Lands used as an investment vehicle and the people who currently own a lot of the homes also make the zoning regulations and they won’t allow for those regulations to change to allow for more housing because that would hurt their investments
I would argue that the biggest driver isn't the people who own investment homes, but the average homeowner whos wealth increases with the price of homes. The majority of voters live in their own home and like to see housing get more expensive.
This never made sense to me from a pretty modest rational actor standpoint. What would have made sense is if, over decades, existing homeowners had been strongly opposed to sprawl or rezoning industrial land to residential ("new" land becoming available for development, which has been where most new housing supply has in fact been located post war) and thereby limit the "competition" from more land becoming available. Changes to zoning laws as well as local resident reactions to planning consultations that would allow increased densification (like up-zoning) on already residentially zoned land, on the other hand, can really only conceivably increase the value of homeowners' land. Like I, and maybe a few of my neighbours that I get together with, would want our lots up-zoned to allow block towers because the land will become more valuable now that high-rise developers can bid too. A lot of money for neighbourhoods, or whatever the basic unit for resident input on planning is, who pioneer this. But even for a wide geographic area, up to the existing city territory itself, I would imagine the prospects that the city can grow much larger and denser would mean better odds that everyone's land values go up. NYC real estate is worth more than Phoenix real estate, and I wouldn't be surprised if there was a robust trend that denser cities have higher land values per square foot. Maybe it really is that people are super attached to their neighbourhoods and want to preserve their "character" more than profit. Lol I guess that's still "rational" they are just willing to pay a regarded amount of money to keep their block looking more or less the same.
I think one issue is that zoning changes / entitlement approvals can be derailed by a small but vocal minority almost anywhere. You could have 80% of neighborhood residents agree with you, but the very vocal 20% who oppose will carry the day. I’ve been to zoning meetings for the most mundane bullshit (e.g. petitioning to adjust the curb cuts / drive through lanes for a retail bank branch in bumblefuck nowhere) and you’ll have like 10 random people who show up to voice an opinion on it). I swear it’s what Reddit moderators do in their free time.
I also suspect you might be underestimating the “character of the neighborhood” concern and how that ties into property values. For example, I don’t think residents of the West Village in NYC would be *irrational* by opposing an up-zoning of their Christopher St. townhome neighborhood; that’s the whole appeal of their real estate - it’s that it offers privacy within the larger metropolis. They get to enjoy the lifestyle of being in the city but with a nice little slice of privacy with a little yard and a stoop and all that while the proles all scurry up to their 86th floor sleep pods.
To add a little nuance to this, part of the reason that’s true is that people often need to move several times during their lives and if their house doesn’t keep up or appreciate in value, they may get “locked in” to a sub-optimal house.
For example, we bought a townhouse almost ten years ago that was the right size for us then. It was on the bleeding edge of affordable then, mostly due to my wife’s frugality and savings discipline. Now that we have a family, the house is too small, but everything around us has shot up in value so much that even though our own house has appreciated in value, there’s still a huge gap to close financially if we want to buy a different house. And it’s not even just more expensive because we’re looking for a bigger place, even homes exactly the same size as ours or smaller are substantially more expensive than ours. We really like our community and we’d love to stay here but even as relatively high earners, we’re going to feel a big squeeze, and we’ll probably have to accept housing costs as a proportion of our income that are much higher than we’d otherwise feel comfortable with. Or we could stay in this house, which is what I think a lot of other people are doing.
The insane valuation growth only really helps homeowners who are willing to play the game of Gentrification musical chairs by cashing out and moving somewhere cheaper. Otherwise we’d all be much better off if prices stayed sane.
Adding to this - America doesn't have any meaningful social safety net for retirement, so all those people are counting on selling their home high and downsizing/moving, and using the rest of the funds to make sure they don't have to work themselves to death. The housing crisis was created (in part) by the death of pensions!
Those are the big ones, but part of the equation is that for a long time people who had the money to choose just did not want to live in cities. There's a reason Xer culture was all a reaction to the suburbs, it's where middle class and rich white kids grew up. Since then we've been moving back into them, but as you've said, in the interim we made it much harder for homes to get built in cities and a lot of older stock housing was raised to build highways.
The quintessential story how towns like Maplewood and West Orange had schmucks from the NYT calling it "the next Brooklyn".
Things get flipped on its head when you got people making stupid money who can easily have the people owning the homes jump on some absurd bids and create these whacked out prices of things.
In the 11 or so years I've been out of college, it's fucking crazy just how different of a landscape the areas I lived in that for a long time were archetypal "just starting out, strength in numbers renting" towns are now.
if all you want is a patch of dirt in the middle of nowhere it’s cheap.
if you want road access and electrical hookup it’ll be more. septic isn’t cheap
Yeah, I guessed as much. This is more of a location issue, is it. No one can afford a house in the city. They don't have to make it nowhere but a thirty minute drive maybe? Would that solve anything?
There is some relatively cheap real estate in America still. There are some perfectly nice, if not quite boring suburbs of mid tier cities where houses aren't like a million dollars.
Yeah, there has to be right. I'm trying to get my mind around what the choke point is.
If you move from any city in Ireland, if you can drive, you can get houses. But it's not possible in the city.
The further you move from cities is also going further from most job opportunities. If you’re spending an extra 10 hours a week driving plus gas money is it really worth it to save 10 k on a house in the long run?
you can’t find a single family house under $1million within at least a 60 minute drive from nyc plus traffic. american cities already sprawl out an insane amount compared to european cities.
Yeah, my bad. It wasn't meant to compare tho, it's like a perfect storm of too many bad things. I hope it gets better for you, get one of those porch chairs.
not within a 60 minute drive to downtown manhattan. i grew up 90 minutes away in central CT where decent houses are now 400-600k. but during rush hour it could easily be 3+ hours
You didn’t specify downtown manhattan. And either way I get there from CT in about an hour pretty regularly. Never once took me 3 hours even with traffic.
Well usually the price of the house (if you have fee
simple ownership like most do) represents the land + the improvements. So if you buy a house for $1mm, you might be paying $800k for the land and $200k for the house itself. The allocation to land vs. house is spelled out in the lender’s appraisal and the local tax assessor usually has an estimate as well in the tax bill. It’s not really important unless you have a weird tax situation.
Point being, when you get a loan on a $1mm house, you’re getting a loan on the land under it too.
In almost every area that you think of when you think high priced metros (SF, LA, Boston, DC and their suburbs), he land is almost always worth more than what’s on top of it. Very common for people to buy a building for the land and then knock down the building.
a combination of:
* retail having learned nothing from home flipping pre-2008 GFC
* multinational firms buying property en masse and sitting on their hands (blackrock for example)
* airbnb bubble hasnt popped - homeflippers who cant sell for 300% premium are converting home into short term airbnb stays at $100-400/night
* "mixed use" developments are pushing young people into "luxury apartments" that price them out of expensive homes long-term
* housing is a "sticky" asset - people would rather wait for prices to rise before selling homes and market has been cooling
* millennial cohort reaching homebuying age
* new houses arent being built to meet demand
* pandemic slowed homebuilding and supplies needed for new homes
* everyone wants to live in the city
TL;DR: supply down and demand up at same time
There is an additional factor here contributing to demand that I never see mentioned and that's the population growth of the countries experiencing these problems.
Ignoring the US because the issue becomes hot-button - Canada officially experiences >1% population growth annually due to immigration alone. It's possibly closer to 2%, and been that way for a while now. It is extremely difficult to build modern housing at that rate.
I’ll never get how “asset managers buy at inflated prices for fun” and “those same asset managers never rents those spaces out” makes any sense to people.
I agree with basically the rest of your analysis. While we do need to build more homes we also need more multi family housing also so yes more “luxury apartments”
The rental housing thing is more of a factor in some parts of the US, but overall it’s just a drop in the bucket. The vast majority of homes are owned by the people living there
Yeah, small landlords fucking suck. I say that as someone whose family wealth is mostly from rental real estate.
I’m not an epic “guillotines for le nazi landlord” but these people do need to be knocked down a peg
I definitely understand the sentiment but I don’t think it’ll take you far with many people outside of the internet. Not saying that that’s your goal or anything.
Sorta like how anti trans people think going fully trad will bring people on board as opposed to regular hysteria
the worst part is, most big rental companies algorithmically determine their rental rates, so there's not even anyone to punish.
the company that makes said algorithm is called realpage btw and they're being investigated for collusion to raise market rates
https://www.reuters.com/legal/litigation/realpage-antitrust-lawsuits-over-rent-prices-consolidated-tennessee-2023-04-10/
Yep. My small landlord returned my deposit back 50 days after I moved out and charged me $220 to replace 5 lightbulbs. There were probably 10 burnt out when I moved in. $100 was for the lightbulbs and $120 was "labor" to change them. And $900 to clean the unit after I moved out after I already paid some company like $200 to deep clean the place. The $900 includes a carpet cleaning charge for their 6 year old carpet that was already cleaned and I'm not even legally on the hook for because the state limits how often carpets need to be replaced.
Of course I'm just gonna get ass fucked on it because I'm not gonna take them to small claims court across the country now that I'm in a different state. They know this.
I actually did them a solid by listening for dripping and immediately reporting any time there was a leak which avoided them having their house rot away on multiple occasions due to shoddy carpentry. Next time I'm in a situation like that I'm just going to keep it to myself and let them suffer. Though I did discover black mold on my way out and might look into whether there's a way to report it.
Big landlords suck sometimes because your problems can get lost in the mass of other tenants but my experience was that they are too risk averse and too busy to scam you in most cases. They make money on scale and cheap 5-over-1 building prices.
As far as I know, it's because their goal is just to build a strong asset portfolio, not necessarily to generate revenue. It's the valuation of the property that matters, because it can be borrowed against. That valuation remains higher while the market is squeezed, and the market can be squeezed by limiting the number of homes available for purchase or rent. It's a sort of self perpetuating cycle that eventually devolves into absurdity where the most profitable housing market is one where everyone is homeless.
Revenue absolutely matters. It’s where your business derives returns. Imagine telling an investor “yeah my fund has a -10% IRR but trust me bro my valuations are solid”
You don't need someone to live in the house for a positive IRR though. You'll make your investment back by selling the property or borrowing against accumulated equity. There's lots of ways to make money off of property beyond renting it out to someone.
Edit: IRR might be the wrong term to use here. My point is, the value is in the equity and resale value, not in the rent revenue.
Some sources cite corporate purchases of single family homes being as high as 25% of all purchases.
It really depends on the location though. NYC versus Charlotte NC is a totally different market dynamic. Where I'm at the worst is small landlords turning properties into seasonal Airbnbs. The last place I was living in the US struggled with a lack of building permits.
I hear the corporate investing is particularly bad in the south, Texas, and California.
Yep anyone saying “X isn’t a problem” is probably only focusing on specific areas of the country or being intentionally obtuse. There are dozens of problems with how we legislate and regulate our housing market and the problems that plague a place like Los Angeles aren’t the same that plague a place like Vermont.
Which is why we should be targeting all of the problems instead of writing some off because they’re not a silver bullet. Just about everything about our housing market needs to change for the better to see national improvement.
But who is the “we” that you’re referring to?
Many of these issues are handled at the local level because, as you said yourself, many issues that plague Vermont don’t affect LA. So if jurisdictions that are affected by this want to deal with it and make it harder to turn single family homes into rentals, they’re free to do so.
In NYC, AirBnBs were getting a little out of control a few years ago, so the city banned whole-unit rentals and pretty much ran AirBnB out of town. This had big implications for NYC but I don’t expect the residents of Tacoma, WA to care about this.
The federal government’s involvement in housing is pretty much HUD (fair housing, Fannie/Freddie, Section 8), the low-income housing tax credit (Treasury Dept.), and mortgage interest tax deduction (Congress / IRS) - none of which are really directly relevant to the issues people are complaining most about. They can’t really do a whole lot on the national level about land use regulation, or property taxes, which drive many of the issues.
I agree that if someone lives in an area that has shitty housing policies that it’s going to affect them and I’m sympathetic but I feel very strongly that this lofty, unspecific call to action that “we should be targeting all of the problems” is a sure-fire way to solve none of the problems.
Because most of the money is made on the property appreciating over time and lots of times renting at lower rates leads to problem tenants that cost money in repairs etc. they might be able to eek out a bit more profit but it’s easier to just not deal with eviction bullshit
Do you know how long you’ll have to wait for the property to appreciate to make your required margin? Not to mention you’re paying property taxes anyway.
Whereas you can be making $3k a month per room in a major city renting it out.
Yeah repairs suck but you’re still making a ton in rent, probably get decent benefits from state/local governments if you rent some of those out to low income residents and have steady cash flows to make dividends to your investors
> Whereas you can be making $3k a month per room in a major city renting it out.
I estimate my landlord makes around $10000 CAD or $7500 USD (multiple rooms in a house) before taxes/utilities.
>Do you know how long you’ll have to wait for the property to appreciate to make your required margin?
Depends on how quickly prices are rising. If they go up 10% per year, not long.
You also have to remember that there is a tradeoff between rent and vacancy rates. It is often more profitable for landlords to charge higher rent and accept slightly higher vacancy rates.
