It's sickening that this is always marketed as bad news, even though we've been in a bubble for the past 20 years. The bad news is that we decided that owning a house is a retirement plan instead of giving people proper retirement plans. Somehow every non-homeowner has to be a policy slave to the passive income of some wealthy person. And we defend it by claiming that old people who are worth enough money not to work are not wealthy, as if we care about old people. We only care about old people as model "savers" who can be used to morally justify policies that directly and overwhelmingly benefit the very wealthy to the obscenely wealthy.
And also, there's a problem with revolving credit (i.e. a 2-year mortgage), such as Australia or Britain, or anything that is floating along with some interest rate. But these are a) intentional problems that the people making the loans hope will make them rich, and b) problems with pricing, because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
> people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time. Somehow every non-homeowner has to be a policy slave to the passive income of some wealthy person.
I agree that we have made houses too central to net-worth, but most homeowners are not wealthy. They are typically paying a significant amount of "rent" in the form of interest on the borrowed capital used to purchase their houses. I'm not saying it's the same as the non-tax-deductible rent paid by renters, but it's a very different situation than an inherited house in a very expensive area that is owned outright.
> people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
As someone who built significant portions of my house with my own hands in my spare time, I can assure you that individuals artisanally and incrementally building their homes is not a scalable approach to housing. We should instead be building houses like we build modular flat-pack furniture, with major components built in controlled factory settings, and final assembly on site. The way I did it (GC doing the heavy structural work, my doing the finishing work) itself isn't scalable.
Yes it saved me money, but the amount of knowledge I had to build in order to effectively complete it isn't realistic for most people, who very reasonably aren't interested in the understanding all the different ways to do flooring underlayments.
Trade carpenter here. IMO biggest problem for folks who banzai DIY home construction projects with no prior experience is the financials behind YouTube content producers. Their need to make engaging content unfortunately necessarily means dead simple tasks end up being presented as significantly more complex than they are in practice. I do agree that DIY construction is poorly suited for the lone individual though. Having a group of friends/family get together to bang out a construction project is a much better strategy.
Houses are routinely constructed in the "flat pack" style you reference. Modular homes have been a thing since at least the 50s (we see you over there Lustron). Weirdly "manufactured housing" performs poorly when compared to traditional stick built construction methods. There is this impression in the market that manufactured housing is in some way inferior. Based on my experience in the industry I'd personally take a modular over anything stick built any day of the week. Modules are built truck enough to shrug off getting hauled OTR for hundreds of miles and then get hoisted into position with a crane. No way in hell stick built anything is going to take that level of abuse and remain intact.
I deeply question the idea that it's reasonable for an adult human in the world to have no curiosity about, or experience with, how their home is constructed. While I have certainly paid my bills off the backs of folks who simply could not come to grips with whatever project was at hand I much prefer to see folks able to do for themselves and thereby avoid my markup.
> While I have certainly paid my bills off the backs of folks who simply could not come to grips with whatever project was at hand I much prefer to see folks able to do for themselves and thereby avoid my markup
I've long thought (and would pay for) a skilled tradesman offering to do a job at double their usual hourly rate - with the condition I (the homeowner) works as their assistant being taught on the job would be a nice niche business for someone with the skills and network.
I'd have paid handsomely for a plumber to come teach me how to sweat pipes in a day or two and all the weird little gotchyas vs. me figuring it out by trial and error. There are other projects I'd love to start but get cold feet about the last 20% so I don't quite ever get there. I would rate myself as near the top of my network in terms of "handy" skills, but still lacking in direct experience.
I know how much of a PITA the average homeowner is, but man I'd love to be able to apprentice next to skilled pros doing work on my own home. Having someone to both teach and act as a safetynet if the project starts going sideways would be highly compelling to me.
I've done a variation on this a couple times. I don't like doing business with friends so when one of mine has a large scale project I'll volunteer to help them with the work and keep them out of the weeds but refuse to take point on anything. Walked a friend with no construction experience through tearing a gas log surround off his house and rebuilding it from the studs out. I recon he saved himself 8 grand on that one. Next weekend I've volunteered to foreman a deck teardown and rebuild at another friend's place, he's got a bunch of his buddies coming over so I'll be keeping them productive and safe.
> I deeply question the idea that it's reasonable for an adult human in the world to have no curiosity about, or experience with, how their home is constructed.
Why isn't it reasonable? Plenty of people have no curiosity or experience with how medications are manufactured or how sewage systems work, and those are no less fundamental to our modern lives than how a house is built.
> I much prefer to see folks able to do for themselves and thereby avoid my markup.
If they are hiring you to do it, doesn't that indicate that they prefer your mark-up over learning how to do it themselves?
The major difference being home construction, remodeling, and repair are routinely performed by untrained laborers who are high out of their mind. Some folks weren't raised to work and are apparently very comfortable with a level of helplessness that I can't fathom. Good business for someone I guess.
> The major difference being home construction, remodeling, and repair are routinely performed by untrained laborers who are high out of their mind.
One would have to be out of their mind to hire someone who is untrained and high out of their mind to build a house (or anything else for that matter).
For starters, you wouldn't let them anywhere near power tools because they are a bad accident just waiting to happen. Secondly the quality of the work would tend to be horrendous.
> Some folks weren't raised to work and are apparently very comfortable with a level of helplessness that I can't fathom.
I'm a big advocate of trade schools as an alternative to college, and think we should take steps to bring societal recognition and pride to the trades as found in places like Northern Europe. And certainly a basic set of mechanical skills is very helpful to anyone and should be encouraged.
That said, if you pick the right set of filters to look through, anyone can look helpless in a way that is unfathomable to someone else, so to judge anyone on such a basis is at the least misinformed.
"One would have to be out of their mind to hire someone who is untrained and high out of their mind to build a house (or anything else for that matter)."
Tell me you've never worked in the trades without telling me you never worked in the trades.
"That said, if you pick the right set of filters to look through, anyone can look helpless in a way that is unfathomable to someone else, so to judge anyone on such a basis is at the least misinformed."
Postmodernist navel-gazing aside it isn't unreasonable to expect grown-ass adults to be able to handle maintenance and repairs on their home.
1. Unless you're screwing around with systems work (plumbing, electrical, hvac) there's nothing particularly complicated about the work and honestly even plumbing and electrical work are dead fucking simple compared to wrangling a codebase.
2. The majority of folks were able to clear this low-ass bar 20 years ago.
3. The US is missing two full generations of skilled trades, the odds of being able to attract a talented craftsman to your project are slim and the majority of folks can't afford one when the find them. The aphorism "If you want it done right do it yourself." has never been more true than it is now.
