[_yb2s]

I don't understand how housing can increase in cost in a stable steady manner, as a fraction of household income over long periods of time like more than 100 years. It seems to defy logic, so it makes me suspect how it is being calculated when people claim that housing costs have gone up by massive amounts.

Since only a small increase would price a large number of people out of the market- it seems logical that housing can't really increase in cost/value over long time spans, but must track the overall economy almost exactly.

[georgeecollins]

To help you conceptualize how that is possible: 100 years ago the world population was 2 billion, and now it is 8 billion. While the housing stock is also increasing with that population growth, the actual amount of desirable land does not grow as fast. That's why -- for example-- the US gov't in the 1850s could just hand out 40 acre plots of land to people. They can still do that, but it has to be way out in Alaska or something.

A hundred years ago it took much more labor to produce enough food to feed a person. Before the industrial revolution let's say 90% of all people were farmers. In 1850 in the US that was maybe 50% of all people were farmers. So the % of GDP going to food was much higher. Now 1-2 people can feed 100 in the west. That means less of your income proportionately goes to food.

Similar declines in the amount of labor required to produce a thing are happening in manufactured goods. So it may have once taken hundreds of hours of human labor to build a car, but now it takes much fewer.

So the wealth of everyone is going up faster than the supply of desirable land. That does mean people are getting priced out. But also people find ways to live on less land. Before the industrial revolution most families needed a farm to survive. Now many, many families can live in an apartment building in a city that takes way less land.

[throw0101d]

> While the housing stock is also increasing with that population growth, the actual amount of desirable land does not grow as fast.

"Buy land, they're not making it anymore." — Mark Twain

[ManuelKiessling]

The Netherlands would like to have a word, but yeah, point taken.

[gamepsys]

> So the wealth of everyone is going up faster than the supply of desirable land

We are also slowing down the rate we are making land desirable. During the 50s-70s we had massive success by creating suburbs that were connected to city centers. Due to how geography works, new suburbs are further from city centers and inherently less desirable. We have developed most of the geographically appealing regions of the US. The regions that can support more sprawl are seeing growth at a high enough rate that local infrastructure such as schools, roads, water, and construction labor is being stressed.

In the not too distant future we will have climate change that will displace people and a declining population that will reduce housing demand. Combine that with new building techniques/materials and in 100 years the housing situation will be totally different than today.

[mapt]

> Due to how geography works, new suburbs are further from city centers and inherently less desirable. We have developed most of the geographically appealing regions of the US.

"We have turned all of the areas within 15 miles of the existing urban development into suburbs, while banning nearly all new urban development, and banning nearly all urbanization of existing suburbs. We've run out of cities to build suburbs around and this seems like a natural limit where a Mad Max style fight for a limited suburban housing stock is our inevitable outcome. This is Basic Geography 101."

That Mad Max style fight has already been won by geriatric white men (PostWar Boys) who paid off their houses 20 years ago, who are now nominal multimillionaires, and whose preferences appear to largely control national, state, and local political outcomes.

[Seanambers]

Compared to Europe the US has an unimaginable amount of land. Europeans don't know this really - no one has told them, because they never went to the US, the ones who did went for some coastal city. On the other side Americans don't realize the reasons why Europeans live in cities. Europe is much much smaller and with less desirable land to begin with and then there is the entire "walkable cities" which is utopia reasoning...

God damn you US ppl dont know how good you got it.

[derf_]

The continental US is 8.08 million km^2 [0], while Europe is 10.18 million km^2 [1], almost 26% larger. Even adding the non-contiguous regions does not make the US bigger (still just 9.83 million km^2) [2].

[0] https://en.wikipedia.org/wiki/Contiguous_United_States

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

[2] https://en.wikipedia.org/wiki/United_States

[abduhl]

Subtract out Russia from this calculation and “Europe” is 75% the size of the US. When people talk about “Europe” and Europeans not understanding how big the US is they are not talking about Eastern Europe/Russia, they’re talking about Portugal to Poland, maybe to Ukraine. Sometimes they’re not even thinking of the Nordic countries which also have a lot of land.

This of course invites the counter argument that the US coastal areas are just as dense and small feeling as Central Europe.

[defrost]

For another comparison, the state of Australia I live in has 3x the land area of Texas, a current population of 2.9 million that largely live in the one concentrated urban area, farms and cattle stations large than those in the US, and had people walk out of the desert than had never met or heard of non indigenous people until that point in time in the mid 1980s.

I grew up in one of the more remote corners when the state population was less than 800 thousand and the local population within a few hours drive was barely a thousand or more..

[doubled112]

I've always found it interesting that Canada and California have a similar population, although I haven't looked those up in a couple of years.

Canada has a couple more km^2.

