How housing became the world’s biggest asset class

Re:How housing became the world’s biggest asset class by hkmurakami on Wednesday January 22, 2020 @12:14PM (#22119545)

There’s been some research lately about whether Private Equity outperformance is partly driven by the illiquidity making it harder for investors to dump their positions in a moment of panic. Your thoughts about housing illiquidity seem related to this concept. (If you’re interested, Matt Levine has covered it in Money stuff with links to the research papers).

In addition, we have affordable margin loans, mortgage interest tax deduction, property tax deduction to juice the system, not to mention additional legsilation like 1031 exchanges, prop13, etc.

Many of these were put in place as public policy promoting homeownership driven by the idea that homeownership would be less costly / beneficial to society compared to long term tenancy. That thought doesn’t seem to necessarily be wrong per se. but if you help out demand side legislatively while restricting supply legislatively, sometimes you’ll get cases of imbalance like we see in the coastal cities.

Given what we’ve observed in the last couple of decades around the world, a managed system like Singapore where property appreciates at a ~2% rate a year (and if demand suddenly shoots up, they’ll add transfer taxes or stamp duties or inject supply into the market) seems much more stable for society.

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Re:How housing became the world’s biggest asset class by throw0101a on Wednesday January 22, 2020 @12:47PM (#22119971)

> There’s been some research lately about whether Private Equity outperformance is partly driven by the illiquidity making it harder for investors to dump their positions in a moment of panic.

There are apocryphal stories of studies purporting to find that the best performing investment accounts are those that belong to people who are either dead or had forgotten about their account:

* https://www.marketwatch.com/story/why-the-buy-and-play-dead-...

* https://twocents.lifehacker.com/the-best-investors-literally...

Generally, even if one invested lump sums right at market peaks, just before crashes, you'd still get a decent returns as long money was not withdrawn:

* https://awealthofcommonsense.com/2014/02/worlds-worst-market...

Though the best strategy for most people seems to be to just put away a little every money in a total market passive index fund:

* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...

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Re:How housing became the world’s biggest asset class by LeoTinnitus on Wednesday January 22, 2020 @12:53PM (#22120049)

2008 really showed that homeownership is no different than tenancy. Look at Detroit. Entire city blocks were owned by the bank simply because people either couldn't afford the mortgage, their loan was called due, or they thought the short term loss in equity wasn't worth staying in a run down place anymore.

I believe that the purpose for homeownership in the US was primarily to foster a competitive housing environment. That way landlords wouldn't control the majority of the housing market and people could help keep housing prices down per month by being able to have the ability to qualify for housing just as easily as tenancy.

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Re:How housing became the world’s biggest asset class by vinniejames on Wednesday January 22, 2020 @12:20PM (#22119626)

| making it harder for investors to dump their positions in a moment of panic

On the flip side, it also makes it harder to sell when it is booming.

The potential return is intrinsically higher from 0 to 1 for PE, than it is from 1 to N in public markets

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Re:How housing became the world’s biggest asset class by gowld on Wednesday January 22, 2020 @12:46PM (#22119958)

My Matt Levine says that Private Equity is actually financial engineering scams to steal money from creditors of bankrupt companies:

https://www.bloomberg.com/opinion/articles/2019-04-18/privat...

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Re:How housing became the world’s biggest asset class by DataWorker on Wednesday January 22, 2020 @01:12PM (#22120240)

It seems like housing demand is almost entirely a function of population growth. Supply is tied to a finite resource, land. We cannot do much to increase supply. The conclusion from this set of facts should be obvious.

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Re:How housing became the world’s biggest asset class by blaser-waffle on Wednesday January 22, 2020 @04:25PM (#22122222)

> The conclusion from this set of facts should be obvious.

Build more housing? Build more land? One-child policy?

Or were you talking about just shooting people?

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Re:How housing became the world’s biggest asset class by imtringued on Thursday January 23, 2020 @06:15AM (#22126587)

It's pretty much limited. The barriers are psychological but they do exist.

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