You might be interested in Walter Segal's ideas of building houses as assemblies from materials in their available dimensions so the parts are easy to reuse or modify. I find his ideas both compelling and a bit too idealistic or from another era. In the winter I have an architect friend who I talk to and hope to get his views on the pros and cons this year.
https://theprepared.org/features-feed/segal-method
He's kind of amazing and I'm obsessed with him, but the problem with his original concept is how hard they are to insulate. He has a lot of living followers that have put a lot of time into designs that can be insulated well, but they lose the off-the-shelf quality of the original Segal concept.
edit: It took me a little while to find Segal's followers' books, so I might as well list the ones I own here if anybody else is interested. They contain updated, insulated interpretations of Segal's process, and experimentation with alternative materials.
The Self-Build Book: How to Enjoy Designing and Building Your Own Home by Jon Broome and Brian Richardson
Out of the Woods by Pat Borer and Cindy Harris
The Whole House Book: Ecological Building Design & Materials by Pat Borer and Cindy Harris
The Green Self-Build Book: How to Design and Build Your Own Eco Home by Jon Broome
Thanks! I did some reading about his concepts but decided it was a rabbit hole that would take a while to explore. Decided to stop for a while so I can focus on more pressing things but I'll add those to the list. Looking at updated information seems worthwhile.
Out of the Woods is familiar for some reason, I know my dad wanted to build a house himself at one point. Maybe that was on the bookshelf when I was younger? I'll have to talk to him about this.
Ugh. Not really. I struggle to come up with any reason at all given that it's proven technology with prior art going back many thousands of years. The entire city of Venice is built on the concept.
We keep digging up long forgotten civilizations to find their post beam foundations in tact.
My best guess is rot. However, if you do it right there is no risk.
I had wondered if there were a sort of open-source floor plan for a smallish single-family home.
I imagine a design that has variations for different geographical regions of the country to account for material availability, local needs and codes. Optimized for ease of construction, cost, etc.
Perhaps it could get some sort of blessing from various municipalities so that building permits are either waived or fast-tracked.
Perhaps construction workers could learn or train to construct these homes such that experienced contractors can rotate across a number of builds in an area — total time for construction of one home perhaps close to 3 or 4 months.
> This plan is drawn to meet the National IBC (International Building Code), but it may not completely comply with state, city, county or municipality code requirements. It's recommended to consult with your local building official prior to purchasing the plan. If needed, this plan can be modified to comply with any state, city, county or municipality code requirements. Modification fee may apply. Plans ordered in an electronic PDF format are not refundable due to the licenses issued to the purchaser for the rights to build the Plan. *State of Illinois residents: Please consult with your local permitting officiant prior to ordering plan.
An "open source floor plan", beyond a floor plan, gets into liability.
Not fully parameterized like what you're talking about but Seattle has some standardized pre-approved plans for DADUs (detached accessory dwelling units) available. It would be nice to see design libraries for various regions with equivalent building codes/standards.
The building by hand thing is a bit of distraction to be honest. In the UK we already know we can build 'ok' housing for £2k per sqm, all in. Land is a minimum of /Half/ the cost of a new build house, and frankly that is probably on the outskirts of some run down town in the midlands or something. Build in a populous, prosperous city and well you can imagine what portion of a £800k 50Sqm apartment is building cost, maybe 10% or so.
It's the land with building permission which is scarce and insanely expensive. If you have a house in an area then you are motivated to block/object to all planning applications locally. Including lobbying your MP, campaigning and so on.
Houses do come as flat pack. You just fail to realize what a miracle the 2x4 is, and all the other standard parts. Walls could come as a unit, but that makes shipping harder and since people (for good reason) don't like identical houses there isn't even any savings possible doing it in a factory.
Prefab/modular is a thing, it isn’t really cheaper yet, but there are niche cases where they have benefits over stick builds. Quality, for example, can be better with prefab, since QA in the factory might be better than QA on-site.
Cover is a company that tries to apply auto manufacturing knowledge to build modular homes. ATM they are super luxurious and expensive granny flats (auxilary unit), but I can't see why they can't scale up in future.
That said steel houses have been tried and have few downsides - echo, blocks RF and hard to modify.
While that can be true, modular has earned a reputation for bad quality. When you buy one with good quality it is only a little cheaper than stick built on site, and stick built gives a lot more options.
Yeah I'm not convinced that reputation is earned. As I said elsewhere in the thread modules are built significantly more rugged than the equivalent stick built construction due to having to survive the rigors of transportation and installation. If there's any grounds at all for critique it might be interior surface treatments, but those are customizable.
I did some tech work for the Amish (seriously) where I used to live, and their model of a community coming together and building a house or barn or whatever seemed to work well for them. I agree that the work I've had to do to make my home my own has been a significant challenge once children appeared, and that many people simple wouldn't have have the bandwidth in one way or another. However, I do wonder if that's a consequence of a lifestyle choice and if there aren't better ways to approach these problems.
>I can assure you that individuals artisanally and incrementally building their homes is not a scalable approach to housing.
I think they were saying that the time and hours taken is not commensurate with the purchase cost, not proposing it as an actual solution. That said I think they are still very wrong.
If you were to build a modern house from scratch, you're taking enormous amount of time. Imagine felling the the timber and Milling it alone would take years. Ignoring the material side of things, most of what you're paying for is the knowledge and experience of the laborers. It takes a lot of time to learn each trade and how to build properly. It also takes a fair amount of work to learn the the regulations and comply with the certifications for each task
I wasn't assuming that you'd be mining the gypsum and milling the screws. The materials cost of houses isn't the justification for the lion's share of the price.
I'm just talking about doing the stuff that anybody can figure out to do. You purchase materials, and you hire craftsmen to do the hard stuff. I'm also not talking about getting a house for free, I'm talking about boring house prices that track inflation rather than exciting house prices that track bitcoin.
Well you can always be the general contractor and do just that for a standalone home. Shop around and hire the workers for each part. Most people don't because it takes time, work, and knowledge, so they would rather pay someone.
Alternatively, you can get a new prefabricated home built and delivered for about 100K or less.
I think a lot of cities have zoning regulations against doing that, but it's common in the country and counties.
Where I think you do have a point is the land. That's often the expensive part. It's not as wild as Bitcoin, but it certainly does follow the market.
After perusing their website for a while, I could not find anything resembling a cost estimate, or cost figures for the multitude existing homes they feature.
With that, I wonder if using their materials and services saves any construction money. (Should save maintenance money, I think.)
> I'm not saying it's the same as the non-tax-deductible rent paid by renters,
With the standard deduction being as high as it is, most people don’t pay enough in interest to itemize to take advantage of the mortgage interest deduction.
While no politician would dare touch the mortgage interest deduction, most progressive economists think that it is hand out to the rich and we should get rid of it.
While the Trump era tax cuts and increasing the standard deduction didn’t get rid of the mortgage deduction, it was one thing that was right about the law.
I'm thinking that the only viable solution to the log jam in construction is to have a structural engineering AI help people build homes and guide construction and renovation.
If the AI says it's safe, the local inspectors will have to agree.
> The bad news is that we decided that owning a house is a retirement plan instead of giving people proper retirement plans.