[thbb123]

To add to that, a house a hundred years ago was nothing like a house today: building codes, square footage per person, heating, plumbing, connectivity... Building and maintaining a decent housing unit is far more expensive in material and energy than it was 60 years ago.

[lotsofpulp]

To add to that, household size also decreased.

https://www.pewresearch.org/short-reads/2019/10/01/the-numbe...

[rootusrootus]

This is the one I'm curious to see play out. How low can it go? Did it reach bottom? Maybe once it stabilizes at a new norm, housing supply will catch up and prices will settle down.

[charlie0]

Yet, almost no one makes those sweet starter homes anymore.

[lotsofpulp]

Newer homes have been trending smaller and smaller for a long time. Especially in the western US.

https://www.washingtonpost.com/business/2024/03/10/smaller-n...

> Median new-home sizes are at a 13-year low.

[charlie0]

I must not be looking at the right place then. All the new homes I've seen recently are 2000+ sq. ft. The only ones that are smaller are usually townhomes and are even less affordable than the bigger homes I just mentioned they are located near downtowns or other heavily populated areas.

[Retric]

People get much larger houses today because they can afford much larger houses. This comes from both increased prosperity and having fewer kids.

1950s: The average new home sold for $82,098. It had 983 square feet of floor space and a household size of 3.37 people, or 292 square feet per person.

2010s: The average new home ($292,700) offers 924 square feet per person (2.59 people per household, 2,392 total square feet) — three times the space afforded in the 1950s.

https://compasscaliforniablog.com/have-american-homes-change...

[PostOnce]

Around here, they're building bigger houses, but also on much smaller plots without gardens or dogs or tree-houses or places for kids to play outdoors.

I suspect it's the same in a lot of places.

Maybe these square-foot-per-person calculations should also include square feet of land.

[travisb]

If you are going to do that, other play grounds should also be counted: the forests and fields which used to be nearby, the per-child space in nearby parks, etc.

All these are places children used to go unsupervised, but now mostly don't.

[Retric]

Most people today don’t want a large back yard.

It’s like an outdoor pool, there’s definitely a market but adding a pool can lower your property’s value. Land doesn’t decrease the value of a property, but it can dramatically lower the number of buyers.

[DontchaKnowit]

If this is true, it is so insanely contrary to the opinion of literally every single person I have ever met. Everyone wants a yard. Most people want a sizeable yard for their dogs or kids, or to drink beer and have campfires.

I grew up in rural midwest USA. maybe opinions are different elsewhere, but your comment is a bit baffling. Ive never in my life heard someone say "that house would be perfect if it just came with less land"

[Retric]

I know several people who decided to get smaller yards or were happy to move into apartment complexes without them.

We both are dealing with biased samples. A childhood friend who is very into the outdoors moved to a rural area and got 14 acres, everyone else moved to an apartment or a house with under an acre. This stuff shows up on migration patterns, and well there’s a reason the Rural Midwest USA is a small percentage of the US population.

So, I agree many people do want a large yard, but revealed preferences suggest it’s a minority opinion.

[qazxcvbnm]

Revealed preferences are only as revealing as the market is competitive. In monopolies, is it not revealed that the populace prefers to be price-gouged? In a market as regulated as housing and with deep ties to policy (and industrial structures that I have heard about which I do not understand), it's difficult to not be sceptical of revealed preferences as a sole convincing explanation.

[martincmartin]

$82,098 in 1955, adjusted for inflation, was worth $727,502.05[1]. So homes were actually much more expensive back then.

[1] https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=82098&year1=19...

[acchow]

No, they already adjusted for inflation.

In nominal dollars, a home in 1955 would be under $10k

https://fred.stlouisfed.org/series/MSPUS

[ffsm8]

I wish I new how that article got to 80k for a house in 1955.. I couldn't find a link to trust "interactive visualisation" they're citing and Google didn't help me either.

I wasn't born then, so no personal experience and everything I could find pointed more towards 5-10k, i.e. this advertisement

https://i.redd.it/75sc90f58qsa1.jpg

That'd be safely below 100k, inflation adjusted... Actually, maybe that 80k is already inflation adjusted? The number is pretty close

[rootusrootus]

That can't be right, it must already be an inflation-adjusted number. My parents bought their most recent house in ~1970 for $30K, and that was a bit above the median for the area.

[tim333]

They don't. The numbers in the article include imputed rents.

If you plot house prices against incomes they do a wave pattern which is high at the moment. But they were even higher against income in 1845.

Article here has data from 1845 for the UK https://archive.ph/FRzaA

[nostrademons]

A few ways that housing can continue to increase as a percentage of income:

1.) Go from a single income supporting to a house to multiple incomes supporting a house. This is actually happening, with the shift from single-earner households in the 1950s to dual-income households to groups of unmarried professionals living together as roommates. The preponderance of post-1950s data can also overweight this effect: historically, the norm was far large extended families to live together in one household, and the single-earner U.S. nuclear family was an aberration created by suburbanization.

