[pkorzeniewski]

I'm disgusted by the whole real estate market, people buying dozens of apartments and houses just to rent them - and hence increasing prices for people who just want something on their own instead of making rich people richer - is destructive for society, especially for young people. Owning a roof over your head shouldn't require an average person to work their ass for half of their lives.

[dgudkov]

It wasn't like that. The inflated real estate market is a result of several factors that emerged in the last 15-20 years and combine and reinforce each other:

- A decade of near-zero interest rates

- A lack of investment opportunities: real estate usually has a below average ROI but there is nothing else to invest in nowadays (look at startup valuations to understand how desperate investors have become)

- Too much money printed worldwide (again, look at startup valuations)

- The desire to park money earned (or stolen) in developing countries in a Western country that hypocritically turns a blind eye on money origin because banks, construction industry, and legislators (who own real estate en masse) all are interested in heating up the market as much as possible (looking at you, Canada)

What makes it worse, is that all stakeholders are now locked up in this situation. Increasing interest rates is not possible because it will bankrupt millions of families with mortgage. Western countries are in the late industrial cycle, so creating new investment opportunities is problematic until a new industrial cycle begins. In this situation central banks have no choice but to print money and lie about inflation as long as possible because there is no way this whole situation can be resolved without money losing value.

[toomuchtodo]

Without regulation, capital will strangle society and the future to squeeze whatever returns can be juiced from both. This is to be expected with secular stagnation [1].

[1] https://en.wikipedia.org/wiki/Secular_stagnation

[closeparen]

Making housing stagnant and expensive is a popular initiative waged against capital.

[toomuchtodo]

Ahh, but you can make housing accessible without making it expensive, using policy. People have rights, capital does not.

[closeparen]

Aren't you usually the first to point out how people who don't currently own houses somewhere, don't have rights?

[toomuchtodo]

I point out the observation of current state, absolutely. I also believe in and contribute to progressive policies and candidates (respectively) who will hopefully improve the situation through policy. Please don’t interpret my analysis and understanding of a system as an endorsement of it. What is the point of property and capital if the outcome is dystopian and feudal?

Both people and systems are complex and not boiled down to binaries. Thanks for getting to know me a bit more!

[akudha]

Most financial gurus preach real estate as a way to get rich. They don't care about the next generation, fuck them. I have a colleague who earns in dollars, but he buys real estate in his home country (India). He'd buy a few apartments in a building right when a new project is announced. By the time the project is completed (2-3 years usually) the apartment value has already gone up by 10-15% minimum, sometimes more. He'd sell it and move on to the next project. The closest he has ever been to these apartments is the 15-30 mins he spends looking at the brochure. If you have the cash, this is the easiest and safest way to grow your wealth.

It was disgusting to see. I asked him if this doesn't bother him (he was already wealthy, he didn't need this extra money) and he looked at me as if I had two horns. Most of the projects he was buying and selling, was outside the range of almost the entire local population, except the rich. It was a fun game for him.

I know it is an unpopular opinion around here, but rentiers are a cancer. Housing should be a basic right. Rich people can buy and play in the art market (or super yachts or whatever) for bajillion dollars for all I care, but not basic necessities like land, water etc.

[pas]

Why do you think it's morally bad what this guy does? Developers make a profit, he basically provides loans to developers, takes on risks.

Prices are too high because there aren't enough units being built, not because folks speculate on new developments.

The rentiers are who do nothing yet they earn extra profit due to market failures. (Usually mandated monopolies or emergent oligopoly markets, see ISPs in the US.)

I agree that the end result of only luxury units being built is disgusting. And I think that's absolutely not an unpopular opinion. But it's this way because society, voters, representatives, local governments, etc.. are stuck in a very suboptimal configuration.

I agree that it should be a basic right.

[akudha]

Not enough units being built is only part of the problem. There are empty apartments in the buildings that he buys. You know why? Because they are owned by people who reside abroad (US, Australia, Canada etc). These people have plenty of cash, so they buy multiple properties and just let it sit there (if they can't sell it for a profit), visiting for a week every 2-3 years. They are simply pricing the locals out. The only reason they buy is to sell it at some point in future, for a profit.

You asked why it is morally bad. It is morally bad because the prices are artificially inflated. This guy I told you about, he can sit on these empty properties for 5, 10, 20 years if he chooses to, because he doesn't need the money.

So not only people like him inflate the prices, they also let properties sit empty.

None of this is illegal, of course. One can argue it is just business, that is also true. But that doesn't make it ethical or moral. Real estate prices in cities like Bangalore are absurd, thanks to people like him. It is happening in Canada, Australia etc too. Chinese people "parking" their money in NYC, Toronto etc housing markets (it is just one example, I am not picking on Chinese, just to be clear)

[pas]

Why can they sell for a future profit? Because there prices are going up faster than inflation? What does this mean? Demand grows faster than supply. What does this mean? Not enough units are being built.

... it's microeconomics. It's real estate. One of the most liquid of markets, one of the most well studied of economic fields. One of the most common example in microecon. Literally econ 101, no oversimplification, no simplification.

Sure, we can add other aspects, like vacancy. (Just as there's a natural rate of unemployment, there's a natural rate of vacancy. And if property taxes are too low, then this rate is too high.)

Also it's possible to tax vacant units. As some cities in Canada do.

> This guy I told you about, he can sit on these empty properties for 5, 10, 20 years if he chooses to, because he doesn't need the money.

What's the problem with that? He basically subsidized the construction. That's equivalent to a direct zero interest loan to the developers.

-----------

Yes, we all know that since the market has a tendency to remain irrational longer than one anticipates it's rarely a good idea to bet against very visible trends. Especially if those trends directly emerge from very visibly bad politics.

