How will someone lower prices when the government has done nothing but print money in the last 4 years...let alone the free cash giveaways in the last 18 months. People are using that money to buy bigger or more houses...thus driving up the price of real estate.

It's mostly not inflation. Inflation-adjusted house price is also up.

Depends on your definition of inflation...

>In economics, inflation (or less frequently, price inflation) is a general rise in the price level of an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.

Good point, which is why wages have to go up.

Eventually everyone will make six figures and a loaf of bread will be $16 but housing will be rationally priced again with starter homes at $500k.

yes the ... one-time $3400 checks and a major economic contraction. That definitely caused 10+% price increases on $500k+ homes.

Beyond everything else, this is just mathematically absurd.

There was also boosted unemployment. In some states people were taking in over $4000 per month in unemployment. That's a lot of money to not work.

It's still not enough to dispute the parent's comment.

There isn't anyone poor getting rich off unemployment. It's not the reason for the housing boom.

You could buy houses in cash in half the cities in Ohio for 6 months unemployment + 3 stimulus checks. There are plenty of places like this in the US - Alabama, Mississippi, etc.

Sure - that is not the reason house prices in Marin are up 30%.

That's probably got more to do with central banks pushing up equities >30%. And probably because when you cut mortgage interest rates by 1 percentage point (which they did), you can afford ~15% more house.

In real terms - monthly payments for new housing purchases are down.

Sure, you could buy a house in the extremely small cities of Ohio with little to no jobs or economic future. I doubt many are. Almost all the population growth in the US is in major metro areas. If those cities are close to commute to Cleveland, Columbus, or Cincinnati, sure.

You could literally buy houses in Cleveland for less than $30k. 6 months of unemployment plus stimulus in Ohio was >$25k.

This is even more true for Detroit.

I live in the rust belt. No one is buying those 30k homes. Why? They're unmaintained, falling apart, need completely rewired, completely new plumbing. The housing stock in the rust belt is OLD. This is what makes prices "so cheap" to you lot looking in from the coasts.

But the reality is no one is buying the discount properties that need major work. They're in run down neighborhoods with vacancies everywhere and sit on the market for months. They're almost unsellable - many are held onto with the hope that a neighborhood will get gentrified. Cities like Detroit and Cleveland see Pittsburgh's resurgence and think that will happen there. But for every expensive Pittsburgh neighborhood there's a Clairton and McKeesport.

I don’t know how but my sister and my brother in law bought a brand new Harley in the middle of the pandemic, while they were both unemployed and collecting benefits.

Pretty discouraging to me, I feel like a sap that I kept working. Why do they get twice as much assistance when my wife doesn’t work because we decided to have her be a stay at home mom?

Even $20,000 is not $500,000.

The obvious answer to your last question is not that your sister and BIL should not get assistance, but that your wife should also get more assistance. We don't do enough to support people across the country. 2020 showed some rare aid to people in a reasonable fashion (at least for a couple of months). We can do more of that.

We have fiat currency after all, let's take advantage of it!

You think that's the only money that got issued? The loans that went to companies was absurdly abused and had almost no oversight. Trillions of dollars went into the economy in a matter of months...

1,800% increase in CEO pay vs 10s % for worker pay.

Gee, I wonder what the problem could be?

Now we're getting closer to the truth - although your hyperbole doesn't help, you're definitely on the right track.

How do you lower the price of real estate?

Decommoditize it. Penalize investors. Make it prohibitively expensive to own a property but not live in it. Expropriate investment properties from those who do have them, as Berlin is currently considering.

> Make it prohibitively expensive to own a property but not live in it.

How does this decrease my rent? I do not want to own property because I do not want my entire wealth invested in a single asset. For me, renting is ideal and then my money goes in to a wide array of assets which provides a better safety net than expecting that house prices will always stay the same or go up in the future.

Renting also affords me the ability to move whenever I feel like upgrading or downgrading without being stuck trying to sell the previous property and paying insane taxes each time.

> because I do not want my entire wealth invested in a single asset

That's the idea: with cheaper real estate you won't have to put your entire wealth into it, trading it would also be easier, and so ownership would be more attractive option.

I don't see how this is possible. The building I live in cost about $100M in construction fees and has 200 apartments. If we make a dumb assumption that they all cost the same amount, thats $500k per apartment on just cost of building before any kind of supply and demand affects the final sales price. These apartments sold new for $600k and I rent one for $480 a week. (All Australian dollars)

Currently I would comfortably put $20,000 in to housing as an asset. I can not see any way possible that banning rentals would allow me to buy a $500k construction cost apartment for $20k.