2.) Have reset points. How can real estate continue to return 7% real returns for 120 years? Well, return 7% for 40 years, at which point your investment is up 15x. Then bomb the house and kill the owner. Then give the land to the guys who helped you kill the owner at a low, low price, help them build a house on it cheap, and start the 7% appreciation calculator over again from a new low baseline. This is also very close to what actually happened over those 120 years, between WW1, WW2, the Russian/Ottoman/Austrian revolutions, the fall of the Warsaw Pact, the Chinese Civil War / Cultural Revolution / Great Famine, and so on.

3.) Have a smaller percentage of people owning houses. The average housing price can absolutely escape the confines of the median income, if the median person does not own a house. The study's use of rent and imputed rent partially controls for this, but the broad answer for "Housing prices can't outstrip incomes forever, can they?" is "Sure they can, if nobody can afford houses."

4.) Have more people. If you're talking the returns to an asset class, and you own all that asset class, and then suddenly there are more people that need that asset, you're going to make money. This, to a large degree, actually happened during those 120 years.

[cyberax]

> I don't understand how housing can increase in cost in a stable steady manner

It's the density death spiral. Dense housing gets more expensive (yes, dense housing IS more expensive!), that in turn drives even more density.

The only way to fix it? Promote suburbs and smaller cities. There is literally _no_ other fix.

[m463]

I sort of think there are other things still at work here.

People still live near infrastructure (although requirements change)

Maybe 1000 years ago, they probably lived near a port, water source and source of food.

Nowadays we have efficient transport with semis and container ships, but I would imagine that there are still things like say power infrastructure, sources of commerce and schools and even internet that make living practical and affordable.

I'll bet as we can do distributed living practically (PV+batteries, wells/septic , starlink and amazon) that maybe more things are possible.

[cyberax]

Not really. Pretty much all of the housing price increase (above the overall average market growth rate) is explained by the density death spiral.

[rootusrootus]

I wonder if Texas, especially around Dallas, is settling into a pattern that'll work well. If you have enough land, that is. Instead of single big city with dense downtown surrounded by progressively less dense housing, there are multiple cores. Smaller cities, close enough that their suburbs mix. On the surface that does seem more workable than building mega-cities.

[cyberax]

YES!

That's exactly the right model. Sparse cities with distributed industry.

Houston (Greater Houston Area) is another such example. It's geographically huge, but most commutes are fairly short. This allows Houston to have faster commutes than NYC, despite having a comparable population, and VASTLY better living conditions.

[jsnell]

That's called a conurbation. I think it's how most of the mega-cities in the world outside of North America formed in practice. For a case with no primary core, have a look at the Ruhr area.

[JumpCrisscross]

> yes, dense housing IS more expensive

Dense housing is more expensive. Dense living massively less so.

[cyberax]

It's actually the inverse. The raw construction cost of a housing unit in a dense building is cheap. Living there is not.

People in dense cities spend a larger percentage of their paycheck on housing than people in sparse cities ( https://smartasset.com/mortgage/housing-spending-2021 ).

[rufus_foreman]

>> The raw construction cost of a housing unit in a dense building is cheap

Not true. The cost per foot of construction of a single family home is lower than that of a small apartment building. A small apartment building has a lower cost per square foot than a mid-rise apartment. And a mid-rise apartment building has a lower cost per square foot than a high-rise apartment building.

Taking only construction costs into account, when land is cheap, single family homes make the most financial sense, and dense housing doesn't make sense.

Well, except for manufactured homes. They have a lower construction cost per square foot than single family homes, but when most people talk about density they aren't talking about trailer parks.

[cyberax]

> The cost per foot of construction

That's why I specifically said that a per-unit cost is lower in cities. But units tend to become smaller and smaller over time.

> Taking only construction costs into account, when land is cheap, single family homes make the most financial sense, and dense housing doesn't make sense.

Absolutely.

[javednissar]

I don’t understand the logic here, the land itself will be valuable regardless of whether or not there is a house there or an apartment building. The principal component of the cost of buying a house or a condo is the associated land cost. Building more density gives more people access to that land.

If your contention is that more housing is bad because it draws more economic activity which raises land values then that’s fair but this is the same as arguing for less freedom of movement. Essentially any nation that adopts your policy prescription is taking a step towards turning into the Soviet Union.

That may sound like hyperbole but that is the end result of NIMBYism and illiberal land use policy.

[cyberax]

It's the "spiral" part (i.e. self-reinforcing vicious process).

Dense cities allow employers to get access to a larger pool of workers, giving them a competitive advantage. This in turn makes cities more attractive for workers. Since land area is conserved and people won't commute for much more than 30 minutes, it means cities have to increase the density.

This in turn makes cities more attractive for employers, driving the demand for housing even higher.