I've pondered on this a lot. Houses have been treated as "nest-eggs", which is really a fancy term for a fallback plan, for quite some time. The housing market really only got out of control after the 80's which coincides with when mortgage packages started getting sold on the stock market. To me, that, city zoning, corporate SFH buying, and state governments that have economic policies that embrace/grow inflation seem to be the actual problem.
I still think it's worth while to have house equity as a way to securely store money, but the government has to protect the housing market conservatively to make that work. Just like anything else the market is a system of incentives.
A big problem is that homeowners understand that for the value of their "nest-egg" to appreciate, this implicitly relies on housing scarcity, and this influences the outcome of elections, which influences the outcome of government housing policy.
As home valuations become more important and critical to the wellbeing of the "middle class", any policy that would even indirectly hinder valuations comes under great criticism.
There were a number of issues in my recent municipal council election, but I cannot help but notice that the candidates suggesting to build rental housing everywhere, which would have empowered renters and hurt homeowning minor landlords that benefit from high rents, lost, and those that won suggested the status quo that would protect detached home areas, with their main housing policy suggestion being around faster renovation permitting, useful of course for those minor home owning landlords wanting to create a secondary suite to get a renter to pay off their massive mortgages.
You could also come at the problem the other way. If incomes were keeping up with productivity and cost-of-living, people wouldn't be relying so heavily on their homes appreciating in order to have enough money to retire.
I agree but there is another factor, that is the ability for income earners to effectively save for retirement. Artificially low interest rates forced savers into the stock market, which caused equities to be artificially high relative to their yields, creating a positive feedback cycle where there was no alternative to 'saving' via stock investments and causing corporations to be able to ride a tidal wave of investment without justifying it via dividends. This is all downstream from cheap credit and a lack of incentive to save money (defer consumption) and now we are faced with the unintended consequences of decades of short-sighted monetary policy.
> If incomes were keeping up with productivity and cost-of-living
Something's got to pay for all that increase in government spending. With all the government spending and government pensions and all the people on the government payroll, sometimes I'm surprised the economy isn't a complete basket case.
The extra productivity isn’t going to the government via taxes on the common person, it’s going to those who already own most of the capital and can leverage that. Maybe the government also spends too much, but that’s not the root cause of the lack of the common person sharing in productivity gains.
Why do you think government spending specifically is the problem? I strongly doubt there is a crowding-out effect going on with the things that the US government has been spending money on lately. And all that spending has been financed by debt; it's not like income taxes have been going up. The big increases to cost of living have come in the form of energy, housing, and healthcare. I'm not sure how government spending would cause that, unless you are arguing that the spending has been misallocated.
> Why do you think government spending specifically is the problem?
There's no such thing as a free lunch. Government spending always gets sucked out of the economy one way or another. Ultimately, everyone pays for it with a lower standard of living, directly or indirectly.
As for the government financed by debt spending, the cost to you is inflation.
No spending is not sucked out of the economy. The government doesn't take your taxes and light the money on fire. They pay for public works that you use every day. They hire people to create such works and maintain them. Those people take their wages and spend it in the economy and support private businesses.
In the scenario you described, the majority of voters in those areas must be land owners, based on how they voted. Assuming that the elections you are describing are genuinely democratic, why should people vote counter to their own interests?
In general, candidates that promise to do things that benefit people who are not their constituency don't get elected. Personally, I want to live in an area where most of the residents own their own property rather than renting it. Why? Because people who own their own property are more invested (literally) in maintaining it than renters.
I live in an area with recent massive flooding (in areas that are not historically flood zones). Lots of people are outside fixing their own properties but also hiring people to fix the problems, both functional and aesthetic. If they were all rental properties, the motivation of the landowner to fix the aesthetics would not exist until the current renter left.
The problems in real estate are not primarily property ownership vs rental, but the financialization of the real estate market.
It's a race to the bottom, because the costs are concentrated and the benefits are distributed. If we allowed each district to vote their own income tax rate, everyone would vote for 0; what's happening with house-building is the equivalent for that. We need state- or national-level housing policy with no ability to override it locally, or at least to enforce some minimums. (Interestingly California at least already has that law on the books, although so far they're only enforcing it against towns they don't like rather than the general enforcement that we need).
> California could vote for a 0% tax rate today via their ballot referendum system and yet it hasn’t happened.
For the state as a whole, sure; I think people can see the problem with that. If you let people vote for an 0% tax for just their town, with the rest of the state staying the same, it'd be a different story.
I'm not the person you responded to, but the exact same thing played out where I live (Vancouver) recently. We also have a massive crisis of homelessness here, which has led to more crime, theft, etc. The party's solution? Make the city safer (for the homeowners, interpretation mine) by hiring more police.
The winning party (ABC, which had all of their candidates claim seats) did not have majority support, they were just one of the only parties that wasn't campaigning heavily on building more affordable housing (8 other parties committed to affordable housing likely split the vote)
So the homeowners largely supported them, and that class of people are also more likely to have time to research the confusing election.
ABC's mayoral candidate had the highest voter support of any of their candidates, and it was still only 86,000 of 172,000 voters.
I think the percentage of adults renting vs. owning their home in Vancouver is about 50/50, but I can't imagine how people who didn't already enter wealth through real estate appreciation could afford to buy a home here now. If prices don't fall, I would never be able to buy a home here.
This is overly simplistic: people regularly vote against their own interests in all domains, all the time.
There are even semi-rational reasons for doing so: many Americans consider themselves "temporarily embarrassed millionaires," and vote in the interest of their hypothetical, wealthy future self rather than their current self.
On the other hand, it's also perfectly rational to "altruistically" vote in favor of policies that decrease your financial wealth in the short term, but that benefit society as a whole, and/or benefits you in the long term.
Now just anticipate the number of private equity firms betting on appreciation of their house portfolios in addition to the rents they charge that fewer and fewer can afford... private equity may be forced to liquidate their sizable home portfolios.
It's worth considering that money that isn't going to mandatory-contribution retirement schemes (as in many union jobs, or government retirement schemes) is freed up to put in one's own retirement account... or to use to buy better housing (in a better school district, say) than one would otherwise be able.
Get a few defectors who choose to do this and suddenly the housing you can get without sacrificing money that should be going into a retirement account is worse than it would have been if no-one had that option, so it gets more and more tempting/necessary to do it.
Perhaps also single family zoning started to make its effects clear in the 80's.
Personally I'd prefer to live in a nice townhouse in a dense neighborhood but that's hard to pull off (location wise not many options, and price wise there's just not enough available to make the nice ones comparable to a single family house)
I suspect a successful city depends on diverse housing availability. Having too much high and medium density brings its own issues, same with too much low density. There's probably also something to how those are arranged within a city. I always wanted to grab something with lots of trees in near-proximity to the city, but I don't want to live near the active hustle and bustle. That usually comes with other trade-offs like a lack of greenery.