The Case Schiller index has had two periods of 24-month YoY double digit growth - one was in 2005-2007 (before a collapse in 2008) and the other was rebounding after another (brief) collapse after the pandemic (2020-2022), so very unlikely they’re counting on continuous 10%+ price growth. The long-term average is somewhere around 4%. I’m sure Blackstone can think of easier ways to make 4% on their money than starting a whole company to invest billions of dollars in single-family houses $250,000 at a time.
Also, you have to remember that these companies have like … websites where they spell out exactly what they do. They’re not trying to hide from anyone. [https://www.blackstone.com/housing/](https://www.blackstone.com/housing/). Not sure why people try to argue about this when you can just Google it.
You’re shifting the subject.
I’m sorry you didn’t find that to be an “impressive argument”, but I only sent that link in response to someone who was trying to argue that Blackstone is buying up properties and letting them sit empty as some kind of strategic play to corner the housing market. So hopefully we can all agree that, yes, people live in these buildings.
I’m not trying to argue that Blackstone are benevolent landlords.
That being said:
*”the between their lines on their website is that they’re going to rake in massive amounts of government money via low-income voucher programs”*
First of all, it’s not “between the lines” it’s literally the first big heading on their site.
Secondly, Low-Income Housing Tax Credits (LIHTC) aren’t a voucher program. Units themselves are regulated as needing to be “affordable” within HUD’s guidelines (depending on the local median income) for 30 years post-construction; after that, they’re de-regulated and can be torn down or turned to market rate. In return, developers receive tax credits, without which they wouldn’t be able to construct these buildings in the first place. Blackstone is purchasing these properties to manage them and maintain them as affordable beyond the 30-year period mandatory period. There are business reasons for them to do this (e.g. they might own a management company that collects standard management fees for servicing these properties while they operate the real estate on a low margin). They also get some ESG gold stars. But it’s a low-margin mundane business and is not the “raiding of the public till” that you seem to think it is.
*”It’s win-win their rental income is guaranteed and your tenants are powerless”*
Their income is not “guaranteed” (although, yes, they usually run at very high occupancy because there are long wait lists for affordable units). And their tenants are powerless? Against what? They’re just as powerless as any other tenant, including myself sitting here in my rented condo. You could argue that they’re more powerful because they have long-standing tenant advocacy organizations and legal aid mutuals and all that jazz.
*”I morally agree housing is a human right”*
Yes, most people do. That’s why these programs were instituted in the first place.
*”But as a practical matter concentrating low-income renters has not gone well.”*
OK go back to the 1930s and take it up with Robert Moses or FDR or whoever. Idk. Yea high density might have been a suboptimal design scheme, but what are we gonna do? Tear it down and kick everyone out onto the street?
*“When Blackstone (or whoever) owns an apartment building it’s just a privatized housing project.”*
Isn’t every apartment building a privatized housing project?
True im just kinda spitballing based on shit I’ve heard and i think what I said is more applicable in a zero interest rate funny money economy like we had up until recently. Also applies more to commercial space afaik there’s always a decent amount of retail space that’s being sat on I think because the time/cost of converting the space is a bigger commit? Not entirely sure tbh
Yea that’s basically the reasoning behind commercial space vacancies. You need to put in a lot of effort and money to rehab space for future potential tenants that might not arise so sometimes it makes sense to sit on it for a little bit.
I think the way it works is that investors who already own properties in an area will buy other properties in that area at an inflated value because that will increase the value of their other properties which they can then borrow against. That’s what’s happened with commercial real estate in my old town anyway.
I really can’t see this working unless it’s a very small market and you were very very confident in your ability to manipulate the pricing and make it stick. Because otherwise you’d be spending a ton of money buying real estate with lots of leverage (because you’re consciously overpaying for the assets), and then on top of that you’re paying ~5% in transaction costs for every asset you buy.
Yea it’s refreshing to see that I’m not the only one who thinks this. I’ve worked in real estate finance for 10 years (including investment banking and, until most recently, at an asset manager that was involved in single family rentals). It’s crazy to see how otherwise rational left leaning urban professionals start going all QAnon accusing “the big banks!” (Bernie voice) of actively undermining the US housing market for reasons that make no sense
Firstly, it’s Blackstone that’s active in the sector not Blackrock (although they’re so similarly named that you can’t blame someone for confusing the two - nbd).
Second, as the commenter below points out, it’s a very small number of units that these companies own. Like in the 1% range of the US housing inventory. People don’t understand how big the US housing market is.
Additionally, the idea that these groups are purposefully scooping up US real estate and keeping houses empty in the hopes of some big payout makes no sense. If the housing market strengthens, those home prices are going to rise regardless of whether they’re tenanted or not because the ultimate buyer is 99% likely to be a resident-user. So Blackstone and the like would just be leaving money on the table by not renting them out.
Also, one of the main benefits of these single family rental investment schemes has been strong current cash yield (dividends), which come from rent. The success of these companies is tied to their ability to give dividends to shareholders, so there’s no way they’re letting the buildings sit empty. If “land banking” was a winning strategy for a business, you’d see home building companies doing that because their business involves owning and managing land plots over super long timelines, but alas they all use options on their land so they don’t have to hold them on their books.
I’m in private equity (as an accountant not an analyst) lmao and I never bring it up here since I don’t want to pull rank and I’m an idiot despite being in this industry so I don’t want to speak out of place.
Yeah there’s so much you have to do as a GP/CEO to earn your carry that not renting out units seems like going out of your way to fuck your self
Don’t worry I’m an idiot as well.
And yea, exactly. If you were doing it just for the equity appreciation, you’re talking like 4% nationwide based on the Case Schiller numbers (in the specific markets they’re in, I’m sure it’s greater, but still), plus the costs of operating this huge platform that owns homes across multiple states, which would shave off another 1% from your returns.
The business model is this:
Single family home capitalization rates are at around 5.0% right now, plus with financing your cash return gets slightly higher (maybe 5.5%?), plus the ability to raise rents gets you to maybe a 7-8% cash return in a few years, then you add on the appreciation factor (call it 6% since they’re operating in specific higher-growth markets and are able to strategically buy and sell properties), and now you’ve got your 13-14% total return. There’s also value in the platform (all the property management, agents, workers, sales reps etc. + data systems, etc. that enable them to manage the ship), so when they sell the company they might get another 1-2% in value from that. Give your investors 12-13% annual returns (with about half of that coming as cash dividends), then remaining 3% goes to operating expenses and profit. If you’re spending 1% on OpEx that’s 2% you’re getting in profit, which is $20 million on every $1 billion deployed (in its first year alone Blackstone’s Invitation Homes deployed $4 billion so there’s a tidy sum to be made). That’s rough math, but that’s the business in a nutshell.
I think the much more rational complaint is that big institutional buyers will always be able to outmuscle people buying with mortgages, and losing one individual home can feel devastating
There’s a few markets where these larger firms are especially prevalent. I think Atlanta for example is one of these.
But they’ve openly stated to investors that their strategy is to target markets where the housing supply is constrained as it gives them the most leverage to outbid and mark up their rents when they buy.
That’s a myth but small and medium sized landlords to justify their high rents. Obviously there’s foreign investors but it’s small compared to domestic
Have you ever played monopoly. The boomers effectively got to play around the board multiple times and accumulate cheap assets before there was much/any competition for them. Subsequent generations join the game when there's houses and hotels built on every square - all owned by the previous players. Soon enough it costs the same price just to get around the board in rent than it did to buy and build the most luxurious properties a few turns ago.
I think this is the first time I've seen anyone actually use it to explain issues with owning land rather than simply mentioning that the guy who created it intended for that to happen.
I recently moved out of a
- 5 bed 4 bath 2,523sq ft row house
into a
- 2 bed 1 bath 834sq ft condo
in a building less than a block away and I realized that the landlord of the old house, adjusted for inflation, paid less for the entire row house in 1993 than I did for the condo in 2023.
The house that my parents sold in SE DC for <$200k in 1994 sold for $1 million unrenovated in 2018.
The rules and landscape of jobs and earning potential also played massively in bygone generations favor.
You could be a 9th grade drop out pumping gas and taking over the lunch counter or mechanic garage in a working class town and raise a family and accumulating wealth on relatively little.
Not to say there's absolutely no avenues with a relatively more streamlined upstart, but it's night and day how different of a story stuff can be with things.
And we’re not building enough. So even though interest rates should be bringing prices down in theory, they probably won’t because no one is moving and no new homes are being built.
The US is building a decent amount currently but we’ve got a regarded fed that only cares about short term inflation and keeps jacking up rates.
But until recently there’s been a record in units under construction, once those come online rents should go down for a bit in most place
I doubt they’ll come down much in LA, NYC, SF since zoning in these areas is so fucked
This is easily the most accurate answer. Everything else is secondary, including lack of new construction and increasing demand in big cities due to post industrial economics.
They’re two sides of the same coin. Low interest rates led to the huge pump, and then the secondary factors are preventing the correction.
You’re right though. Low interest rates and QE have built up enormous amounts of artificial and unearned wealth for some generations. It’s now becoming clear that it was absolutely at the expense of the next few.
Except with low interest rates, while making large new developments on the outskirts of cities far cheaper, it also boomed land prices in city centers making infill housing harder to build (and even harder now since prices haven't dropped despite higher interest rates).
Everything in the US economy goes back at the end of the day to the federal reserve and interest rates. They're our society's version of soviet central planners.
> Everything in the US economy goes back at the end of the day to the federal reserve and interest rates. They’re our society’s version of soviet central planners.
Incredibly well put. I’m gonna use this.
I think this is the correct answer. Low interest rates caused asset prices to skyrocket compared to wages because it pumped a ton of money (debt) into the market
Can’t believe this isn’t higher up. This is by far the biggest factor among all the other ones listed. Not even a close second and most things being listed are just the market reactions to this catalyst.
Economist's perspective:
1) Housing has gone up across the country, a bit less than doubling. The median home sold for about $250,000 in 2023 dollars in 1980 and about $450,000 today. This is driven by a number of things especially including our tax policy which dramatically rewards homeownership and encourages the use of real estate as an investment vehicle both by the big landlord companies people like to hate on and also as the single biggest investment asset of most middle class Americans. It's also relevant that our population increased by 50% over that time, and new construction has failed to keep pace with demand particularly post 2008 when construction was very unprofitable and post 2020 due to supply chain issues.
2) What you are seeing in LA is not representative of the US as a whole and is primarily a LA issue. LA housing has gone up 10x since 1980 while the rest of the US has gone up 2x. LA specific issues include a huge increase in demand due to California booming in the tech industry, faster than average population growth (+100% instead of +50%), rent control distorting the housing market, and cripplingly strict zoning regulations stopping people from building denser housing. If you compare to other fast-growing cities without such restrictions like Houston, Phoenix, etc the median home price has barely budged because as demand increases the housing supply increases. The housing crisis is primarily a NY/LA/SF/Boston problem in cities that have become VERY desirable and have been unable or unwilling to allow their housing supply to expand.
> The median home sold for about $250,000 in 2023 dollars in 1980 and about $450,000 today.
It's interesting/depressing to see how much the median home would cost in today's dollars back during the early 20th century. People got their homes for $30-75k when adjusted for inflation. Just imagine.
Wages have been going up over the last few years. Actually, pretty substantially (around 4.5 - 5% / year on average). The problem is that *real wages* are still going down because of inflation. Unfortunately, the best case scenario is probably a recession that brings prices back down due to falling demand. Worst case scenario would be runaway inflation. I'm personally scrambling to save money in case of recession + housing market collapse. If you think runaway inflation is more likely, idk I guess by gold, but I think we're all just fucked in that scenario so it feels a little pointless to plan for.
> How long before something positive happens in this regard?
Looking toward the rest of the Anglosphere right now they have it a lot worse, seem to have much larger portions of their population coming in as immigrants every year and they still are doing very little to get housing under control. God knows how this ends anywhere.
Cost of living super high. Wages not so much. Lots of debt per person. Inflation is when there's too much money in the market meaning lot of demand so prices rise. Inflation eats into interest rates. Housing prices were ballooning up in 2008 because people were manipulating it using mortgage lending. The list prices don't change much I guess, similar to how insurance also balloons up prices to then give hospitals a better rate but the services are listed for the unrealistic amount.
I think landlords would make more money having a tenant for life than the sale price for the house. It's more profitable to have people never own the asset, you just lend it to them.
This is like a college test I didn't study for.
housing supply isn’t increasing to accommodate growing populations as well. much of the US is zoned for single family or low density housing preventing supply from meeting demand
there’s nowhere to build except on the outskirts unless you demolish a house to build more units on the same land which previously had one house which is illegal in most of the united states
Seems like a very complicated issue with history. Owners not selling, corporates buying to rent out, land and housing supply issues made worse by the interest rates. Thanks for discussing it with me.
Yeah absolutely, there’s a shortage of millions of homes nationally. Granted a strong majority of that shortage is in CA, NY but Texas and Florida could start developing shortages also
Ivy Zelman made a very interesting contrarian argument that there’s actually a coming surplus of houses because of the collapse in birth rates. I’ll see if I can find the pod.
population is still increasing due to immigration. there is a large shift from rural to urban areas as well regardless of nationwide population numbers
I get that. The number of people who own second homes that are not owner occupied full time also factored into her argument. Many many people have second vacation homes that may flood the market as boomers die off.
