Personally, I don't believe they are the same. I view AI as the next natural update to worker productivity like PC and windows. It's like the old days where people put MS Office on their resume as a skill, prompt engineering or whatever AI is gonna be exactly like that.
This feels like a very realistic take and is probably already occurring given what you can see on LinkedIn and the like: people are using “prompt engineer” in their job titles ancillary to their primary role.
Just because this doesn’t magically solve the housing crisis, doesn’t mean it’s not a good start. We have to stop looking at magical solutions that will solve all our problems in one shot. We have to start somewhere.
> because this doesn’t magically solve the housing crisis
It does. Twenty thousand units represent about 5% of Denver's housing stock [1]. Commit to adding this many units to the housing stock every year for the next 10 years and you'll have solved the housing crisis. (You'll probably need to bail out recent homebuyers, who will be permanently underwater, but that's a separate issue.)
> You'll probably need to bail out recent homebuyers, who will be permanently underwater
If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision. You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators.
It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house we're supposed to give massive government support to correct the buyer's mistake?
Yeah, pretty sure a government won’t bail me out if I invested in a stock so much that it would crush me if the stock went down. If buying a house is an investment and not for living, then it should be treated like it is.
Homeowners shouldn't be either. Locals should have less of a say in zoning decisions since they've demonstrated they won't act in their community's interest.
Also, making the public hold the bag in a bubble is perhaps the most sinister form of theft imaginable.
Short term thinking dominates economics these days. Managing the current downturn is most important, when people ask about longterm implications do a bunch of hand wavy stuff about it being temporary and then kick the can to the next guys who do the same thing.
You are assuming that there was any good way of dealing with a year where nobody went to work because of a global pandemic.
The economic pain of inflation was far preferable to the economic pain of active economic destruction, as short-term disruption to business would have resulted in long-term destruction of real value. It was far less painful long-term to print money and have the economy on pause for a year, with bills still getting paid, than it would have been to have the economy collapse over that year.
If it weren't for those mitigations, we'd all still be sitting around a tire fire, trading bottle caps for ammunition.
people call buying a house to live in an investment but that's because they don't know the technical term is a "hedge"
so you know: most localities do treat the house you live in very differently from a tax perspective than they do any additional properties you might have, because everyone is born short housing, until they own 1 place to live.
so yes, the proposed bailouts up thread would be for people who bought a house because they didn't want to be short housing; a hedge, not an investment.
also if the house has hedges then your hedges are a hedge. I'll see myself out
Buying a house is more than an "investment" though: It's achieving the American dream. And while this dream might have been a farce, it's like everything else in that you hear it enough combined with not understanding the economics and policies underlying home ownership and the lie is reality.
And let's not even get to your point about hedges. I don't know many people that can define it let alone consider housing as a hedge.
If the house price goes down you don't lose the house. You just end up paying more for it than you could have if the price was lower when you bought it. You are just keeping your promise to pay your mortgage. This whole "unrealized gains need to be compensated" thing is insane. Responsible policymakers would ignore such greedy, self-centered, anti-community sentiments.
Basically everyone considers housing as a hedge - homes are expected to grow steadily in value or at the very least not depreciate.
This is not a good policy goal, but the fact is that the wealth of the American middle class is mostly stored in property, and tanking property values would be a disaster for a broad swath of society which otherwise only has long-term retirement accounts to rely on.
They will vote to protect their interests, no matter how badly it screws their kids or contributes to homelessness.
Buying a house is investment.
Living in a house you own is consumption.
These are two distinct things that are coupled through life choices. It's a real pity that tax regulations are different just because you make individual life choices.
Whether a house is worth $400k or $300k is, sometimes, a choice the government makes.
It isn't always, but sometimes it is. Through regulations, through monetary policy, through other policies.
Now if the government decides that you, you personally, standardUser, are going to lose $100k, I don't think the government should bail you out. It's called "moral hazard". You lost $100k. Deal with it.
If the government decides that I, me personally, am going to lost $100k, I would say that I am old and I vote in every single election, and despite my failing memory, I will remember that lost $100k until the day I die and no politician who voted for that will ever get my vote again. I will remember who did that to me.
I think it always is, frankly. The price of pretty much every single house in the US[0] is a function of decades of government housing policy. And I don't think it's particularly fair to say, "oopsie, our housing policy since before you were born was kinda bad, we're going to fix it right now, but it's going to put you underwater on your mortgage... sorry, but you'll have to just deal with it".
[0] Sure, maybe this isn't the case for an off-the-grid cabin out in the woods, far from any town, but that describes a teeny tiny portion of the housing stock.
As someone that's bought their first house in the last few years, it's hard not to take offense.
A car or a TV are much smaller investments relative to a house. Over a decade of savings is tied up in my home. If the ass drops out of the market, myself, and others like me, who have broken into the market without assistance at the peak of housing prices will be virtually permanently financially set back. And to call buying a house around this time a mistake is crazy. I would be as much a speculator if I continued to rent and pay someone else's mortgage, hoping that prices dropped so I could get a good deal. It's a home and this attitude of treating homes as investments or mere purchases is why we're in this mess in the first place.
How is it fair to compare buying a house to buying a TV? One costs 500$ and the other costs 500k plus ongoing costs like repairs and taxes. Not saying you’re wrong, just that the comparison isn’t apt
Because if you're buying a house for a house, then it (mostly, generally¹) doesn't matter that the housing market has moved downwards and you'll be underwater until you pay down a bit on the house. You still have a house! So long as you can afford the mortgage — something you should have already planned for given you bought the house — you can still afford it. You might have remorse at having paid +$100k right before the market moved, but that's what the parent is saying: that's buyer's remorse, that is speculating on the price, when instead, you should be saying "am I willing (and financially able) to trade $400k for a home to live in?"