Inflation adjusted house per square foot has been quite stable for almost 100 years. Houses are now a lot bigger, making the inflation adjusted prices increase. If you factor in shrinking household size, then square foot per person as increased dramatically over the past 50 years. Finally, if you include house quality (fire retardant, electrical improvements, thermal improvements, etc.), then house benefit per dollar has vastly grown over 50 years.
Not sure where you get the "out of control in the 80s" unless you ignore all other relevant variables (like size, quality, efficiency) that also changed.
To read this stuff and see Census data (and others) demonstrating it, google for historical house price per square foot inflation adjusted, and read articles and look at data.
The cake of my house has gone up 5x in twenty years. Ignoring the last year, inflation didn't quite double in that time period. So, for at least me, my house per square foot wasn't stable
> I've pondered on this a lot. Houses have been treated as "nest-eggs"
There is a nasty policy trap here, in that reducing the investment value of houses can mean (as a federal government) you are expecting pain down the road caring for people with insufficient retirement savings.
A crash back to where we'd be with a following-inflation rate of increase in house prices since, say, 1995, would absolutely wipe out a terrifying proportion of the working-age population's on-paper wealth.
IDK what the solution is that doesn't completely fuck a generation or three, one way or another. Of course the best answer would have been to never get into this situation in the first place, but here we are.
There are a couple misconceptions with this. There is no such thing as “inflation”, inflation exists in different categories and inflates differently based on supply or demand for different products. It wouldn’t make any sense for housing to inflate at the rate that consumer electronics inflated, they are totally separate markets.
If you want a real answer, look at the population now vs. the population in 1995, and the number of housing units now vs. 1995, you’ll see that housing has not kept pace. The prices are a form of equilibrium. Because increasing supply in many locations is physically impossible, prices are unlikely to drop much. Another input people don’t want to talk about much is the price of energy, and the cost of skilled labor which has skyrocketed. The cost of building things is simply more expensive.
If we just started building enough housing now, things would be fine IMO. No need to bring prices down to a reasonable level and wipe out all the NIMBYs
I would settle for prices simply flattening, which at least would cut off the cycle of homeowners expecting property to continue appreciating.
We also need to start building different kinds of homes. More "starter homes", fewer McMansions in the suburbs and luxury condo apartments in the cities.
Sadly, investors that own the undeveloped property, construction companies — they want the big margins and so build expensive homes. (Which the rest of us buy because that's what's available — a bit like a car dealership lot these days where their entire inventory are the expensive, top-of-the-line models.)
Something else happened about that time and it boggles my mind that it’s practically never mentioned when it comes to home prices: https://cis.org/node/11952
We’re letting in far more immigrants than homes being built - of course home prices are going to soar.
Technically you are correct. But practically I'm not sure effect is directly correlated - immigrants typically have nowhere near funds to buy property, so instead rent from rent seekers (which itself is huge problem). Some of them also live in much denser arrangements - think someone sleeping in living room, 4-8 people per bedroom in bunk beds.
As person who migrated couple of times it really hurts to come help local economy, pay significantly more taxes and then get accused. For one - my parents will never be able to lend me $100-300k for a deposit. Tons of migrants also have to support extended families back home.
Right, but those apartments are still off of the market. Demand goes up with supply staying the same.
I will say it's a bit more complicated in the US considering how many immigrants are involved in actually building homes, but I very much doubt it makes up for the literal millions of people coming in every year. Are there any (first world) countries that have housing costs going up at a large rate that doesn't have large population growth from immigration?
It's not hard to see that if we're adding a little more than 1 million housing units a year and our population is going up significantly more than that due to immigrants and their children that we're going to have an issue.
- we stop building more houses. That's what happened in 2008, and is one of the major causes of the current crisis
- it discourages turnover. IOW, people who should move for work/personal reasons don't because they're underwater or because selling would mean they lose the really nice rate they're currently locked in to. And without turnover, it becomes hard / expensive for people to buy.
The latter issue is a stupid technical reason. The second issue could be solved by transferrable mortgages.
I am a huge proponent of normalizing work from home / remote work for this reason. Arbitrary, economically forced turnover (i.e., location requirements from corporations) is very disruptive for human life and childhood development. As a kid, I averaged one move per year due to job availability being tied to location of said job. If housing turnover was primarily a matter of personal preference, not economic necessity, the world would be a more stable, healthier place.
Factory work cannot be done from home. With re-industrialization trying to take off, there will be more factory work, with many positions requiring highly educated / trained professionals.
Reindustrualization is coming with automation. The people building the factory will go to the next one when this is done so they can live anywhere. Many of the machines need a specialist to repair, so that person just needs good access to an airport and can live anywhere.
Some people will go in daily, but the days of thousands of Union workers in a factory are gone. It will be hundreds.
Transferable mortgages would be great or even just carry mortgages - if you are in a 300k house on a 3% mortgage you should be able to swap house (assuming all approvals and stuff) to another 300k house and keep the mortgage.
Might cause rates to rise a bit but probably worth it.
You can do most of this already, right? When you can choose from 10, 15, 20, 25, 30, 40, 50 year mortgages, take your equity, swap to a new house, pick the mortgage closest to the term you want, and there you go.
You will never get 3% mortgages to follow you through any refinance - if people like the ability to lower by refinancing, the cost is that if you refinance under a worse time you get higher rates. If you want the ability to lock in a 3% loan no matter what changes you make, you will have to pay a premium, so you would not get the 3% to begin with.
I don't understand how high prices good news for anyone except people who own multiple houses. Your home is not a luxury. If you're selling it in an inflated market you're also buying in an inflated market, unless you want to throw your money away renting.
One tends to have a lot more constraints on where one can or would prefer to live when one has kids and/or is working age.
Once the kids are out of the house and you retire you can dump the expensive house in commuting range of a high-wage city in the excellent school district, buy one half as expensive somewhere with worse schools and farther from jobs, and pocket the rest of the money.
> unless you want to throw your money away renting.
You're not always throwing your money away when you're renting; I'm pretty sure that housing prices are rising faster than rents, due to a culture of housing speculation.
Housing prices may be going up faster than rent. But as a homeowner my housing prices aren’t going up.
When we moved into an apartment in 2012, rent was $1200. By the time we left in 2016, rent was $1700. Our mortgage was $2200 including PMI, taxes and insurance for a house we had a built. By 2020, rent at the same apartment was $2400. Our house is three times the size.
The rent you are paying now is the least you will ever pay where you live. Besides changes in property taxes, our mortgage is the most we will ever pay.
lot of opinions here - counter to that, we're paying less for renting the same location we moved into three years ago. Covid, WFH and location value... lots can happen to change prices.
> Still, rents rose by double-digit percentages in all size categories in July compared to a year ago, with monthly rents for studios up 14.3% to $1,555; one-bedrooms, up 12.2% to $1,745; and two-bedrooms, up 11.7% to $2,103.
