Finally, no bid on mortgage-backed securities(notoriousrob.com)
notoriousrob.com
Finally, no bid on mortgage-backed securities
https://notoriousrob.com/2022/06/finally-no-bid-on-mbs/
409 comments
What are you expecting this to do exactly? Inflation in norther Europe is rampant too, and the housing market is just as bad. the fact that many people bike to work doesn’t change that.
biking costs are a lot less susceptible to inflation. similarly if other variable costs of living go up but these are shared by more people (due to density) then ceteris paribus those pesky northerners have it a bit better in this hypothetical scenario.
Its not a hypothetical scenario. Its literally reality as we speak. And its not the case as your hypothesis would have it that countries in northern Europe are in any non insignificant way are less affected than other parts of the world.
The world economic situation is not going to be resolved by people drinking fewer expensive coffees, eating fewer avocado toasts or biking more to work, or other bike shed related activities. The effects are negligible in the overall picture.
The world economic situation is not going to be resolved by people drinking fewer expensive coffees, eating fewer avocado toasts or biking more to work, or other bike shed related activities. The effects are negligible in the overall picture.
how is it negligible that you can't go to work without a car?
if said car breaks down you have to pay (and spend time) to repair it. many people live paycheck to paycheck, no savings. payday loans and credit card loans are a problem in the US and it's not exactly a coincidence.
of course people in said European cities who can't afford a car also usually don't frequent Starbucks and don't buy avocado (unless maybe if it's on sale), that doesn't mean transportation as a factor is negligible.
> The world economic situation ...
is a completely structural problem. the world needs to spend less of its economic surplus on unsustainable stuff, and this includes everything with externalities (from things like watering the desert in California on an industrial scale to housing/heating/cooling/moving people and freight around using costly ways) and allocating more to building infrastructure for energy generation (and transmission and storage), healthcare and education.
of course strictly speak we don't need to. feudalism was fine, most people got used to it.
if said car breaks down you have to pay (and spend time) to repair it. many people live paycheck to paycheck, no savings. payday loans and credit card loans are a problem in the US and it's not exactly a coincidence.
of course people in said European cities who can't afford a car also usually don't frequent Starbucks and don't buy avocado (unless maybe if it's on sale), that doesn't mean transportation as a factor is negligible.
> The world economic situation ...
is a completely structural problem. the world needs to spend less of its economic surplus on unsustainable stuff, and this includes everything with externalities (from things like watering the desert in California on an industrial scale to housing/heating/cooling/moving people and freight around using costly ways) and allocating more to building infrastructure for energy generation (and transmission and storage), healthcare and education.
of course strictly speak we don't need to. feudalism was fine, most people got used to it.
Commuting by bike isn't going to happen. It's not practical for most business and personal purposes. Electric scooters have a better shot than bikes. (Still not going to happen.)
The only alternative to cars in cities is working public transit. And working means available, frequent, safe, and clean. You can't have homeless people sleeping on buses, you can't turn it off at 1 am. Regular people need to be able to rely on it.
The only alternative to cars in cities is working public transit. And working means available, frequent, safe, and clean. You can't have homeless people sleeping on buses, you can't turn it off at 1 am. Regular people need to be able to rely on it.
Bikes and electric scooters can very well supplement public transit, at least for the "last mile". Cities like Paris and Amsterdam have very good public transit, but biking is still popular, even in wind, rain and cold. People bike in freaking Oulu, Finland, even with the snow and cold.
It's a perfectly viable supplement to good public transit.
It's a perfectly viable supplement to good public transit.
It’s the heat that is the problem. That’s why you’re only able to cite mild to cold cities as doing this successfully.
It’s currently about 95F and humid every day where I live (mid-sized US city). I start sweating the moment I step outside. Add 10-15m worth of physical activity and I’m a disgusting smelly mess for the rest of the day. I hate that I live in a place that is car centric. But bike travel is not realistic here either even though most places I go to are easily within biking distance.
We have to collectively realize that the competition we’re up against is a private, quiet, climate controlled box with a built-in entertainment system that takes you directly from point A to point B reliably and on demand. Oh and a nationwide set of infrastructure built to accommodate it. People will absolutely pay a premium (both in $ and time sitting in traffic) as a trade off for those features. Additionally an enormous chunk of the market does not believe (or at least believe enough to care) that it matters for the climate. Environmentalism as a selling point for public/bike transit will never be effective on ~50% of the market.
The solution has to literally be better than cars in order to win. And cars have a lot going for them, to the point where most people have implicitly built their entire lives around the ubiquity of car availability. Transit advocates don’t seem to “get” this. We’re not asking people to change their mode of transit, we’re asking people to change their entire way of life for an alternative that they don’t believe (and may be right about) is better
It’s currently about 95F and humid every day where I live (mid-sized US city). I start sweating the moment I step outside. Add 10-15m worth of physical activity and I’m a disgusting smelly mess for the rest of the day. I hate that I live in a place that is car centric. But bike travel is not realistic here either even though most places I go to are easily within biking distance.
We have to collectively realize that the competition we’re up against is a private, quiet, climate controlled box with a built-in entertainment system that takes you directly from point A to point B reliably and on demand. Oh and a nationwide set of infrastructure built to accommodate it. People will absolutely pay a premium (both in $ and time sitting in traffic) as a trade off for those features. Additionally an enormous chunk of the market does not believe (or at least believe enough to care) that it matters for the climate. Environmentalism as a selling point for public/bike transit will never be effective on ~50% of the market.
The solution has to literally be better than cars in order to win. And cars have a lot going for them, to the point where most people have implicitly built their entire lives around the ubiquity of car availability. Transit advocates don’t seem to “get” this. We’re not asking people to change their mode of transit, we’re asking people to change their entire way of life for an alternative that they don’t believe (and may be right about) is better
You could ride an electric scooter between two climate controlled garages for ten minutes or a couple miles without getting disgusting. In many U.S. urban areas the garages and scooters already exist, it's "just" a matter of setting aside dedicated lanes and popularizing it.
I can, and do, use electric scooters reasonably often.
As a northern European, I can confirm. The nearest train station is a 10 minute bike ride from my house. From there the rest of my commute is a breeze. If I was to drive I'd be stuck in traffic much longer. And it's nice to get some fresh air to start the day. Only problem is the few months of snow.
I believe you that your commute is fine but I think you don’t understand how much Americans love convenience. How do I work a McDonalds drive through into that trip? Can yon get bikes with cup holders for a 32 ounce beverage?
Of course it’s not just Americans. I’ve got southern German friends who love the American car centric lifestyle.
Of course it’s not just Americans. I’ve got southern German friends who love the American car centric lifestyle.
> ...but biking is still popular, even in wind, rain and cold...
The frame of the comment is quite vulnerable to survival biases though - if the transport has taken a step back from cars then the people who stopped travelling will not be visually observable.
Although I do think car-first cities are a plague and it'd be better not to have them.
The frame of the comment is quite vulnerable to survival biases though - if the transport has taken a step back from cars then the people who stopped travelling will not be visually observable.
Although I do think car-first cities are a plague and it'd be better not to have them.
Sure, that works very well for European cities where moderate temperatures are the norm. For the heat of Texas, Arizona, Florida, and New Mexico? For the freezing temperatures in Minnesota, Alaska, and North Dakota? You would quickly die.
Furthermore, our cities are simply bigger and more spread out. You’ll counter by saying we need denser, more walkable cities even though we obviously can’t just tear down our cities and start from scratch.
Furthermore, our cities are simply bigger and more spread out. You’ll counter by saying we need denser, more walkable cities even though we obviously can’t just tear down our cities and start from scratch.
I bike all year long in Sweden, it's doable with the right gear and clothing. And I'm not even originally from a cold country, I'm Brazilian, living here for 7 years and used to bike in the heat of Brazil as well. This is a cop-out...