(¹I don't want to get too much into the sidetrack that is "but if you're underwater you could lose your home" — yes… that's possible. The example here is a 20% fall in prices — which would be astounding to those of us wanting a home, the thing of dreams — but you put 20% in the down payment, so a single mortgage payment & you're no longer underwater. In reality, the price drop (in rent, but let's work with what we got) was 3.7%. (Don't get me wrong, I'd take that too, as a renter.))
What if your company transfers you to another place, and you need to move, and you can't pay off the remainder of principal on the home with the (now lower) proceeds you get from the sale? Or even if you can, but you don't have enough for a down payment on a house in the new area?
Even regardless of that, I don't love the idea that a change in housing policy could make people feel trapped in their current home, unable to move. Granted, current housing policy (e.g. California Prop 13) has that effect on some people already. And I bet it sucks. Now, I'm not sure the government should be bailing out people who can continue to pay their (now underwater) mortgage but would just like the option to sell it and move. But I think this requires a bit more thought than just wielding that axe and letting things fall where the are. I mean, hopefully we're not advocating for more of the DOGE method.
> I don't love the idea that a change in housing policy could make people feel trapped in their current home, unable to move.
The needs of the many (would-be homebuyers locked out of the market, renters suffering higher rents) outweigh the needs of the few (homebuyers who did buy recently, and would be underwater, and would have an event to trigger that mattering at all, and whose finances are not orderly enough to survive that).
I think you're neglecting to account for a big risk. If the house retains or increases in value, the bank can just take the house to recoup what you owe them of you can no longer pay the mortgage due to ill health, accidents, etc. What do you think happens if the houses value drops a lot and you can no longer pay what you owe? You don't just lose the house, you're in a much, much deeper hole. How property values go substantially changes the risk calculus of owning a home with a mortgage.
> You don't just lose the house, you're in a much, much deeper hole.
Oof, I was about to question if this is correct or not, but it turns out that this is indeed true in most US states: if you default on your mortgage, and the bank can't resell your house for at least as much principal as you have left to pay, you still owe the difference, and they can get a court to garnish your wages, put a lien on any future home you may buy, get your accounts frozen.
Didn't realize this was a thing... I live in a non-recourse state (California) where the bank only gets the property on default and can't pursue you further.
The median isn't even 20%, it is a bit less than that. Median first-time home buyers put only 9% down. Even the median repeat buyer, who just sold a house and had probably been paying mortgage payments for a while, only put 23% down.
Some loans require PMI if your outstanding balance is larger than the current value. PMI is very expensive and, unlike a TV or car, you might be forced to give up your house because it devalued too far and you can no longer afford mortgage and PMI.
I'm not saying we shouldn't make housing affordable, but it's worth considering the impact for everyone.
Correct - though the dirty secret is some percentage of the economy is run on rolling loans against house equity, and prices stagnating or dropping would slow that down.
Easy: make it illegal to require PMI in that case. Some loans will require PMI at signing (IIRC, often this will be when you put down less than 20%; you're required to carry PMI until you've paid off enough to get your principal below 80% of the purchase price), but we can certainly make clauses unenforceable that require it later under whatever conditions.
> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision. You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators.
Isn't that missing the forest for the trees? There's an all-out class war between the haves and the have-nots. If it controls supply like a cartel, and if it pursues rent-seeking like a cartel, then maybe the real estate moguls and speculators that treat everything like an investment instrument should be held accountable and liable.
You never know what your house or apartment or condo is worth, even to you. Maybe you can afford $400k barely, but you'll be hugely squeezed. Or maybe you'd get a bigger place if prices had dropped for your family size.
You hope conditions won't change. You can look at the current market trends to try to value it. But things will change in the next few years probably. You can guess, but you'll never "know with pretty good accuracy". The economy can go down, interest rates can change, major employers can come and go, there can be an earthquake or cancerous ground discovered there.
These are my feelings too, but in the interests of compassion, I would suggest a return of some proportion of equity to (human, non-LLC, non-corporate, primary resident) buyers in cash, up to bank failure. Hopefully they can then buy another house at the presumably much lower prevailing market rate. Someone has to lose, let it be in order of "he who should have known what he was doing in making this catastrophe possible."
I mean, there are a few things here. Like if the bank want the house sold on the loan because the house value goes down even though the person with the loan is willing to continue servicing it - then that seems like an own goal for the bank.
There are a variety of circumstances that can be dreamt up for either side of the equation. And I have no compassion for lenders either.
As you say, maybe the mortgage/loan should be seen as a partnership of some degree between the parties so that the lender is less likely to take advantage.
But ultimately "he who should have known" is the person asking for money to buy XYZ thing. A person should be responsible for their actions.
> But ultimately "he who should have known" is the person asking for money to buy XYZ thing. A person should be responsible for their actions.
I agree with this in principle, but the real world is messy, and many (most? all?) people end up having to make decisions in their lives where they maybe should know, but don't know everything they should. Perfect information is rarely a thing, and even if you have it, you need a certain level of education to exploit it that we can't expect anywhere near everyone to have.
I don't give even the smallest shit for lenders. I care about people. I care about people having housing security, food security, and a little extra so they don't have to live paycheck to paycheck. No, I don't think we should just be printing money and firing it off in a t-shirt cannon at people for the hell of it. But I think we need to be compassionate, and understand that a huge, unexpected change in housing policy that tanked their home value is not something they "should have known" might happen.
I feel like many of us here forget (or were, oof, too young for) the 2007/08 financial crisis. We bailed out a lot of banks, and left a lot of regular folks holding the bag. I don't want to see that happen ever again. And yes, I get that housing policy changes that create lots of new housing is different. But the outcome could be very similar.