Rinse, wash, repeat.

> That may sound like hyperbole but that is the end result of NIMBYism and illiberal land use policy.

There is literally no city in Japan, US or in major EU countries that managed to build its way out of high housing prices. Not a single one.

[esyir]

Except famously Japan, even Tokyo, where housing costs have consistently stayed low.

[pessimizer]

> I don't understand how housing can increase in cost in a stable steady manner, as a fraction of household income over long periods of time like more than 100 years.

It hasn't. House prices have been stable for hundreds of years. They're currently being used as financial vehicles, and as another government asset inflation to ward off that pesky balance of accounts reckoning, but they'll be back down eventually.

Rents are different, probably because landlords collude. Or irrational exuberance or whatever. Times when everybody suddenly agrees that housing is worth a lot more, for no particular reason.

Some guy here (https://www.reddit.com/r/Economics/comments/sq1pb/graph_of_c...) plotted the 2000s housing bubble vs. inflation-predicted price.

I would say that the fact that we didn't see a dip after the bubble makes it pretty obvious that if you deal in financial instruments around houses rather than houses themselves (including rents), there had to be a lot of money made that never came back. Renters never got a refund of the inflated rent that they paid during the time of those inflated house prices; that seems like it would account for the 6.6% a year that this paper claims as the return on owning housing. Because the buying and selling of houses is ultimately going to be a wash.

That says to me that housing bubbles are required in order to make any money from housing. That money will be supplied by renters and overextended owners who can't buy when prices return to the ground, and can't hold out until the next bubble.

[cmrdporcupine]

I'd like to see that same chart but for places like here in Canada that did not have a housing price correction in the 2008 era.

It just went up up up, and the lines would show divergence.

And of course if that chart continued into 2022...

[bombcar]

There have been two major real housing price jumps that I know of, and both are correlated with significant household income increases (at least nominal). Almost everything else can be factored into changes in what the "nominal house" is - from a one room cabin without plumbing to a McMansion with a three car garage.

One was the great urbanization post-world wars and the other was the great increase in dual-income households.

But if you factor things out and try to correct for as many variables as you can, housing is pretty "steady state" though the percentage of income directed toward it that's acceptable has crept up somewhat.

Shelter is, like food, one of the few real necessities and so it will be bid up to the point of pain or worse if there is a scarcity.

[_yb2s]

Fair point, in that sense it seems like some fairly fixed step-ups are possible where people culturally decide to spend more of their income on housing, but it cannot be a steady trend to profit from as an investor, because it will always have a hard cap at 100% of household income. It can't steadily beat inflation over long time scales.

[JumpCrisscross]

> It can't steadily beat inflation over long time scales

Of course it can. That’s what productivity means. The value could keep going up even amidst the fraction of incomes being spent on it going down.

[sdwr]

Housing has elastic demand, right?

Based on prices, you can have roommates, children can live with parents, etc.

Real housing costs could double tomorrow, and people would survive (not happily).

[carlosjobim]

With extreme consequences to the population. When people are not given space to create their own families, the result is the massive population decrease we're living through now in industrialised nations.

[inglor_cz]

Is the housing price adjusted to sqms / sqft and equipment / amenities?

Because my grandparents with their two kids and great-grandma literally lived in a one-room studio in the 1950s, even though they weren't poor. (Grandpa was an engineer for state railways, a good job in 1950s Czechoslovakia.) The toilet was common for 3 households. That was just the standard of living back then. You wanted to be warm, you had to drag coal upstairs from the basement and feed the home furnace. Daily.

In 1964, all five moved to a 3-room apartment, which increased their living space a lot, but it would still feel incredibly cramped by today's standards. It had a separate toilet just for them, though, and centralized heating. No more hauling coal upstairs. Progress!

Of course that those smaller, more primitive apartments were much cheaper than the house built in 2022 that I am now living in, and that is stuffed full with various sophisticated devices.

[Too]

Trust in institutions and low interest rates allows people today to afford houses 10x more expensive than their tangible savings.

[llm_trw]

>It seems to defy logic

There are more people than ever and the surface area of the planet hasn't increased.

[thfuran]

The surface area of the planet is pretty much entirely unrelated to the cost of housing.

[adammarples]

Its variance is though. It is all owned, and controlled. If there was a new land rush then new housing would be almost free until the land was all claimed.

[thfuran]

Building a second Australia in the middle of the Pacific would have very little effect on the price of housing in London.

[adammarples]

Not true, because millions of people would migrate away

[bluGill]

right out of adam smith, when people get more money they typically spend it on better housing.

[_yb2s]

I'm talking about in proportion to income... for example, if people spend 30% of household income on housing, you cannot have an order of magnitude increase in housing prices over any time scale as it will always have a hard cap at 100%.

[bluGill]

Inflation is a factor as well.