> it's doable with the right gear and clothing
It's doable, but it's also the most time consuming and impractical way of transportation, compared to the other options, so therefor it's bad.
Just because you can find a weird amish guys who insists that riding a horse is great, doesn't make that a good way of transportation, or something that we should start doing more.
It's doable, but it's also the most time consuming and impractical way of transportation, compared to the other options, so therefor it's bad.
Just because you can find a weird amish guys who insists that riding a horse is great, doesn't make that a good way of transportation, or something that we should start doing more.
> It's doable, but it's also the most time consuming and impractical way of transportation, compared to the other options, so therefor it's bad.
My connection to the center of Stockholm takes 45-60 minutes counting the time to-from stations, I bike the same distance in about 40-45 minutes. I get some exercise, I get to bike to any street I want to in more-or-less the same amount of time. It's bad for you, so just swallow that as a personal opinion but don't come with sweeping statements that "it's therefore bad", this is totally subjective to one's level of discomfort and/or laziness.
I prefer the bike than the great public transportation here for any trip where I won't be carrying more than what my cargo backpack can carry.
I don't agree with the logic of your statement ("it's not perfect for me so therefore bad"), also coming after biking infrastructure is a very weird hill to die on...
My connection to the center of Stockholm takes 45-60 minutes counting the time to-from stations, I bike the same distance in about 40-45 minutes. I get some exercise, I get to bike to any street I want to in more-or-less the same amount of time. It's bad for you, so just swallow that as a personal opinion but don't come with sweeping statements that "it's therefore bad", this is totally subjective to one's level of discomfort and/or laziness.
I prefer the bike than the great public transportation here for any trip where I won't be carrying more than what my cargo backpack can carry.
I don't agree with the logic of your statement ("it's not perfect for me so therefore bad"), also coming after biking infrastructure is a very weird hill to die on...
> this is totally subjective to one's level of discomfort and/or laziness.
Being forced to do activities that are uncomfortable and strenuous = bad. The whole point of our society is to transcend this. There are a million ways to do exercise and sports, and to spend your life and time and energy. Just because someone doesn't like cycling like you, doesn't make them lazy. That's an unbelievably self centered and arrogant viewpoint.
My logic is that cycling is bad because 1. it's not powerful and 2. it's sensitive to the weather, and 3. most people don't do it. Doesn't matter what you personally like.
Being forced to do activities that are uncomfortable and strenuous = bad. The whole point of our society is to transcend this. There are a million ways to do exercise and sports, and to spend your life and time and energy. Just because someone doesn't like cycling like you, doesn't make them lazy. That's an unbelievably self centered and arrogant viewpoint.
My logic is that cycling is bad because 1. it's not powerful and 2. it's sensitive to the weather, and 3. most people don't do it. Doesn't matter what you personally like.
> That's an unbelievably self centered and arrogant viewpoint.
> My logic is that cycling is bad because 1. it's not powerful and 2. it's sensitive to the weather, and 3. most people don't do it.
> Being forced to do activities that are uncomfortable and strenuous = bad. The whole point of our society is to transcend this.
Pretty self-centered I'd say.
> My logic is that cycling is bad because 1. it's not powerful and 2. it's sensitive to the weather, and 3. most people don't do it.
> Being forced to do activities that are uncomfortable and strenuous = bad. The whole point of our society is to transcend this.
Pretty self-centered I'd say.
This doesn't mean that we should construct infrastructure that actively discourages cycling. The argument isn't "let's force everyone to cycle". It's "let's make cycling so safe and convenient that the ones who would like to do it can do so without risking life and limb jostling in the same lanes as SUVs the size of Abrams tanks."
Let's prioritise what makes for actually efficient transport, and which most people will use, and not prioritise inefficient transports that only a few enthusiasts are using.
"Being forced to do activities that are uncomfortable and strenuous = bad"
Think you might find that your biology disagrees somewhat, there. Try sitting in a bathtub 100% of your life and see what happens with your health.
Yes, yes, being forced is bad. But it does help against laziness :)
Think you might find that your biology disagrees somewhat, there. Try sitting in a bathtub 100% of your life and see what happens with your health.
Yes, yes, being forced is bad. But it does help against laziness :)
You also have cities on the coasts (especially west) with weather very compatible with biking. Also no need to tear everything down, just add a few floors and shops at the ground level on existing houses, with maybe larger sidewalks. As long as shops are not all required to be concentrated along a big non walkable road it will work.
> For the heat of Texas, Arizona, Florida, and New Mexico? For the freezing temperatures in Minnesota, Alaska, and North Dakota? You would quickly die.
The majority of people commute by scooter/moped in Jakarta, so it's clearly doable in climates as hot as those you mention.
> even though we obviously can’t just tear down our cities and start from scratch.
You don't have to. Reclaim the roads/stroads by building in the middle and leaving a single one-way lane on each side.
The majority of people commute by scooter/moped in Jakarta, so it's clearly doable in climates as hot as those you mention.
> even though we obviously can’t just tear down our cities and start from scratch.
You don't have to. Reclaim the roads/stroads by building in the middle and leaving a single one-way lane on each side.
> The majority of people commute by scooter/moped in Jakarta, so it's clearly doable in climates as hot as those you mention.
Yeah and the majority of people in Dhaka where I’m from walk everywhere. The true goal of urbanists and environmentalists is for us to live like we’re impoverished people in the third world.
Yeah and the majority of people in Dhaka where I’m from walk everywhere. The true goal of urbanists and environmentalists is for us to live like we’re impoverished people in the third world.
Would people in Dhaka prefer cars or just a better walking and public transit experience? Are cars even conceivable with a population density of 76,080 per square mile? If cars are impossible in such a city then it doesn't matter whether they're impoverished or not.
> Would people in Dhaka prefer cars or just a better walking and public transit experience
Nobody wants to walk or take public transit in that heat and humidity. Especially not with two or three kids, or carrying tiffin containers of leftovers after a dinner party. My family members who came over from Dhaka to the US moved to places built around cars as soon as they could afford it. My cousin just moved to Texas (after studying in Queens) and is loving all the open space, the houses with pools, etc.
Nobody wants to walk or take public transit in that heat and humidity. Especially not with two or three kids, or carrying tiffin containers of leftovers after a dinner party. My family members who came over from Dhaka to the US moved to places built around cars as soon as they could afford it. My cousin just moved to Texas (after studying in Queens) and is loving all the open space, the houses with pools, etc.
Walking in heat and humidity is unpleasant but the climate and population are what they are so you work with what you have.
I can't speak for all environmentalists but I'd like people to live pleasantly wherever they like if they can do so sustainably. Probably most Dhaka residents, like most people anywhere, would prefer to stay in their home city and country if possible, just improved. In any case giving everyone in the world a Texas-sized house and pool is not on the table no matter what until we invent personal fusion generators and matter replicators.
Having climate-controlled walkways or more comfortable transit options specifically for people with kids should be available in every city, "impoverished" or "third world" or not. The world certainly has the resources for it.
I can't speak for all environmentalists but I'd like people to live pleasantly wherever they like if they can do so sustainably. Probably most Dhaka residents, like most people anywhere, would prefer to stay in their home city and country if possible, just improved. In any case giving everyone in the world a Texas-sized house and pool is not on the table no matter what until we invent personal fusion generators and matter replicators.
Having climate-controlled walkways or more comfortable transit options specifically for people with kids should be available in every city, "impoverished" or "third world" or not. The world certainly has the resources for it.
> Walking in heat and humidity is unpleasant but the climate and population are what they are so you work with what you have.
Bangladesh has about the same population density as the Houston metro area. So it would be totally possible for most people to have cars and houses if it became an advanced service economy.
> I can't speak for all environmentalists but I'd like people to live pleasantly wherever they like if they can do so sustainably.
