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Culture War Roundup for the week of August 12, 2024

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Couple of thoughts:

  • People who own homes often spend against their equity, and dropping house values would at the very least put a stop to this money faucet;
  • People who own homes often don't want their neighborhoods to become more affordable, as they do not wish to live near People of Affordability;
  • People who don't own homes often have pensions and retirement accounts affixed to the nominal value of homes.

Under the current regime, if you're savvy, you can buy an asset that more than pays for itself, appreciates over time, becomes completely yours after 30 years, and even gets a lot of tax benefits. Why put your money anywhere else? This can't go on.

I agree with the general thought that homes as an investment is incompatible with a functioning nation, because it by definition requires housing to become only less affordable over time. When you consider the fact that what can't continue won't, it's simply inevitable that this arrangement will end at some point. The only question is who will be left holding the bag, which I imagine will be a hotly battled political contest.

Not sure if I want my money in that fight. Difficult to imagine that property owners will somehow win. On the other hand, the tide doesn't look like it's turning quite yet. We're still patching in buffs to what is already the best asset class.

I wonder how this will interact with population effects. Birth rates are below replacement and falling (though thankfully not as much as in some other places), which if that were the only effect, would mean that demand for residential housing should be decreasing. That hasn't been happening, because of other factors: increasing lifespans, a lower person:household ratio, and immigration. But we shouldn't expect that to continue, except maybe immigration—otherwise housing values will start falling as the population declines. So we can't expect houses to be a permanently appreciating asset (adjusting for inflation), without changes to society, or immigration.

Birth rates are below replacement and falling (though thankfully not as much as in some other places), which if that were the only effect, would mean that demand for residential housing should be decreasing.

Demand for residential housing increasing is in part why the birthrate is collapsing. Demand for properties drives up the cost of family formation, so fewer families get formed.

Under the current regime, if you're savvy, you can buy an asset that more than pays for itself, appreciates over time, becomes completely yours after 30 years, and even gets a lot of tax benefits. Why put your money anywhere else? This can't go on.

You usually can't actually do this; it only works in a few places and times. If you can see those times and places when they happen, go to town, but most people can't. Buying a house is still often a good investment but it's a rather ordinary one with the exception of the fact that it displaces a necessary expense.

My house has likely appreciated over $200,000 since I bought it in 2011. But I've put more than $100,000 into it outside of interest and taxes (which are not small either). It would be a loss if you didn't consider the fact that I get the use of it.

As for housing-as-investment requiring houses to become less affordable, no. It merely requires that any particular house grows in value in real terms. Housing-as-savings-vehicle doesn't even require that.