In this sense I think buying real estate and letting it sit empty is questionable. But, like I said, it's still funding development. High prices still incentivize development. We know how these things go. We know how irrational people are. (How we regularly fail to elect competent governments.) At some point it's impossible to paper over this. Like you said, basic housing should be provided, not something to fight tooth and nail for. But for some reason it's not happening. (And it's not like we don't know how. Soviet high-rise blocs are all over Europe and they are pretty okay, yet somehow the 'projects' in the US failed spectacularly. [And of course we know why they failed.]) And it's hard [but not impossible!] to hold people accountable for looking out for themselves in this crazy world (by using their existing capital to invest into housing).

[syshum]

Historically the price of the Average Home should be about 2x average household annual income.

We are way off that good median today, so either prices have to fall or incomes have to go up.

However the causes of this can not be simply explained away by "people buying dozens of apartments and houses just to rent them" the reality is far more complicated than that. even if you put a ban or cap on the number of rentals a person / company could have it would not solve the housing issue, and likely make it worse.

[nemo44x]

Interest rates have steadily fallen for about 40 years. So the 2x income idea is badly outdated as it assume interest rates around 15%.

When you consider inflation and interest rate decreases, owning a home today is essentially the same as it was 40 years ago in most markets. There are some outliers but overall the inflation adjusted monthly payment isn’t that different. It’s just that a bigger part of that payment is going to principal rather than interest.

The biggest issue is the outdated idea of putting 20% down. As interest rates fall, down payment percentages should fall. And although you can put less down you end up paying PMI which should be adjusted down too.

[syshum]

>>So the 2x income idea is badly outdated as it assume interest rates around 15%.

I 100% disagree, what is badly outdated is the idea that someone can actually afford 2x income home at 15% interest. Doing that would mean likely the inability to have an emergency fund, or save for retirement.

The metrics banks use today to determine "affordability" put people in terrible situations. the focus is on the monthly payment level not the over all debt load. Which IMO is a mistake. the classic Mortgage payment of 30% gross income is WAY to high IMO.

[nemo44x]

I mainly agree with your feelings but it is how it is. People look at what they can “afford” per month and bid houses up to that point. Many people don’t consider what they’ll have left to save/invest, etc and they stretch themselves to be the one who gets the house.

I don’t think this is a recent phenomenon though. I’ve heard stories from my parents from 40 years ago and it’s similar. One that sticks out is when rates fell to 12% they were assured they’d never see rates like that again - time to lock in. And of course the banker was right as rates just slowly made their way down over the following 30 years.

So anyone that says “rates can’t stay this low” are just joining the chorus from way back when.

[syshum]

There is a big difference between saying "Rates can stay this low" when they are 12% during a time when the government was not printing money, nor in the housing market so mortgage has to actually be profitable for the lenders

and a time when the fed is literally printing money and giving it away for 0% interest to institutions with the sole purpose of driving up costs so consumer confidence does not collapse...

I will not say rates cant not stay this low, but doing so is highly irresponsible and will cause massive problems in the 10 year time frame.. The longer the fed keep the money printing brrrrrring the worse off we are all going to be very soon

[nemo44x]

So I do wonder where the equilibrium is between inflation and raising interest rates. That is, inflation gets to a point where homes double in dollar value over a few years but interest rates go much higher creating a situation where anyone with an existing, low rate mortgage is making pretty easy payments (due to inflation and therefore wage inflation) but the real value of their house hasn't really gone up in value due to that same inflation.

Would end up with a win-win situation for existing and future home buyers as opposed to a situation where rates go up but inflation does not which would crust millions of existing home owners and probably lead to regime change, making it political unviable.

Orchestrating this is the difficult part as it couldn't happen over night. But rather as inflation begins to take hold and we see increases in wages, interest rates rise slowly enough to let the housing market avoid collapse.

[gremlinsinc]

What if we could stage a rental strike with teeth?

Buy up some land in multiple states to build a "campground" that has Yurts for office space (work from home), plenty of places to pitch your own tent, showers, bathrooms, etc... it'd be somewhat less comfortable than 'normal life' but in the end if rental units sit vacant long enough it'll drive prices down, no?

[voisin]

> Historically the price of the Average Home should be about 2x average household annual income.

Source? I have heard many boomers talk about how the advice was to pay no more than 4x income. Obviously highly unlikely in this day and age.

[syshum]

I don't know the original source, but it fairly common financial advice. Here is one source [1] but a simple DuckDuckGo search or Google Search will show many others. Some are starting to recommended 3-4x due to low interest which as I said in other comments I do not agree with.

[1] https://www.investopedia.com/articles/pf/05/030905.asp

[imtringued]

I don't see how buying apartments and renting them out makes housing more expensive.

I'm the exact opposite. All these emotional people don't make sense.

From my perspective there is a whole bunch of emotional people that wants expensive housing and they complain when someone else i.e. landlords benefit from the thing they wanted. I can't stand the double standard.

The problem has never been properties. Just think about how illogical it is for a house to go up in value even though it is a depreciating asset. It's the land that is going up in value. Expensive land needs expensive rents.

Why is land expensive? Because of all land owners, not just the ones that are renting dozen apartments on land that could at most fit 2 single family homes. Yes, the average home owner is rent seeking just as much as that landlord with 12 apartments is doing.

The worst part is those home owners don't actually want their windfall because they want to live in their home. They do not want the liability of increasing property taxes as their land goes up in value. They'll vote for tax freezes and lower taxes which obviously makes it easier for homeowners and landlords to earn money at the expense of other people.

You know, if there were no owner occupiers and everyone was renting then people would just vote for increased property taxes on landowners to make land a liablity which lowers its value.