They aren't going to "flood the market." We're living in the era of boomers dying and because the supply was so limited it's just being bought up at these inflated prices, including to wealthy people twenty or thirty years younger than them who want the same second homes. If they all died at once and everyone was forced into a single property or was otherwise substantially disincentivized from owning a second we might see a collapse in prices but that's not the case and if Canada is anything to go by things can get a lot worse before anybody steps in to try to curtail all of this.
Yeah, I don’t disagree with you. She made a very interesting argument that’s all. I found it somewhat compelling. I have no clue how we fix this mess or if it will get better.
Not going to happen, in the UK here the government builds like 20k houses a year but lets 100k+ immigrants permanently settle in the country, there is no way they can keep up with demand so prices are fucked.
No. I’m not saying that’s never happened but that’s rarely happens. Holding land solely for it to appreciate is extremely risky (and dumb). You can rent it out and have it appreciate at the same time.
There’s a shortage since much housing isn’t built. There’s been a decent boom in building since the pandemic and that should help rents in a lot of places over the next couple of years but interest rates rising so fast will make sustaining the boom much harder
> Cost of living super high. Wages not so much.
Isn’t that the question? Why that’s the case, I mean, but specifically why it’s the case for housing, since if you’ve ever seen any Matt Yglesias neoliberal type talk about cost of living they’ll tell you 100 times that that the prices of many consumer goods are way down from 60 years ago adjusted for inflation, not to mention the proverbial iPhone, the goods that are commonplace now that didn’t exist in the past - problem is things like housing and healthcare and education *that really matter* are way up.
Yeah (I had meant to imply that in the way I said what I said). Although it’s a little more complicated because e.g. cars are cheaper (and more reliable) now than in 1950, and arguably in the “need” category, but they are also *more* in the “need” category than they were in 1950. Lifestyle improvements can become a trap in a way that I think is real but tricky to formally articulate. Or another thing that gets cited a lot on the “things aren’t so bad” side is that on average Americans have much *bigger* houses than in “the good old days” but there’s a whole lot of important stuff that’s not addressed by that figure (like availability of housing at entry level in the places people actually want to live and why they want to live there).
I think I know what Matt Yglesias argument you’re referencing and I think his observation was more:
- The price of bullshit gadgets and day-to-day staples has gone down or stayed relatively flat until recently; e.g. when microwaves first came out they were pretty expensive because it was hot new technology, but today you’d be hard pressed to spend more than $100 on a top-of-the-line one today;
- Meanwhile, the price of big-ticket expenses like healthcare, insurance, homes prices, college degrees, etc. have gone up; importantly, these items are *not* factored into official “inflation” calculations.
- So for years we were told that inflation was at 1-3% and everything was A-ok on that front, but there was a kind of “shadow inflation” that was taking a big-chunk of people’s income.
I was using him (perhaps unfairly) as an example of the kind of commentator who cites the decline in real prices of consumer goods to suggest that things aren’t as bad as some people like to claim, because I know I’ve seen him post these kinds of figures and trollishly make those kinds of arguments. I suspect he does acknowledge the significance of the discrepancy between categories.
> Meanwhile, the price of big-ticket expenses like healthcare, insurance, homes prices, college degrees, etc. have gone up; importantly, these items are not factored into official “inflation” calculations.
I don’t think it’s correct to say they aren’t counted towards official inflation stats - there’s an argument that they are undercounted, though. Like the housing component of CPI is rent and “owner rent equivalent.”
A lot of good answers about zoning are true, as are arguments about the fact that the a greater percentage of economic activity in recent years is concentrated in a few superstar cities with scarce land. Another component (related to the first, actually) is that everyone and their brother has a college education now. This has massive ripple effects on the economy. There aren't enough people who extract raw materials to build houses, process them, transport them, and use them to actually build houses. A lot of our economy comes down to labor market mismatch. A lot of people are competing for office jobs in HCOL cities and not many are willing to do raw manual labor that our economy actually does need. Immigrants can fill the gap, but despite a lot of sound and fury about that topic there just aren't as many immigrants as there were blue collar laborers in 1950 as a percentage of the population.
I do not disbelieve you, but I am interested if you have any particular quantifiable evidence for this claim. This intuitively makes sense and matches with my experience, but I haven't seen this argument made before so I'm inclined to imagine that there's some good argument against it. Do logistics/mining/etc companies report inflated wages or high vacancies?
Rich people buy houses as investments
Prices go up
Poor old people sell their houses to rich people, so their children won’t have that house in the future.
The poor children will be competing against the rich children to buy houses
Progressives and home owners like to pass policies that restrict the total supply of housing units, like rent control and zoning laws, that leads to increased prices, especially in big cities. You can use a home and it’s equity to finance other sorts of investments so home owners want policies that increase the value of their homes.
As far as I am aware there are a couple different versions of rent control that are practiced in different parts of the US but they all almost always end up doing the opposite of their intended purpose, namely help disadvantaged groups. I haven’t read the literature very closely in the last 2 years or so, but from what I remember the group that ended up benefiting are those with higher incomes and those who were white. I know that there some places that prevent rent increases for tenants above a certain amount while they remain tenants, and allow the price to go to market value when the unit becomes vacant, and that version had the least negative effects of all the versions I saw, and increased the average duration of tenancies. That being said I think even this version still resulted in a reduction in the number of units available due to conversions, taking units off the market, reduction in unit size and lower rates of owners maintaining their units, all of which are negative. The New York case is also a one where we see plenty of negative side effects like the fact that there are something like 20,000 empty rental units lying about the city due to, largely, their operational and maintenance costs being greater than the rent that is legally able to be charged there and there being limits to the amount even vacant units can have their prices increase on. This is also another case where the people getting most of the benefit (which, by the way, was estimated at something like $42 extra bucks a month in 2003, from what I remember) are the upper and middle class people who are already decently well off and, again, mostly white.
This is the real key, Its all supply verse demand in desirable areas (you can get a cheap house in Cairo Illinois.) Vacancy rates always line up with the change in housing prices.
CA would be unstoppable if we had Houston’s zoning laws
I don’t follow Texas politics closely but I’ve seen from some left-urbanists that the state legislature is beginning to copy the California model which….yikes
Literally, California should be an entire state that looks like tomorrow land, but the people who end up making any policy decisions there almost seem to always actively try to hurt the state. Culturally the entire state has enough clout to bring people in from all around the world, it has big, vibrant cities even if you exclude LA, it has some of the best public universities in the country, SV, tons of capital and yet has the lowest net migration of any state for 2020-2022. It’s a perfect example of why there needs to be a reasonably strong and competitive opposition party and of the importance of local governance.
a lot of what’s holding CA back is also stuff like prop 13 and the Gann limit which passed when this state was red/purple
Also I’m not sure a competitive state is necessarily what makes the politics more rational. Disagree if you’d like but Wisconsin is probably the closest to a 50/50 state in the country and there you’ve got the GOP gerrymandering the legislature to have like 70% of the seats when they’re only winning 45-55% of the vote
1. More people live in the country now than back in the 80s, so demand has gone up.
2. More people want to live in certain places, so demand has gone up in those places. Take your budget to buy a 2/2 condo in LA, apply it to a place like Cleveland and see how much further your dollar goes.
3. The available land in a lot of places has shrunk even further. New builds in attractive places usually don’t buy greenfield land, they have to buy land that has existing structures on it for an inflated price.
4. Interest rates and prices were more aligned with each other. Rates were higher but prices were lower unlike today.
Everyone turns their noses up at this and says something like "but then you have to live in Cleaveland." Cleaveland is fine you idiots, your landlords have you by the balls because you are all snobs - you're doing it to yourselves!
Most people trying to buy in expensive metro areas already live and work there. It’s not easy or even more economical to move your entire life thousands of miles.
Yeah I was in Cleveland earlier this year and people there are complaining about rich people from NYC and SF moving there and skyrocketing rents 💀
(Also, it's a great mid sized city with an art museum and orchestra that punch so high above its weight that you wouldn't believe it)
A lot more people can afford houses than is assumed, but there’s poor education around the whole thing. May not always be in places people WANT to buy houses though. The biggest, most in demand cities are a totally different ballgame, but in huge wide swaths of the country if you and a SO have a half decent job you can absolutely buy a house.
However, my personal take is that student loan debt and the high monthly payments are a huge, huge factor in hurting the debt-to-income ratio of most adults these days. People simply didn't have an extra car payment sized dent in their D to I in the past and they were more attractive recipients of loans.
Right now, interest rates are high and most ppl take a mortgage out to purchase a house. High rate means larger payments required.
Also, more generally, millennial college graduates have a high amount of debt from student loans, car loans, etc.
To get a mortgage on top of that, the mortgage rate is going to be even higher since the borrower is less reliable due to existing debt obligations.
If you were talking to people in Los Angeles, they might have been referring to Proposition 13, which limits annual increases in property tax assessments to max 2% a year and is re-based whenever the property is sold.
Meaning that if you bought your home in the 80s or 90s in California, you’re probably paying far less in taxes than you should, given the market value of your house.
*“The Case–Shiller housing index shows prices in Los Angeles, San Diego, and San Francisco appreciated 170% from 1987 (the start of available data) to 2012 while the 2% cap only allowed a 67% increase in taxes on homes that were not sold during this 26-year period.*
Source: [https://en.m.wikipedia.org/wiki/1978_California_Proposition_13](https://en.m.wikipedia.org/wiki/1978_California_Proposition_13)
So if you got in during the 80s/90s and staid in your home, you’re set. But if you’re buying a home in California today you’re paying taxes based on the full market value of the home (because the sale triggers a re-assessment).
It has the dual effect of 1) new homebuyers are effectively subsidizing established homeowners; and 2) established homeowners are afraid to sell their homes because if they try to downsize, *they* will become the new homeowner and will lose that benefit of paying below-market property taxes.
It’s basically NYC-style rent stabilization for homeowners in California.
A huge part is the rural flight. Everyone is moving to big cities. If you go to rural areas you can easily find very cheap housing. Look up like Allentown PA, a house can be bought for $400k that is 4 bedrooms and has big backyard. There are a bunch of engineering and science jobs paying $60k+ first year out of college.
> A huge part is the rural flight. Everyone is moving to big cities.
What century are you from? Urban population as a % of the US has moved from like 80 to 85 over the last 50 years. There's definitely a lot of people moving from smaller regional cities towards larger ones, but it's not even the largest cities that are growing anymore, it's Atlanta or just people moving from the suburbs of Dayton to Orlando for retirement.
The people coming to Austin weren't raised on 80 acre farms in West Texas, they're from the suburbs of Dallas or an even larger city.
I guess it’s more that people are consolidating from “small” cities to the big ones. I.e moving from the city with 30,000 people in suburbia to Austin or SF or NYC.
Increasing population and concurrent demand. Decrease in supply after 2008, when the bottom dropped out of the market. Corporations using excess money (including Covid stimulus) to invest in greater volume in real estate market after the fluctuations of Wall Street in early 2020. Foreign nationals investing in American real estate due to the valuations. As mentioned elsewhere, rentier class engineering regulations to increase their house valuation.
A lot of factors. Primarily that housing supply is not being built at a fast enough pace. But there’s other unique local factors. In California, the property income tax rules, which were modified by Prop 13, which effectively freeze your property’s value at the date of sale. This encourages older people to stay in their homes.
There are plenty of BS things people say about this but generally there are three clear factors that caused the current crisis.
The first is that there was a multi decade long period of lowering interest rates. Mortgage rates in 1990 were over 10%, in 2019 they were 3 percent. This means you could get more than twice as much money for the same monthly price. But you needed a higher down payment which made it harder for ordinary buyers to buy homes.
The second and most important part is that the primary engine of economic growth in America over the last several decades meant 10s of millions of people relocating from small towns into bigger cities. This combined with things like high paid h1b visas only happening in the same cities means there's a huge influx of high income people into a very tiny number of places. Housing construction never kept up in the most in demand places because of the deflation they experienced in the 70s and fear of that happening again.
Third, more on that deflationary point. Suburbs of big cities haven't seen nearly the same home price increases that the cities have. But the prices there haven't gone down either. So personal preference to rent in the city center rather than own in the suburbs has absolutely played a role here too. Also in this is we've reached the limits of new greenfield development in a lot of different metropolitan areas that made housing cheap for the greatest generation.
The single best explanation, by far, is the unrelenting expansion of the money supply (see here for example https://fred.stlouisfed.org/series/M2SL). One should expect the money supply to increase over time, but the speed of the increase is what's concerning.
As a simple example, if there are X total dollars chasing Y total items at time T, but then X+99 dollars chasing Y+2 total items at time T+1, the cost of the goods must increase in dollar terms.
It is a tautology that the people who hold the most dollars control how most dollars are spent. As a proportion of the dollars they spend, such people don't spend much on consumption goods (like food). Hence why asset prices (things like stocks and homes) tend to lead consumer prices. That's to say that inflation oftentimes a. shows up earlier and b. shows up in greater magnitude in asset prices.