It's not really up to environmentalists in the first world.
> Probably most Dhaka residents, like most people anywhere, would prefer to stay in their home city and country if possible, just improved. In any case giving everyone in the world a Texas-sized house and pool is not on the table no matter what until we invent personal fusion generators and matter replicators.
I think that's an accurate reflection of what people's end goals are, yes. Using technology to increase the standard of living, just as in western countries.
Bangladesh has about the same population density as the Houston metro area. So it would be totally possible for most people to have cars and houses if it became an advanced service economy.
> I can't speak for all environmentalists but I'd like people to live pleasantly wherever they like if they can do so sustainably.
It's not really up to environmentalists in the first world.
> Probably most Dhaka residents, like most people anywhere, would prefer to stay in their home city and country if possible, just improved. In any case giving everyone in the world a Texas-sized house and pool is not on the table no matter what until we invent personal fusion generators and matter replicators.
I think that's an accurate reflection of what people's end goals are, yes. Using technology to increase the standard of living, just as in western countries.
> It's not really up to environmentalists in the first world.
We are also predominantly complaining about people in the "first world" disregarding the environment due to minor convenience and unfortunate economics.
(But we only have one planet for now, and as things are, nobody is entitled to a free pass to be environmentally irresponsible anymore.)
We are also predominantly complaining about people in the "first world" disregarding the environment due to minor convenience and unfortunate economics.
(But we only have one planet for now, and as things are, nobody is entitled to a free pass to be environmentally irresponsible anymore.)
> The true goal of urbanists and environmentalists is for us to live like we’re impoverished people in the third world.
Indeed, when you bike to work you're mimicking truly impoverished people like Crown Prince Frederik of Denmark.
Sometimes I wonder if aggressively pro-car anti-bicycle people ever tried using a bicycle seriously...
Indeed, when you bike to work you're mimicking truly impoverished people like Crown Prince Frederik of Denmark.
Sometimes I wonder if aggressively pro-car anti-bicycle people ever tried using a bicycle seriously...
I once told my dad, who grew up in a Bangladeshi village, that my wife and I were going to a fancy restaurant that churns its own butter. “Why would you churn your own butter,” he asked. “You can buy butter at the store.”
Similarly, biking to work does not make you impoverished. Having to bike to work, or living in a society where most people bike to work, strongly suggests you are impoverished.
Similarly, biking to work does not make you impoverished. Having to bike to work, or living in a society where most people bike to work, strongly suggests you are impoverished.
Your dad has a point about butter, but would the transport equivalent of not having to churn your own butter not be to have others chauffeur you around, rather than driving yourself? Or, if we think of it as highlighting mass manufacture efficiency, taking public transport?
In Denmark at least, most people bike to work, so the latter part is at least objectively false.
In Denmark at least, most people bike to work, so the latter part is at least objectively false.
> In Denmark at least, most people bike to work, so the latter part is at least objectively false.
In case anyone is curious, the following PDF provides some statistics on this issue: https://trimis.ec.europa.eu/sites/default/files/project/docu...
Tldr: 20% of commuting trips are by bicycle, 13% by public transport, and 60% by private car/van. Of all travel miles, 5% are by bicycle, 10% by public transport, and 77% are by car/van.
In case anyone is curious, the following PDF provides some statistics on this issue: https://trimis.ec.europa.eu/sites/default/files/project/docu...
Tldr: 20% of commuting trips are by bicycle, 13% by public transport, and 60% by private car/van. Of all travel miles, 5% are by bicycle, 10% by public transport, and 77% are by car/van.
Oulu has temperatures go below -30C and has a healthy cycling culture.
For heat, it will depend individually. Personally I've biked at +35C and it was fine until i stopped due to the wind/movement refreshing.
For heat, it will depend individually. Personally I've biked at +35C and it was fine until i stopped due to the wind/movement refreshing.
The commenter did already address the temperature part of your concern already, but this should be helpful: https://youtu.be/Uhx-26GfCBU
I have biked year round in Minnesota for my commute since I was a child, not dead yet decades later.
So much of the Internet these days is Americans explaining why their collapsing system will never be fixable. It makes me sad.
Where do you see bicycles in Paris?
Literally everywhere? Quais, bd Sébastopol, Grands Boulevards, Rivoli, Bastille are places you can barely cross due to the amount of bicycles.
I've also biked and seen others on the Maréchaux, through all arrondissements. Same in the Petite Couronne suburbs, and i have friends living in faraway places that have well bike parkings at their train stations.
I've also biked and seen others on the Maréchaux, through all arrondissements. Same in the Petite Couronne suburbs, and i have friends living in faraway places that have well bike parkings at their train stations.
Concur. I remember sitting jet-lagged in a cafe at the Place Bastille watching all the cyclists go by. I was impressed by the guy who cycled with a phone to his ear, until I saw the woman with a phone to her ear and a cello on her back.
Three weeks ago I walked from Opera to Eiffel tower and while there were some cyclist it was only a few and nothing compared to like the netherlands.
Why is it not practical for most business and personal purposes? I cycle to work (on an e-bike) every day and so do most people I know
Too hot, or too cold, or too rainy. The Western European cities that are oftentimes given as positive examples (I’m thinking about Copenhagen and Amsterdam most) happen to be located in a temperate climate where it is almost never too cold, nor too hot, nor do you get pouring rain all that often.
Those are just two cities in two countries but you're ignoring Spain (Barcelona, Seville), France (Paris, Lyon), England (London), Italy where there are pretty extensive plans in cities like Milan, Germany which would be perfectly fine for cycling, ditto for the Nordics, and people also cycle a lot in Finland despite the cold. Also cities in NA like Montreal which are dramatically expanding their cycling network and already have fairly good ridership on the protected routes.
Yes, in places like Montreal they face a lot of opposition from car owners who literally seem to ignore that the only reason you can drive in heavy snow is because the snow gets cleared by pretty major logistics networks.
I've rarely been to a city that couldn't be a good cycling city at least for huge parts of the year, even if not a complete solution - does anyone who is pro-bicycle argue against extensive and effective public transport?
Yes, in places like Montreal they face a lot of opposition from car owners who literally seem to ignore that the only reason you can drive in heavy snow is because the snow gets cleared by pretty major logistics networks.
I've rarely been to a city that couldn't be a good cycling city at least for huge parts of the year, even if not a complete solution - does anyone who is pro-bicycle argue against extensive and effective public transport?
> and people also cycle a lot in Finland despite the cold
Yeah and how much is this exactly? Even with perfect cycling infrastructure it's something like 12% of trips. Go to finland or sweden in the middle of the winter, observe the bike lanes and see for yourself how much they are used. Hint, they are largely empty, which comes as no surprise considering how obviously impractical and uncomfortable it is. And they cost a ton of money in maintenance.
Yeah and how much is this exactly? Even with perfect cycling infrastructure it's something like 12% of trips. Go to finland or sweden in the middle of the winter, observe the bike lanes and see for yourself how much they are used. Hint, they are largely empty, which comes as no surprise considering how obviously impractical and uncomfortable it is. And they cost a ton of money in maintenance.
> And they cost a ton of money in maintenance.
A lot less than the roads for automobiles, and I regularly use the bike lanes in Sweden during all seasons and have no issues with that despite being originally from a warm country.
What a weird rant to come after bike lanes because "they are expensive and just virtue signalling", jesus.
A lot less than the roads for automobiles, and I regularly use the bike lanes in Sweden during all seasons and have no issues with that despite being originally from a warm country.
What a weird rant to come after bike lanes because "they are expensive and just virtue signalling", jesus.
It doesn't matter if you regularly do it, most people do not. We live in a democracy and we should not spend tax money and public space to accommodate for a small minority of enthusiasts who like to be inefficient, despite our whole society motivating us to do the opposite.
