Well that’s what happens when you frame housing as an investment. If it didn’t outpace the market and the consumer inflation rate, it wouldn’t be a good investment. So by definition it must become unaffordable for the masses.
Unlike many other sectors where prices drop thanks to constant advances in Tech, what is weird is how Tech hasn't made a dent in Housing.
Health I can understand cause it takes a long time to produce a Doc, and there is a high demand and low supply dynamic.
But we can easily build housing cheap. Even if the real estate/investment lobby is busy buying up all the "prime" land, its not like the US is a small country to work around them somewhere.
It's because of the government regulation and how localized it is so you can't pick a fight with just one regulator to force them to stop doing stupid, you need to pick fights with tens of thousands of local regulators (and their tens to hundreds of thousands of unionized government employees). On top of that, building is super capital intensive with long lead times to profitability that are fully controlled by said regulators so you can't pull an uber and just operate on a moderate sum of angel investor money while you also earn money from your service and flip the bird to the regulator. You don't make any money until you beat the regulator into submission, which makes beating the regulator a bad investment.
On top of all the above, you have teh general populace, of which a significant portion own housing they want to see go up so you won't ever get to the point where everyone sees the light and overwhelmingly supports you like uber got to, there will always be significant push back from the populace who want to abuse supply constraint to increase their personal benefit at the severe cost to all of us.
> Even if the real estate/investment lobby is busy buying up all the "prime" land, its not like the US is a small country to work around them somewhere.
Even the US being a big country doesn't help much. The value of land for the purpose of living on it is largely defined by the infrastructure around a particular piece of land: are there schools, shops, doctors, ... nearby, or do you have to drive through an empty desert for hours to reach them? And unless faster forms of individual travel are invented, this will limit the amount of "usable" land even in an imaginary country with unlimited boundaries.
The infrastructure problem should also have a relatively cheap technical solution. I assume the major bottleneck is bureaucracy, which largely has no technical workarounds so far.
It's not a problem of bureaucracy, but rather efficiency. Urban centers emerge because they make sense - grouping together labor, production, and consumption. If we just equally distribute people across the country our economy would implode on itself. How do you get to work? Where do you work? Where does your work go once you've worked on it? Who buys your work? And what work do you buy?
I'm not going to build a doctors office, or a train, or a corner store next to 10 people. I'm gonna build it next to 100,000 people. And now here we are, where we have space but not really because most of the space is worthless.
There are plenty of thriving towns in America with 5k-10k people. I think you need to just get out more. I grew up in one and it was fine. I now live in a slightly larger city (in the low hundred thousands) and enjoy the low cost of living with a high salary. But I'd never live in a major metro area, that's nuts.
> There are plenty of thriving towns in America with 5k-10k people
Very, very few. Rural areas are disproportionately impoverished. It's just statistical, not personal, and it makes complete sense once you consider what an economy is.
> But I'd never live in a major metro area, that's nuts
Those major metro areas make up the vast majority of the US' economic prowess. You don't have to live in them of course, but you should be aware that the American suburbs and rural areas are essentially on the welfare of more economically successful areas.
> Even if the real estate/investment lobby is busy buying up all the "prime" land, its not like the US is a small country to work around them somewhere.
40% of the US population lives in a coastal county:
People can't live inside Kubernetes pod, unfortunately :) . The problem is not technical, it's regulation in three ways - 1) regulations restricting building new housing altogether (USA and Commonwealth issues especially, due to obsession with detached homes and zoning). 2) increasingly long times to obtain all permits (Australia issue and likely many others), 3) economic downturn which is also a type of regulation.
"I will keep house prices rising" is an even better one, although its often funny that every party (in my country at least) wants to send that message but can't say it openly.
The simple fact is homeowners are a large voting block often with the most ability to vote. Gotta keep them happy or its electoral suicide.
There are a few things that could be done to remove the artificial advantage of (primary) residential property:
- remove the exemption (or reduction) for Capital Gains Tax
- remove Income Tax relief for mortgage interest
- remove any exemption (or reduction) for Inheritance Tax
Not all these advantages exist in all jurisdictions.
