As long as housing remains an investment asset the price will continue to go up.
If we would just decide that housing is meant to be lived in, not profited from, you'd see the price come down overnight because investment companies and rich people wouldn't be buying up hundreds of houses they'll never live in.
You know what happens then? House prices will fall because they won't have access to cheap money, so they'll end up being priced at their true value. Housing would stop being an investment, instead it would serve it's true purpose of providing lodging.
Housing investors still either live in the house themselves or rent it out to people who live in them. Getting rid of them won't change the price. The price is driven by the supply and the people who want to live there (demand).
I believe the argument is supply and demand. Housing as an investment works if demand out paces supply or supply lowers. If you don't have some reasonable assurance of housing prices increasing over time then why buy?
One thing I haven't understood yet: After I've bought a house to live in, why does it matter for me whether housing prices go up? Does it matter even if my $X house is worth $3X ten years from now? I assume that I must live somewhere, and any any money I'd earn selling the house, I'd lose buying a new one.
I think one of the main issues with pricing is the deferral of taxation for the sale of rental or investment properties. A lot of people are seeing housing as a potential retirement savings account that can be reinvested and also produce income at the same time.
If I had $100k to put as a down payment on a $500k house, and was able to rent at a rate that would pay, mortgage, taxes and upkeep. In 30 years, even assuming the price of housing stayed the same, it would have been a pretty good investment.
What is better though is if anytime within the 30 years the house doubles in price. I can sell it tax free and have enough money to buy an even more expensive house and potentially have a better retirement.
As long as I keep shifting the money from one house to another, I never pay taxes. I am also able to continue to rent the property and bring in a nice continuous income.
The fun little trick to this is you have to find a new property within 45 days of selling the previous property to keep the tax deferral benefits.
I think this 45 day window combined with low interest rates and limited inventory caused most of this crazy increase in housing prices.
Unfortunately, the landlords have increased their rents to correspond with local housing prices, and normal hardworking people are getting squeezed more than they ever have been.
I don't think this is sustainable, and as soon as there is a drop in renters in an area, and the rental properties start losing money. The housing prices will start to fall. The question is how long this will take.
OK, so it can appreciate with inflation. So it doesn't go up or down, it just stays the same.
This can be done by changing who is even allowed to own them, and what they're allowed to do with them. Make it unbelievably unattractive to have "investment properties" - massive taxes, extremely high interest rates, very restrictive rental laws, and all of them go up by an order of magnitude for each successive residential property owned.
So now suddenly nobody (especially not corporations) want to actually own residential property for the purpose of making money. It won't be a good place to put money, because it doesn't make money in the same way bonds or the stock market will. So now demand has gone WAAAAY down. And then prices come down, because the only people who really do want to buy residential property are people that need a place to live, not people (or companies) looking to make a profit from that property.
We wouldn't let a couple of private companies buy all the drinking water or air and then sell it back to us for the purpose of making a profit. Those are as essential to a good life as a place to live.
Obviously rich people, and people (and companies) making profit from residential property don't like this idea. But we need to provide people a place to live, not companies a way to make profit.
This madness in the US is feeding property speculation. The responsible thing to do is to use this money to build more housing, so prices will fall or at least remain at the same level.
>buying an asset class that has a history of appreciating in value
Correction - over a time period of decreasing interest rates. Housing, on its own, is a depreciating asset. It is a consumable like a TV. It deteriorates with time.
"Housing always goes up", without an understanding of why it has been going up, can be a dangerous belief and could be one of the reasons why housing at the moment is so expensive relative to rents.
I think for a good functioning economy we do want housing prices to generally go up, but in a much more modest and controlled way - so in that way it should be viewed as an appreciating asset.
What it shouldn't be is a speculative investment for companies, non residents or wealthy individuals.
Housing builders don't want prices to fall. Nor do the investors who fund new construction and buy existing houses. In other words, the general public are not the ones you need to convince.
EDIT: Nor do existing homeowners want to see their house prices fall. So anything that relies upon them voting to change the value of their homes is a non-starter too.
Plus, houses are touted as a major investment vehicle for the average citizen. If they all go underwater due to lowered prices, it'll result in a pretty big economic crisis. So most government agencies won't want to see house prices go down too much either.