If you want to make change but not make it scary - make it gradual. Which I suspect is going to be the outcome. I'm not sure what change in policy could suddenly produce a market surplus across a country in short order.
Fixing the housing crisis will be a generational task.
But, the convention in the US is that people see their houses as a form of savings. Realistically, we should account for that.
Also, if continuing the building ends up requiring some policy change (supported by changing laws and regulations)… it seems reasonable to protect normal people, doing normal things, from massive financial chaos that is explicitly caused by the government changing policies on them. At least for people actually using the houses as intended, that is, living in them.
Because policies they cause huge financial harm to normal people become unpopular, and don’t spread as a result. And also because it is bad for society if we modify the rules in ways that makes it harder to plan ahead.
> Are angry homeowners overthrowing governments and blocking homebuilding?
Yes. Go to city council meetings when new housing developments are being proposed. See the throngs of people that'll show up demanding that new development doesn't get built. See the angry people shouting about how allowing ADUs will just destroy their way of life.
The amount of vitrol I saw about the Plano Tomorrow plan against past mayor LaRosiliere was astounding, people fighting tooth and nail to prevent denser housing from being approved. So many people saying things like the "wrong kind of people" would be moving in and allowing more density would make the city unsafe.
That's the local council. Local
council meetings are notorious for attracting people willing to oppose any development. Not the same thing as an electoral force.
Recent zoning changes in Texas came from the state legislature and remove cities ability to block a fair number of housing types.
Did Plano itself actually enact any new pro zoning law that has drawn new protests? The article you shared it about developing undeveloped land but zoning is largely about what is blocked on existing inhabited land.
> Local council meetings are notorious for attracting people willing to oppose any development.
So yes, even you agree there are angry homeowners doing what they can blocking homebuilding.
Yes, it's been happening at the local level, because that's where those decisions are almost always made.
> Recent zoning changes in Texas came from the state legislature
As in, this last legislative session. It took to that point because of angry homeowners blocking development. And how did they do it? By pushing out any local government that tried to enact development plans that tried to densify over and over again throughout tons of towns. The legislation didn't come from a vacuum, it came in response to these NIMBYs that have otherwise yielded significant political power at the local level.
> zoning is largely about what is blocked on existing inhabited land.
Practically all that land is currently zoned. It's not developed, but it is zoned. Almost always zoned agriculturally, as it was once pretty much all farm lands. Lots of those areas are still farms, but largely for tax reasons.
> Are angry homeowners overthrowing governments and blocking homebuilding?
No, they're already in the government, have been for decades, and they're the ones responsible for anti-development policy.
> For example, re Texas, 9 out of 10 say housing prices are too high
Cute punchy polls like that make for nice sound bits, but don't tell the whole story. I'm sure if you followed that up with, "If the government were to enact new housing development property that would reduce the value of your home by 20% over the next 10 years, would you support it?", I guarantee you that 9 out of 10 (homeowners) would absolutely not.
It doesn't really matter why; what matters is that they do see things that way.
And I agree with you, it's a bad convention, and it causes tons of problems, and it's the result of recent decades of bad mortgage/housing/zoning policy. But we can't just wipe it away and pretend it was never there, and let the chips fall where they may. That's just heartless, and, well -- you talk about making society poorer -- that will make society much, much poorer, nearly overnight.
No it won't. If society builds more dwellings society is richer. Wealth is the actual physical production of goods and services.
We wouldn't get richer if we blew up car factories to protect the market value of existing cars. The market value of existing cars WOULD skyrocket if we destroyed all new car production, but that would be society getting poorer, not richer, as we would have fewer cars.
> But, the convention in the US is that people see their houses as a form of savings.
And that is a big part of the problem. You cannot have it both ways, if housing is an investment, it will eventually lead to poorer outcomes for anybody that needs a house and does not inherit one.
If we go to a place where homes cost $400k then we're all buying at $400k, regardless of whether people understand speculation or markets. Once you allow enough people with deep pockets to do speculation or price arbitrage... then we're all paying it.
It's not that we shouldn't desire cheaper homes, but we should realize that people who paid $400k are largely not speculators. They bought what the market was willing to offer.
>It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house we're supposed to give massive government support to correct the buyer's mistake?
The difference is order of magnitude as proportion of net worth and the necessity of the purchase.
And it's not like the actual value has decreased. You still own the same house. It's the same size, location, build quality... That's the value of the house to you. If you're not currently buying a house, the price of a house should be irrelevant to you.
But the price you were strong armed into paying is more than the value of that stuff, and you only begrudgingly accepted the price that included a large speculative component, because you saw that the government has been guaranteeing that the speculative component only goes up.
If the government passed subsidy laws or building requirements that caused your loss, then you might expect compensation. Did you disagree with bailing out small businesses shuttered during COVID and their furloughed employees? Same principle.
But the buyer probably didn't think it was actually worth $400k intrinsically. They were bullied into paying $400k because (1) they need a house no matter what and (2) at least the government guarantees that there will be a bigger sucker down the line who will pay $500k.
It's the government's fault that this bigger-fool game even exists, because the buck always stops there. They might want to consider compensating people for the misery they caused.
We (government) does debt forgiveness all the time. For very practical reasons. Can't some of the cheddar be redirected from the 0.1% to the rest of us?
A $400k home is probably a starter home. Owners are probably a young couple (millennials). They probably want to have kids.
Forgiving 100k of their debt means they (and their kids) will have a fair chance at success. Earning more money. Saving more. Paying more taxes (over their life times).