Then there are other changes that could mitigate distortions, inequality and volatility:
- separate interest rates for residential mortgages, commercial property, consumption and productive investments (industry, infrastructure, education)
- separate institutions for these different credit markets, with different reserve ratios and other regulations
- promote sound(er) money, to reduce inflation, and reduce the necessity to protect wealth by asset investment
- break cartels of real estate agents and aggregators to reduce transaction costs
- streamline the planning process to enable more houses to be built, without delay and costs of excessive eco/nimby appeals
- level the playing field between landlords and renters (means different things in different local jurisdictions)
Finally, there are more radical combinations of these things, such as removing the claim of mortgage interest as a business cost for landlords, which would raise their corporate taxes and deter high leverage.
>- separate interest rates for residential mortgages, commercial property, consumption and productive investments (industry, infrastructure, education)
How do you propose to do that? If I have money to lend, I'm pretty sure I'll lend it wherever I like the return I get. So interest rates are all related to each other - they should be risk-adjusted equal, because the lenders don't care about anything else.
Separate rates and markets already exist. Commercial property is a totally different market than residential, and agricultural is yet another market. Investment into residential is different than primary residence in origination rules and pricing.
- enforce security and building standards to old buildings, this pushing new ones to be built
Japan has this and it is used to enforce new civil engineering tech for earthquake/tsunami/disaster prevention, but it also makes old not up to standard buildings becomes less valuable
I think our homes are not as technological as they should be because we see them as investments to be preserved
Are you aware of the vast disparity of wealth among American families? On the order of 100k for white families, 10k for black families. Wealth being passed down family trees ensures immigrants and people who are worse off now will remain priced out.
Do you know the actual rates, what value the estate must be at for it to kick in, and in which states? Are you aware of spousal transfers and other mechanisms to reduce or avoid it?
Most people get very worried about “death tax”, until they do the numbers on their own estate and realise either it mostly doesn’t apply to them or it’s marginal.
In the UK this is often used as a major campaign point but the number of estates actually subject to it is quite small.
In the United States, federal tax applies when the estate is valued over $13.6M for 2024[1], though as you mention spousal transfers and other methods can be used for tax avoidance as well.
For you maybe. For 99% of the US population, it does absolutely nothing.
> Just over 7,100 estate tax returns will be filed for people who die in 2023, of which only about 4,000 will be taxable—less than 0.2 percent of the 2.8 million people expected to die in the year.
This is not a U.S only or even a western issue. UK, EU, China, India etc all suffer from crazy real estate prices.
I think the whole world is due for a big societal revamp. The old generation has concentrated too much asset wealth for the productive generation to stay productive.
Not Japan, fwiw. Japan has been very reasonable for real estate for decades. We're now seeing inflation in major metro areas but outside of that, it's very reasonable.
Japan has reasonable real estate and yet around 10% is in Tokyo proper, nearly 30% in the greater metropolis. Less than half own their homes.
This study: https://www.sciencedirect.com/science/article/pii/S026427512... from 2023 shows that they're suffering similar issues of intergenerational wealth transfer when it comes to owning homes, specifically if your parents don't help you - you're unlikely to be able to get on the ladder.
There are a ton of homes that are not claimed but purchasing them, their value, the land value are all - as you know - quite different from the US/AUS/India where the value goes up. Different from the UK where you own the home, but lease the land etc.
People in Japan don't feel the need to own their own homes that much. Apartment rents are generally reasonable, and there's constantly new apartments being built so there's lots of competition. Tenant protection law is also pretty strong so landlords can't mistreat tenants as badly as in other places.
>There are a ton of homes that are not claimed
Those are in rural places with dwindling populations, where no one wants to live any more.
My understanding is that japanese houses are fundamentally different in that they are designed to be expendable in the long term, similar to cars. You don't buy a high quality house that you maintain, you buy or build a new house and then tear it down a few decades later.
Aren't US houses the same effectively? - Not necessarily in that they aren't built to last, but that they'll be rebuilt regardless in a couple decades.
Literally a couple decades like 20 years? I just don't think that could be true, at least not where I live.
