No, a large capital asset with attendant cash flows is pretty much the definition of an investment. An investment can be a money sink and a money sink is not necessarily an investment. If your definition of an investment is any large capital asset, sure. But Snevet is a financial advisor: Wikipedia posted:In economics, investment is the accumulation of newly produced physical entities, such as factories, machinery, houses, and goods inventories. If the expectation is that the house value tracks inflation, while the house drains money through property tax, maintenance, and ultimately agent fees on liquidation, then there is no expectation of earnings, and the house is not an investment. That's in the same sense that a car might be an investment under the first definition, but not under the second. That's also not to say that it wouldn't be possible to make money from property by buying low and selling high, but in the Canadian market, which is where Snevet operates, property right now is high.
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Jun 9, 2014 09:52
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You are ignoring the fact that a house easily has cash income, either rental rates, or imputed rental rates for owner-occupied housing. Housing is an investment, it's just not a very good one. The high returns experienced are typically because people use leverage, hold for a long time, and have very little churn. If banks let you borrow 500k at 4% to invest in the stock market, you should absolutely do that instead, but typically the only way you'll borrow lots of money is to buy a house/car.
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Jun 9, 2014 09:58
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on the left posted:You are ignoring the fact that a house easily has cash income, either rental rates, or imputed rental rates for owner-occupied housing. Not at all. If you spreadsheet out costs vs rental income for housing in Canada's more insane housing markets right now, you come out at a loss. To qualify: in Vancouver, right now, accounting for rental income (or imputed rental), maintenance, property taxes, and liquidation fees, housing is not a money-making investment even if the current interest rates hold and the prices continue to rise just a little over inflation. If/when the interest rates increase and mortgages have to refinanced at the new rates, a lot of mortgage holders will be hosed, and the whole house of cards will come crashing down. on the left posted:Housing is an investment, it's just not a very good one. The high returns experienced are typically because people use leverage, hold for a long time, and have very little churn. Housing can be an investment, but even then it's not a very good one, due to illiquidity and indivisibility. Buying housing during peak prices is just insanity, but that's Canada right now. People viewing their homes as investments, and buying them for that purpose on mortgages they can barely afford under current low-interest conditions is exactly what's causing the bubble (in Canada, at least). Come read the Canadian Housing Bubble thread if you're interested.
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Jun 9, 2014 10:14
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If people want to buy real estate as part of an investment there's plenty of REIT funds out there. poo poo, you could just buy Fannie/Freddie/Ginnie securities if you wanted. The investment issue with buying an actual property is that it highly concentrates you in one highly illiquid asset. That's pretty much the opposite of what you want to do. If people had just all bought REITs or MBS as part of a well-diversified portfolio instead of actually buying the properties the 2008 crash wouldn't have been nearly as destructive. The political situation right now, with so much of the older generation putting the majority of their wealth into their homes means we'll probably not see any meaningful reform until things either get bad enough that other cities start having SF-level protests or the older generation dies. Or if there's another crash I guess 
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Jun 9, 2014 12:34
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Runaktla posted:You know I have been skimming the thread. I learned a lot about what influences home prices, the OP was informative and so are the replies. But, isn't the single biggest driving factor demand? It seems to be under-commented on in this thread, although it suppose there isn't much argument that can be had about it. We have more people than ever before competing for the same space. Sure there are assholes and entities gaming the market a bit more to keep pushing it up, but prices are just plainly going to rise as the population rises when you want to live in places that other people (that have more money than you) also want to live. Well, yes demand certainly matters but to some degree there isn't much we can do there in the present political climate. I had a draft post written up saying that but I guess I didn't actually post it: Part of the massive price bumps in many areas is that they a islands of jobs in the sea of poo poo that is the post crisis economy. People aren't moving to North Dakota for the wide open living and despite what Austin City Council says they aren't moving to Austin just because it is "cool". They move because that's the only place they can get a drat job, even if it means 50% of income going to housing costs. I know many people who moved here for a job and would move out in an instant if they could get a job where they came form. Even if those people are a relative minority, with supply stretched so tight they small increase in demand will cause prices to pop. There are plenty of units in the US, they just aren't where the jobs are. is the structurally vacant inventory in the OP:  That is why the hedge funds buying up property is such a big deal. Even if they make up a small slice of demand in an area the rest of the demand is extremely inelastic because you have to live somewhere within some radius of your place of employment. Also the HF demand isn't all that elastic either in the short term: a buyer wants a house, a landlord wants X units, a HF backed investment house needs $XXX million of housing because that's what this round of funding pulled in.
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Jun 9, 2014 14:45
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I have been shopping for houses the past year and was wondering why there could be sooooo many vacant houses but the prices remain so high. I guess it's because hedge funds / the rich are just gobbling up as much real estate as possible, forcing you to rent or pay inflated prices? This world is hosed up.
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Jun 9, 2014 14:56
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etalian posted:The other problem with rentals is units tend to be biased towards single or studio units in terms of construction. This is a big deal, and it's usually not addressed at all. It's pretty much impossible to find a small house to rent in Chicagoland that isn't hours away from downtown. The entire concept of renting a 1k sqft place that might have a yard or garage is just completely foreign, even though anecdotally I know a lot of people who would jump at the opportunity to live in such a building. Runaktla posted:You know I have been skimming the thread. I learned a lot about what influences home prices, the OP was informative and so are the replies. But, isn't the single biggest driving factor demand? It seems to be under-commented on in this thread, although it suppose there isn't much argument that can be had about it. We have more people than ever before competing for the same space. Sure there are assholes and entities gaming the market a bit more to keep pushing it up, but prices are just plainly going to rise as the population rises when you want to live in places that other people (that have more money than you) also want to live. Here's the other thing - it isn't demand in cities, it's demand in the 'safe' (white) parts of cities. Major cities have lost millions of people since the 1950s. Again, Chicago is an example - in 1950 the population was 3.6million, without any of the high density high rises that have come to dominate the near north and the lakefront. Now, it's 2.7m. So 1/4 of the city is gone, yet prices are vastly, vastly higher. Even just the microcosm of the last 5 years shows this - prices are above the 2008 peak in the safe zipcodes, and absolutely flatlined in the others. What needs to happen is politicians rebuilding the entire city's infrastructure, not just the community that is the most politically influential, so that people can live anywhere in said region. But that will never happen.
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Jun 9, 2014 15:20
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EAB posted:I have been shopping for houses the past year and was wondering why there could be sooooo many vacant houses but the prices remain so high. I guess it's because hedge funds / the rich are just gobbling up as much real estate as possible, forcing you to rent or pay inflated prices? Housing prices are local. Areas with lots of vacant houses aren't the areas where housing prices are skyrocketing.
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Jun 9, 2014 15:26
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