> The South and Northeast have seen the largest rent increases. Miami, where rents were up 26.2% from a year ago, saw the biggest increase among the 50 largest US cities for the 10th-straight month. Miami was followed by New York, Boston, Chicago, and Orlando.
If not in the principle building (mortgage payments are commonly less than rent and 20+% goes to principle year 1 - assuming 0 price increase over your term).
But also in the US + state tax code and credits - first with "homestead exemptions" - but especially if you make over $100k (yes, roughly 2x median household income, but applies broadly to hacker news and it's a home worth the "average"city price as you get to deduct the property tax and the mortgage interest (so rough savings of 25% on the remaining 80% year 1). For icing on top, you also get credits on energy efficient upgrades.
My current rent is half (literally) what I’d pay in mortgage and property taxes if I’d bought the same place at the same time. That was when rates were low. It’s even crazier now, with the interest rate spikes.
Even at the maximum rate it’s allowed to go up, it would take 5 years for that to change. But that isn’t happening, because California prices dropped 30% yoy already, and it isn’t stopping there anytime soon.
Conservatively, my landlord has been ‘paying’ me $4500/mo due to the difference. She inherited it, and refinanced with low rates, so she’s fine at least. A lot of folks I know are staring at bankruptcy right now.
Landlords haven’t had positive cash flow on a property in California in at least 5 years (based on ‘purchase now’ numbers).
What you are talking about is the ‘sane market’ behavior, but that hasn’t happened anywhere in the country (near as I can tell, from real estate investor friends) for years.
sure, if you're going to live in a 3BR+ home either way, it doesn't take long to break even on a purchase in most markets.
but I'm living in a 1BR apartment that comes with a garage parking spot, an ideal setup for me personally. a mortgage for an entry level home in the same neighborhood is comparable to my rent, but it would be a strict downgrade to my QOL, as I don't actually benefit from the extra sqft and would have to put in more work to maintain it. obviously a house with a garage would be much more expensive. I've looked at 1BR condos, but the condo fee generally means it takes much longer to break even vs renting a similar property.
In Atlanta, I was renting in a 1br condo for 7 years; when rent went up 15% in one year, it was free (after principal subtraction) for me to buy/move to a 2br in the same building in 2017. (Even more advantageous as a friend moved in). By 2019 comparable rents for a 2br were 2x my total payments.
You are paying for a service (somewhere to live). Unless you can afford to buy outright then you’re either “throwing money away” renting or on interest payments.
In a lot of places, mortgage payments are around the same as rent, so if you can "buy" (qualify for a good mortgage) you'll be paying less AND your net worth will be growing
Of course, the situation is more complicated in areas like the SF Bay and Seattle. Housing prices vs rent basically assume 5% year over year growth forever, so if you think housing prices will be flat, it's economically advantageous to rent
> In a lot of places, mortgage payments are around the same as rent, so if you can "buy" (qualify for a good mortgage) you'll be paying less AND your net worth will be growing
sure you'll be paying less, but you'll also be buying a lot of risk. You don't own anything until it's fully paid, and if the interest rates skyrocket good luck with bankruptcy
What kind of lunatic offers a fixed rate mortgage for 30 years? If people knew anything about banking they would realize that this type of mortgage can only exist in the form of a government subsidy.
You’re assuming that a mortgage is always more expensive than rent. Your rent is going to go up. My mortgage isn’t.
To put things in perspective, my parents had a mortgage of $600/month in 1978. It wasn’t too much of stretch for them then. But it did sting. They were a teacher and a factory worker. By the time they paid the house off in 2008, $700 by then was laughably small.
This is a vastly underestimated component of why owning makes more sense than renting for the majority of the population. Practically, you are unlikely to make more than 2x your starting compensation from school. Rental costs are somewhat sticky at around ~25-50% of your income depending on your preferences. You can save money, and live frugally. But a good chunk of your future disposable cash flow is going to come from fixing your housing costs.
> Practically, you are unlikely to make more than 2x your starting compensation from school
I wouldn’t go that far. I don’t know what my parents made in 1968 or for that matter 2008. But from the time period I mentioned 1978 - 2008, if their income just kept up with inflation, it would have gone up by 650% according to the official CPI calculator (https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=100&year1=1968...).
Well actually, they retired in 2002 at 55 and 57 respectively - from teaching and factory work - and have been retired since then.
They’ve taken two 5 month long cross country trips and have only slowed down their shorter road trips in the last couple of years because they were worried about Covid
I should have specified 2x real income e.g. income indexed for inflation.
If your parents started working in '78 they have likely had a nearly miraculous wealth transfer from owning a home in a world with declining real interest rates. As you noted, their income rose 650% due to inflation - and their housing cost was likely fixed.
You said if you buy outright then that means that you won’t have that money to invest. If you assume that you either pay money for mortgage or rent, the only way that would be true is if your mortgage would be more expensive than your rent short term.
What are the chances I’ll want to be living in the same area, or same house, considering the massive churn in demographics, economic shifts, etc. currently ongoing? Or even in 5 years?
About the same.
If one of those moves happens and the markets down, things get interesting. Especially when someone is upside down.
Either way, transaction costs tend to eat up any potential gains unless one is really lucky or you stay a long time, which is hard to do during high change times.
If, in the future, I can find a place in a good location/part of town, with plenty of room, and is convenient to earning income, etc. and that doesn’t require me to get loan payments at some crazy multiple of my income, then yeah I’ll probably buy.
But that hasn’t been a thing in the Bay Area since about ‘15 or so. And with everyone running for the rural areas for a multitude of reasons and remote work becoming the norm, the rental markets are crashing hard here.
Even before COVID however, housing prices had started to flatline or decrease as even with historic low interest rates, payments were very high, and even with increasingly risky financing, very few people could afford them.
> Either way, transaction costs tend to eat up any potential gains unless one is really lucky or you stay a long time, which is hard to do during high change times.
Even if you go by historical norms of prices housing rising with inflation and you consider selling costs of 10% (a bit high of estimate), you only have to be in a house 5 years to come out ahead.
> If, in the future, I can find a place in a good location/part of town, with plenty of room, and is convenient to earning income, etc. and that doesn’t require me to get loan payments at some crazy multiple of my income, then yeah I’ll probably buy.
I’ve been in the same metro area since 1996. My last job was 30 minutes away. My current job’s headquarters is on the opposite coast and the official location of my division is on the same coast but about 15 hours away by car. I doubt I will ever work in an office again.
> But that hasn’t been a thing in the Bay Area since about ‘15 or so
There is a whole big old United States outside of the Bay Area.
I ran the math when I rented in SF. I was paying about half of what my place would cost to own.
Even with housing doubling in price, the returns from the market were 3x (though not leveraged).
Assuming 20% down and the cumulative monthly difference, maintenance, transaction costs, and what equity I would have gotten back, I pretty much broke even to owning.
It’s good for people who want to sell and live in something smaller, since the market inflated the delta between differently valued houses on an absolute dollars basis.