Bike lanes are like gym memberships, people like the idea and buy into it, but in reality they are too lazy, and don't have the time to actually do it. And it just ends up being a waste of money on duplicated infrastructure, because you still need to cover 100% of the capacity in public transport for the rainy days.
Bike lanes are like gym memberships, people like the idea and buy into it, but in reality they are too lazy, and don't have the time to actually do it. And it just ends up being a waste of money on duplicated infrastructure, because you still need to cover 100% of the capacity in public transport for the rainy days.
> Bike lanes are like gym memberships, people like the idea and buy into it, but in reality they are too lazy, and don't have the time to actually do it. And it just ends up being a waste of money on duplicated infrastructure, because you still need to cover 100% of the capacity in public transport for the rainy days.
This was me before an ebike. I now use it absolutely every day, when the weather allows.
This was me before an ebike. I now use it absolutely every day, when the weather allows.
None of this is fact, and it's funny you think it's the people who are pro-bicycle who are in fact the lazy ones, not the people who choose to drive literally everywhere.
You surely need some numbers to back up this argument somehow...
> Too hot, or too cold, or too rainy.
Or too windy. And more importantly, it's too slow and have limited range. Bonus point for also being the most boring mode of transportation since you can't talk to your friends or use your phone.
You want to spend more time being stuck in traffic? Ok then cycling is a great choice.
> The Western European cities that are oftentimes given as positive examples (I’m thinking about Copenhagen and Amsterdam most)
Cycling in these cities are probably related to tourism more than anything else. When you have time and you are flexible, sure cycling works well. If you are pressed for time and you need to be places regardless of weather, not so great.
I'm from a northern european country, have cycled in all weathers, winter etc, and I think it's one of the most pointless wastes of tax money and inducing unnecessary hardships on people with problems that are already solved much better. All for virtue signalling.
Or too windy. And more importantly, it's too slow and have limited range. Bonus point for also being the most boring mode of transportation since you can't talk to your friends or use your phone.
You want to spend more time being stuck in traffic? Ok then cycling is a great choice.
> The Western European cities that are oftentimes given as positive examples (I’m thinking about Copenhagen and Amsterdam most)
Cycling in these cities are probably related to tourism more than anything else. When you have time and you are flexible, sure cycling works well. If you are pressed for time and you need to be places regardless of weather, not so great.
I'm from a northern european country, have cycled in all weathers, winter etc, and I think it's one of the most pointless wastes of tax money and inducing unnecessary hardships on people with problems that are already solved much better. All for virtue signalling.
> you can't talk to your friends or use your phone
You've obviously never casually biked. In NL you very frequently see teens riding with 3 people next to each other talking, and while you're not allowed to hold phones anymore, you can easily do hands-free phone calls if you wanted. A lot of people have earpods for music or podcasts in.
You've obviously never casually biked. In NL you very frequently see teens riding with 3 people next to each other talking, and while you're not allowed to hold phones anymore, you can easily do hands-free phone calls if you wanted. A lot of people have earpods for music or podcasts in.
> In NL you very frequently see teens riding with 3 people next to each other talking
That's illegal and dangerous.
> you can easily do hands-free phone calls if you wanted
No you can't because of the wind noise.
That's illegal and dangerous.
> you can easily do hands-free phone calls if you wanted
No you can't because of the wind noise.
If you think it isn't rainy in those locations... Amsterdam gets about 35 inches of rain a year vs 25 inches in London - plenty damp enough. Don't forget the canals often freeze up yearly or so in Amsterdam too, so it can be pretty cold there, and due to wet air feel pretty vile - but people still cycle as it is easy, fast and cheap.
No, it doesn't get rainy, rainy, you don't get half of the city flooded in just 30 or so minutes [1], most of the times it's just a drizzle that's manageable with a decent raincoat.
[1] https://youtu.be/Ve-oExiwq_0?t=92
[1] https://youtu.be/Ve-oExiwq_0?t=92
That's a strawman. Intense weather like a flooded city that would stop a car would of course stop a bike, but you're either stuck at home or stuck outside regardless of what you do. The only relevant weather is common weather you would have no issue with in a car (or would not allow you to do remote work that day).
It should also be noted that many Europeans have cars but bike in medium to good weather. I take the car in hail or snow for example, but bike as much as a car otherwise as I physically and mentally feel better after biking, I reduce pollution and I save money. Wins all around.
It should also be noted that many Europeans have cars but bike in medium to good weather. I take the car in hail or snow for example, but bike as much as a car otherwise as I physically and mentally feel better after biking, I reduce pollution and I save money. Wins all around.
London https://youtube.com/shorts/Pvjm3NvJaWI?feature=share
Amsterdam https://youtu.be/1twXqpsDUIQ
- but a way, let's go back to what you said: Nor do you get pouring rain all that often.
Have you lived in either of those countries?
Amsterdam https://youtu.be/1twXqpsDUIQ
- but a way, let's go back to what you said: Nor do you get pouring rain all that often.
Have you lived in either of those countries?
Raincoats work when you are walking, and the rain comes from above, but not when you are cycling, because the rain comes from the sides, and below.
It's really complicated to cycle in the rain, especially in cold winter rain. You have to have specialised clothing that will both keep you warm, and be waterproof. Special gloves, insulated rubber boots? And you still get sweaty underneath at the same time.
How do you cover your helmet? Your face? Have fun taking a shower in freezing water three times a week for 6 months of the year, ice bucket challenge on the way to work. I hope you don't mind those extra sick days.
It's really complicated to cycle in the rain, especially in cold winter rain. You have to have specialised clothing that will both keep you warm, and be waterproof. Special gloves, insulated rubber boots? And you still get sweaty underneath at the same time.
How do you cover your helmet? Your face? Have fun taking a shower in freezing water three times a week for 6 months of the year, ice bucket challenge on the way to work. I hope you don't mind those extra sick days.
It's not that complicated, you need a rain jacket, waterproof pants and you are already 90% there. If you want to be more comfortable if you are biking longer than 30-45 minutes in bitter cold before freezing (5C or less) it can be sensible to have insulated shoes but it's not a requirement at all, I usually don't wear any weatherproof shoes during spring/fall in Stockholm, rainy and windy around 5C or less and experienced no issues having a change of socks + shoes after a 45-60 minutes commute on a bike.
It's really not an issue if you just get used to it, every time I read similar comments to this I can only think of a picky child complaining about relatively minor issues, and mostly they are imagined ones by people who never really had to/tried to bike during these conditions...
It's really not an issue if you just get used to it, every time I read similar comments to this I can only think of a picky child complaining about relatively minor issues, and mostly they are imagined ones by people who never really had to/tried to bike during these conditions...
It is an issue to have your hands, feet, head and face soaked in freezing water for 45 minutes.
> experienced no issues having a change of socks + shoes
Oh so now you have to carry extra shoes and socks all the time, "no problem" lol. You can just go into the subway and all of these issues disappear, and you will get to your destination faster, so cycling is bad in comparison.
It doesn't matter if you can find some person who likes it, the vast majority of people will optimise for practicality and efficiency, because that's what our society revolves around.
Building bike lanes is the easy part, the hard part is coming up with the extra time and patience for people to put up with a longer and more uncomfortable commute.
> experienced no issues having a change of socks + shoes
Oh so now you have to carry extra shoes and socks all the time, "no problem" lol. You can just go into the subway and all of these issues disappear, and you will get to your destination faster, so cycling is bad in comparison.
It doesn't matter if you can find some person who likes it, the vast majority of people will optimise for practicality and efficiency, because that's what our society revolves around.
Building bike lanes is the easy part, the hard part is coming up with the extra time and patience for people to put up with a longer and more uncomfortable commute.
> Oh so now you have to carry extra shoes and socks all the time, "no problem" lol. You can just go into the subway and all of these issues disappear, and you will get to your destination faster, so cycling is bad in comparison.