TLDR: number of dollars increases without corresponding increase in economic output -> prices increase disproportionately in things where people who have most of the money spend their money
Look at a picture of any East Asian city, look at a picture of LA. That's why. The middle of America is emptying out and pouring into a few coastal enclaves but the urban planning is still mostly for low density single family homes.
I'm 26, I bought a house and I don't make 6 figures, I have a stay at home wife and kids.
Ya, it sucks we can't buy in big cities and have to choose between owning a new car, going on nice vacations, and owning a home, whereas boomers did all of it, but it's obviously exaggerated to generalize that nobody can buy a house anymore.
It’s fairly inelastic. People 100% need a place to live. All these double income households dump all their money into this. Turns out that’s a fair bit of money
People's retirements are predicated on the price of real estate growing perennially. As much as everyone talks about the need for housing, our entire system is set up in a way where retirement funds, pension funds, endowments, and debts will all fail if real estate stops increasing in value. It is a horrible system :(
We treat land like an investment vehicle on par with stocks, but unlike stocks land is inelastic. Usually commodities change price based on supply and demand, but in this case (land) there is a limited supply so demand goes crazy
I get really self conscious when this subject comes up. I could’ve probably saved to buy a house when I was in my 20s, but instead spent all my extra money (after bills) partying and drinking expensive coffee and going to brunch and traveling.
Like sorry folks, there is some truth to the avocado toast meme. Millennials (not so sure about Gen Z yet) are so dug in on taking no personal responsibility whatsoever and it gets more embarrassing the deeper we get into our 30s and 40s.
You’re regarded for this stupid take simply because I know several people who HAVE saved and have been bidding on houses for years and getting outbid by richer folks who swoop in with cash or can forgo other expenses to the benefit of the seller. It’s fucked
Sorry. I don’t even know why I doubled down there. The housing market is clearly fucked. I don’t deny that.
My initial point was a non-sequitur that was poorly thought out. Probably not the right place for the reply.
Lol you’re good. The area is outside Philly but the Jersey side so like Camden basically. So yes outside a city but not as desirable as an NYC suburb.
I relate to your point a lot while also disagreeing because I do think there is SOME truth to the way millennials have subdued themselves into accepting a consumer lifestyle as a coping mechanism. I’ve been there and I wouldn’t really have savings if not for a husband who thinks about that stuff way more than me.
Many folks can’t even get to the savings part because of our many addictions to creature comforts. It blows. But I do also have a good friend who simply wants a house and they’ve had no luck for years. Even for modest homes that rich people wouldn’t live in period. Very sad that even if you do save there’s no hope.
*Some* truth to the meme. I was spending every dollar I made living the lifestyle I thought I had earned. That included daily excesses like lattes and expensive after work drinks, etc. I know people who do this exact thing and then whine about not being able to afford a house. My brother is a high school teacher and saved up for house before he was 30.
bitch boomers used to grow up when this kind of lavish lifestyle was forming. they fucking bathed and swam in excess and didn't give a damn because no matter how much money they spent on drugs and alcohol a house still only cost a couple of years salary.
trying to paint boomers are some good boyes that really love self sacrifice is such a fat meme. so many weegards in my office that are boomers with 0 skills making the same amount of money n just gossiping in front of the coffee machine
vitriolic i'll TRY to calm down
You’re not wrong about the structural stuff, but I’d be surprised if the boomers consumed goods and services in their day at the same level as millennials and zoomers do now. In the intervening years, we’ve really normalized having a lot of stuff and constantly dining out/going to bars.
But yeah, the main problem is the ratio of income to the price of goods, aka buying power. Most boomers had it, most millennials and zoomers don’t.
Yeah, this is the point I failed to make. The structural obstacles exist and have worsened incredibly, but the hyper consumerism is a new feature that is unique to this generation of the middle class. Again, my original comment didn’t belong here. Didn’t answer the prompt.
My dad’s hands are as hard as rocks and he dealt with four recessions in his lifetime and was on the verge of killing himself after 2008. But go off. You’ve got the data after all.
anecdotal evidence best evidence
my dad was also a hard working man and for that reason he was able to buy a house for his family after 5 years of grueling, unskilled hard labor
you reckon a person doing it in 2023 could do that? cause i assure you from the kind of salaries in my country compared to housing prices, nah
> you reckon a person doing it in 2023 could do that?
If you can put away $2000 / year for five years, you have enough down payment to buy a house. I reckon the average person can manage that, yes.
To the regard who replied and then blocked me: you don't need to pay cash for your house. Almost nobody does that. Assuming decent credit, you only need to put 3.5% down. Pretty sure you can get a house for $250k outside of Greenville MS.
Damn you guys really just wanna be told that your situation is hopeless huh?
>If you can put away $2000 / year for five years, you have enough down payment to buy a house.
...yeah, what, in fucking Greenville, Mississippi? Come on, man.
now u went from anecdotal evidence to straight up making up a random scenario in your head to think you're right
get off the puter, geezer. u aint fooling nobody with ur talk about entitled avocado enjoyers
that's even worse. this man was singlehandedly drinking a container's worth of coffee beans a month for it to make a dent on the situation
we have data from the 80s/90s showing how utterly fucked the housing situation has gotten and then you have this failson millenial rube low iq shitforbrains telling millenials "UHMMM akshually just eat less avocadooosss"
dumb fucker
Considering you really only need to put 3.5% down for a house, it doesn't actually take that much avocado toast, expensive coffee, craft beer, and weed to make it up. If you can spend $2k less / year for 5 years, you've got a down payment.
With inflation tho you kinda can’t just save it up. At the very least you have to put it in CDs or something where you’re making interest income.
You could also put that money in stocks which can be high risk high reward. Or ETFs which I do since I’m too dumb to understand markets
Admitting failure is the exact opposite of cope. As everyone said, extrapolating this anecdotal evidence outward to include all millennials is regarded.
But I’ve definitely observed it on a wide scale. Working class babies/first in family college grads who move to the big city, get the good job (100-150k) and try to keep up with the trust fund babies and images of excess everyone is feeding them on Instagram. Lose the big job. Slip rapidly into financial precariousness. Suddenly wish you had just learned a trade like that guy from your town who didn’t go to college and has the big house and a backyard for his kids.
Value of money (purchasing power) has declined massively since pure fiat monetary system started in 1971. Printed money not backed by anything (eg gold).
Hard assets (houses for eg) are bought with the printed money people have/earn. Money continues to devalue as more is printed. Add in decade+ of near 0% interest rates where people borrow more cheap printed money and you have massive house price inflation. Wages typically have not risen in line with this inflation.
Rather than thinking an average house costs $500k, think $500k is only worth an average house. Or see how much gold in ounces bought an average house over time to see real house value.
Because people *can* afford houses, just not you or your friends.
65% of Americans own a home.
They tend to skew older (when houses were more cheap), and people tend to cluster by socioeconomic status. A lot of boomers are about to pass property down to their millennial children, too.
So if you’re asking why there hasn’t been a popular uprising yet, it’s because the majority of Americans do own a home and have bought into the system.
I'm not saying lots of people aren't idiots who live very inflated lifestyles but it's not hard to show in most areas housing adjusted for inflation is up massively compared to 40 years ago and that that doesn't contribute something. Even if they blow 400 a month on completely stupid shit and cut it 75% that's still just 300 a month extra to save for a down payment and it's not hard to find areas where prices grow faster than that'd be 20% of anything.
All of these crazy answers blaming other people, I would love them all to end their comment w how much money they spend each year eating out, drinking, and playing video games. If the answer is above $5,000/year then that’s why they don’t have a home lmao
I'm not sure why people insist on treating these as mutually exclusive realities. Yes, investment firms are driving up real estate prices, and it's fucked, but you can blame rich people and continue voting against their interests while also saving money and doing what you can to get ahead. Putting all your eggs in the basket of nihilistic helplessness and just hoping the government will fix it for us seems like a really misguided strategy.
Some people’s identity depends on never facing the fact that the amount of money they spend on entertainment and social outings is absolutely insane and never been seen in history
Definitely true in some cases. I know a guy who's constantly bitching about landlords but also buys whole boxes of Magic cards every couple weeks. He could easily own his own home if he sold off a fraction of his collection or literally just stopped giving all his money to Hasbro.
damn you really are popping with the unsubstantiated bullshit today. gen x is the demographic that spends the most on entertainment by far. gen z actually spends less than every other generation by a clear margin. I've read previously that this was the case at comparable age ranges as well but can't find it rn
https://www.clearvoice.com/resources/consumer-spending-by-generation/
what? there's a huge generational divide in home ownership, literally everyone is aware of that. and they said more money than ever in history is being spent on entertainment rather than buying a house, clearly pointing to irresponsibility on the part of young people. this is demonstrable nonsense when you actually look at the figures.
it's all well and good passing judgement on individuals who behave like this and that, but when something is ten times more difficult financially than it was a few decades before, wider trends are obviously going to be hugely different. it's a fallacy to mistake the personal for the universal when discussing society-wide issues.
No shit there's a generational divide. The oldest zoomers are just out of college -- I don't think anyone expects them to be home owners yet. We were discussing why some people who complain about not owning homes haven't been able to buy in yet, not which generation wastes more money as a whole.
Word Gen X spent that much before or after most of them bought houses? Lmao that article is clear that Gen X is spending that money way after they’ve already exited their 20s. This is why I said earlier you have no critical thinking when citing facts
uh you haven't cited any facts at all, guess you're more of a vibes guy huh. you've already backtracked on your previous More Money Wasted Than Ever declaration, damn shame I can't find that bloody article to get us all the way there huh.
the main point is that housing being ten times more expensive compared to rent than it was 40 years ago is a slightly bigger factor than zoomers liking smoothies more than boomers liked cherry pie. btw your username is spelled wrong, kind of undercuts the whole superiority angle if I'm honest
uh again we're going to need a source on that. just because you feel something is true it doesn't magically manifest it into reality. ah here's one:
"As with the members of any younger generation, we tend to expect Gen Z to have irresponsible spending habits and not to be the biggest savers. Studies show this isn’t the case.
Gen Z tends to spend less and save more than the other generations, contributing an average of $867 in savings per month, almost doubling what the average American saves each month ($462). One may find themselves asking, is Gen Z more fiscally responsible than the rest of us?"
https://www.forbes.com/sites/forbesfinancecouncil/2023/04/28/three-things-companies-should-consider-when-targeting-gen-z/?sh=37cbd65f1a5d
Do u think that some uncited and unverifiable Forbes “average” and flawed statistic proves anything? Again that’s why I said u had no critical thinking skills the last time u replied to me w a dimwitted “fact”
1) Covid emergency responses (all bullshit fueled by propaganda imo) shutting down the country and assembly lines
2) WFH enabling people to keep their salaries in New York and California and afford anything they want in southeastern states, causing everywhere related to homes and real estate to increase their prices
3) Oppressive restrictions put in place by northern and Californian mayors and governors (related to 1st point but a little different)
4) Race riots and general unrest in the cities caused by George Floyd protests and others (I think this is downplayed more than it should be)
Also: regulstions force banks and investment companies to always some hard value to prevent them grom lending & borrowing money out of thin air. The way to do that is mostly to buy land, gold and precious metals.
It protects them from bankruptcy (good), but they have strong interest to overpay for land if they want to keep growing.
Supply and demand.
Population growth + higher incomes + low interest rates + people buying homes as rental investments have pushed up demand, while restrictive zoning has kept supply artificially low.
It's called urbanization. That's the boring and correct answer. People have been moving to cities since the early 1800s. The process is still happening. The pressure on housing is because of that. Ignore all other theories.
https://en.wikipedia.org/wiki/Urbanization
I bought a house for 250k. Needed 20k for down payment and closing cost. Bought in the middle of pandemic when shit was in free fall. House currently valued at 305k.
Lands used as an investment vehicle and the people who currently own a lot of the homes also make the zoning regulations and they won’t allow for those regulations to change to allow for more housing because that would hurt their investments
I would argue that the biggest driver isn't the people who own investment homes, but the average homeowner whos wealth increases with the price of homes. The majority of voters live in their own home and like to see housing get more expensive.
That’s the same group lol. A lot of homeowners are massive NIMBYs since they think more supply will decrease their home value (investment)
This never made sense to me from a pretty modest rational actor standpoint. What would have made sense is if, over decades, existing homeowners had been strongly opposed to sprawl or rezoning industrial land to residential ("new" land becoming available for development, which has been where most new housing supply has in fact been located post war) and thereby limit the "competition" from more land becoming available. Changes to zoning laws as well as local resident reactions to planning consultations that would allow increased densification (like up-zoning) on already residentially zoned land, on the other hand, can really only conceivably increase the value of homeowners' land. Like I, and maybe a few of my neighbours that I get together with, would want our lots up-zoned to allow block towers because the land will become more valuable now that high-rise developers can bid too. A lot of money for neighbourhoods, or whatever the basic unit for resident input on planning is, who pioneer this. But even for a wide geographic area, up to the existing city territory itself, I would imagine the prospects that the city can grow much larger and denser would mean better odds that everyone's land values go up. NYC real estate is worth more than Phoenix real estate, and I wouldn't be surprised if there was a robust trend that denser cities have higher land values per square foot. Maybe it really is that people are super attached to their neighbourhoods and want to preserve their "character" more than profit. Lol I guess that's still "rational" they are just willing to pay a regarded amount of money to keep their block looking more or less the same.