And in the age of increased nomadic living, emigration to low CoL countries and multi-generational households, there might not be much of a replacement to buy or begin to expense.
Just explaining, not advocating for selling one’s home to retire.
>> Some states are non recourse or single action. Worth knowing if you’re possibly going to be in a Situation.
Non recourse means they dont pursue you for the difference. It doesnt mean your credit isnt completely ruined for the next 7 years. It would be impossible to get another home (and in many cases to lease another apartment) with a walk-away from debt.
High prices are good news because home building is profitable, you get increased supply and that buffers price shocks. If prices start falling it will put home builders out of business (The same as 2008), and we’ll have another decade of housing shortages. Sure there will be some people who benefit, people with means who can use cash to go scoop up cheap real estate as an investment. The average person is going to be screwed and the bank will not give them a 9% interest loan during a recession.
On a more abstract note, deflation is terrible for an economy. In a healthy economy you want people to be building things. It creates jobs, lifts people out of poverty, and so on. Deflation causes people to hoard cash and stop working and investing.
Nope - they’re talking about turnover between current ‘have’s’ and ‘have nots’, allowing the have’s to move to an area that someone who is poorer cannot afford to live due to lack of jobs or the like.
There are more than enough actual houses in the US. We aren’t short on space. It’s location and current needs based on time in their life and available assets, etc.
It's bad news if you own a home and the market falls and you need to sell.
Otherwise it's some opportunity cost (arguably) but you can continue paying your mortgage payments to stay in your house, and if you hold long enough it'll likely recover.
This is different from the last major crash because that time house prices AND mortgage rates both dropped so you could easily feel "trapped" in your underwater house.
>> Otherwise it's some opportunity cost (arguably) but you can continue paying your mortgage payments to stay in your house, and if you hold long enough it'll likely recover.
Most people cannot do this though, because the conditions that lead to housing market crashes also result in huge numbers of layoffs. What that means is that not only do people find themselves "underwater" but also unemployed, which means they either can no longer afford their mortgage payments, or sell at a (often huge) loss and start renting and/or relocate.
It’d be interesting to see the actual numbers - i suspect they’re relatively low for those in 20% down loans even during the last housing crisis, but I don’t have evidence beyond anecdata.
It's not that bad as long as you're planning to stay in your home and keep your job. Long-term owners are basically indifferent to housing prices, because they're not going to be making any transactions in the housing market. Same reason Warren Buffett is always marveling over why working-age people think news of stock market declines is bad. If you are a net saver, you want asset prices to be cheap and interest rates to be high, because you'll be a buyer of assets.
Also, you're going to be investing in your children for a good 20 years, so it's not that irrational to make a 30yr investment in a house to get them into a good school district.
> The problem is the entire system where you are making a 30yr investment just so your family can get a good school district.
A good school district can be nice (if you'll have kids and if you'll send them to that public school) but the primary reason to have a home is have a place to live where the costs are predictable over the long term, unlike renting.
> And also, there's a problem with revolving credit (i.e. a 2-year mortgage), such as Australia or Britain, or anything that is floating along with some interest rate. But these are a) intentional problems that the people making the loans hope will make them rich, and
The 30 year fixed US mortgage is responsible for a lot of the higher prices in US. Future taxpayers or users of the USD pick up a lot of the interest rate risk on behalf of present day borrowers. Evidently, given the continued resilience of the USD, market participants are very okay with this.
> b) problems with pricing, because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
This is a highly dubious claim for which I would need to see proof. The actual building of a house in the US is down to 100 days by a well operated tract builder. The outsize portion of the cost is in the land.
> The actual building of a house in the US is down to 100 days by a well operated tract builder.
So I think one person should be able to manage it in less than 30 years, periodically calling in skilled help. If you're a Walter Segal fan, you can probably do it a lot faster.
> The outsize portion of the cost is in the land.
It is. I think that's a problem because land value is always speculative, so everything can be written off as land value. Why is that land worth that much? Because that's what was paid for it.
If you think the average person is capable of doing the things needed to build a modern house, or learning to do them at a level of expertise compared to any professional, we are living in different worlds.
90% of people will not get past laying a concrete foundation.
I think of all the reddit DIY posts where there are immediately a hundred comments about how those notched beams will inevitably collapse and destroy the second story, or about how those pipes are laid out wrong and are guaranteed to clog, and then there's the nightmare that is bad wiring...
Not to mention code compliance. It requires high skill just to understand what requirements you must meet, when they must be inspected, etc. The idea that most people can build a modern house is hilariously out of touch.
> 90% of people will not get past laying a concrete foundation.
Mainly because it's a good idea to leave certain parts to the pros. Anyone can do framing or hang drywall. Roofs are as simple as you design them to be. It's the areas where your house 'interfaces' with the rest of the world where you'll need the most help, but a lot of those situations can be set up so you can do the majority of the labor (and the tools available now make it easier than ever).
The USA has enough cheap and cheerful (aka "shit") housing already. The last thing we need are people with no building skills building crappy stud framed square boxes. If they have to build, let it be more quirky and individual, and if they don't, lets try to keep pushing building standards forwards, not backwards towards the level that Jill & Joe Everyman will likely (not necessarily, just likely) operate at.
People could also learn to do a lot of stuff they choose to buy instead, like sew their own clothes or build their own furniture. What makes housing so special here?
I could take a random sample of 10 HN users, ask them to frame and drywall a house, and the result would have to be condemned. Please don't kid yourself.
I’m fairly handy and have hung drywall before. It’s not the hardest thing in the world, but you quickly realize a mediocre hanging job results in far more work by the mudding/taping crew. And the end result still probably would be OK at best.
Agreed, and I was exaggerating of course. There are definitely some handy people around here, but a lot of folks tend to underestimate what is involved. I've worked with a lot of beginners, and they can have a rough time just getting drywall screws to sink properly.
Like you said, it's not the hardest thing in the world, but it's not something that just anybody can do.
they can assemble houses on sight that fast too. however it is a lot of management and you often have people standing around waiting until someone else finishes their part so they can start. . it is done as a stunt once in a while, but for price reasons it takes a few months.
The US federal government explicitly and implicitly guarantees a huge portion of the mortgage market, keeping an interest rates lower than they would be. Explicitly via things like FHA/VA/Ginnie Mae loans since investors know the government will pay even if borrowers default, and implicitly by bailing out Fannie Mae/Freddie Mac in 2008, as well as the COVID bailouts (unemployment/PPP).
All of these actions either accrue more debt for the federal government, which usually means higher taxes in the future, or increase money supply, which means reduced purchasing power for users of the currency, which also includes taxpayers.
I write usually in the paragraph above because if the debt or issuance of new money results in commensurate economic growth, then it would not reduce purchasing power, but I am of the opinion that a large part of the economic growth equation is birthrates and proportion of working age population, which has been in decline for a long time. The effects were tempered due to automation/immigration and productivity enhancements in general, but I do not think that has been able to keep up with declines in birth rate for a while now.
