I thought it was development companies that build houses? And why would development companies build so much housing that the value started to drop? Are you saying that "leftists" put up barriers to new housing such as regulation that helps drive up the overall cost of building and hence the price of housing? I would agree with you there. Are you sure "housing has been built in droves" is what brought the price of rent down?
House prices went sky high because of investors/speculators increasing demand (and massive immigration). Maybe if the government regulated more who buys housing (home dwellers not investors) rather than regulating what gets built. Also, have more sensible immigration levels.
Since developers will be less likely to build with falling prices perhaps the govt can build rent to own housing for lower income earners. Or incentivize private developers to build affordable housing.
High prices doesn't necessarily mean its purely a supply problem. If profit is high with low supply for developers what incentive would they have to increase supply?
I'm not going to downvote you, but all of your preferred solutions are exactly the problem. Everyone who thinks more oversight and "support" will fix the problem has their own specific bogeyman responsible for higher housing prices, "bans" it, fails to actually ban it, and then all they have accomplished is that it's now at least slightly more difficult to build housing, and therefore at least slightly more expensive.
> And why would development companies build so much housing that the value started to drop?
Because they have very healthy margins currently, and would probably continue to build if their margins drop from around 20% to around 15%. At some point it would become an issue, but we haven't seen that in the areas where building is keeping up with demand or even exceeding it slightly.
> Are you sure "housing has been built in droves" is what brought the price of rent down?
Yes. What else could it possibly be?
> House prices went sky high because of investors/speculators increasing demand (and massive immigration). Maybe if the government regulated more who buys housing (home dwellers not investors) rather than regulating what gets built. Also, have more sensible immigration levels.
That, plus the many, many artificial restrictions on increasing supply, which actually are the issue. Hint: "speculators" are a tiny portion of the market and aren't leaving homes unoccupied for extended periods of time, and "massive" immigration is also a very small portion of the increased demand for housing. Also, if you want to understand the alternative to population growth, see the Rust Belt in the 1980s.
> Since developers will be less likely to build with falling prices perhaps the govt can build rent to own housing for lower income earners. Or incentivize private developers to build affordable housing.
This already happens. It's ineffective.
> High prices doesn't necessarily mean its purely a supply problem. If profit is high with low supply for developers what incentive would they have to increase supply?
Because its literally how they make money, and new participants in the market are not barred from entry?
>Ironically, if yuan becomes new petroleum currency, it might hurt Chinese long term.
Agreed. Which is why the Chinese do NOT want their currency to become the Petrodollar or world's reserve currency. They know that that is what destroyed US Manufacturing. China wants to maintain their manufacturing dominance. They've seen what de-industrialization has done to the US.
How are you connecting the petrodollar and US manufacturing? US manufacturing was destroyed because companies closed their factories in the US and used factories in China because labor was cheaper and they were less regulated.
Under normal conditions, when your economy becomes less competitive, your currency gets depreciated, increasing competitiveness.
Unless of course everybody is forced to buy your currency to get an essential resource. This causes:
- the currency to maintain value better
- puts you in position of other countries having to maintain a trade surplus with you so they can actually purchase said resource
- the oil producers end up with great amounts of your currency, which they have to spend, getting a political foothold in your country.
Petrodollar almost certainly was devastating to US economy. And like most resource curses, it's like a drug - you need to stop taking it to get better, but it will hurt as hell.
Petrodollar creates demand for dollars. This is demand that no other currency gets. That's why US production is expensive vs other countries. China labor is cheaper and it is less regulated, but the petrodollar exacerbates the problem.
But BB has achieved the opposite. Israel is now reviled the world over. He flushed any sympathy generated by the Holocaust down the toilet. Even Jews in USA now experiencing hate crime towards them like never before.
Investors add to demand for housing. This will help drive up prices. And no, builders will not necessarily increase supply if they can realise increased margin of profit due to increased demand. We see that with RAM manufacturers. RAM suppliers constrain supply to boost margins. Same with house builders. The difference is people can go without RAM but everyone needs a place to live.