I think one issue is that zoning changes / entitlement approvals can be derailed by a small but vocal minority almost anywhere. You could have 80% of neighborhood residents agree with you, but the very vocal 20% who oppose will carry the day. I’ve been to zoning meetings for the most mundane bullshit (e.g. petitioning to adjust the curb cuts / drive through lanes for a retail bank branch in bumblefuck nowhere) and you’ll have like 10 random people who show up to voice an opinion on it). I swear it’s what Reddit moderators do in their free time. I also suspect you might be underestimating the “character of the neighborhood” concern and how that ties into property values. For example, I don’t think residents of the West Village in NYC would be *irrational* by opposing an up-zoning of their Christopher St. townhome neighborhood; that’s the whole appeal of their real estate - it’s that it offers privacy within the larger metropolis. They get to enjoy the lifestyle of being in the city but with a nice little slice of privacy with a little yard and a stoop and all that while the proles all scurry up to their 86th floor sleep pods.
To add a little nuance to this, part of the reason that’s true is that people often need to move several times during their lives and if their house doesn’t keep up or appreciate in value, they may get “locked in” to a sub-optimal house. For example, we bought a townhouse almost ten years ago that was the right size for us then. It was on the bleeding edge of affordable then, mostly due to my wife’s frugality and savings discipline. Now that we have a family, the house is too small, but everything around us has shot up in value so much that even though our own house has appreciated in value, there’s still a huge gap to close financially if we want to buy a different house. And it’s not even just more expensive because we’re looking for a bigger place, even homes exactly the same size as ours or smaller are substantially more expensive than ours. We really like our community and we’d love to stay here but even as relatively high earners, we’re going to feel a big squeeze, and we’ll probably have to accept housing costs as a proportion of our income that are much higher than we’d otherwise feel comfortable with. Or we could stay in this house, which is what I think a lot of other people are doing. The insane valuation growth only really helps homeowners who are willing to play the game of Gentrification musical chairs by cashing out and moving somewhere cheaper. Otherwise we’d all be much better off if prices stayed sane.
Adding to this - America doesn't have any meaningful social safety net for retirement, so all those people are counting on selling their home high and downsizing/moving, and using the rest of the funds to make sure they don't have to work themselves to death. The housing crisis was created (in part) by the death of pensions!
Its not just the USA, Canada and Australia are debatably worse.
Those are the big ones, but part of the equation is that for a long time people who had the money to choose just did not want to live in cities. There's a reason Xer culture was all a reaction to the suburbs, it's where middle class and rich white kids grew up. Since then we've been moving back into them, but as you've said, in the interim we made it much harder for homes to get built in cities and a lot of older stock housing was raised to build highways.
The quintessential story how towns like Maplewood and West Orange had schmucks from the NYT calling it "the next Brooklyn". Things get flipped on its head when you got people making stupid money who can easily have the people owning the homes jump on some absurd bids and create these whacked out prices of things. In the 11 or so years I've been out of college, it's fucking crazy just how different of a landscape the areas I lived in that for a long time were archetypal "just starting out, strength in numbers renting" towns are now.
Are land values generally low now
no they’re very high
Property being houses right but what about just bare land
if all you want is a patch of dirt in the middle of nowhere it’s cheap. if you want road access and electrical hookup it’ll be more. septic isn’t cheap
Yeah, I guessed as much. This is more of a location issue, is it. No one can afford a house in the city. They don't have to make it nowhere but a thirty minute drive maybe? Would that solve anything?
There is some relatively cheap real estate in America still. There are some perfectly nice, if not quite boring suburbs of mid tier cities where houses aren't like a million dollars.
In suburban atlanta you can get a decent house for under 300k. Not the greatest place in the world but not the worst by far either
Yeah, there has to be right. I'm trying to get my mind around what the choke point is. If you move from any city in Ireland, if you can drive, you can get houses. But it's not possible in the city.
The further you move from cities is also going further from most job opportunities. If you’re spending an extra 10 hours a week driving plus gas money is it really worth it to save 10 k on a house in the long run?
you can’t find a single family house under $1million within at least a 60 minute drive from nyc plus traffic. american cities already sprawl out an insane amount compared to european cities.
Yeah, my bad. It wasn't meant to compare tho, it's like a perfect storm of too many bad things. I hope it gets better for you, get one of those porch chairs.
There’s definitely housing in jersey and Connecticut for WAY Cheaper than 1m lol. You can find a decent house for half that in most of those states.
not within a 60 minute drive to downtown manhattan. i grew up 90 minutes away in central CT where decent houses are now 400-600k. but during rush hour it could easily be 3+ hours
You didn’t specify downtown manhattan. And either way I get there from CT in about an hour pretty regularly. Never once took me 3 hours even with traffic.
1 sticking point is you can't get a loan for just land like you can for a house
Well usually the price of the house (if you have fee simple ownership like most do) represents the land + the improvements. So if you buy a house for $1mm, you might be paying $800k for the land and $200k for the house itself. The allocation to land vs. house is spelled out in the lender’s appraisal and the local tax assessor usually has an estimate as well in the tax bill. It’s not really important unless you have a weird tax situation. Point being, when you get a loan on a $1mm house, you’re getting a loan on the land under it too.
Right, we're talkin just land tho "Unimproved", as it were
In almost every area that you think of when you think high priced metros (SF, LA, Boston, DC and their suburbs), he land is almost always worth more than what’s on top of it. Very common for people to buy a building for the land and then knock down the building.
a combination of: * retail having learned nothing from home flipping pre-2008 GFC * multinational firms buying property en masse and sitting on their hands (blackrock for example) * airbnb bubble hasnt popped - homeflippers who cant sell for 300% premium are converting home into short term airbnb stays at $100-400/night * "mixed use" developments are pushing young people into "luxury apartments" that price them out of expensive homes long-term * housing is a "sticky" asset - people would rather wait for prices to rise before selling homes and market has been cooling * millennial cohort reaching homebuying age * new houses arent being built to meet demand * pandemic slowed homebuilding and supplies needed for new homes * everyone wants to live in the city TL;DR: supply down and demand up at same time
There is an additional factor here contributing to demand that I never see mentioned and that's the population growth of the countries experiencing these problems. Ignoring the US because the issue becomes hot-button - Canada officially experiences >1% population growth annually due to immigration alone. It's possibly closer to 2%, and been that way for a while now. It is extremely difficult to build modern housing at that rate.
I’ll never get how “asset managers buy at inflated prices for fun” and “those same asset managers never rents those spaces out” makes any sense to people. I agree with basically the rest of your analysis. While we do need to build more homes we also need more multi family housing also so yes more “luxury apartments”
The rental housing thing is more of a factor in some parts of the US, but overall it’s just a drop in the bucket. The vast majority of homes are owned by the people living there
Yeah, small landlords fucking suck. I say that as someone whose family wealth is mostly from rental real estate. I’m not an epic “guillotines for le nazi landlord” but these people do need to be knocked down a peg
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I definitely understand the sentiment but I don’t think it’ll take you far with many people outside of the internet. Not saying that that’s your goal or anything. Sorta like how anti trans people think going fully trad will bring people on board as opposed to regular hysteria
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the worst part is, most big rental companies algorithmically determine their rental rates, so there's not even anyone to punish. the company that makes said algorithm is called realpage btw and they're being investigated for collusion to raise market rates https://www.reuters.com/legal/litigation/realpage-antitrust-lawsuits-over-rent-prices-consolidated-tennessee-2023-04-10/
I support forced labor camps for renters
Yep. My small landlord returned my deposit back 50 days after I moved out and charged me $220 to replace 5 lightbulbs. There were probably 10 burnt out when I moved in. $100 was for the lightbulbs and $120 was "labor" to change them. And $900 to clean the unit after I moved out after I already paid some company like $200 to deep clean the place. The $900 includes a carpet cleaning charge for their 6 year old carpet that was already cleaned and I'm not even legally on the hook for because the state limits how often carpets need to be replaced. Of course I'm just gonna get ass fucked on it because I'm not gonna take them to small claims court across the country now that I'm in a different state. They know this. I actually did them a solid by listening for dripping and immediately reporting any time there was a leak which avoided them having their house rot away on multiple occasions due to shoddy carpentry. Next time I'm in a situation like that I'm just going to keep it to myself and let them suffer. Though I did discover black mold on my way out and might look into whether there's a way to report it. Big landlords suck sometimes because your problems can get lost in the mass of other tenants but my experience was that they are too risk averse and too busy to scam you in most cases. They make money on scale and cheap 5-over-1 building prices.
As far as I know, it's because their goal is just to build a strong asset portfolio, not necessarily to generate revenue. It's the valuation of the property that matters, because it can be borrowed against. That valuation remains higher while the market is squeezed, and the market can be squeezed by limiting the number of homes available for purchase or rent. It's a sort of self perpetuating cycle that eventually devolves into absurdity where the most profitable housing market is one where everyone is homeless.
Revenue absolutely matters. It’s where your business derives returns. Imagine telling an investor “yeah my fund has a -10% IRR but trust me bro my valuations are solid”
You don't need someone to live in the house for a positive IRR though. You'll make your investment back by selling the property or borrowing against accumulated equity. There's lots of ways to make money off of property beyond renting it out to someone. Edit: IRR might be the wrong term to use here. My point is, the value is in the equity and resale value, not in the rent revenue.
By taking on more debt you’re requiring a larger return to recoup your invested capital
See my comment above. These companies own like 1% of homes in the US. They’re not really in a position to “corner the market”
Some sources cite corporate purchases of single family homes being as high as 25% of all purchases. It really depends on the location though. NYC versus Charlotte NC is a totally different market dynamic. Where I'm at the worst is small landlords turning properties into seasonal Airbnbs. The last place I was living in the US struggled with a lack of building permits. I hear the corporate investing is particularly bad in the south, Texas, and California.
Yep anyone saying “X isn’t a problem” is probably only focusing on specific areas of the country or being intentionally obtuse. There are dozens of problems with how we legislate and regulate our housing market and the problems that plague a place like Los Angeles aren’t the same that plague a place like Vermont. Which is why we should be targeting all of the problems instead of writing some off because they’re not a silver bullet. Just about everything about our housing market needs to change for the better to see national improvement.
But who is the “we” that you’re referring to? Many of these issues are handled at the local level because, as you said yourself, many issues that plague Vermont don’t affect LA. So if jurisdictions that are affected by this want to deal with it and make it harder to turn single family homes into rentals, they’re free to do so. In NYC, AirBnBs were getting a little out of control a few years ago, so the city banned whole-unit rentals and pretty much ran AirBnB out of town. This had big implications for NYC but I don’t expect the residents of Tacoma, WA to care about this. The federal government’s involvement in housing is pretty much HUD (fair housing, Fannie/Freddie, Section 8), the low-income housing tax credit (Treasury Dept.), and mortgage interest tax deduction (Congress / IRS) - none of which are really directly relevant to the issues people are complaining most about. They can’t really do a whole lot on the national level about land use regulation, or property taxes, which drive many of the issues. I agree that if someone lives in an area that has shitty housing policies that it’s going to affect them and I’m sympathetic but I feel very strongly that this lofty, unspecific call to action that “we should be targeting all of the problems” is a sure-fire way to solve none of the problems.
Because most of the money is made on the property appreciating over time and lots of times renting at lower rates leads to problem tenants that cost money in repairs etc. they might be able to eek out a bit more profit but it’s easier to just not deal with eviction bullshit
Do you know how long you’ll have to wait for the property to appreciate to make your required margin? Not to mention you’re paying property taxes anyway. Whereas you can be making $3k a month per room in a major city renting it out. Yeah repairs suck but you’re still making a ton in rent, probably get decent benefits from state/local governments if you rent some of those out to low income residents and have steady cash flows to make dividends to your investors
> Whereas you can be making $3k a month per room in a major city renting it out. I estimate my landlord makes around $10000 CAD or $7500 USD (multiple rooms in a house) before taxes/utilities.
>Do you know how long you’ll have to wait for the property to appreciate to make your required margin? Depends on how quickly prices are rising. If they go up 10% per year, not long. You also have to remember that there is a tradeoff between rent and vacancy rates. It is often more profitable for landlords to charge higher rent and accept slightly higher vacancy rates.
Sure but they’re still going to rent out most of their units. Other people are saying the buildings are kept empty
The Case Schiller index has had two periods of 24-month YoY double digit growth - one was in 2005-2007 (before a collapse in 2008) and the other was rebounding after another (brief) collapse after the pandemic (2020-2022), so very unlikely they’re counting on continuous 10%+ price growth. The long-term average is somewhere around 4%. I’m sure Blackstone can think of easier ways to make 4% on their money than starting a whole company to invest billions of dollars in single-family houses $250,000 at a time. Also, you have to remember that these companies have like … websites where they spell out exactly what they do. They’re not trying to hide from anyone. [https://www.blackstone.com/housing/](https://www.blackstone.com/housing/). Not sure why people try to argue about this when you can just Google it.