While at the end of the day I don’t think people should be bailed out, I don’t agree that everyone who over paid is a speculator. Many people are just wanting to own their own home. The market has been crazy for the last 5 years. Many people are just buying to own not to flip it for a huge profit. So when a new home owner buys something and suddenly the value drops $100k and the bank wants the money I do feel slightly sorry for them.
For the person who ownes multiple houses and buys simply to rent and flip a profit well I have very little sympathy for them. They are the true speculators.
> So when a new home owner buys something and suddenly the value drops $100k and the bank wants the money
That's not how mortgages work (in the US, anyway). If the value drops, nothing happens, you still have the same house and same mortgage.
I've been underwater twice, in the same house, as prices go up and down over the years. As long as you still like the house and want to continue living there (I did), being underwater doesn't mean anything.
That's the catch, though. What if you wanted to move? That would have sucked. What if you had to move? That could have been disastrous to you. What if you had lost your job, and defaulted on the loan. Apparently most states in the US are non-recourse, so how would you feel when your next job's wages are garnished, or there's a lien on the next home you buy?
When you have to put an "If" in front of "being underwater doesn't mean anything", then that means sometimes it really does mean something.
Where do those ifs stop? What if you went blind in an accident? Some things are just disasters, you can't count that for optimising the majority of the system. Of course you can have support for poor people but that will obviously not match the 400k house lifestyle.
> So when a new home owner buys something and suddenly the value drops $100k and the bank wants the money I do feel slightly sorry for them.
I feel a little sorry for them but they are not missing the money total of "the whole house". They can sell the house, have a shitty $100k debt, a tale of woe, and hopefully a better idea of how to go about spending money they didn't have.
I feel there are too many people who "borrow as much as they can for the best house they can get" rather than being sensible about their money and using a mortgage as a hedge against paying rent and future rent raises. Some of them make it, some of them don't.
we’re talking about wiping out most of the stored wealth of roughly a quarter of all homeowners here. and they cannot take that home with them when a new job opportunity comes up or worse get fired/sick.
Is it great? No! It's certainly not an outcome I would wish for anyone. I'm not a monster.
But there's two things here:
1. allowing people freedom to make their own choices.
2. the dangers of borrowing large sums of money
Adding those two together in a free(for some notion of free) market means there will be losers. In this case, the outcome sucks but it isn't like they lost their life in a car crash.
If you start guaranteeing outcomes... that way madness lies.
> So when a new home owner buys something and suddenly the value drops $100k and the bank wants the money I do feel slightly sorry for them.
I don’t understand this point. If you’re paying the mortgage, the bank dgaf. Is there some sort of margin call a bank can claim on a house that is worth less than it was when it was purchased?
Don’t you just pay the mortgage you agreed to pay the bank?
Well those people vote. Home ownership rate is 65%. Home owners I believe are more likely to vote than renters. So yeah your proposition is not feasible
I agree in principle that we shouldn't be bailing people out for the consequences of making purchases with their eyes open, but if something like this happened, a lot of people would be mad. And I get it.
The problem in this eventuality is mobility: if you buy a house for $400k, live there for, say, 5 years and the resale value of your house is at $300k, that's going to be a big problem if you have (or just want) to move. If you sell at $300k, you'll have about $50k left over (after repaying the bank) for a down payment on your new house, which means you can only afford a $250k house, which may well not meet your needs.
If someone is planning to live in that house long enough such that when they do want to sell it, they can move to a new place that meets their needs, at a price they can still afford, sure, great. We shouldn't be bailing those people out.
> You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators.
That's absurd. Aside from people who buy too much house ('00s, anyone?) and regret it later, people pay the price they have to pay for the amount of space and location they believe they need. Most people -- very understandably -- don't know the dynamics of the housing market to the point that they'd be able to predict that their resale value might go down by 25% at some point in the future, because, historically, that's just not what home prices do. (And don't parrot the "past performance is no guarantee of the future" crap... yes, true, so what. Most people unfortunately can't plan their lives around that.)
These people aren't speculators... speculators are buying to flip, or to hold and resell, as investment properties. These are just regular folks who need a place to live and have -- regardless of prudence or correctness -- bought into the idea that owning their home is the next life stage, a proof of success and well-being. Calling people like that speculators shows a severe lack of understanding and empathy.
> It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house...
A car or a TV costs nowhere near as much as a house. Losing a car or a TV is not going to make someone homeless. Housing is a basic need, and housing security is essential in a healthy society. (Granted, in many places in the US, losing your car can lead to financial ruin as well, sadly, considering how crucial a car can be to many people for basic things like getting to work.)
> Losing a car or a TV is not going to make someone homeless.
Your house losing 100k$ in value isn't going to make you homeless either (quite the opposite actually). If you buy a house and it depreciates, so what?
Not to mention if everyone's house depreciates, your new house is cheaper to buy. You lose _nothing_, except imaginary dollar values.
> Calling people like that speculators shows a severe lack of understanding and empathy.
I don't know what you call preventing young people from buying, or even renting, at affordable prices so 'people like that' don't have a possibility of losing some money, but you sure as fuck don't call it empathy either.
> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision. You should have been certain that the house was worth $400k to you at the time of purchase.
I think it's pretty normal for rational purchasers to consider the resale value of something that they purchase, and hand-waving that away doesn't make for a very serious argument.
In the case of housing, it is generally very not normal for resale to be less than purchase price. Sure, there are exceptions to that: market downturns happen, and sometimes regional issues (like the one big employer leaving town) can cause that. But in general, no, it's normal for the resale value of a home to be higher than when you purchased it.
Very rarely does the value of a purchase increase over time. Literally the only examples I can come up with are things that are very old and rare, or a house.
Viewing a home as some kind of investment vehicle is everything wrong with the housing market today. It’s so wrong it makes my head spin.
> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision...we shouldn't be bailing out speeculators
When the speculators vote, yes, you need to bail out the speculators.
> It's called buyer's remorse
It's called building consensus. At the end of the day, if it costs making homeowners whole to gain their buy in to solve the housing crisis, that's money well spent.
I'm not saying what I'm proposing is fair or even palatable. But it's functional. If solving the housing crisis is more important than aesthetics, it's a good move.
I agree there are political considerations, but we are talking about a scenario where the only damage done is that the buyer must continue to live in the home they purchased at the price they purchased it for, and where the recipient of government benefits is a household capable of purchasing a house, presumably at the height of the market. Is a tax dollar better spent placating grumpy homeowners who already have a place to live they can afford, or by more directly building more housing and infrastructure?
> we are talking about a scenario where the only damage done is that the buyer must continue to live in the home they purchased at the price they purchased it for
In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down.
> Is a tax dollar better spent placating grumpy homeowners
If it gets you the reform, yes. The point is you don't get housing reform with grumpy homeowners barring a massive shift in voting patterns.
Also, let's keep scope in mind. You only need to bail anyout out if you reduce home prices. If you hold them constant in nominal terms, that shouldn't generate pushback. (If you hold them constant in real terms, people can continue feeling wealthier.)
> In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down.
At the trade-off of never being able to get a mortgage again, unless that's the bailout these homeowners get. Almost everyone will either sit tight or rent/sell at a loss. That being said, you will lose out on the public and private support of everyone who bought a house since roughly 2020. It doesn't matter if you've got a 3% rate if you're not getting your down payment out of the house.
The plan that makes the most sense to me is to keep housing prices constant/barely increasing while letting 3% inflation and gradual lowering of interest rates do its thing. Eventually the houses won't seem that expensive and those who locked in at high rates and high prices have an offramp through refinancing.
> At the trade-off of never being able to get a mortgage again
That's not the effect of abandoning a mortgage (or using the leverage provided by that option to secure lender approval for a short sale) in a non-recourse state.
(Source: been there, done that, have a new mortgage since.)
The costs and hassle of moving kept me in an underwater house that I mathematically should have walked on; eventually it wasn’t underwater and the mortgage was paid the entire time because I couldn’t be arsed to move.
The potential credit hit wasn’t even a consideration.
> If it gets you the reform, yes. The point is you don't get housing reform with grumpy homeowners barring a massive shift in voting patterns.
I think this is a really good insight. The reason for long-lived NIMBY policies is because NIMBYs[0] vote and lobby more than everyone else does. I have, do, and will continue to vote for pro-housing policies, but there are a lot of people -- probably still in the majority -- who will not vote for anything or anyone that will reduce the value of their homes.
What matters is outcomes. If paying off the NIMBYs gets you a good future housing policy, then we should do it.
[0] I know "NIMBY" is generally a pejorative, and I agree with that for the most part, but I will admit that many NIMBYs are operating and voting quite logically, for their own interest, even if it hurts others, and hurts society collectively.
It’s a valid point of view. That said, for most homeowners it is as simple as: My house is multiples More expensive than my next expensive asset. Loosing all the equity in my home will affect my lifestyle and financial future negatively, a lot. I will therefore continue to vote against whatever brings home values down.
There really isn’t an easy and elegant way out where you neither pay off the haves nor pitch the have nots majority against the haves.
Yup, and that's why it's so hard to get housing policy changed. To make it harder, I'd wager that homeowners, proportionately, lobby and vote more than renters do.
You only win here if you placate the homeowners, and a surefire way to do that is by making them whole when you whack 20% off their home's resale value. Maybe there are better ways, but I'm having trouble thinking of them.
The scenario to address is people who are forced to move (via e.g. layoffs, company relocations, industry collapse, etc) who are also suddenly saddled with a mortgage far higher than they can realistically payback while still moving on to whatever opportunity necessitated the move in the first place.
The first order consequence of treating housing as an investment vehicle is high prices, sure, but the second order consequence is that you dramatically increase the stakes when individual people buy any house whatsoever.
I would much rather give checks to every homeowner whose home value falls than to force even a single laid-off autoworker or whatever into bankruptcy (good luck buying a home after that) if they elect to move somewhere else for a new job and can't sell their house for enough to pay off their mortgage. If the consequence of a government policy to build more housing is that more people become homeless, then its failing.
> It does. Twenty thousand units represent about 5% of Denver's housing stock [1]. Commit to adding this many units to the housing stock every year for the next 10 years and you'll have solved the housing crisis. (You'll probably need to bail out recent homebuyers, who will be permanently underwater, but that's a separate issue.)
That is only if you believe that more capacity does not induce more demand, which really isn't true as long as the city remains popular for jobs/climate/nature/etc.... People not moving to Denver because the rent is too high will decide to move to Denver if rents decrease (and the demand they add will cause rents to increase, wash/rinse/repeat until an equilibrium is reached). You also have cases where a city becomes even more attractive because of growing density alone (NYC, Hong Kong, Tokyo).
This argument always comes up when discussing a specific place.
"Everyone would move to ________ because it is the best place in the spiral arm of the Milky Way", where ________ is Boulder, Bend, Austin, Portland, San Francisco, Santa Barbara, Hawai'i, Santa Fe, etc.... etc....
It cannot be true for all of them. So they all need to build and people will figure out where they actually want to live.
Bozeman, Montana, a small city of 50K people, is seeing falling rents because they built a lot of housing:
If everyone could live where they wanted to live, then ya, why wouldn't everyone want to live in the best cities?