I agree, I bought my house as a home, I really don't need or want it to go up in value. I think many people would be better of if we had policies discouraging residential housing as an investment.
My home's value has gone up over 30% since I bought it around 18 months ago (and 50% since 3 years ago) - I couldn't afford to buy my own home if I were house shopping today.
Yes I don't see how making more money available is gonna cause prices to go down. Isn't it simple supply and demand? Now there is more money that housing investors and realtors can grab.
I agree with you here. It really annoys me when people tell me they hope their house continues to increase in value at an exponential rate. Houses are not like stocks, families don't buy and sell them to make money. They are places to live.
The people I hear this the most from are in the middle class, the ones who are most likely not to benefit from the increases.
I mostly agree, but this fantasy/system where housing prices will just continue to increase infinitely while wages stagnate is ludicrous. People shouldn't have bottomless faith in American real estate going up in price forever.
This entire idea that people should buy a house and have that be their nest egg is awful, and the consequences of it are playing out in every city in the country as a slow motion tragedy of mass homelessness.
Why do housing prices go up? Partially inflation. But mostly because purchasing a house and renting it out is massively profitable, state subsidized, and a safe way to invest a store of wealth. Owners of capital seek out niches with good risk:value ratios. Look at housing prices over the last 5 years: even if your investment home sat empty, it's probably gone up 70% or more in price. Rent is just profit on top of those (also state-subsidized, way more than any other asset class!) asset gains. Mortgages that are all-but-guaranteed by the state allow even the least-qualified investors to massively leverage themselves into multiple million dollar properties.
The housing market is broken because moneymakers would rather maximize profits and render everyone else homeless than participate in a functional society. Consider a world where investors own 80% of housing in the USA: would they rent it all out? Or would the small number of corporations collaborate to keep _most_ units off the market, massively spiking the cost of housing and increasing the value of their portfolios? Our healthcare market suggests that when it comes to necessities, people are willing to pay literally any price. And our society has become more and more unequal in the past couple of decades, with the top 1% controlling as much capital as the bottom 50%. Logic dictates that the small number of that 1%, or perhaps the top 10%, if forced to pay insane rents for housing, will provide more profit than setting rent prices that everyone can afford.
I don't think we should vilify the average homeowner who doesn't want to end up underwater on their mortgage. We should vilify the government that has allowed market forces to increasingly distort the residential real estate market, to the point where we're starting to squeeze essential jobs like teacher, firefighter, waitress, and nurse out of the market entirely. Both for rentals and purchases.
Right now it doesn't matter if we double the US housing supply in the next year: it'll still get bought up by investors with far deeper pockets than the average family, because those investors have a strong incentive to prop up the real estate bubble -- they've got more skin in the game than anyone else. And they're less discerning, waiving inspections and paying 10% over asking in cash because if the house turns out to be a lemon they'll just absorb it into margins. Or write it off as a business expense -- depreciation!
The US housing market needs a massive overhaul to disincentivize residential property ownership for anything other than owner-dwellings, co-ops, and small, local landlords (to provide flexible rental options for those who move around too much to justify one-time buying costs). Much like a monopoly or oligopoly in the any other industry, large market forces in the housing industry have deeper pockets, more lawyers, more lobbyists, and more time than any small-time player. And those large market forces have a tendency to squeeze everyone else out.
Housing should, first and foremost, put a roof over the head of every person in the country before anyone profits at all. Anyone who tells you otherwise is either directly or indirectly profiting from homelessness.
This fact cannot be ignored, but we must also grapple with the question of whether betting your retirement on rising home prices is a decision that should be underwritten by the public at large.
My answer is no. I want to live in a world where goods and services are abundant and cheap, including housing. I own a house and benefit from the rise in prices but I'm under no illusion that this is beneficial to society. On the contrary, the rising prices are a calamity.
If we care about the wellbeing of our fellow people, we should desire that homes become cheap.
I don't understand why house prices should rise. Buildings have a limited lifespan. If a modern reinforced concrete building only lasts 80 years then it should lose 1% or more of its value every year.
I believe as long as there are people who make much more money than they can invest productively in non-housing they will keeping buying houses and drive prices up. That's one of the effects of income inequality. The people who are on the winning side make more money than they can invest.
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