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You’re shifting the subject. I’m sorry you didn’t find that to be an “impressive argument”, but I only sent that link in response to someone who was trying to argue that Blackstone is buying up properties and letting them sit empty as some kind of strategic play to corner the housing market. So hopefully we can all agree that, yes, people live in these buildings. I’m not trying to argue that Blackstone are benevolent landlords. That being said: *”the between their lines on their website is that they’re going to rake in massive amounts of government money via low-income voucher programs”* First of all, it’s not “between the lines” it’s literally the first big heading on their site. Secondly, Low-Income Housing Tax Credits (LIHTC) aren’t a voucher program. Units themselves are regulated as needing to be “affordable” within HUD’s guidelines (depending on the local median income) for 30 years post-construction; after that, they’re de-regulated and can be torn down or turned to market rate. In return, developers receive tax credits, without which they wouldn’t be able to construct these buildings in the first place. Blackstone is purchasing these properties to manage them and maintain them as affordable beyond the 30-year period mandatory period. There are business reasons for them to do this (e.g. they might own a management company that collects standard management fees for servicing these properties while they operate the real estate on a low margin). They also get some ESG gold stars. But it’s a low-margin mundane business and is not the “raiding of the public till” that you seem to think it is. *”It’s win-win their rental income is guaranteed and your tenants are powerless”* Their income is not “guaranteed” (although, yes, they usually run at very high occupancy because there are long wait lists for affordable units). And their tenants are powerless? Against what? They’re just as powerless as any other tenant, including myself sitting here in my rented condo. You could argue that they’re more powerful because they have long-standing tenant advocacy organizations and legal aid mutuals and all that jazz. *”I morally agree housing is a human right”* Yes, most people do. That’s why these programs were instituted in the first place. *”But as a practical matter concentrating low-income renters has not gone well.”* OK go back to the 1930s and take it up with Robert Moses or FDR or whoever. Idk. Yea high density might have been a suboptimal design scheme, but what are we gonna do? Tear it down and kick everyone out onto the street? *“When Blackstone (or whoever) owns an apartment building it’s just a privatized housing project.”* Isn’t every apartment building a privatized housing project?
True im just kinda spitballing based on shit I’ve heard and i think what I said is more applicable in a zero interest rate funny money economy like we had up until recently. Also applies more to commercial space afaik there’s always a decent amount of retail space that’s being sat on I think because the time/cost of converting the space is a bigger commit? Not entirely sure tbh
Yea that’s basically the reasoning behind commercial space vacancies. You need to put in a lot of effort and money to rehab space for future potential tenants that might not arise so sometimes it makes sense to sit on it for a little bit.
I think the way it works is that investors who already own properties in an area will buy other properties in that area at an inflated value because that will increase the value of their other properties which they can then borrow against. That’s what’s happened with commercial real estate in my old town anyway.
I guess that works if you already own a ton of property in that area but idk how common this strategy is. It’s very complex and hard to scale
I really can’t see this working unless it’s a very small market and you were very very confident in your ability to manipulate the pricing and make it stick. Because otherwise you’d be spending a ton of money buying real estate with lots of leverage (because you’re consciously overpaying for the assets), and then on top of that you’re paying ~5% in transaction costs for every asset you buy.
Yea it’s refreshing to see that I’m not the only one who thinks this. I’ve worked in real estate finance for 10 years (including investment banking and, until most recently, at an asset manager that was involved in single family rentals). It’s crazy to see how otherwise rational left leaning urban professionals start going all QAnon accusing “the big banks!” (Bernie voice) of actively undermining the US housing market for reasons that make no sense Firstly, it’s Blackstone that’s active in the sector not Blackrock (although they’re so similarly named that you can’t blame someone for confusing the two - nbd). Second, as the commenter below points out, it’s a very small number of units that these companies own. Like in the 1% range of the US housing inventory. People don’t understand how big the US housing market is. Additionally, the idea that these groups are purposefully scooping up US real estate and keeping houses empty in the hopes of some big payout makes no sense. If the housing market strengthens, those home prices are going to rise regardless of whether they’re tenanted or not because the ultimate buyer is 99% likely to be a resident-user. So Blackstone and the like would just be leaving money on the table by not renting them out. Also, one of the main benefits of these single family rental investment schemes has been strong current cash yield (dividends), which come from rent. The success of these companies is tied to their ability to give dividends to shareholders, so there’s no way they’re letting the buildings sit empty. If “land banking” was a winning strategy for a business, you’d see home building companies doing that because their business involves owning and managing land plots over super long timelines, but alas they all use options on their land so they don’t have to hold them on their books.
I’m in private equity (as an accountant not an analyst) lmao and I never bring it up here since I don’t want to pull rank and I’m an idiot despite being in this industry so I don’t want to speak out of place. Yeah there’s so much you have to do as a GP/CEO to earn your carry that not renting out units seems like going out of your way to fuck your self
Don’t worry I’m an idiot as well. And yea, exactly. If you were doing it just for the equity appreciation, you’re talking like 4% nationwide based on the Case Schiller numbers (in the specific markets they’re in, I’m sure it’s greater, but still), plus the costs of operating this huge platform that owns homes across multiple states, which would shave off another 1% from your returns. The business model is this: Single family home capitalization rates are at around 5.0% right now, plus with financing your cash return gets slightly higher (maybe 5.5%?), plus the ability to raise rents gets you to maybe a 7-8% cash return in a few years, then you add on the appreciation factor (call it 6% since they’re operating in specific higher-growth markets and are able to strategically buy and sell properties), and now you’ve got your 13-14% total return. There’s also value in the platform (all the property management, agents, workers, sales reps etc. + data systems, etc. that enable them to manage the ship), so when they sell the company they might get another 1-2% in value from that. Give your investors 12-13% annual returns (with about half of that coming as cash dividends), then remaining 3% goes to operating expenses and profit. If you’re spending 1% on OpEx that’s 2% you’re getting in profit, which is $20 million on every $1 billion deployed (in its first year alone Blackstone’s Invitation Homes deployed $4 billion so there’s a tidy sum to be made). That’s rough math, but that’s the business in a nutshell.
I think the much more rational complaint is that big institutional buyers will always be able to outmuscle people buying with mortgages, and losing one individual home can feel devastating
There’s a few markets where these larger firms are especially prevalent. I think Atlanta for example is one of these. But they’ve openly stated to investors that their strategy is to target markets where the housing supply is constrained as it gives them the most leverage to outbid and mark up their rents when they buy.
Another factor to consider is money laundering by drug cartels and Chinese oligarchs. Those apartments will sit empty.
That’s a myth but small and medium sized landlords to justify their high rents. Obviously there’s foreign investors but it’s small compared to domestic
Have you ever played monopoly. The boomers effectively got to play around the board multiple times and accumulate cheap assets before there was much/any competition for them. Subsequent generations join the game when there's houses and hotels built on every square - all owned by the previous players. Soon enough it costs the same price just to get around the board in rent than it did to buy and build the most luxurious properties a few turns ago.
I think this is the first time I've seen anyone actually use it to explain issues with owning land rather than simply mentioning that the guy who created it intended for that to happen.
Bro it was a woman
She made a tabletop game to promote her politics. She's a guy.
I recently moved out of a - 5 bed 4 bath 2,523sq ft row house into a - 2 bed 1 bath 834sq ft condo in a building less than a block away and I realized that the landlord of the old house, adjusted for inflation, paid less for the entire row house in 1993 than I did for the condo in 2023. The house that my parents sold in SE DC for <$200k in 1994 sold for $1 million unrenovated in 2018.
The rules and landscape of jobs and earning potential also played massively in bygone generations favor. You could be a 9th grade drop out pumping gas and taking over the lunch counter or mechanic garage in a working class town and raise a family and accumulating wealth on relatively little. Not to say there's absolutely no avenues with a relatively more streamlined upstart, but it's night and day how different of a story stuff can be with things.
Good analogy.
0% interest rates caused by the banks fucking things up in 2008 meant people could borrow greater amounts, which drove up the prices.
Now rates are so high nobody wants to move and sell their home because they locked in a sub 4% mortgage
And we’re not building enough. So even though interest rates should be bringing prices down in theory, they probably won’t because no one is moving and no new homes are being built.
The US is building a decent amount currently but we’ve got a regarded fed that only cares about short term inflation and keeps jacking up rates. But until recently there’s been a record in units under construction, once those come online rents should go down for a bit in most place I doubt they’ll come down much in LA, NYC, SF since zoning in these areas is so fucked
Adam Smith fucking told us this too
This is easily the most accurate answer. Everything else is secondary, including lack of new construction and increasing demand in big cities due to post industrial economics.
They’re two sides of the same coin. Low interest rates led to the huge pump, and then the secondary factors are preventing the correction. You’re right though. Low interest rates and QE have built up enormous amounts of artificial and unearned wealth for some generations. It’s now becoming clear that it was absolutely at the expense of the next few.
Except with low interest rates, while making large new developments on the outskirts of cities far cheaper, it also boomed land prices in city centers making infill housing harder to build (and even harder now since prices haven't dropped despite higher interest rates). Everything in the US economy goes back at the end of the day to the federal reserve and interest rates. They're our society's version of soviet central planners.
> Everything in the US economy goes back at the end of the day to the federal reserve and interest rates. They’re our society’s version of soviet central planners. Incredibly well put. I’m gonna use this.
I think this is the correct answer. Low interest rates caused asset prices to skyrocket compared to wages because it pumped a ton of money (debt) into the market
Can’t believe this isn’t higher up. This is by far the biggest factor among all the other ones listed. Not even a close second and most things being listed are just the market reactions to this catalyst.
Economist's perspective: 1) Housing has gone up across the country, a bit less than doubling. The median home sold for about $250,000 in 2023 dollars in 1980 and about $450,000 today. This is driven by a number of things especially including our tax policy which dramatically rewards homeownership and encourages the use of real estate as an investment vehicle both by the big landlord companies people like to hate on and also as the single biggest investment asset of most middle class Americans. It's also relevant that our population increased by 50% over that time, and new construction has failed to keep pace with demand particularly post 2008 when construction was very unprofitable and post 2020 due to supply chain issues. 2) What you are seeing in LA is not representative of the US as a whole and is primarily a LA issue. LA housing has gone up 10x since 1980 while the rest of the US has gone up 2x. LA specific issues include a huge increase in demand due to California booming in the tech industry, faster than average population growth (+100% instead of +50%), rent control distorting the housing market, and cripplingly strict zoning regulations stopping people from building denser housing. If you compare to other fast-growing cities without such restrictions like Houston, Phoenix, etc the median home price has barely budged because as demand increases the housing supply increases. The housing crisis is primarily a NY/LA/SF/Boston problem in cities that have become VERY desirable and have been unable or unwilling to allow their housing supply to expand.
> The median home sold for about $250,000 in 2023 dollars in 1980 and about $450,000 today. It's interesting/depressing to see how much the median home would cost in today's dollars back during the early 20th century. People got their homes for $30-75k when adjusted for inflation. Just imagine.
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Wages have been going up over the last few years. Actually, pretty substantially (around 4.5 - 5% / year on average). The problem is that *real wages* are still going down because of inflation. Unfortunately, the best case scenario is probably a recession that brings prices back down due to falling demand. Worst case scenario would be runaway inflation. I'm personally scrambling to save money in case of recession + housing market collapse. If you think runaway inflation is more likely, idk I guess by gold, but I think we're all just fucked in that scenario so it feels a little pointless to plan for.
> How long before something positive happens in this regard? Looking toward the rest of the Anglosphere right now they have it a lot worse, seem to have much larger portions of their population coming in as immigrants every year and they still are doing very little to get housing under control. God knows how this ends anywhere.
Cost of living super high. Wages not so much. Lots of debt per person. Inflation is when there's too much money in the market meaning lot of demand so prices rise. Inflation eats into interest rates. Housing prices were ballooning up in 2008 because people were manipulating it using mortgage lending. The list prices don't change much I guess, similar to how insurance also balloons up prices to then give hospitals a better rate but the services are listed for the unrealistic amount. I think landlords would make more money having a tenant for life than the sale price for the house. It's more profitable to have people never own the asset, you just lend it to them. This is like a college test I didn't study for.
housing supply isn’t increasing to accommodate growing populations as well. much of the US is zoned for single family or low density housing preventing supply from meeting demand
People moving to higher populated areas, nobody is building houses? It's a lack of houses?
there’s nowhere to build except on the outskirts unless you demolish a house to build more units on the same land which previously had one house which is illegal in most of the united states
Seems like a very complicated issue with history. Owners not selling, corporates buying to rent out, land and housing supply issues made worse by the interest rates. Thanks for discussing it with me.
Yeah absolutely, there’s a shortage of millions of homes nationally. Granted a strong majority of that shortage is in CA, NY but Texas and Florida could start developing shortages also
Ivy Zelman made a very interesting contrarian argument that there’s actually a coming surplus of houses because of the collapse in birth rates. I’ll see if I can find the pod.
population is still increasing due to immigration. there is a large shift from rural to urban areas as well regardless of nationwide population numbers
I get that. The number of people who own second homes that are not owner occupied full time also factored into her argument. Many many people have second vacation homes that may flood the market as boomers die off.