If you have fixed demand, then you can definitely "build" your way out of a housing crisis. Bozeman, for example, doesn't have many jobs, so you can't really live there if you don't bring your own money. A big city like Seattle or Denver... they have lots of jobs, so they will grow at least to the point that all those jobs have people working them...but then a city like that attracts even more jobs (the way cities work since they concentrate talent, which attracts more businesses looking for that talent), more people, it could grow from a million people to 10 or 20 million easily.
> And it's very much the kind of small place where "everyone wants to live there".
MT is a bad place if you need to work for a living: high housing prices, jobs don't pay very well if you can find them at all. My mom moved to Helena in the late 90s and found that out first hand. If WFH took off as expected, then you definitely could make a good life in Bozeman or Missoula or Butte, but alas, the opposite happened and we regressed greatly.
The population of Bozeman is still growing, albeit more slowly. It's not like people left. They just built a lot of housing, vacancy rates increased and prices dropped.
Same thing happened in Austin, Texas, which is a much bigger city with lots of jobs.
The underlying story is that building enough housing is a good way to fix a shortage of housing, which is what causes high prices.
> If everyone could live where they wanted to live, then ya, why wouldn't everyone want to live in the best cities?
Best is different for different people. Some people it means close to beaches, for other it means cultural institutions, for others it means lots of tech companies, for others it means wide open spaces.
Land is eventually limited, but there is tons of variety available of what people like.
> If everyone could live where they wanted to live, then ya, why wouldn't everyone want to live in the best cities?
I moved from midtown Manhattan to western Wyoming. People have diverse preferences. (Even if we assume uniform preferences, densifying the population into a few cities so we can reclaim our wildlands sounds like a dream.)
The point is everyone in Jackson doesn't want to live in Manhattan and vice versa. There are multiple equilibria. Same for Denver, Seattle, San Francisco and Los Angeles.
Really? It's very small, isolated and while there is a ton of outdoor stuff, I don't think there's much else. There are tons of people who enjoy the urban amenities in places like NYC or San Francisco who would have fun for about a week and then be desperate to go somewhere with more going on.
Just as there are plenty of people from outdoor towns who would enjoy hanging out in NYC for a week but then miss mountain biking or something.
I couldn't stand the rain in Seattle. You'd have to pay me to live there. Some people apparently like it or at least don't mind it much, though!
Jackson is a resort town, like Vail, Aspen, Sun City, Park City, etc...you are usually really rich if you live there, or doing service jobs for the very rich. Obviously, you can't just move there and expect to somehow survive.
If I had a few billion dollars lying around why not? I'm a big fan of anything on the snake river, having been a toddler in the city where it meets the Columbia. But I need to work for a living, so it will be a big city with a thriving economy for me, I don't have the option of liesuring about in a resort town.
Even if you can observe this induced demand locally in a city or two, the net supply is going up.
Globally, demand isn't even fixed. It's proportional to the population size, which we would expect to shrink.
The only way this could work in the opposite direction is that you build enough that it becomes feasible for everyone to live in a few supercities where demand keeps growing due to network effects, and the supply outside of the supercities is useless.
Housing stock definitely goes up in those cities that have the demand. Other cities drain out as a consequence and housing is razed in the cities that are no longer popular, like Buffalo and Detroit.
Do we really want that? Of course, housing has to be maintained and has a lifespan (the Japanese are good at rebuilding housing stock after 20-30 years), and so it can simply die off in the places that are no longer popular, but it seems like a waste of infrastructure investments that then have to be re-done in the new hot places.
Induced demand can only function if there's a scarcity to begin with, and it's premised on increased supply increasing affordability (that's the mechanism by which it works), but these axiomatic derivations don't matter because we have case studies (in MN, in TX, and now CO, a story we're literally commenting on). Empirical observations win.
> Induced demand can only function if there's a scarcity to begin with, and it's premised on increased supply increasing affordability (that's the mechanism by which it works)
I don't think that's how the theory is supposed to work. It's more along the lines of, if you build more housing in a place then more people live there and then the higher population density can sustain more shops and jobs, and then people want to live near shops and jobs so the local demand increases.
There are two reasons the theory doesn't actually mean that you can't solve the problem with more housing.
The first is, the effect isn't infinite. As the reductio, if the entire New York Metro area had the population density of Manhattan, it would house 450M people, which is more than the entire US population. So you can build more housing than you have people to move into it even if that would literally cause the entire national population to move to the same place, and of course building that much housing in one place wouldn't cause literally everyone to move there anyway, so the amount you need in practice is far less than that.
And the second is, it's a local effect that comes from net migration. If you build more housing in Denver and that causes people to want to move from Austin to Denver, even if you don't build enough to overcome that in Denver itself, you'd still be lowering housing costs in Austin. And if you're simultaneously building new housing everywhere then there is no net migration and therefore no induced demand anywhere.
This Colorado story includes construction already slowing so why should we be convinced this is the start of a downward trend toward affordability vs a corrective blip after the Covid-era remote work migration trend?
Affordability and desirability are always going to be in constant tension, and any given change - including construction - can tip things more one way than the other. The long-term affordability trends are poor even in states like Texas - is that purely because of construction? No, it also has to do with policies like trying to poach established businesses from other states and importing wealth and high salaried individuals. But it shows that development is no panacea and that even in areas with more open land to build more new construction on there are still powerful trends in the US towards sprawl, low-to-medium density, and rising cost of living. Without explicit intervention like subsidies or direct government construction development will slow - focusing on higher-ROI units for the same spend vs pure unit count - as developers worry more about not being able to command the per-unit price they want if they were to aim for quantity.
> Induced demand can only function if there's a scarcity to begin with
I don't believe this is true, assuming scarcity = shortage. Ad absurdum, if Denver overbuilt such that one could pick up a parcel for a song, you'd see opportunistic demand where there previously was none.