Looking at the listings in a broad radius around me, there is still a lot of housing built in the 1960s and 1970s being bought and sold quite regularly, and some stuff even older. A house built in 2004 ("a couple decades") would absolutely not be worth the cost to rebuild.
I'm curious where in the US you're from, or where you've seen that. Florida coast? In the cities I've lived, most of the houses were built right after WW2 (80 years ago), and in some older neighborhoods, most of the houses date to the victorian age. I can't even imagine someone doing a teardown on one built within the "last couple decades" (i.e. built in the 2000s).
The vast majority of houses aren't rebuilt with any regularity in the US. The extreme high-end McMansions are commonly rebuilt, but that's an outlier. Much of the affordable housing is the luxury apartments of 40-80 years ago.
The inflation is mostly because of the devaluation of the yen compared to the USD, mostly because the BOJ refuses to raise interest rates.
There is some real estate inflation in very desirable parts of the biggest cities because of foreign investment, but I'd say it's limited. There's still lots of new construction going on, though it's slowing due to labor shortages. The foreign investment can only go so far: real estate isn't a great investment here because structures depreciate rapidly, and it's relatively easy to build new housing just about anywhere if you own the land.
Japan also suffers from severe population decline (I think it has been declining for 15 years straight). Aka the old guard let their assets go the hard way.
Maybe it's population decline instead of severe population increase beyond what society can sustain. It's like the infinite economical growth didn't account for finite resources.
Always wondered what happens to housing in countries that rapidly depopulate. Like, Latvia losing 1/3 of its population, or Japan losing 4 million in 10 years. So they now have much fewer people for the same housing supply? Does it all just get abandoned?
Yes. Country side or old industrial downs die out with properties will have negative value. While prices in places like capital regions can be unsustainable. In Finland this is happening. Thankfully other growing or sustainable large cities still have somewhat reasonable prices outside most central core.
But there isn't a major housing problem in the cities at all: there's lots of housing, and lots of new construction for new housing, keeping prices in check. The problem everywhere else is that people don't want to build housing, and that factor doesn't apply in Japan. Here, if you can buy the land, you can basically build whateverTF you want on it. So in desirable places, big real estate companies like Mitsui Fudosan buy up land and build apartment blocks or tower mansions on them, and in farther-out (less dense) places old houses are routinely demolished and replaced with new ones. There's no worry about NIMBYs keeping you from building.
The population in Tokyo and other desirable cities is rising, not falling. The population is falling in small towns and rural areas where no one wants to live any more.
I think we could do with governments actively trying to stabilize the value of assets like housing and maybe equities like they do with currencies. They could make a profit doing so as well but selling high and buying low.
Maybe, but so far we've been pretty successful in just adding patches/bandaids to capitalism to address the places where it falls on it's face. For example, healthcare doesn't fit into a "free market" model, and most countries have figured that out. Even the US, which imposes lots and lots of regulation and protections in healthcare.
Imagine being outraged your grandparents managed to actually retire in a forum that very nearly worships a couple of guys that could purchase Utah. I'd consider reviewing the holdings of the 780ish billionaires currently residing in the US before declaring a generational issue.
Ok let’s entertain this idea that the billionaires are the core of the problem. Total wealth of 800 billionaires is around $7T. The housing real estate market in the US (not counting commercial) is around $50T.
So I guess they play a role but even if we erased them we would still be in the same spot.
I'm not as convinced. A quick glance at the numbers doesn't factor for the outsized influence oligarch-class real estate developers have on legislative processes. Consider the frequency with which the state legislature here signs off on infrastructure and beach replenishment projects that explicitly and solely service the most expensive coastal development projects in the state. They've literally greenlit coastal overdevelopment to the point that the bulk of the state's shellfish industry has gone bankrupt as once-viable commercial beds have become inundated with surface and septic tank runoff to the point they are no longer safe for human consumption. This in the face of decades of protests by middle and working class folks on the coast. Then there's the billions of dollars worth of public funds that have been tossed at the same developers for "mixed use" urban high-rises in all of the largest cities in the state. Without exception these projects were billed as targeting the housing crisis to generate positive column inches. The actual net result is three quarters of a million dollar condos, rent and property prices downtown tripling over the course of 18 months, and a massive wave of local businesses filing for bankruptcy in the face of unsustainable rent increases, all of which has exacerbated the problems it was claimed were being addressed. Lastly there's the rash of 300+ unit suburban hellscape subdivisions that are popping up like mushrooms in what was once quiet rural corners of the county. I am absolutely dead-ass certain that 100% of the existing residents of those areas would have had those projects halted in the planning phase if they had any way to do so.