> And here I thought people who want to live in houses add to demand for housing.
Desire is a necessary component in demand, but it also requires willingness at a given price point. If houses are selling for $1,000,000 and you only have $500,000 to spend, then no matter how much you dream every night about having a home, you are not a contributor to demand.
Counterpoint: houses sell for $1,000,000 because there are more people with $500,000 (and every other number less than $1,000,000) who want those houses than there are houses.
Said comment doesn't mention demand. However, it is true that supply and demand normally find equilibrium, which is the concept the comment was trying to describe. Which is the same concept I described. In simple terms, if you have 10 houses for sale (supply), then in a normally functioning market there will only be 10 people with the desire and willingness to buy them (demand). Many more may have the desire to own a home, but factors like price see their willingness disappear.
There are two exceptions:
- Surplus: When the price is too high and is unable to fall. Where supply exceeds demand. This manifests as there being houses trying to be sold, but that nobody wants to buy.
- Shortage: When the price is too low and is unable to rise. Where demand exceeds supply. This manifests in non-price mechanisms taking over. You might, for example, see houses get sold via lottery as a potentially higher bidder is prevented (e.g. the government stepped in and started enforcing a price ceiling) from offering more.
There may be some argument that there is a housing surplus in some markets, where houses are for sale but never find a willing buyer. However, it seems most houses eventually sell. There is likely no argument for there being a housing shortage by the technical definition. If you have unlimited money, you can surely buy any house on the market.
There are always exceptions, but it is pretty safe to say that supply and demand are finding equilibrium in most housing markets.
1) morally. Alice deserves it because her intention is more pure.
2) financially. Bob gets it, because he can pay more for it than alice.
Which choice above you make as a policy direction is a reflection of your world view. I'm voting for 2), but i can understand the POV of 1), even tho i disagree with it.
You are entirely missing the point. The correct answer is to build 2 houses. The problem with these policies is that they artificially restrict demand. If they didn't do that, nobody would have a problem with them.
Sounds easier to just outlaw investor from owning houses they don't live in themselves. Seems we can't really stop collusion, only real way to win there is to not make that possible in the first place.
> Then everyone is forced to buy a house to live in, no matter what their situation or desires are.
Great! Now we're talking real solutions that can actually help people :)
> Of course we can stop collusion. What are you even talking about?
Besides laws and regulation (which already exists and clearly isn't enough), what is your suggested solution for stopping collusion?
Price fixing is/was already illegal in the US (if I understand the Sherman Act correctly), yet the largest landlords in the US was found to engage in price-fixing and artificially raising rents. https://www.propublica.org/article/justice-department-sues-l...
I currently don't own, and I can't either, because I don't want to be stuck in one place for too long. If the prices where lower, where I could reliably buy, live for some years then sell again, without a huge amount of hassle, and not costing at least one million to buy some shitty apartment, then that'd be preferably.
And besides just having "real estate investors" slurping up all housing, people could own one house then rent out parts of it, or a collection of people could own their apartment building together, there are many other ways to make housing work that doesn't involve huge companies owning large parts of the market. A little bit of nuance goes a long way.
> people could own one house then rent out parts of it
It's already a thing, called house hacking. Tough luck if you're a couple that wants a complete unit instead of a room in someone else's house.
> a collection of people could own their apartment building together
That's called a co-op or a condo (the difference is a bit fuzzy to me). This still involves ownership and upkeep of an asset, which many people prefer not to do.
> huge companies owning large parts of the market
Make it publicly-owned, for all I care. Or let it be individual landlords. Or forbid a single company from owning more than 5% of the stock in a city. As long as it's market rate and abundant and competitive, it literally does not matter. More houses = cheaper housing.
> yet the largest landlords in the US was found to engage in price-fixing and artificially raising rents
Your own link shows that we know this happened because there was a Justice Department investigation about the practice. How can you say enforcement isn't happening.
35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.
This logic assumes that 35% of Americans WANT to rent their home. Which seems odd to me, if only for financial reasons - why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it?