There's places all over where land, and sometimes land with buildings gets very inexpensive because there's not much demand.
Here's a listing for a parcel for $9000, that's been listed for over a year[1]. Denver seems like a nicer place than Detroit, IMHO, but it's possible for there to be more supply than demand.
I suspect at 5% annual growth in units, you would be able to reach the point where there's not enough demand for builders to recover costs. It might take a few years, depending on just how much unmet demand there is.
But there’s an obvious limit somewhere, Denver with 5 billion units might still see demand, perhaps even ten billion (need that second house of course!) but once Denver has 20 billion dwelling units demand will have leveled off, no matter how much more supply is added.
That's why you have to allow large-scale building everywhere. Then the market will find its own level.
The inverse of this situation is that everyone lives somewhere they consider unpleasant because the rent is affordable there.
The megacities you mention are enormously economically productive per capita. All sorts of efficiencies pop up when a huge number of people live near one another.
> The megacities you mention are enormously economically productive per capita. All sorts of efficiencies pop up when a huge number of people live near one another.
It isn't a bad thing. NYC and Hong Kong are nice cities, they should exist. But don't expect housing prices to fall because you add more density if demand isn't fixed, the opposite often happens instead (people want to live in megacities even though housing costs are high). And that isn't really a bad thing, like gentrifying a blighted neighborhood will drive up housing prices as well.
> only if you believe that more capacity does not induce more demand
No, it doesn't. What you're describing is elasticity. It's a well-studed concept, and means that a 5% increase in supply will probably reduce prices by less than 4.8%.
(An interesting side effect of a government committing to a zero real-price increase housing strategy is it eliminates whole categories of speculative demand. I wouldn't count on this for policy effects. But it's another feather in the cap for pro-housing policy.)
Giving significantly more people a way to live a lifestyle they seek, while holding the cost of housing flat -- if thats the worst case outcome, that seems totally fine, and arguably a better solution than trying to crash the cost of housing.
I would imagine for most people, this is what "solving the housing crisis" means
A 5% increase in supply annually indefinitely would crash the housing market there, induced demand be damned. To put it in perspective, a metro area growing at 2% is killing it, the highest growth rate is Austin at 3%. Denver only grows at less than 1%.
Cheaper homes may induce demand, they won't induce a 5% growth rate.
> A 5% increase in supply annually indefinitely would crash the housing market there
Only if population is held constant.
Housing supply is inelastic, but housing demand is somewhat elastic. As seen in Denver, an increase in housing supply would decrease prices. But those lower prices will increase demand from people that want to live in Denver but previously couldn’t afford it.
I think you missed my point. It won’t increase it to 5% because that’s basically an unheard of population level increase for a big city/metro. It’s like 5x your average fast growing big city. You may induce some demand, it will be nowhere near that much.
You keep building until supply meets demand, regardless of what that demand is or where it comes from.
We don't have an infinite number of people available to move into housing. There are only a certain number of people who will want to move into a particular region, and that number will stop growing at some point.
Granted, you don't want to build too much and end up with a ghost town. There's a balance to be maintained, and I think housing should be affordable, not a race-to-the-bottom cheap as possible.
How much demand do you think CAN be induced? Colorado has 2.6M housing units for ~6M people. If Denver builds 20k units a year for the next 5 years, that would represent the entire state growing by 4% (230k people) off the back of one city alone. I guess that's not terribly unreasonable - if Denver was the only city in the country.
Except, it's not. Where would all of these extra people come from?
More to the point, Denver is already quite expensive. Where are you going to find another 230k people capable of paying even higher rents than folks do today?
Are there people who have been avoiding Denver because the rent is too high? I think of Denver as somewhere you go if you're sick of the cost of living on the coast.
> I think of Denver as somewhere you go if you're sick of the cost of living on the coast.
Denver hasn't been that place for more than a few decades. Heck, the whole rocky mountain region has never ever been a place for cheap housing. Western housing prices are high historically for reasons related to desirability. They never were as cheap as the midwest or deep south.
> It does. Twenty thousand units represent about 5% of Denver's housing stock [1]. Commit to adding this many units to the housing stock every year for the next 10 years and you'll have solved the housing crisis. (You'll probably need to bail out recent homebuyers, who will be permanently underwater, but that's a separate issue.)
"Committing to doing this every year" is VERY different than doing it in one particular year. Yes, that would solve it. But of course, 2022 was part of a very unusual cycle including a lot of migration and you should note the last line in the article:
> Meanwhile, the pipeline of new apartment buildings is drying up. The number of properties under construction is down by roughly one-third from the peak in 2023, the report found. That likely means fewer units coming available in the months ahead, potentially giving landlords room to start raising rents again.
> Commit to adding this many units to the housing stock every year for the next 10 years and you'll have solved the housing crisis.
That would be an incredible commitment, and not something which has happened. This burst of new rental property is already subsiding, with an expectation that rents will again raise next year. Moreso, it would be hard to get private organizations to commit to building such a massive glut of property knowing that they are tanking the market that would pay back their investment.
That is why this doesn't magically solve the housing crisis.
Why would we consider bailing out entities that are financially solvent? These homeowners may have an underwater investment, but they (presumably) can still pay the mortgage to get it paid off
1. House prices have risen consistently for the past ~50 years. This is an anomaly (various theories why, my favourite is because women entered the workforce so the income per household increased and we spend as much as we can afford on housing). If/when house prices stop rising consistently then buying doesn't look much better than renting from a financial perspective.
2. Existing laws tend to favour the landlord over the tenant. In countries where this is not true (e.g. most of Europe) and the tenant is favoured, then renting is not so precarious and has lots of advantages.