I already have a backpack when biking, a change of shoes and socks is a non-issue, I don't know why this would be a problem for you but yes, if you are looking for "maximum convenience" instead of a balance of trade-offs.
Again, it's not faster for me to take the subway, the subway doesn't have infinite capacity, crowding during rush hour is a thing. There are issues with any mode of transportation, fighting against bikes and biking infrastructure is definitely the strangest position I have seen someone take.
I don't understand if you are just a contrarian or if you really believe that investment in biking infrastructure is an issue for transportation in dense cities... If so the only argument I read boils down to "it's not super convenient and hence is bad and no one does it". I don't see reality in that argument.
Yup, you want and can optimise for practicality, biking infrastructure is definitely not holding that up. Now trying to argue that biking is "bad" is way out, biking is bad for your constraints, I know tons of people who bike everyday in northern Europe and have no issues with it.
Not sure exactly what your point is... We shouldn't invest in biking infrastructure? Because... It's "bad" for your convenience constraints?
I already have a backpack when biking, a change of shoes and socks is a non-issue, I don't know why this would be a problem for you but yes, if you are looking for "maximum convenience" instead of a balance of trade-offs.
Again, it's not faster for me to take the subway, the subway doesn't have infinite capacity, crowding during rush hour is a thing. There are issues with any mode of transportation, fighting against bikes and biking infrastructure is definitely the strangest position I have seen someone take.
I don't understand if you are just a contrarian or if you really believe that investment in biking infrastructure is an issue for transportation in dense cities... If so the only argument I read boils down to "it's not super convenient and hence is bad and no one does it". I don't see reality in that argument.
Yup, you want and can optimise for practicality, biking infrastructure is definitely not holding that up. Now trying to argue that biking is "bad" is way out, biking is bad for your constraints, I know tons of people who bike everyday in northern Europe and have no issues with it.
Not sure exactly what your point is... We shouldn't invest in biking infrastructure? Because... It's "bad" for your convenience constraints?
Biking is not convenient/practical enough therefore not enough people will do it to justify large investment. This is why billions for a subway station make sense while parking spots and bike lanes would be way better utilized as restaurant patios in dense cities.
Most dutch people own a raincoat and -pants for biking, you put it over your clothes and remain dry. They cost maybe €30. No-one wears a helmet, nor do you need to.
Most Amish people just ride a horse and it's just fine. Yeah so what, it's obviously impractical and we have better options.
The amount of adult dutch people who cycle to work in the rain is a small minority.
The amount of adult dutch people who cycle to work in the rain is a small minority.
> but people still cycle as it is easy, fast and cheap
some people do cycle, but most people do not, because there are other options that are easier and faster.
some people do cycle, but most people do not, because there are other options that are easier and faster.
> nor do you get pouring rain all that often.
Have you been to Copenhagen?
Or is your definition of "pouring rain" one that only includes Category 5 hurricane levels of downpour?
Have you been to Copenhagen?
Or is your definition of "pouring rain" one that only includes Category 5 hurricane levels of downpour?
I see autonomous EV's as the public transit that could change everything...and not until then.
Your unsubstantiated claim is, no surprise, false.
A bike is perfectly practical for most business and personal purposes and I live in a city which demonstrates it.
I do everything by bike, except when the weather is really bad or I'm going really far away, when I use public transportation.
A bike is perfectly practical for most business and personal purposes and I live in a city which demonstrates it.
I do everything by bike, except when the weather is really bad or I'm going really far away, when I use public transportation.
> Let go of pride and commute by bicycle.
It has nothing to do with pride.
Cars are comfortable and convenient. You get a nice seat, air the temperature you want it, and can carry actual cargo. It's easy to run a complete loop of errands after your workday, because you can store stuff in your car.
I went from around ten years of riding the trains in Tokyo to driving a car around a Japanese suburb. Japanese public transportation is excellent, easily best on Planet Earth, and the car wins hands-down.
It has nothing to do with pride.
Cars are comfortable and convenient. You get a nice seat, air the temperature you want it, and can carry actual cargo. It's easy to run a complete loop of errands after your workday, because you can store stuff in your car.
I went from around ten years of riding the trains in Tokyo to driving a car around a Japanese suburb. Japanese public transportation is excellent, easily best on Planet Earth, and the car wins hands-down.
The pride remark is anecdotal on my part, but based on SUV sales I would argue that my point is close to true in the US.
Cars are a luxury. If you are willing to pay a tax based on engine displacement , give priority on roads to pedestrians and cyclists, and still prefer car-travel, then it is a win-win. If you want city governments to prioritize car-travel over everyone else, then it is a win-lose. The only winner will be car-owners who can spare the cash flow.
The economics on transporting 1s of kgs of food by 1000s of kgs of metal no longer makes sense in the United States for the majority of people as they have poor cash flow and poor balance sheets. I think economically speaking delivery trucks and local supermarkets should take most of the burden.
Cars are a luxury. If you are willing to pay a tax based on engine displacement , give priority on roads to pedestrians and cyclists, and still prefer car-travel, then it is a win-win. If you want city governments to prioritize car-travel over everyone else, then it is a win-lose. The only winner will be car-owners who can spare the cash flow.
The economics on transporting 1s of kgs of food by 1000s of kgs of metal no longer makes sense in the United States for the majority of people as they have poor cash flow and poor balance sheets. I think economically speaking delivery trucks and local supermarkets should take most of the burden.
>I think economically speaking delivery trucks and local supermarkets should take most of the burden.
Currently car owners disproportionately pay for roads that those without cars enjoy. They pay for roads (in their own fuel tax, purchase tax on automobile, and often in registration fees) that allow heavy delivery trucks to bring food and medicine and various goods to local shops and addresses where the car-less can access them. This all despite a car wears remarkably less on a road than the semis that truck in these goods so the car-less (and others) can access them locally.
If anything, pedestrians and bike riders underpay for a road system they take advantage of. In fact one can ride a bicycle and be a near complete free-rider to the road system, if your income is low enough, despite still availing yourself of benefits such as trucked in food/medicine/goods.
Currently car owners disproportionately pay for roads that those without cars enjoy. They pay for roads (in their own fuel tax, purchase tax on automobile, and often in registration fees) that allow heavy delivery trucks to bring food and medicine and various goods to local shops and addresses where the car-less can access them. This all despite a car wears remarkably less on a road than the semis that truck in these goods so the car-less (and others) can access them locally.
If anything, pedestrians and bike riders underpay for a road system they take advantage of. In fact one can ride a bicycle and be a near complete free-rider to the road system, if your income is low enough, despite still availing yourself of benefits such as trucked in food/medicine/goods.
> It has nothing to do with pride.
Why dont people take the bus? Because the bus is for poor people.
I guess technically it isnt pride - its ego and virtue signalling.
Why dont people take the bus? Because the bus is for poor people.
I guess technically it isnt pride - its ego and virtue signalling.
I just did a search to see “what if I had to take public transit to my old office to arrive by 9 AM?”
If I left at 7:09 AM, I could walk 5 minutes, catch a bus, change to a train, change to a another bus, and walk 5 minutes to arrive at 8:18, paying $3.40 one way.
Or I could leave at 8:30, walk 1 minute out to my car, drive 20 minutes, and walk 2 minutes to arrive by 8:55, paying whatever 8.5 miles of car ownership and operation costs me. Is it worth $1.58 (at GSA rate of $0.585/mile) to buy myself 81 minutes at home? Hell yes, it's worth $1.17/hr!
My office is one of the better ones, with a bus stop nearby on both ends. From my prior apartment and office, it would be 7:19 departure, half-mile walk, subway ride, bus ride, and a one mile walk to arrive at 8:32. Or a 24 minute (in morning traffic), 10 mile drive. In both cases, I could leave my house later than I’d have to arrive by public transit and still make that 9 AM meeting.
