It's very clear what it means - inflation. Consider a farmer in Zimbabwe who buys a used truck for 10000 Zimbabwe dollars to bring his produce to market. A few years later, he sells his truck for a million Zimbabwe dollars. He is a millionaire! But he still is a farmer and needs a truck to move his produce. Another used truck would set him back 5 million Zimbabwe dollars.
It can't go on like that. At some point the chunk of money that shelter takes out of the monthly paycheck can't grow further.
If you are trading up, the house you are buying is more expensive than the house you are selling. In this case you want a down market. Yes, you get somewhat less for your existing house, but you more than make up for it in what you save on the new house.
If you are trading down, the opposite is true. A hot market has increased the value of the house you are selling more than the house you are buying.
Yes I absolutely agree, the greater extent "homeownership is a middle class right", the more housing price rising just is an across-the-board inflation. To the extent that the poor / non-whites are not involved, it is stealing from them.
This is why fixed asset ownership is just a rotten scheme, inflation or theft, nothing good comes from it.
"store of value" is highly overrated. Public goods and infrastructure are what materially derisks the future. Not some bidding rat race.
Cashing out comes with the hassle to move, and is less attractive during pandemic. Rich people that want to decamp boost up demand in the select few popular remote places. That was the 2020 story.
Recently I am less sure exactly what's going, but yeah, single family homes are the worst!
The rest of the inflation is due to pandemic-related supply side dysfunction, and fossil fuels which are even more subject to random things like OPEC whims.
Raising rates to bring down SFH prices and not reforming the SFH system would be colossally stupid.
We have intentionally sabotaged the ability for our youth to afford houses under guise of safety while simultaneously grandfathering in our own shitty run down structures that were built under much looser requirements. The result is land with a shitty old structure can be worth almost as much as a new one, under this restrained and captured supply.
A smart first time owner will take advantage of this and effectively create an additional 1 or 2 living units (Primary residence+JADU+ADU) that can cover the new mortgage.
Honestly, I agree with one of the quoted people that ADUs are just a political hack to get a half-measure by the NIMBYs.
Even if we converted all the garages it would an extremely inefficient way to construct more housing. There was talk of trying to do financing for poor people to do the conversions, but insofar that that works I think it is likely to push up construction prices because ADUs are so inefficient.
(Conversely, the externality of decreased parking is quite good. I don't want to neglact that.)
If we really care about housing and equity for the poor, we should allow poor homeowners to trade in for a new condo if the entire block agrees, and then redevelop it at a massive scale. Far more housing, still equity for them, and once you bootstrap the process no one even need be displaced out of the neighborhood. Win-win
- the floor rent is too damn high, but the land rent is two damn low
- Ownership is very hard to price, but the existance of the instutition of ownership is a choice! By raising the land rent the price of ownership shrivels up, and that clamps down on the risks from this volatile and ill-defined problem.
- Rent is just better, what is bad is rent paid to owners, integrating the flow into the stock. Rent that cycles right back around as citizen divdend or gov services stays as a flow and is good. (And what ever evil inclinations states might have, profits are not one of them in the fiat era. (States == federal government in this case. State, local, and invididual departments could still be money grubbers.))
I see you've never rented before.
Landlords maintain power through the restriction of supply. They don't need to actively do it, the single-family-home complex does it for them.
Land value tax (+ land use regulation reform) demolishes that. Appartment management, divorced from land speculation, will become the boring low-margin business it deserves to be.
Mass ownership of appreciating assets is a very unstable situation, and also unclear what it even means. It is better to increase wealth through public goods.