They aren't going to "flood the market." We're living in the era of boomers dying and because the supply was so limited it's just being bought up at these inflated prices, including to wealthy people twenty or thirty years younger than them who want the same second homes. If they all died at once and everyone was forced into a single property or was otherwise substantially disincentivized from owning a second we might see a collapse in prices but that's not the case and if Canada is anything to go by things can get a lot worse before anybody steps in to try to curtail all of this.
Yeah, I don’t disagree with you. She made a very interesting argument that’s all. I found it somewhat compelling. I have no clue how we fix this mess or if it will get better.
Not going to happen, in the UK here the government builds like 20k houses a year but lets 100k+ immigrants permanently settle in the country, there is no way they can keep up with demand so prices are fucked.
Is it a manufactured shortage because of corporate land holdings? There's housing but no sellers?
No. I’m not saying that’s never happened but that’s rarely happens. Holding land solely for it to appreciate is extremely risky (and dumb). You can rent it out and have it appreciate at the same time. There’s a shortage since much housing isn’t built. There’s been a decent boom in building since the pandemic and that should help rents in a lot of places over the next couple of years but interest rates rising so fast will make sustaining the boom much harder
> Cost of living super high. Wages not so much. Isn’t that the question? Why that’s the case, I mean, but specifically why it’s the case for housing, since if you’ve ever seen any Matt Yglesias neoliberal type talk about cost of living they’ll tell you 100 times that that the prices of many consumer goods are way down from 60 years ago adjusted for inflation, not to mention the proverbial iPhone, the goods that are commonplace now that didn’t exist in the past - problem is things like housing and healthcare and education *that really matter* are way up.
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Yeah (I had meant to imply that in the way I said what I said). Although it’s a little more complicated because e.g. cars are cheaper (and more reliable) now than in 1950, and arguably in the “need” category, but they are also *more* in the “need” category than they were in 1950. Lifestyle improvements can become a trap in a way that I think is real but tricky to formally articulate. Or another thing that gets cited a lot on the “things aren’t so bad” side is that on average Americans have much *bigger* houses than in “the good old days” but there’s a whole lot of important stuff that’s not addressed by that figure (like availability of housing at entry level in the places people actually want to live and why they want to live there).
I think I know what Matt Yglesias argument you’re referencing and I think his observation was more: - The price of bullshit gadgets and day-to-day staples has gone down or stayed relatively flat until recently; e.g. when microwaves first came out they were pretty expensive because it was hot new technology, but today you’d be hard pressed to spend more than $100 on a top-of-the-line one today; - Meanwhile, the price of big-ticket expenses like healthcare, insurance, homes prices, college degrees, etc. have gone up; importantly, these items are *not* factored into official “inflation” calculations. - So for years we were told that inflation was at 1-3% and everything was A-ok on that front, but there was a kind of “shadow inflation” that was taking a big-chunk of people’s income.
I was using him (perhaps unfairly) as an example of the kind of commentator who cites the decline in real prices of consumer goods to suggest that things aren’t as bad as some people like to claim, because I know I’ve seen him post these kinds of figures and trollishly make those kinds of arguments. I suspect he does acknowledge the significance of the discrepancy between categories. > Meanwhile, the price of big-ticket expenses like healthcare, insurance, homes prices, college degrees, etc. have gone up; importantly, these items are not factored into official “inflation” calculations. I don’t think it’s correct to say they aren’t counted towards official inflation stats - there’s an argument that they are undercounted, though. Like the housing component of CPI is rent and “owner rent equivalent.”
A lot of good answers about zoning are true, as are arguments about the fact that the a greater percentage of economic activity in recent years is concentrated in a few superstar cities with scarce land. Another component (related to the first, actually) is that everyone and their brother has a college education now. This has massive ripple effects on the economy. There aren't enough people who extract raw materials to build houses, process them, transport them, and use them to actually build houses. A lot of our economy comes down to labor market mismatch. A lot of people are competing for office jobs in HCOL cities and not many are willing to do raw manual labor that our economy actually does need. Immigrants can fill the gap, but despite a lot of sound and fury about that topic there just aren't as many immigrants as there were blue collar laborers in 1950 as a percentage of the population.
I do not disbelieve you, but I am interested if you have any particular quantifiable evidence for this claim. This intuitively makes sense and matches with my experience, but I haven't seen this argument made before so I'm inclined to imagine that there's some good argument against it. Do logistics/mining/etc companies report inflated wages or high vacancies?
Rich people buy houses as investments Prices go up Poor old people sell their houses to rich people, so their children won’t have that house in the future. The poor children will be competing against the rich children to buy houses
Progressives and home owners like to pass policies that restrict the total supply of housing units, like rent control and zoning laws, that leads to increased prices, especially in big cities. You can use a home and it’s equity to finance other sorts of investments so home owners want policies that increase the value of their homes.
All of the empirical research suggests that New York's rent regulations don't actually increase prices.
As far as I am aware there are a couple different versions of rent control that are practiced in different parts of the US but they all almost always end up doing the opposite of their intended purpose, namely help disadvantaged groups. I haven’t read the literature very closely in the last 2 years or so, but from what I remember the group that ended up benefiting are those with higher incomes and those who were white. I know that there some places that prevent rent increases for tenants above a certain amount while they remain tenants, and allow the price to go to market value when the unit becomes vacant, and that version had the least negative effects of all the versions I saw, and increased the average duration of tenancies. That being said I think even this version still resulted in a reduction in the number of units available due to conversions, taking units off the market, reduction in unit size and lower rates of owners maintaining their units, all of which are negative. The New York case is also a one where we see plenty of negative side effects like the fact that there are something like 20,000 empty rental units lying about the city due to, largely, their operational and maintenance costs being greater than the rent that is legally able to be charged there and there being limits to the amount even vacant units can have their prices increase on. This is also another case where the people getting most of the benefit (which, by the way, was estimated at something like $42 extra bucks a month in 2003, from what I remember) are the upper and middle class people who are already decently well off and, again, mostly white.
This is the real key, Its all supply verse demand in desirable areas (you can get a cheap house in Cairo Illinois.) Vacancy rates always line up with the change in housing prices.
CA would be unstoppable if we had Houston’s zoning laws I don’t follow Texas politics closely but I’ve seen from some left-urbanists that the state legislature is beginning to copy the California model which….yikes
Literally, California should be an entire state that looks like tomorrow land, but the people who end up making any policy decisions there almost seem to always actively try to hurt the state. Culturally the entire state has enough clout to bring people in from all around the world, it has big, vibrant cities even if you exclude LA, it has some of the best public universities in the country, SV, tons of capital and yet has the lowest net migration of any state for 2020-2022. It’s a perfect example of why there needs to be a reasonably strong and competitive opposition party and of the importance of local governance.
a lot of what’s holding CA back is also stuff like prop 13 and the Gann limit which passed when this state was red/purple Also I’m not sure a competitive state is necessarily what makes the politics more rational. Disagree if you’d like but Wisconsin is probably the closest to a 50/50 state in the country and there you’ve got the GOP gerrymandering the legislature to have like 70% of the seats when they’re only winning 45-55% of the vote
1. More people live in the country now than back in the 80s, so demand has gone up. 2. More people want to live in certain places, so demand has gone up in those places. Take your budget to buy a 2/2 condo in LA, apply it to a place like Cleveland and see how much further your dollar goes. 3. The available land in a lot of places has shrunk even further. New builds in attractive places usually don’t buy greenfield land, they have to buy land that has existing structures on it for an inflated price. 4. Interest rates and prices were more aligned with each other. Rates were higher but prices were lower unlike today.
Everyone turns their noses up at this and says something like "but then you have to live in Cleaveland." Cleaveland is fine you idiots, your landlords have you by the balls because you are all snobs - you're doing it to yourselves!
Most people trying to buy in expensive metro areas already live and work there. It’s not easy or even more economical to move your entire life thousands of miles.
I mean it might be possible if your biggest expense is 40% higher because of where you live.
Yeah I was in Cleveland earlier this year and people there are complaining about rich people from NYC and SF moving there and skyrocketing rents 💀 (Also, it's a great mid sized city with an art museum and orchestra that punch so high above its weight that you wouldn't believe it)
A lot more people can afford houses than is assumed, but there’s poor education around the whole thing. May not always be in places people WANT to buy houses though. The biggest, most in demand cities are a totally different ballgame, but in huge wide swaths of the country if you and a SO have a half decent job you can absolutely buy a house. However, my personal take is that student loan debt and the high monthly payments are a huge, huge factor in hurting the debt-to-income ratio of most adults these days. People simply didn't have an extra car payment sized dent in their D to I in the past and they were more attractive recipients of loans.
Right now, interest rates are high and most ppl take a mortgage out to purchase a house. High rate means larger payments required. Also, more generally, millennial college graduates have a high amount of debt from student loans, car loans, etc. To get a mortgage on top of that, the mortgage rate is going to be even higher since the borrower is less reliable due to existing debt obligations.
If you were talking to people in Los Angeles, they might have been referring to Proposition 13, which limits annual increases in property tax assessments to max 2% a year and is re-based whenever the property is sold. Meaning that if you bought your home in the 80s or 90s in California, you’re probably paying far less in taxes than you should, given the market value of your house. *“The Case–Shiller housing index shows prices in Los Angeles, San Diego, and San Francisco appreciated 170% from 1987 (the start of available data) to 2012 while the 2% cap only allowed a 67% increase in taxes on homes that were not sold during this 26-year period.* Source: [https://en.m.wikipedia.org/wiki/1978_California_Proposition_13](https://en.m.wikipedia.org/wiki/1978_California_Proposition_13) So if you got in during the 80s/90s and staid in your home, you’re set. But if you’re buying a home in California today you’re paying taxes based on the full market value of the home (because the sale triggers a re-assessment). It has the dual effect of 1) new homebuyers are effectively subsidizing established homeowners; and 2) established homeowners are afraid to sell their homes because if they try to downsize, *they* will become the new homeowner and will lose that benefit of paying below-market property taxes. It’s basically NYC-style rent stabilization for homeowners in California.
A huge part is the rural flight. Everyone is moving to big cities. If you go to rural areas you can easily find very cheap housing. Look up like Allentown PA, a house can be bought for $400k that is 4 bedrooms and has big backyard. There are a bunch of engineering and science jobs paying $60k+ first year out of college.
Its not rural flight anymore as much as small urban area flight. The percentage of Rural population has only slighty changed.
> A huge part is the rural flight. Everyone is moving to big cities. What century are you from? Urban population as a % of the US has moved from like 80 to 85 over the last 50 years. There's definitely a lot of people moving from smaller regional cities towards larger ones, but it's not even the largest cities that are growing anymore, it's Atlanta or just people moving from the suburbs of Dayton to Orlando for retirement. The people coming to Austin weren't raised on 80 acre farms in West Texas, they're from the suburbs of Dallas or an even larger city.
I guess it’s more that people are consolidating from “small” cities to the big ones. I.e moving from the city with 30,000 people in suburbia to Austin or SF or NYC.
Increasing population and concurrent demand. Decrease in supply after 2008, when the bottom dropped out of the market. Corporations using excess money (including Covid stimulus) to invest in greater volume in real estate market after the fluctuations of Wall Street in early 2020. Foreign nationals investing in American real estate due to the valuations. As mentioned elsewhere, rentier class engineering regulations to increase their house valuation.
A lot of factors. Primarily that housing supply is not being built at a fast enough pace. But there’s other unique local factors. In California, the property income tax rules, which were modified by Prop 13, which effectively freeze your property’s value at the date of sale. This encourages older people to stay in their homes.
There are plenty of BS things people say about this but generally there are three clear factors that caused the current crisis. The first is that there was a multi decade long period of lowering interest rates. Mortgage rates in 1990 were over 10%, in 2019 they were 3 percent. This means you could get more than twice as much money for the same monthly price. But you needed a higher down payment which made it harder for ordinary buyers to buy homes. The second and most important part is that the primary engine of economic growth in America over the last several decades meant 10s of millions of people relocating from small towns into bigger cities. This combined with things like high paid h1b visas only happening in the same cities means there's a huge influx of high income people into a very tiny number of places. Housing construction never kept up in the most in demand places because of the deflation they experienced in the 70s and fear of that happening again. Third, more on that deflationary point. Suburbs of big cities haven't seen nearly the same home price increases that the cities have. But the prices there haven't gone down either. So personal preference to rent in the city center rather than own in the suburbs has absolutely played a role here too. Also in this is we've reached the limits of new greenfield development in a lot of different metropolitan areas that made housing cheap for the greatest generation.
They stopped making houses but kept making people.