IMO, to the extent “buses are for poor people”, it’s because they’re terribly inefficient for the riders’ time. Maybe if they were more time-efficient, more people would choose to use them?
If I left at 7:09 AM, I could walk 5 minutes, catch a bus, change to a train, change to a another bus, and walk 5 minutes to arrive at 8:18, paying $3.40 one way.
Or I could leave at 8:30, walk 1 minute out to my car, drive 20 minutes, and walk 2 minutes to arrive by 8:55, paying whatever 8.5 miles of car ownership and operation costs me. Is it worth $1.58 (at GSA rate of $0.585/mile) to buy myself 81 minutes at home? Hell yes, it's worth $1.17/hr!
My office is one of the better ones, with a bus stop nearby on both ends. From my prior apartment and office, it would be 7:19 departure, half-mile walk, subway ride, bus ride, and a one mile walk to arrive at 8:32. Or a 24 minute (in morning traffic), 10 mile drive. In both cases, I could leave my house later than I’d have to arrive by public transit and still make that 9 AM meeting.
IMO, to the extent “buses are for poor people”, it’s because they’re terribly inefficient for the riders’ time. Maybe if they were more time-efficient, more people would choose to use them?
Yeah, this is spot on. I'd go further and say it's also a completely undependable mode of transportation, even near bigger cities.
I remember going to a town just north of Boston (Everett) for vacation and every day I took the bus into the main Boston area. It was about a 30 minute ride based on distance but all-in it was a little over an hour when accounting for the time you leave your residence to arriving at your destination -- this was being ~5 minutes from the bus stop too.
That's only accounting for 1 way too, there's that time penalty on the way back as well.
Plus there were times where I watched the bus completely skip stops on the way into the city near the end of the route because it was full, so you could end up waiting +30-45 minutes at the bus stop and this is fully out of your control. I was only there for 5 days and I saw it happen twice (fortunately the route started near where I was) but you could see the the look of disgust on the people's faces when the bus didn't stop for them.
I remember going to a town just north of Boston (Everett) for vacation and every day I took the bus into the main Boston area. It was about a 30 minute ride based on distance but all-in it was a little over an hour when accounting for the time you leave your residence to arriving at your destination -- this was being ~5 minutes from the bus stop too.
That's only accounting for 1 way too, there's that time penalty on the way back as well.
Plus there were times where I watched the bus completely skip stops on the way into the city near the end of the route because it was full, so you could end up waiting +30-45 minutes at the bus stop and this is fully out of your control. I was only there for 5 days and I saw it happen twice (fortunately the route started near where I was) but you could see the the look of disgust on the people's faces when the bus didn't stop for them.
>just north of Boston (Everett) for vacation and every day I took the bus into the main Boston area
FWIW - I live in Everett and commute to downtown Boston (Seaport), so I feel like I should weigh in on this. Bus (either the whole way, or to Wellington subway station transfer) is slow. Bike to Wellington, then subway is still pretty bad because of which where the subway runs if you don't transfer. Subway transfer is slow. Uber is very expensive during rushhour.
By far the fastest, cheapest and most convenient way is for me to motorcycle from my door to the Seaport office where I squeeze between 2 cars to park (for free... haven't been ticketed yet). So that's what I generally do if it's not winter. And this is in a city that actually does have decent public transit compared to most of America.
I don't know if motorcycling is the future or not. It's admittedly more dangerous than driving and requires more coordination. There are safety advancement (automated emergency braking on some brand new KTM's... although that won't help if you overshoot a turn). There are now auto-clutches or non-geared electric motorcycles that are easier for beginners. It would basically take no changes to infrastructure and I've seen it work in Ho Chi Minh (although, again, crashes do occur and are worse when they do).
FWIW - I live in Everett and commute to downtown Boston (Seaport), so I feel like I should weigh in on this. Bus (either the whole way, or to Wellington subway station transfer) is slow. Bike to Wellington, then subway is still pretty bad because of which where the subway runs if you don't transfer. Subway transfer is slow. Uber is very expensive during rushhour.
By far the fastest, cheapest and most convenient way is for me to motorcycle from my door to the Seaport office where I squeeze between 2 cars to park (for free... haven't been ticketed yet). So that's what I generally do if it's not winter. And this is in a city that actually does have decent public transit compared to most of America.
I don't know if motorcycling is the future or not. It's admittedly more dangerous than driving and requires more coordination. There are safety advancement (automated emergency braking on some brand new KTM's... although that won't help if you overshoot a turn). There are now auto-clutches or non-geared electric motorcycles that are easier for beginners. It would basically take no changes to infrastructure and I've seen it work in Ho Chi Minh (although, again, crashes do occur and are worse when they do).
This is exactly what gets car-centric infrastructure built in the first place. It makes sense.
But then as an American metro area grows, the car-centric solution is sticky and public transit seems impossible to build later. I one-way commute 55 miles by car twice a week and there is no vaguely sensible public transit option. I'm doing rings around the SF Bay Area. The public transit should be better around here by now.
But then as an American metro area grows, the car-centric solution is sticky and public transit seems impossible to build later. I one-way commute 55 miles by car twice a week and there is no vaguely sensible public transit option. I'm doing rings around the SF Bay Area. The public transit should be better around here by now.
It isn't impossible. People would be more than happy to use public transit for e.g. commuting, if metro made public transit for commuting.
I wouldn't mind the HOV lane being buses-only and having ramps to bused-only lanes/roads if it also meant busses were faster and highways only needed 2 lanes of travel lanes instead of 4+.
The problem is there's no money in doing it until you get enough ridership, and your not going to get ridership from "tweaking" the routes like most cities try. And no one wants to spend more tax money on the homeless transportation plan.
It's just a shitshow, and there won't be improvement until the chicken and egg cycle can be broken.
I wouldn't mind the HOV lane being buses-only and having ramps to bused-only lanes/roads if it also meant busses were faster and highways only needed 2 lanes of travel lanes instead of 4+.
The problem is there's no money in doing it until you get enough ridership, and your not going to get ridership from "tweaking" the routes like most cities try. And no one wants to spend more tax money on the homeless transportation plan.
It's just a shitshow, and there won't be improvement until the chicken and egg cycle can be broken.
I feel like many public transit systems in the US are designed as radial lines from a city center (constant theta, varying r) and relatively few axial/circular routes (constant r, varying theta).
Car routes (and placement of shops and offices) take advantage of the random route ability of cars to specifically avoid the downtown congestion, enshrining the “quick and convenient to drive from one suburb to the neighboring suburb, but incredibly painful to use public transit for that trip”.
Buses suffer a time penalty naturally along their route, but if you add a “take a bus in a direction you don’t want to go, change buses, take that bus back-tracking the wasted motion, and only then get closer to your destination”, it’s pretty much bound to suck.
In Japan and Europe, I’ve seen more axial service lines and/or more of a mesh covering the areas rather than a bicycle spokes looking transit map.
Car routes (and placement of shops and offices) take advantage of the random route ability of cars to specifically avoid the downtown congestion, enshrining the “quick and convenient to drive from one suburb to the neighboring suburb, but incredibly painful to use public transit for that trip”.
Buses suffer a time penalty naturally along their route, but if you add a “take a bus in a direction you don’t want to go, change buses, take that bus back-tracking the wasted motion, and only then get closer to your destination”, it’s pretty much bound to suck.
In Japan and Europe, I’ve seen more axial service lines and/or more of a mesh covering the areas rather than a bicycle spokes looking transit map.
I always say that people only choose public transit over driving when it's (A) cheaper, (B) faster, OR (C) more practical. And ideally it needs to be two or even three of those.
In the US, it's pretty rare that any of those three are ever satisfied outside of major urban cores.