Jeff Bezos owning 10% of Amazon really has nothing to do with the massive issue of entrenched institutional NIMBYism.
San Francisco built 74 new units of housing last year. Not 74,000. Seventy four. We could kill all billionaires and housing would not get cheaper in a world like that.
Middle-class NIMBY homeowners have literally zero meaningful input into zoning and permitting processes. At the absolute peak of their power they can show up to public hearings and whinge into a microphone for 3 minutes, an activity that planning boards and city councils around the country are perfectly happy to ignore.
That's a heartwarming narrative that bears no resemblance to observed reality. Frequently these positions are either totally uncontested or a straight party line vote by individuals who have literally no idea who or what they're voting for beyond party affiliation. What actually happens: council ignores the shit out of the noise coming from individuals that don't actually fund their campaigns, their affiliated party, or both. Entire projects are reframed as notionally beneficial to the community at large, citing some combination of bullshit claims about economic benefits and inclusivity, something something gentrification bad, etc, and the larger voting populace shrugs and goes on with their day oblivious. Worst case scenario a seat or two get sacrificed and the party apparatus advances another foot soldier to fill in the now vacated seat, with identical results.
the first-time homebuyers age moved up from the historically typical 33 to the current 38 only in the last 3 years which is not surprising given that the rates and thus mortgage payment jumped 2x times while all the other prices and thus expenses also jumped.
I anything the graph tells that the repeat buyers' situation has been worsening over the last 4 decades - from 36 years age to 61 - while the first buyers' one hadn't changed that much - 29 in 1981 to 33 in 2021 - until the last 3 years. So it is more of the story of worsening situation of the middle class.
I thought I would have a house in my 20s. Then I thought maybe by the time I was in my 30s. Now I’m in my 30s and I have no idea when I’ll buy a house, if ever.
> Now I’m in my 30s and I have no idea when I’ll buy a house, if ever.
This might not be what you want to do, or hear; I know it wasn't what I wanted in my late 20s. But you could own a house within a year or so if you decide you want a house more than living in an expensive area.
I spent my 20s banging my head against an impossibly expensive area trying to find something and perpetually failing (in my case, NYC). In my late 20s I gave up, moved to a very suburban (borderline rural) area and bought a house right away.
If one wants children, is planning on children, one wants good public schools for them, and those are generally found in areas with significant population and higher land values. If you can plan around home schooling and one parent staying home to conduct it, rural living may be a great choice. But trips to libraries might be long, and fast internet connections unavailable or unaffordable. Those amenities are available where population is denser.
It is, in my observation, a popular HN myth that amenities only exist in hyper-dense and expensive cities. But it's not true.
In my very suburban (low density suburban, surrounded on two sides by forest) area the library is a 10 minute walk away at toddler-speed so my child has been an avid visitor as soon as started reading a tiny bit. Schools are also walking distance (high school will be a bit farther, but within easy cycling distance, about 2 miles). And yes, we have internet in the suburbs.
Have you considered getting married? I may very well have been able to afford a house before I got married but the timing and the compromises that would have entailed always seemed to hold me back.
Once I got married though there was both more money and a realization that some possibilities (you know I might just pick up sticks and move across the country) were less likely. Plus expanding our family was very possible.
There's a reasonable view that says finding a spouse is a more major undertaking then finding a house. I honestly don't think that's the case. Go out on a date withe someone, if you enjoy it repeat that a few times. After 6 months imagine it'll be that way for the rest of your life,and then ask yourself, is it really that bad? If the answer is no propose marriage.
Depends on how hard you want it. I spent more than a decade between the start of the search for proper property and buy decision. I even managed to sign my mortgage agreement in last weeks of cheap money in eurozone. It’s a long game unless you have a case full of cash.