So this change forces me to invest in a market I do not want to invest in to. Buying one of these apartments is an incredible risk as it will likely devalue over time and be difficult to sell on when I want to move. So every time I move under this system I am risking massive losses Vs just having a weekly price and no commitment or risk.

I plugged your numbers into this mortgage calculator[0], and it looks like the payment on a 30 year loan of 500k with 20k down @ the average interest rate is less than your rent payment.... and you'd then be able to sell the asset when you move.

It doesn't sound like your landlord is doing you any favors.

0. https://moneysmart.gov.au/home-loans/mortgage-calculator

The thing is, I don't want to buy this apartment. I don't trust the local builders enough for that and I believe that it will devalue faster than my rent payments. I also don't plan on living here for more than a few years. That calculator puts me at $537/week in just loan repayments for 30 years and does not include strata fees, council rates, sewerage fees, building insurance, etc.

To buy a property means paying tens of thousands in taxes each time you buy. If I stay here for 2 years and sell I would pay more in just taxes than the entire rent would have been and I am on the hook for any issues with the building or changes in value.

And I am perfectly happy to pay a known weekly amount which is well within my budget and put my savings in to other investments which don't tie me down to living in a particular place, do not require taking out multi decade loans and are easy to sell back for cash later.

Doesn't this reduce investment in real estate, hence reduce supply?

"Supply" is the "just spin up more instances" of housing. It's an incantation that libertarians invoke to make the elephant in the room vanish. We'd be better served long term by addressing a fundamental inefficiency: literal rent seeking.

Increase supply by building more and building up.

Based on my local market, this doesn’t work. Builders (more likely their financiers) hold on to houses until they sell at their target price.

They don’t rent them, they don’t lower the target price.

They’ll wait for months or years for the sale to come in order to maximize their returns, and they have enough liquidity to be able to wait.

Accurate. I used to have about 20 neighbors on the adjoining two lots, until the previous owner pushed them all out and then sold to some investors who wanted to convert the properties into condos. They gathered dust for 2 years then there's been 18 months of half-assed construction. Why rush? They're accruing value by the day.They didn't even get proper permits, but the fine is nominal.

That can be fixed with idle real estate taxes. They would have to at least rent them.

Won’t cure all. Building costs are soaring. Try building something new for less than $200/sf and you’ll see that the price of dirt is only part of the cost.

Throw out property taxes and implement land taxes. Stop assessing a tax penalty on building up.

that in the US i believe is mostly regulatory capture (guilds & licensing, unions, in some cases inappropriate regulations)

https://www.vox.com/policy-and-politics/2017/1/1/14112776/ne...

The dirt is pretty expensive. In many areas just a block of dirt will sell for $1-2M. While a nice apartment in the same area sells for $600,000 AUD.

This alone would solve almost all the wage "problems" in the Bay Area.

This doesn't help in the short term, because building takes time. Moving people is faster than constructing buildings.

You're right it does not help in the short term, but we've been speaking about the Bay Area problems (for example) for two decades and vigorously discussing it in the past decade -- building five years ago could have solved today's problem.

Similarly, we could speak about it for another decade, or we could build now and solve part of the problem in five years.

This also doesn't exclude other fixes that can happen orthogonally.

> building takes time

It does not have to take nine months (the national average) to build a house or a hundred houses. Housing can be and in times of necessity has been built rapidly and well. My favorite example is Hilton Village in Newport News, VA, built to house workers at Newport News Shipyard at the tail end of and after World War I. Five hundred units were constructed within two years, and they were built cheaply yet with a randomization to the sequence of models and detailing that kept the houses from feeling like a cookie-cutter development, avoiding pitfalls into which many suburbs today fall. A hundred years later the homes remain occupied and in fact prized today for their charm.

The barriers to affordable, desirable, swiftly built housing are artificial.

Manufactured housing is probably the best bet for "built cheaply yet with a randomization", but most high-cost-of-living areas lack the available land. So then you need to build up, and that opens the Pandora's box of building code compliance, labor costs and material cost.

The city of Los Angeles presumably has access to average material costs and average labor costs, but the simple apartment complex they developed to house the homeless still ended up at $746,000 a unit https://www.nbclosangeles.com/investigations/las-homeless-ho...