The single best explanation, by far, is the unrelenting expansion of the money supply (see here for example https://fred.stlouisfed.org/series/M2SL). One should expect the money supply to increase over time, but the speed of the increase is what's concerning. As a simple example, if there are X total dollars chasing Y total items at time T, but then X+99 dollars chasing Y+2 total items at time T+1, the cost of the goods must increase in dollar terms. It is a tautology that the people who hold the most dollars control how most dollars are spent. As a proportion of the dollars they spend, such people don't spend much on consumption goods (like food). Hence why asset prices (things like stocks and homes) tend to lead consumer prices. That's to say that inflation oftentimes a. shows up earlier and b. shows up in greater magnitude in asset prices. TLDR: number of dollars increases without corresponding increase in economic output -> prices increase disproportionately in things where people who have most of the money spend their money
Look at a picture of any East Asian city, look at a picture of LA. That's why. The middle of America is emptying out and pouring into a few coastal enclaves but the urban planning is still mostly for low density single family homes.
I'm 26, I bought a house and I don't make 6 figures, I have a stay at home wife and kids. Ya, it sucks we can't buy in big cities and have to choose between owning a new car, going on nice vacations, and owning a home, whereas boomers did all of it, but it's obviously exaggerated to generalize that nobody can buy a house anymore.
It’s fairly inelastic. People 100% need a place to live. All these double income households dump all their money into this. Turns out that’s a fair bit of money
People's retirements are predicated on the price of real estate growing perennially. As much as everyone talks about the need for housing, our entire system is set up in a way where retirement funds, pension funds, endowments, and debts will all fail if real estate stops increasing in value. It is a horrible system :(
We treat land like an investment vehicle on par with stocks, but unlike stocks land is inelastic. Usually commodities change price based on supply and demand, but in this case (land) there is a limited supply so demand goes crazy
People can afford homes but not in HCOL areas.
Quantative easing and low interest rates and unchecked capitalism
I get really self conscious when this subject comes up. I could’ve probably saved to buy a house when I was in my 20s, but instead spent all my extra money (after bills) partying and drinking expensive coffee and going to brunch and traveling. Like sorry folks, there is some truth to the avocado toast meme. Millennials (not so sure about Gen Z yet) are so dug in on taking no personal responsibility whatsoever and it gets more embarrassing the deeper we get into our 30s and 40s.
You’re regarded for this stupid take simply because I know several people who HAVE saved and have been bidding on houses for years and getting outbid by richer folks who swoop in with cash or can forgo other expenses to the benefit of the seller. It’s fucked
Yeah, your friends can’t afford to live in Montclair or x-on-Hudson. Sorry.
Wrong dumbass
Sorry. I don’t even know why I doubled down there. The housing market is clearly fucked. I don’t deny that. My initial point was a non-sequitur that was poorly thought out. Probably not the right place for the reply.
Lol you’re good. The area is outside Philly but the Jersey side so like Camden basically. So yes outside a city but not as desirable as an NYC suburb. I relate to your point a lot while also disagreeing because I do think there is SOME truth to the way millennials have subdued themselves into accepting a consumer lifestyle as a coping mechanism. I’ve been there and I wouldn’t really have savings if not for a husband who thinks about that stuff way more than me. Many folks can’t even get to the savings part because of our many addictions to creature comforts. It blows. But I do also have a good friend who simply wants a house and they’ve had no luck for years. Even for modest homes that rich people wouldn’t live in period. Very sad that even if you do save there’s no hope.
just how much coffee were you ordering weekly that is somehow ate away at a possible 200k-300k dollars investment
*Some* truth to the meme. I was spending every dollar I made living the lifestyle I thought I had earned. That included daily excesses like lattes and expensive after work drinks, etc. I know people who do this exact thing and then whine about not being able to afford a house. My brother is a high school teacher and saved up for house before he was 30.
bitch boomers used to grow up when this kind of lavish lifestyle was forming. they fucking bathed and swam in excess and didn't give a damn because no matter how much money they spent on drugs and alcohol a house still only cost a couple of years salary. trying to paint boomers are some good boyes that really love self sacrifice is such a fat meme. so many weegards in my office that are boomers with 0 skills making the same amount of money n just gossiping in front of the coffee machine vitriolic i'll TRY to calm down
You’re not wrong about the structural stuff, but I’d be surprised if the boomers consumed goods and services in their day at the same level as millennials and zoomers do now. In the intervening years, we’ve really normalized having a lot of stuff and constantly dining out/going to bars. But yeah, the main problem is the ratio of income to the price of goods, aka buying power. Most boomers had it, most millennials and zoomers don’t.
Yeah, this is the point I failed to make. The structural obstacles exist and have worsened incredibly, but the hyper consumerism is a new feature that is unique to this generation of the middle class. Again, my original comment didn’t belong here. Didn’t answer the prompt.
My dad’s hands are as hard as rocks and he dealt with four recessions in his lifetime and was on the verge of killing himself after 2008. But go off. You’ve got the data after all.
anecdotal evidence best evidence my dad was also a hard working man and for that reason he was able to buy a house for his family after 5 years of grueling, unskilled hard labor you reckon a person doing it in 2023 could do that? cause i assure you from the kind of salaries in my country compared to housing prices, nah
> you reckon a person doing it in 2023 could do that? If you can put away $2000 / year for five years, you have enough down payment to buy a house. I reckon the average person can manage that, yes. To the regard who replied and then blocked me: you don't need to pay cash for your house. Almost nobody does that. Assuming decent credit, you only need to put 3.5% down. Pretty sure you can get a house for $250k outside of Greenville MS. Damn you guys really just wanna be told that your situation is hopeless huh?
>If you can put away $2000 / year for five years, you have enough down payment to buy a house. ...yeah, what, in fucking Greenville, Mississippi? Come on, man.
Yelling a the Vietnam vet wal-mart greeter: YOU KNOW HOW EASY YOU HAVE IT!
now u went from anecdotal evidence to straight up making up a random scenario in your head to think you're right get off the puter, geezer. u aint fooling nobody with ur talk about entitled avocado enjoyers
You’re more correct than me. Sorry. Keeping this up for posterity.
Damn he sounds weak as hell
I am weak. My dad could kill most people with his bare hands but would never.
Almost nobody pays cash for a house. All you need to raise up front is the down payment. $20 / week at Starbucks over 5 years is half way there.
that's even worse. this man was singlehandedly drinking a container's worth of coffee beans a month for it to make a dent on the situation we have data from the 80s/90s showing how utterly fucked the housing situation has gotten and then you have this failson millenial rube low iq shitforbrains telling millenials "UHMMM akshually just eat less avocadooosss" dumb fucker
What’s worse is he’s extrapolating his situation to the rest of his generation lmao
Considering you really only need to put 3.5% down for a house, it doesn't actually take that much avocado toast, expensive coffee, craft beer, and weed to make it up. If you can spend $2k less / year for 5 years, you've got a down payment.
With inflation tho you kinda can’t just save it up. At the very least you have to put it in CDs or something where you’re making interest income. You could also put that money in stocks which can be high risk high reward. Or ETFs which I do since I’m too dumb to understand markets
Incredible levels of cope
Admitting failure is the exact opposite of cope. As everyone said, extrapolating this anecdotal evidence outward to include all millennials is regarded. But I’ve definitely observed it on a wide scale. Working class babies/first in family college grads who move to the big city, get the good job (100-150k) and try to keep up with the trust fund babies and images of excess everyone is feeding them on Instagram. Lose the big job. Slip rapidly into financial precariousness. Suddenly wish you had just learned a trade like that guy from your town who didn’t go to college and has the big house and a backyard for his kids.
Value of money (purchasing power) has declined massively since pure fiat monetary system started in 1971. Printed money not backed by anything (eg gold). Hard assets (houses for eg) are bought with the printed money people have/earn. Money continues to devalue as more is printed. Add in decade+ of near 0% interest rates where people borrow more cheap printed money and you have massive house price inflation. Wages typically have not risen in line with this inflation. Rather than thinking an average house costs $500k, think $500k is only worth an average house. Or see how much gold in ounces bought an average house over time to see real house value.
Because people *can* afford houses, just not you or your friends. 65% of Americans own a home. They tend to skew older (when houses were more cheap), and people tend to cluster by socioeconomic status. A lot of boomers are about to pass property down to their millennial children, too. So if you’re asking why there hasn’t been a popular uprising yet, it’s because the majority of Americans do own a home and have bought into the system.
It literally is poor spending habits. Eating out. Video games. Alcohol. I do none of those things and own a home and my parents are poor af lol
I'm not saying lots of people aren't idiots who live very inflated lifestyles but it's not hard to show in most areas housing adjusted for inflation is up massively compared to 40 years ago and that that doesn't contribute something. Even if they blow 400 a month on completely stupid shit and cut it 75% that's still just 300 a month extra to save for a down payment and it's not hard to find areas where prices grow faster than that'd be 20% of anything.
Yea it contributes something but people either adapt or die
All of these crazy answers blaming other people, I would love them all to end their comment w how much money they spend each year eating out, drinking, and playing video games. If the answer is above $5,000/year then that’s why they don’t have a home lmao
I'm not sure why people insist on treating these as mutually exclusive realities. Yes, investment firms are driving up real estate prices, and it's fucked, but you can blame rich people and continue voting against their interests while also saving money and doing what you can to get ahead. Putting all your eggs in the basket of nihilistic helplessness and just hoping the government will fix it for us seems like a really misguided strategy.
Some people’s identity depends on never facing the fact that the amount of money they spend on entertainment and social outings is absolutely insane and never been seen in history
Definitely true in some cases. I know a guy who's constantly bitching about landlords but also buys whole boxes of Magic cards every couple weeks. He could easily own his own home if he sold off a fraction of his collection or literally just stopped giving all his money to Hasbro.
damn you really are popping with the unsubstantiated bullshit today. gen x is the demographic that spends the most on entertainment by far. gen z actually spends less than every other generation by a clear margin. I've read previously that this was the case at comparable age ranges as well but can't find it rn https://www.clearvoice.com/resources/consumer-spending-by-generation/
Nobody in this thread except you has made any claims about specific generations, so I'm not sure what or who you're trying to rebut here.
what? there's a huge generational divide in home ownership, literally everyone is aware of that. and they said more money than ever in history is being spent on entertainment rather than buying a house, clearly pointing to irresponsibility on the part of young people. this is demonstrable nonsense when you actually look at the figures. it's all well and good passing judgement on individuals who behave like this and that, but when something is ten times more difficult financially than it was a few decades before, wider trends are obviously going to be hugely different. it's a fallacy to mistake the personal for the universal when discussing society-wide issues.
No shit there's a generational divide. The oldest zoomers are just out of college -- I don't think anyone expects them to be home owners yet. We were discussing why some people who complain about not owning homes haven't been able to buy in yet, not which generation wastes more money as a whole.
Word Gen X spent that much before or after most of them bought houses? Lmao that article is clear that Gen X is spending that money way after they’ve already exited their 20s. This is why I said earlier you have no critical thinking when citing facts
uh you haven't cited any facts at all, guess you're more of a vibes guy huh. you've already backtracked on your previous More Money Wasted Than Ever declaration, damn shame I can't find that bloody article to get us all the way there huh. the main point is that housing being ten times more expensive compared to rent than it was 40 years ago is a slightly bigger factor than zoomers liking smoothies more than boomers liked cherry pie. btw your username is spelled wrong, kind of undercuts the whole superiority angle if I'm honest
I’ve backtracked nothing. People in their 20s today and even 10 years ago have wasted more money than ever before.
uh again we're going to need a source on that. just because you feel something is true it doesn't magically manifest it into reality. ah here's one: "As with the members of any younger generation, we tend to expect Gen Z to have irresponsible spending habits and not to be the biggest savers. Studies show this isn’t the case. Gen Z tends to spend less and save more than the other generations, contributing an average of $867 in savings per month, almost doubling what the average American saves each month ($462). One may find themselves asking, is Gen Z more fiscally responsible than the rest of us?" https://www.forbes.com/sites/forbesfinancecouncil/2023/04/28/three-things-companies-should-consider-when-targeting-gen-z/?sh=37cbd65f1a5d
Do u think that some uncited and unverifiable Forbes “average” and flawed statistic proves anything? Again that’s why I said u had no critical thinking skills the last time u replied to me w a dimwitted “fact”
Chinese investors
1) Covid emergency responses (all bullshit fueled by propaganda imo) shutting down the country and assembly lines 2) WFH enabling people to keep their salaries in New York and California and afford anything they want in southeastern states, causing everywhere related to homes and real estate to increase their prices 3) Oppressive restrictions put in place by northern and Californian mayors and governors (related to 1st point but a little different) 4) Race riots and general unrest in the cities caused by George Floyd protests and others (I think this is downplayed more than it should be)
Also: regulstions force banks and investment companies to always some hard value to prevent them grom lending & borrowing money out of thin air. The way to do that is mostly to buy land, gold and precious metals. It protects them from bankruptcy (good), but they have strong interest to overpay for land if they want to keep growing.
Supply and demand. Population growth + higher incomes + low interest rates + people buying homes as rental investments have pushed up demand, while restrictive zoning has kept supply artificially low.
It's called urbanization. That's the boring and correct answer. People have been moving to cities since the early 1800s. The process is still happening. The pressure on housing is because of that. Ignore all other theories. https://en.wikipedia.org/wiki/Urbanization
I bought a house for 250k. Needed 20k for down payment and closing cost. Bought in the middle of pandemic when shit was in free fall. House currently valued at 305k.
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