In the US, it's pretty rare that any of those three are ever satisfied outside of major urban cores.
No? It’s about convenience.
My town actually has a little bus line. But the closest bus stop is a mile and a half or so away from my house. How do I get there? Walk? Once I get there, I have to wait for the bus, which could mean a wait of at least ten minutes or so. Assuming it’s not late. Let’s assume it drops me off exactly where I want to go — the grocery store 5 miles from my house. Now let’s also assume the bus doesn’t make any other stops and takes the most direct route possible. Great, I’ve spent at least 45 minutes each way to make a 5 mile trip. And I’m limited to buying only as much as I can comfortably carry. And oh yeah, I have to walk another mile and a half with those bags once I’m dropped off.
But yeah, my objection is sitting in a bus with poor people.
My town actually has a little bus line. But the closest bus stop is a mile and a half or so away from my house. How do I get there? Walk? Once I get there, I have to wait for the bus, which could mean a wait of at least ten minutes or so. Assuming it’s not late. Let’s assume it drops me off exactly where I want to go — the grocery store 5 miles from my house. Now let’s also assume the bus doesn’t make any other stops and takes the most direct route possible. Great, I’ve spent at least 45 minutes each way to make a 5 mile trip. And I’m limited to buying only as much as I can comfortably carry. And oh yeah, I have to walk another mile and a half with those bags once I’m dropped off.
But yeah, my objection is sitting in a bus with poor people.
Your argument isn’t really that cars are superior to the bus in general, just that your local public transit is poorly designed. When everyone treats this argument as if cars are always superior no matter what, no one wants to invest in making public transit actually better.
Well, the problem is we have to take what we have.
The argument that someone a country away lives a way because of some sort of pride is plain arrogance. We use cars because there is no reasonable alternative for most people. If we even try to consider alternatives, there simply isn't nothing short of wasting half a day on public transit.
It's not that public transit is superior, or that cars are superior. It's that method A is the most reasonable way to get around nearly 99% of the trips I need to take, and is affordable for me, so I will take that.
In Europe, that tends to be bikes and public transit. In America, it's personal vehicles. It's the nature we're both in.
That in of itself doesn't make one superior to the other.
The argument that someone a country away lives a way because of some sort of pride is plain arrogance. We use cars because there is no reasonable alternative for most people. If we even try to consider alternatives, there simply isn't nothing short of wasting half a day on public transit.
It's not that public transit is superior, or that cars are superior. It's that method A is the most reasonable way to get around nearly 99% of the trips I need to take, and is affordable for me, so I will take that.
In Europe, that tends to be bikes and public transit. In America, it's personal vehicles. It's the nature we're both in.
That in of itself doesn't make one superior to the other.
Driving a car isn't about pride, ego, or virtue signalling...it's about having a comfortable and convenient way to get from point A to point B.
While it is a local optimum, it can lead to global inefficiencies.
For example, L.A. traffic, where because everyone wants to drive (and, to be fair, in L.A. where everything is super spread out and public transport is non-existant, this is understandable), you end up getting a solution that, due to horrific space inefficiency of cars [0], comfort and convenience go to zero.
[0] https://www.danielbowen.com/2012/09/19/road-space-photo/
For example, L.A. traffic, where because everyone wants to drive (and, to be fair, in L.A. where everything is super spread out and public transport is non-existant, this is understandable), you end up getting a solution that, due to horrific space inefficiency of cars [0], comfort and convenience go to zero.
[0] https://www.danielbowen.com/2012/09/19/road-space-photo/
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Few reasons I don't take a bus:
It will take a long time to get there (bus stops, changing lines).
I have cargo (like groceries).
It's too early/late and there is no bus.
The bus does not go where I want to be.
It will take a long time to get there (bus stops, changing lines).
I have cargo (like groceries).
It's too early/late and there is no bus.
The bus does not go where I want to be.
[deleted]
Please stop the urbanism spam.
On average, Americans like suburbs. They like driving. They like space, a yard, a DIY workshop, and sunlight. They don't like cities. "haha go live in a city and bike to work" is not a fair response to high gas prices and inflation. It's not how people want to live.
We've got a better chance of the USA banning oil exports to lower crude prices, or enacting substantial EV subsidies to get people off gas before we can convince the suburbanite with a 5bd house + quarter acre lot in a good school district that they should move to an urban 2 bedroom apartment instead. Even if we can, I guarantee you that the apartment won't be considered an upgrade.
On average, Americans like suburbs. They like driving. They like space, a yard, a DIY workshop, and sunlight. They don't like cities. "haha go live in a city and bike to work" is not a fair response to high gas prices and inflation. It's not how people want to live.
We've got a better chance of the USA banning oil exports to lower crude prices, or enacting substantial EV subsidies to get people off gas before we can convince the suburbanite with a 5bd house + quarter acre lot in a good school district that they should move to an urban 2 bedroom apartment instead. Even if we can, I guarantee you that the apartment won't be considered an upgrade.
Don't "convince the suburbanite", just get petrol taxes to the same point as in Europe, so that the $10/gl price sends a signal to the soccer mums in their Canyonero when they fill up at the pump after ferrying their kids around - and on the margin it will have an effect. (And it is good for the climate too.)
It seems to me that there's a common theme among urbanist folks. That is, if people don't like the urbanist vision, they should be forced to change their habits via government policy, even if they don't like those changes.
Why is that? Hasn't the opposite (suburbia and car dependency) been forced upon you by government policy for the last 70 years? Yet, there's a substantial population that wants to completely destroy the suburban way of life via taxing it to death. Governments never intended to destroy city living. At least, not purposefully (perhaps via disinvestment).
You'd think you'd want the government to just create conditions for cheap energy since that's objectively good for everyone, and let people live how they want. If people choose suburbia, great. If they choose cities, great too. If the online movement is representative of a larger group, there are a lot off people who will still choose cities!
Why is that? Hasn't the opposite (suburbia and car dependency) been forced upon you by government policy for the last 70 years? Yet, there's a substantial population that wants to completely destroy the suburban way of life via taxing it to death. Governments never intended to destroy city living. At least, not purposefully (perhaps via disinvestment).
You'd think you'd want the government to just create conditions for cheap energy since that's objectively good for everyone, and let people live how they want. If people choose suburbia, great. If they choose cities, great too. If the online movement is representative of a larger group, there are a lot off people who will still choose cities!
I'd be fine with this if most folks saying it actually were being genuine.
What I've found when I head down this path with folks on a deeper level they actually don't want everyone to own their life choices. They actually want the status quo of being the most subsidized political cohort the US has.
Suburban living in most areas I've stayed clearly should be far more expensive. The fact my parents live 50 feet off a paved 60mph road 60 miles away from the nearest large city is utterly absurd. That road might see two dozen cars a day. There is no way the tax base can support such a thing.
I think in our lifetimes we'll see prices start to escalate rapidly due to the fundamentals baked in.
However I have very little hope this turns into anything but more subsidy for that cohort, since they are the ones who show up to vote. Anyone not offering to prop up the suburban property bubble will not have a chance in office.
What I've found when I head down this path with folks on a deeper level they actually don't want everyone to own their life choices. They actually want the status quo of being the most subsidized political cohort the US has.
Suburban living in most areas I've stayed clearly should be far more expensive. The fact my parents live 50 feet off a paved 60mph road 60 miles away from the nearest large city is utterly absurd. That road might see two dozen cars a day. There is no way the tax base can support such a thing.
I think in our lifetimes we'll see prices start to escalate rapidly due to the fundamentals baked in.
However I have very little hope this turns into anything but more subsidy for that cohort, since they are the ones who show up to vote. Anyone not offering to prop up the suburban property bubble will not have a chance in office.
> I think we'll see in our lifetimes see prices start to escalate rapidly due to the fundamentals baked in.