I lived in rented accomodation in Berlin and it's a completely different experience from renting in the Anglosphere (UK or Australia for me, I don't know about the USA).
For single family homes square footage alone has a fairly modest impact on housing prices.
Land, driveway, number and quality of fixtures, electrical hookups, cabinets, countertops, doors, clearing land, water, sewage, etc can be nearly identical costs for a 1,000 sf or a 3,000sf home. Many things like wall insulation and heating demand increase sub linearly with square footage.
Which is why home builders so heavily favor large homes by historic standards. This is slightly less true of high rises, but making the building wider doesn’t require more elevators, internal hallways, etc.
A 1000 sqft, 3BR, 1 Bath, basic kitchen unit will be cheaper than a 3000 sqft 4BR, 2.5 Bath, fancy kitchen unit. Builders (and most everyone else involved in real estate) make a lot more money on the latter than the former, though.
Cheaper sure, but a large fraction of the difference is that extra 1.5 bathroom and fancy kitchen. Plus all the other little difference like more larger and nicer windows.
I’m not sure I get your point. If the utility of a home is largely a function of size, but the cost is largely a function of location and amenities then there’s little benefit to specifically building smaller homes rather than less expensive homes.
No one is seeking to build smaller; they're seeking to build less expensive.
Building smaller (specifically reducing square footage, baths, and kitchen amenities [which are a mix of size and non-size elements], and using less land [going up, sharing walls/roofs, eliminating private outdoor space, etc.]) is the mechanism by which the goal of less expensive can be met.
“Size” within the normal range of homes is only going to save you 2-5% on its own. It’s not useless, but doesn’t actually make that meaningful of difference while significantly impacting the homes utility.
Amenities on the other hand can literally 2X+ the cost of a home.
It’s actually quite hard to definitively quantify if renting or owning is better in a given area/scenario.
Obviously the case near me where the mortgage payment on a house would be $2600/mo but the rent for the identical one next door is $2000 is going to swing heavily toward renting, but there’s more to it than just that.
Maintenance is huge and real and people just seem to ignore it on the “own” side, but 5-10% of the value of the house a year in maintenance isn’t unheard of.
The $10K roof is noticeable precisely because it's an outlier that pulls the average up towards the 1-2% per year range for all but the least expensive houses.
If houses really consumed 5-10% of the purchase price on average per year, people wouldn't worry or talk so much about roof replacements; they'd be just other drops in the bucket.
> where the mortgage payment on a house would be $2600/mo but the rent for the identical one next door is $2000 is going to swing heavily toward renting
I think those figures point towards buying being favored, especially if the mortgage payment is PITI, but even if it's principal and interest only, I think buying is likely to be better in the long-term if the spread is that small.
Maintenance is not going to run 5% of the purchase price on average, except in the most extreme low-cost housing situations. A house that sold for ~$500K (as would be implied by a $2600 mortgage payment) is not going to cost $500K in maintenance over the next 20 years (as 5% would imply) and certainly not over the next 10 (as 10% would).
You may have an individual year that's over 10%, but that's a cashflow issue not an overall cost issue.
The advantage of renting is the flexibility, lack of commitment to a specific house or area, and the lack of need for a large upfront sum (in this example, renting might need $6K upfront [$2K of which is the first month's rent], while buying might need traditionally $100K to avoid PMI or ~$20K on an FHA first-time buyer mortgage and associated transaction costs).
> 5-10% of the value of the house a year in maintenance isn’t unheard of
That's actually pretty much unheard-of (unless you specifically bought a very cheap fixer-upper with the intent of remodeling).
I've owned current house for over 25 years and I have not spent 10% of its value in maintenance even if I add up everything over the 25+ years! Let alone every year!
It is instructive to look at how we got expensive housing in the first place. Expensive housing comes from a surplus of people. How did we get all those people? By building more housing and having people breed there.
New housing is only a temporary salve and perpetuates a vicious cycle. The people who move into these new units will have more babies, because they have new habitat. These babies will grow up and eventually drive up housing prices. Even before then, people will move or emigrate into cheap housing and fill it up. Housing then becomes expensive again, only with more people filling up the earth: polluting the air, straining water supplies, clogging roads, uglifying neighborhoods with massive buildings, overrunning parks and trails.
Thankfully, expensive housing, in part, has reduced American baby making to 1.6 per woman, a sustainable rate. Unfortunately, because humans are living longer, the US population still continues to rise. The U.S. Census Bureau currently projects that the resident U.S. population will peak at nearly 370 million around the year 2080, before it gradually declines to about 366 million by 2100. If immortality is invented before 2080, the population may never go down, ever.
Meanwhile, the latest estimates put the current U.S. population (as of mid‑2025) at approximately 342 million. The population has increased roughly 4.5x since 1900. From building new housing.
The author must be talking about Sprint Kayak, which is incredibly unstable, must be in flat/calm water. Commercial paddling kayaks are incredibly stable, you have to try really, really hard to flip.
Is it? It was designed for damage control system on naval combat vessels. I have no idea what it does on a naval vessel, but I imagine there is certain level of safeness.
Be grateful of what you have, be hungry for what's ahead.
I'm in my mid 40s, willingly neglected personal health for others because they needed more. It worked out and I'm back focusing on myself. I honestly considered myself lucky as I see some other burned out or broke down due to lack of self care.
1. Get your finance/insurance in order. Financial stress is the #1 killer. You don't need to be rich like on social media. Just be comfortable with a safety margin.
2. Get your physical/mental health in order. Working out or find a sports that you can share with others will help you a lot.
3. Make some friends. I've lost a lot of friends over the years, and covid accelerated that as many have moved. Playing sports can give you a sense of friendship. The group that I climb with are now talking a climbing trip this and next year. It's great.