Ok so many things are like 90% correct here but missing the crucial 10%.
Fannie and Freddie are not end holders of your mortgage. They sell it ahead and because they’re govt entities, they actually pay less for offloading that risk off their balance sheet than a typical bank would. As you say, they are guarantors. This means you as a taxpayer are on the hook only during events of default which happen once a decade if that. 2008 was a massive one off.
Gnma loans are sub prime as you’d know but they’re also just guarantors. They’re not literally lending money.
The cost of these guarantees is typically very very low compared to the size of the US govt. FNMA is like a $47 billion company. And that is with full conservatorship. It’ll likely expand in size as the public takes on more risk. But it’ll still be very small.
Your second paragraph is also like 95% correct. I’m not sure what you mean by increased money supply in the future. Increasing debt is increased money supply in the present, not in the future. Econ 101 would tell you it means reduced purchasing power but that doesn’t account for how much the US dominates the world. There are several untapped sources of low labor and costs around the planet. This is currently a non issue unless we suffer a double whammy of continuous high rates and the discarding of the $$$ as the worlds leading exchange currency.
The last paragraph I understand but disagree with. Economic growth imo is driven by loose monetary policy and almost nothing else. Human ingenuity or labor capital continues to be as high as it ever was in the highest echelons of research, finance, industry etc (compared to the revenue being produced). But that’s just my opinion. It is likely someone has studied this but I’m too lazy to search and then find a study where I find immediate issues with the way it is structured right in the abstract.
>Increasing debt is increased money supply in the present, not in the future.
I phrased that poorly. I should have written now and in the future (the future because I am assuming bailouts will happen regularly until a total collapse). When the government enables socialization of losses and privatization of profits, that lets people today realize a lot of the potential gains from the future. For example, land that costs x years of work can now cost 2x or 3x years of work.
>Econ 101 would tell you it means reduced purchasing power but that doesn’t account for how much the US dominates the world. There are several untapped sources of low labor and costs around the planet.
I think there is a lessening of the domination, specifically with competition from China.
>This is currently a non issue unless we suffer a double whammy of continuous high rates and the discarding of the $$$ as the worlds leading exchange currency.
Yes, the US is still in a relatively good position, but what has occurred is a fracturing in the trajectories of the US population itself. If you are top 10%, life is awesome and looks okay going forward. Next 10%, you have a chance of moving into the top. Next 10%, you are treading water and with some luck might move up. Bottom 70% has stagnant futures or looking at declines (relative to their recent past).
>Human ingenuity or labor capital continues to be as high as it ever was in the highest echelons of research, finance, industry etc (compared to the revenue being produced).
Yes, but the distribution of gains from the ingenuity will be less equal.
I find the bad news angle weird too. If our home were to lose half of it's value it wouldn't really change anything except our ability to move in the near future. That's assuming I keep my job during this time of course.
Well, it depends on how you financed. If you paid a large part of your mortgage already, or needed a small one to begin with, you can still move, bacause all houses will get cheaper.
If you sit on a large mortgage, though, you better don't move and have a long-running fixed interest rate.
> That's assuming I keep my job during this time of course.
Sure, but that's the other jaw of the trap we've built for ourselves. The knock-on effects of large-scale drops in home values are highly likely to induce major economic disruption on a national scale, which makes losing that job all too likely.
Does everything in world have to be sickening, or appalling or catastrophic. Is it really so sickening that someone in the world had the audacity to frame something in a way you disagree with? Can't you just say "I disagree with this"?
I say this as someone who thinks it is very much a good thing that house prices are coming down, and the more the better.
I only say sickening because it makes me nauseous. You may have another physical reaction, and you're entitled to it.
> Is it really so sickening that someone in the world had the audacity to frame something in a way you disagree with?
It's sickening because it's a manipulation intended to bolster house price growth. When housing is too expensive, some children literally don't eat. Is that sickening?
> Can't you just say "I disagree with this"?
I feel like I got that across. If you're complaining about getting a little extra, it's low on the list of things that bother me.
Getting physically nauseated by every opinion you encounter you disagree with sounds like more of a bad outcome for you then anything else. I'd want to fix that if I were you but of course feel free to continue if you enjoy it.
I'll be honest, I don't believe you. I guess go ahead with it if that's what you want. It definitely lowers the quality of the discussion
No one said anything about 'every opinion you encounter', so if anyone is exaggerating it's you (and personally it feels more like you're lowering the quality of the discussion at this point).
In this specific case I'm also incredibly frustrated by the negative language used in these articles. I see the same thing all the time here in New Zealand, despite house prices being completely out of reach of nearly everyone and most young people wondering if they will ever own a house.
I guess it's just natural for those who only see housing as a 'market' to be exploited.
> even though we've been in a bubble for the past 20 years
what is a "bubble", to you? the last 20 years includes one of the greatest housing crashes of all time, and a period of some of the cheapest housing costs we've ever seen.
> the last 20 years includes one of the greatest housing crashes of all time,
We can call it a housing pause at this point, because all of that money was put back into houses. I think it is unbelievably important to remember as a baseline that world housing prices tracked inflation for 400 years. In the US they tracked inflation, there was a bump up with government housing subsidy right after WWII, then it continued to track inflation until the dot com bubble burst
After which there was hockey stick price growth, a crash, massive government intervention and transfer payments to the wealthy, mass evictions of people who couldn't pay after their ARMs moved, massive buy-ups of that property by large investors and funds, and the restoration of hockey stick price growth.
> a period of some of the cheapest housing costs we've ever seen.
Where? Are there any places that fell back to the 380 year trend line, or are there places that are reasonable compared to their price in 2006 considering inflation. We're still in a period of the most expensive housing costs ever. They've grown to precisely what they need to be to take away any disposable income, along with education and healthcare. They're completely detached from physical considerations, they're simple financial instruments. And property owners have tricked people into thinking that it's a supply problem.
Because it's certainly true that there have been real (not just nominal) housing cost increases, but my understanding is the increase is much less extreme if you compare apples to apples.
Americans have just decided to consume a lot more square-footage of living space than they used to, is a large part of the story outside of tightly constrained markets.
Doesn't the Shiller index account for that? It's currently at 307 compared to 213 two years ago. A decade ago it was 134. Hard to look at the curve and avoid the conclusion that things are way more expensive now than anytime in the past.
Yes, Case-Schiller index is same-home sales. The only thing it doesn’t account for is upgrades/additions but I doubt those are prevalent enough to change the numbers much.
I suspect in most cities it is the land that is valuable not the house. Even the 1940s-1950s houses where I live are selling for 800k. I suspect that an empty lot would sell for slightly more since they get immediately torn down and something bigger put up whenever they sell. And I am just in some random suburb of a city that is not even close to top 10 in terms of population or wealth.
We also have higher population and it’s literally illegal to build houses like many that are in the older/cheaper parts of town. The sq ft of the “minimal viable house” keeps growing.