"Moving people" OTOH sounds violent.

It doesn't have to. For example, if people are moving from Bay Area to Texas, we should think about how to accelerate that.

Isn't Jimmy Carter and Habit For Humanity building new homes, each in under 30 days, around the southern east coast? https://allthatsinteresting.com/jimmy-carter-houses

You're unlikely to find an instant solution to a problem decades in the making, period.

Make it illegal for Private Equity to increase their current large nationwide ownership of over 300K single family homes in the United States, which they rent out, do not maintain, and push rental rates higher nation-wide. This behavior generates large scale misery and should be illegal.

The real hill to die on is the private equity firms buying trailer parks, then extorting poor people who own trailers but not the land under them. Imagine having a 50 year old trailer you grew up in and you inherited, and it’s your only asset but it’s too old to move. Suddenly the trailer park is bought by a hedge fund and rent is increased to an unaffordable level. This is happening all over America right now.

There’s a bit over 120 million households in the US. How could ownership (and productive rental) of a mere 300k SFRs meaningfully shift the market and generate level scale misery? That’s a PE-owned rental for every 400 households.

They're not evenly distributed, they're concentrated in high COL areas.

1. Change property tax laws that ensure an always increasing property value. 2. Ensure that real estate is zone and rezoned quickly to ensure supply in a market. 3. Create policy that makes it uneconomical to hold unused real estate. 4. Quickly make underused or misused real estate re-enter the market. E.g. speed up clean up and demolition of vacated real estate.

At least in the UK, we may see an improvement if government stopped inflating real estate prices with new schemes every year (help-to-buy or the latest stamp duty suspension) and if investing in property to rent it, attracted as much tax as investing in training to get a better job. Also, in the UK, stronger regulations (such as a set of first-world tenant-protection laws and stronger requirements for landlod to look after their properties) would help.

Increase interest rates.

Yes, but how? Monetary authority can change nominal interest rate but has little control of real interest rate, and it's real interest rate you want to change.

Real interest rates will certainly increase if Fed increases nominal rates.

The real rate is of course the inflation adjusted rate, and Fed policy has been one of the prime drivers of higher inflation.

If they weren't printing 120B a month, or monetizing government spending, real rates would go up. Treasury yields are artificially suppressed by their bond buying.

Beyond asset purchases, simply raising short term rates would immediately dampen inflation, though has economic consequences as well (slow business activity).

Unfortunately the Fed seems more interested in supporting markets than doing what's right for the longer term health of the economy. Wealth inequality has been primarily perpetuated through monetary policy... Though fiscal plays a role too, of course.

I don't think interest rates mean what you think it does.

One can't simply raise interest rates on a whim.

end all state subsidies of residential mortgages

I would love to see this, getting rid of all the less than 20% down and 30 year fixed rate taxpayer subsidized mortgages in the US would help lower house prices very quickly.

Not necessarily, currently there are a lot of Wall Street companies buying real estate at any price (Zillow, etc). That is contributing some to the price inflation. My house has increased insanely in just the past 30 days for no obvious reason.

sure but zillow needs to find someone else to sell to, and that someone is likely getting a government backed mortgage

Don't think that is enough by itself.

There is no subsidy on residential mortgages in the UK but still the same problems with house prices.

my understanding is that the UK government has a mortgage guarantee scheme, which is a subsidy

Increase interest rates.

Rezone for more density.

Allow building with less red tape.

Government incentives to build.

It can be very easy if there's the political will. Look at what China did when they built all those empty cities... which are now pretty much filled.

If we built 30 million new housing units in the next few years, I guarantee you the cost of housing would decline significantly. If it's profitable to build, builders will do it.

Unfortunately the US government has been more keen on supporting housing prices rather than lowering them.

The easiest way is probably to mandate work from home for all jobs that are primarily done on a computer.

Build more of course.

Discourage gentrification using taxation.

Discourage owning empty homes with taxation.

Make evictions more difficult, even for squatting.

Require mixed use and prohibit office-only / mall-only areas and McMansions.

Gentrification is the problem? Not real estate investment trusts buying up single family homes? Turn off your TV.

Nothing says that problems have to be mutually exclusive.

Gentrification is a racist term that reduces market forces on housing down to "white middle class people need to stop moving into previously lower class areas."

That sounds more like classism to me.