Saving a down payment in a single month would mean you have a pretty sizable income to start. I get what you’re saying, but if it’s a $10 avocado toast every day, then there are enough days in 3 years to save a $10k down payment for a starter home.
One of the unintuitive consequences of low interest rates/ZIRP is that the savings rate is abysmal. When I was a kid I remember my first savings account earned maybe 2 or 3% interest annually. Now you’re lucky to get half a percent. People are disincentivized from saving money and instead end up putting savings into investments, which are inherently risky.
Honestly I thought the US is one of the easiest places in the developed world to become a homeowner (even if you have average income), provided you're willing to not live in one of the super expensive places.
The US is relatively sparsely populated, while typical wooden homes take less labor and material to build.
It is. The "56" in the headline is skewed because of repeat buyers. Average age of first time buyers is 38, and that's skewed because of inflation/high interest rates of the last four years. It had been very steady around 30 for the last 50 years. Also, the 30 year fixed mortgage which is not as common abroad helps, but moreso when rates are low.
Could some of this have to do with the post-WW2 rise in births peaking around 1959? That means we are now near a peak of people reaching retirement age, which often leads to them selling their current house and buying a house more suitable to retirement.
That increase in people around 65 buying retirement houses could pull up the average homebuyer age.
Without taking away from the reality of housing costs, the long-term chart [1, chart is a year old but looking for trends] suggests other explanations. In particular, the average of first-time buyers was 35, up from 30 as recently as 2010. That's a bad trend.
The overall average appears to be driven by people who have bought homes before. Anecdotally, the Boomers I know bought houses well into retirement where their parents typically made their last home purchase in their 30s. I am less concerned about housing turnover among older people.
A lot of never-purchased-home-before people have money but still don't buy a home. Why? What happens that causes people who have money and can pay to finally buy a home?
I'm asking, what causes people to buy a house for the first time?
For upper middle class people the answer is probably having a baby, so you can see why if people are having babies later in life when their incomes are higher, prices rise.
but the upper middle class is relatively small, depending on how you define upper middle class. Nationally, one might say the 15% who are below the 95th percentile (but locally is what matters for the purpose of buying property, and maybe "upper middle" is 60% to 95% of the local ranking).
I do financial coaching as a side business and I can tell you the main two reason why most people in their 30s can't afford a home is because they have no idea how to budget and they carry too much debt spent on things they don't need.
On average people spend about 30% of their income paying off non mortgage debts like credit cards, car loans, and student loans.
I teach my clients how to budget, cut back on unnecessary expenses, pay off their debts, and save up for their goals. On average, after 2 years they are debt free and can save up for a down payment on a home.
Image how much quicker you could come up with a down payment if you could free up 30% of your income plus cut out all the unnecessary spending that's holding you back from achieving your goals.
I don't work in those states but I've had plenty of clients who live in high cost of living areas and the solution is to move somewhere you can actually afford. It's not benefiting you in any way to work in a place you can't afford.
You're right in that it doesn't benefit them financially. Living in some of the few spots in the continental united states that allow for a more passively-active lifestyle (temerate enough to spend more time outdoors without making it an activity, reasonable transit/bike infrastructure, the ability to walk instead of driving everywhere) carries some pretty hefty health benefits, especially as it compounds over a lifetime.
I know software engineers in SF that don’t even consider trying to buy a house there. I also know generationally wealthy folks who rent from the same building I do in NYC.
NYC and SF are major outliers in this discussion - in my experience, home ownership isn’t as much of an inherent end goal there as it is elsewhere in NA.
Do you actually find people who pay you to teach them to stop buying crap? Like, when I get a Doordash I already know it's a waste of money that instead could compound as an investment, but I do it as a treat...
Almost every single client I meet has no idea how much is actually going towards eating out or entertainment every month until we sit together and look at the numbers.
Everyone knows how much their rent and car payment is but most other stuff people have no idea. A lot of people don't even want to look at the numbers on their own so they need someone they can trust to help them face the reality.
Having someone who can sit you down through the process of accounting for every dollar, calls out areas where you're over spending, and helps you create a realistic balanced budget is very valuable.