Prices did fall after the 2008 crash, but only back to where they were around 2003: https://fred.stlouisfed.org/series/CSUSHPINSA. Of course there may have been more of a drop in particular locations.
This may not be a functioning program in the next 30-50 years, or will have extended the minimum ages for payout that they won't be viable.
2,3,4.
All examples of the replacements for traditional Pension programs, which are what we should have. Putting the onus to not only save hard, but to invest wisely in the time horizons necessary for something like retirement in the market is, in my opinion, not workable and combined with the complete lack of education around money management in public schools makes it, again imho, just down right cruel.
I'd like to see the return of heavily regulated pension programs and unions for many, if not most professions.
The traditional pension systems (defined benefit programs) have turned out to be very vulnerable to insolvency. Hence the transition to defined contribution programs, like 401ks and IRAs.
SS is a defined benefit program. Its insolvency is a problem with all such systems, including the ones you advocate for.
Traditional pension plans should work better than individual retirement investments because they pool participants. Individuals have to invest enough to get the payout for their longest reasonable life expectancy. A pension fund can rely on statistics and not be funded enough for every participant to live the longest time.
Emphasis on the word should. Humans are bad at managing huge amounts of money.
private pensions are typically not adjusted for inflation. you're trading a slice of an uncertain economy for a guaranteed amount of an uncertain currency. pensions could be inflation-adjusted, but then you have to trust that the official inflation figures actually track your personal expenses. it's a tradeoff either way; no one can guarantee that there will be enough surplus to support the non-working population several decades in the future. but at least 401k upside is uncapped.
> Traditional pension plans should work better than individual retirement investments because they pool participants
I don't see any particular reason why they would. Lots of individuals do much better with their investments than bureaucrats do. Also, there are many "fire and forget" index funds available for those with little investment skill.
Defined contribution plans have been an abject failure.
Quite simply, the guise of individual exceptionalism and the illusion of financial control was used to justify the shift away from pensions, which shareholders took profit from what would’ve been pension contributions, and compounded by stagnant wages, a substantial amount of workers were left with nothing.
Which never were given to many people (so SS was the biggest source of income, even then), were insolvent, and make little sense for the mobility of a modern job market. I'd much rather get paid more, put that money into multiple places and plans I control, so if my company folds, I am not left with nothing.
And the historical evidence is that pensions were not what people now assume they were.
Probably the fact that some of the worse financial disasters undergone by city/county governments have been because of pension obligations.
(Sarcasm to be clear, though I think something between a full pension and entirely on the worker is what we need). Defined benefit is too easy to abuse and defined contribution has weaknesses, too.
Well you want prices to go down because supply is going up. If the supply is the same and prices go down it doesnt mean it is more affordable - it is precisely because it is LESS affordable!
In the US, there is Social Security which one could argue could be higher but it's there.
And lot of people were happy with the shift away from defined benefit pension plans that were essentially a transparent way to get a retirement supplement for having worked for GM for 30 years. A lot of people wanted to have greater control of their retirement savings in a way that wasn't tied to long tenure with an employer.
Maybe because the long tenure with an employer went away in the 70's when we started off-shoring everything?
I don't think people want control of their retirement savings, they just want a retirement savings. (And you're lucky if Social Security even covers health insurance costs - forget about covering your property taxes, grocery bill, utilities, etc.)
>Maybe because the long tenure with an employer went away in the 70's when we started off-shoring everything?
Maybe because people started moving around in their careers a lot more than in the 1970s when you had one job for life?
We employ far more people, at higher wages (especially for women and minorities, and certainly with higher benefits (BLS tracks total cost to employ - check the historical data) than the 1970s. So maybe that offshoring really did not move many jobs overseas. Most jobs moved to automation (the US only lost top producer of goods rank somewhat recently - except most of that production is automated now).
Also, pensions never covered many people. Far more people retiring have 401ks now than had pensions at their peak.
In general, I get the somewhat paternalistic sentiment that people should be provided for in retirement in spite of lack of explicit savings on their part (presumably in excess of Social Security). As a society, we don't want elderly people to lack shelter and food.
However, I find it hard to argue that the fix is to tie increased retirement security to very long term employment with government or individual large companies. Basically, the typical tech worker would get basically no pension under the terms of most pension agreements of the 50s-80s even if the large tech companies offered such.
I see a lot of people in well-paying tech jobs moving around every few years--and not just because of companies going out of business or laying off people. I'm sure many have good reasons for doing so. But people used to stick with employers through thick and thin. I just saw a former manager who was with the same employer (through a couple acquisitions--and, yes, a couple years laid off in dot-bomb) for 43 years.
That's a small amount of people. Most people in life move from job to job by choice as they gain skills or want to try something else.
Track all the people you run into in a week, and consider how many you think would choose to keep the job their in with the same employer for life. I don't know anyone I can think of who would choose that.
There's just too many opportunities, at all levels, to find better jobs over a 50 year span.
> because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
The problem isn't the building costs - it's the land costs.
Construction workers are relatively low paid, and profits on home building aren't outrageous.
DIY housing doesn't really solve any problems - and is a ridiculous proposal to the average person.
Probably because people are only building McMansions - mostly because the way the market works - buyers are only buying new McMansions.
Between site prep, utility hookup, permits, and plans - there's probably close to a $30k fixed cost to build a 600 sqft house.
If the lot also costs $15k (usually $60k+) - you're looking at a $45k - $90k fixed cost.
Every house has at least one kitchen - you can build these for much cheaper - but the types of kitchens buyers of new houses expect cost at least $60k. Same for a bathroom - but you're looking at $20k.
Assuming the rest of the house costs $100 sqft - a new 500 sqft house is going to cost $50k + $60k + $20k + $45-90k = $175-225k. You want a ~20% margin - so this becomes $210k-$270k. At this point - why are you building a 500 sqft home? You bump it up to a 2bd + 2ba 1400 sqft home, and you run into the same problem. There's no buyers at the price you can build - so you build a McMansion instead.
> It's sickening that this is always marketed as bad news, even though we've been in a bubble for the past 20 years.
Everything is marketed as bad news. Bad news sells. The bubble was itself a favorite target.
And FWIW, we're seeing the same thing happen currently with the freakout about inflation. Understood correctly, inflation is just a gauge transform; it doesn't "do" anything on balance. Sure, it moves money around a little because some signals are delayed more than others. But to the extent it does it works to the benefit of almost everyone complaining about it. Everyone with significant debt (mortgages for the folks here, credit cards for the proles, corporate loans for the people folks here want to be) experiences inflation as a reduction in net money owed. It's a good thing for us, on balance. Yet... freakout anyway. Because bad news sells.
And also, there's a problem with revolving credit (i.e. a 2-year mortgage), such as Australia or Britain, or anything that is floating along with some interest rate. But these are a) intentional problems that the people making the loans hope will make them rich, and b) problems with pricing, because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.