> why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it
Because the down payment you put into your purchased home could've been put into the stock market and grown faster than property values (this is historically true).
Because you don't want the headache of home maintenance.
Because in the 21st century, job stability doesn't exist so it's a big risk to buy a home fifteen minutes from your current job that might be an hour from your new job after you get fired so a CEO can get more golden parachutes.
Because you might have to change cities a year from now.
My wife and I rented for a long time because it was better than owning for us.
Agreed. It’s a classic fallacy to compare rent vs mortgage on a numbers to numbers basis. It’s classic example of not accounting for the total cost of ownership.
Maybe not half, but it’s pretty common around here (generic midwestern city) for renting to be more expensive than a comparable mortgage.
Many landlords seem to expect to pay their mortgage and property taxes and maintenance with the rental income, and still net a profit, if r/landlord is to be believed.
The profit is compensation for the risk. The mortgage and property taxes and maintenance are due no matter what - can't find a tenant, tenant doesn't pay, tenant flushes paper towels down the toilets every day etc etc.
If there was no profit there would be no landlords. Some might say that's great. But it would be a world with less flexibility, with fewer choices. Don't like your job and want to move? Split up with your partner and need someplace to live? Moved to a new city and don't know where you want to put down roots yet? At college for 4 years? Don't want to deal with house maintenance? "F** you, buy a house anyway". That's what we'd have if there was no rental housing.
The actual numbers might be more like rent $1400 vs mortgage $1000. After property taxes, insurance, and maintenance there might be $50 left. A handsome 3.5% profit, rising to maybe 6-7% if you include principal paydown. This is hardly a money-printing machine. It's a steady return for taking on some risk.
> Substituting your numbers in for theirs doesn’t change much
You can buy a boat for $10 or rent one for $9. Assuming you really want a boat, would you buy or rent? Do my numbers reflect reality? Do they have a bearing on the choice you make?
It changes a TON whether you pay 2x for renting or whether you pay 1.05x.
Renting has annoyances but it also has flexibility. A flat "more expensive" is staring at one tree and missing the whole forest of tradeoffs. Way more people would choose to spend $50/month for that flexibility versus $700/month.
?? How in the world is it splitting hairs to point out that those numbers don't make sense. It is directly relevant to the question of how many Americans want to rent. You don't need to be like this :(
> renting to be more expensive than a comparable mortgage.
that doesn't sound plausible. May be for a select few properties that are in some unique circumstance (e.g., the seller of the property would sell underpriced because they needed quick sale).
And often, in arguments like these, the rent is the rent, but the mortgage is purely the interest on the loan, and doesn't count the maintenance cost, and doesn't count the deposit required (which has a cost, ala the cost of capital). If you added up all these costs, it exceeds rent.
I fundamentally agree on statement that rents are more expensive than mortgages. As capital is involved and landlords want premium on capital.
Still, things can go either way. And well renting is lot more flexible and less risky. So there is really nothing wrong with that option existing. And many times it is the better pick of the two.
> And well renting is lot more flexible and less risky
Sure if you don't count the cost of risk for the tenant (of needing to move due to job loss, unexpected maintenance bills) then renting is more expensive.
You do know that the posters on r/landlord are often selling services to landlords and thus have a financial incentive to make being a landlord seem attractive. Its a pretty safe assumption that reality isn't that rosy.
> 35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.
This only holds until the percentage owned by the investors becomes a monopolistic chunk. At that point the investors would rather leave some apartments empty rather than see rents go down.
House prices went sky high because of investors/speculators increasing demand (and massive immigration). Maybe if the government regulated more who buys housing (home dwellers not investors) rather than regulating what gets built. Also, have more sensible immigration levels.
Since developers will be less likely to build with falling prices perhaps the govt can build rent to own housing for lower income earners. Or incentivize private developers to build affordable housing.
High prices doesn't necessarily mean its purely a supply problem. If profit is high with low supply for developers what incentive would they have to increase supply?
Cue the downvotes.
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