Plus, there's other things like understanding the most effective way to pay off your debts, how much you could actually afford if you wanted to buy a house or a car, and understanding how to build wealth. Most people lack these skills but are very successful once they learn them.
That was one of my "wait, doesn't everyone do this?" realizations: Most people do not regularly look at their own finances, know how much they spend on what, and even roughly know how much money they have in their checking account! I could tell you how much I've spent on groceries, gas, restaurants, clothing, and so on, to the penny, and how it tracks vs. my budget, accurate at least as of a particular day. I can tell you to the penny any of my current account balances, cash, investment, or debt. But when I mention this to people, they look at me like I have a horn growing out of my head, like it's really weird and obsessive.
I've been in an HN thread where people claimed that it's easy to lose track of your subscriptions and accidentally pay for a service for years that you don't use. Like, really? You don't even look at your credit card bill and see what you're paying for, even monthly??? You really just turn on autopay and never even look at your bills?
I could have written this comment myself. I was surprised to find out that it wasn't common to track every single thing you spend, to have multiple Excel sheets for your money, and to constantly look at how you are faring against your budget. Seems like a lot of folks look at their checking account and go "guess I still have some money left over to spend." Maybe it's because I grew up poor or because my mother was very careful with finances herself (in spite of hardship). I would be curious to know what your case is.
Honestly that sounds like not the whole picture. I think your perception might be because your clientele comes from the top whatever% of US society, where people make a ton of money.
Accoring to stats, the top 15% of households in the US has an income in excess of $200k - saving half of it and living like a king on the rest should be easy enough, while the median around $75k - even living frugally won't allow you to save a significant chunk of income.
Over the last 16 years I've worked with a wide range of clients. Most of my clients fall within the median but of course there are many that make more or less than the median.
An important thing to understand is that income is not fixed. There are many things you can do to increase it. But even those making below $75k can afford a down payment on a home if they free up the money that's going toward debt, make changes to their budget, and choose an appropriately priced house.
It's gonna be 16 years in February that I've been a financial coach and I've helped literally hundreds of people at all income levels and backgrounds achieve their financial goals. What I said is the truth and my clients can attest to that.
I believe you :) Simply refusing to play "keep up with the Joneses", seems to me can make the difference between being able to buy a home or not. Albeit it can take some inner confidence. I can't remember anyone actually asking me "why do you drive such a s*** car?", but they probably think it. ;) The key thing is not to care. Caveats - (1) this doesn't solve the problem if due to friends and family network you feel a need to live somewhere extortionate e:g London, NY, SF etc (although OTOH all of those have cheaper places 2 hr train ride away) (2) In USA, people can get randomly saddled with huge healthcare bills.
You're absolutely right. Lifestyle creep and keeping up with the Joneses is a real thing and once you can shift the clients perspective on what's actually important the rest is pretty easy.
Healthcare bills are just another debt. Health providers are almost always willing to work out some kind of payment plan and we tackle it the same way we would a credit card or student loan. Additionally, there are things like HSA contributions that can help you save some money on healthcare bills. Usually in the range of 10-20%.
> It's gonna be 16 years in February that I've been a financial coach
You mentioned doing this as a side gig? If you could give a few pointers to info on how you got started? Sometimes I think it would be rewarding to do something like this at a low-cost or volunteer basis for people who need help.
Before I was a software engineer I worked, full time, as a financial counselor helping people do pretty much the same thing. I used to do other things as well like housing and bankruptcy counseling which I don't do anymore.
You could get certified as a financial advisor if you want to give investment advice or look for some financial coaching training programs.
If that's true then it means the statistics include people that sell their home to buy a new one. Not sure what lesson we should draw from it but perhaps it's not just that young people don't buy homes anymore (if that's what you wanted to observe then find statistics that show the age of first home buyers)
So it looks as if the cohort buying has stayed roughly the same over the years. The average buyer was born in 1970. Bad enough. But when we consider the bell curve, to compensate for the older tail getting decimated by age it must have gotten even worse for younger cohorts than what "the average rises by one year per year" suggests at first glance.
No great way out of this mess.