I agree. One of the big risks to future political stability and, honestly, avoiding violent conflict is that these price increases won't just be rapid but immediate. People could adjust if the price of gas went up $1/gallon every year for ten years. If the government keeps the price artificially low all that time and is then forced to raise it $10 all at once, that would be very difficult.
I agree. One of the big risks to future political stability and, honestly, avoiding violent conflict is that these price increases won't just be rapid but immediate. People could adjust if the price of gas went up $1/gallon every year for ten years. If the government keeps the price artificially low all that time and is then forced to raise it $10 all at once, that would be very difficult.
This is why I'm not an urbanist even though I support in theory a lot of urbanist policies.
The motte: "There is great demand for dense, walkable, affordable, towns/cities/neighborhoods in the US, and not enough supply to satisfy this demand. A big reason why there is a supply shortage, aside from the relative inelasticity of housing in general, is government restrictions on building/zoning these sorts of developments. There are many coordination failures in attempts to create these sorts of neighborhoods which could be rectified through government action."
The bailey: "Suburbs are a failure of city planning. Car ownership/usage is a net negative on society and should be disincentivized. Government policy should work to eliminate suburbs, replacing them with dense development. Most of those who live in suburbs would surely choose and be happier living in denser developments."
The motte: "There is great demand for dense, walkable, affordable, towns/cities/neighborhoods in the US, and not enough supply to satisfy this demand. A big reason why there is a supply shortage, aside from the relative inelasticity of housing in general, is government restrictions on building/zoning these sorts of developments. There are many coordination failures in attempts to create these sorts of neighborhoods which could be rectified through government action."
The bailey: "Suburbs are a failure of city planning. Car ownership/usage is a net negative on society and should be disincentivized. Government policy should work to eliminate suburbs, replacing them with dense development. Most of those who live in suburbs would surely choose and be happier living in denser developments."
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> Don't "convince the suburbanite", just get petrol taxes to the same point as in Europe, so that the $10/gl price sends a signal to the soccer mums
...to vote you out a replace you with someone who will undo the tax hike.
The US is a very imperfect democracy, at best, but there are some red lines that, if you don't convince people first, will toast you immediately politically, and rapid tax increases related to automobiles or their operation are high on the list.
...to vote you out a replace you with someone who will undo the tax hike.
The US is a very imperfect democracy, at best, but there are some red lines that, if you don't convince people first, will toast you immediately politically, and rapid tax increases related to automobiles or their operation are high on the list.
I think the US is actually a very responsive democracy—liberals just don’t like the revealed preferences of the polity.
My dad is a blue dog democrat. Has voted democrat ever since becoming naturalized. Wouldn’t even vote for Larry Hogan. Yet he’s apoplectic about inflation and gas prices, and hates the idea of raising taxes on people making $100-200k/year like himself. At the end of the day he cares more about those things than anything else Democrats care about.
Liberals keep pinning their electoral prospects on people like my dad. Before it was Bangladeshi immigrants it was Irish and Italian immigrants. But these folks came to America for the American dream—two cars, a house with a pool, drive through McDonalds. As a result, liberals take it in the chin every time there is the slightest threat to the low tax consumerist suburban lifestyle. The last time it happened, in the 1970s, we got two decades of Reaganism.
My dad is a blue dog democrat. Has voted democrat ever since becoming naturalized. Wouldn’t even vote for Larry Hogan. Yet he’s apoplectic about inflation and gas prices, and hates the idea of raising taxes on people making $100-200k/year like himself. At the end of the day he cares more about those things than anything else Democrats care about.
Liberals keep pinning their electoral prospects on people like my dad. Before it was Bangladeshi immigrants it was Irish and Italian immigrants. But these folks came to America for the American dream—two cars, a house with a pool, drive through McDonalds. As a result, liberals take it in the chin every time there is the slightest threat to the low tax consumerist suburban lifestyle. The last time it happened, in the 1970s, we got two decades of Reaganism.
First, don’t worry about it. Just change the zoning and then let people choose what they will. If what you say is true, the market won’t change a thing.
Second, price per square foot in cities is set by demand, and it is several times prices in suburbs. That behavior tells us there are people who would rather be downtown and we aren’t letting them.
Second, price per square foot in cities is set by demand, and it is several times prices in suburbs. That behavior tells us there are people who would rather be downtown and we aren’t letting them.
> Just change the zoning and then let people choose what they will
But, we already know from the political fortunes of people who have run on those ideas, what they will choose is to replace the people implementing those policies, unless you do a lot of work in advance to convince them of the merits rather than thinking you can just dictatorially change incentives and let that shape behavior without any blowback that undoes the policy.
But, we already know from the political fortunes of people who have run on those ideas, what they will choose is to replace the people implementing those policies, unless you do a lot of work in advance to convince them of the merits rather than thinking you can just dictatorially change incentives and let that shape behavior without any blowback that undoes the policy.
Oh, I don't think you can do it with the legislative branch of government at all. I think there's a clear path to overturning Euclid and finding zoning unconstitutional. That court case was entirely based on a bunch of racist shit in the appellate decision.
> We've got a better chance of the USA banning oil exports to lower crude prices
Banning oil exports would reduce the incentive to pump domestic oil, and, because much of the domestic supply isn't the grades best for producing gasoline, even if it did reduce the price of those grades of crude, it wouldn't do much for gasoline prices.
Banning oil exports would reduce the incentive to pump domestic oil, and, because much of the domestic supply isn't the grades best for producing gasoline, even if it did reduce the price of those grades of crude, it wouldn't do much for gasoline prices.
An export ban would place the maximum American crude price at about $70/barrel, since that's a little bit above the shale breakeven price. Prices would tank overnight. There is no conceivable scenario where an export ban would not substantially cut oil prices.
Maybe we won't see $2/gallon again, but $6+/gallon would be a thing of the past.
Maybe we won't see $2/gallon again, but $6+/gallon would be a thing of the past.
Of course those suburbanites love their hard won individualism, the point is, that this kind of life is built on externalities that make it unsustainable for the majority of people to live this way.
How long would that take to happen? It’s not like all of the current building and infrastructure can be torn down and rebuilt in the European model overnight. Could it even happen within one person’s lifetime?
No pain, no gain. We just suck it up for a few years. Our future generations will thank us.
You get immediate savings by stopping road expansion and cutting fuel demand (close lanes on big roads, replace with bicycle lanes). You get 3-10 years of pain from bicycle/walk-commuting in a city designed for cars. To compensate, let people build supermarkets and stores in single family zoned areas. Subsidize rent-a-bike companies with funds from gas taxes and frozen road construction projects.
This is basically the only sure-fire way to let poor people generate free cash flow to survive the recession without having to helicopter them money. This has worked for developing countries like China. Also, this is a way to keep cities financially solvent by letting the tax revenue to land area ratio increase naturally as people adjust to human-powered commuting.
You get immediate savings by stopping road expansion and cutting fuel demand (close lanes on big roads, replace with bicycle lanes). You get 3-10 years of pain from bicycle/walk-commuting in a city designed for cars. To compensate, let people build supermarkets and stores in single family zoned areas. Subsidize rent-a-bike companies with funds from gas taxes and frozen road construction projects.
This is basically the only sure-fire way to let poor people generate free cash flow to survive the recession without having to helicopter them money. This has worked for developing countries like China. Also, this is a way to keep cities financially solvent by letting the tax revenue to land area ratio increase naturally as people adjust to human-powered commuting.
I still don't understand how that would fix anything. The suburbs of the city I live nearby extend out for 10 miles from the city center. And between here and the city center there is a super steep road that runs for about 4 miles. Trying to bike from the city center up to the suburbs at the end of the work day would be extremely difficult except for an elite athlete.
Building is fast if you allow people to do it. You could have a new apartment building in around a year, and that's without really pushing it. Zoning and permits are what's holding construction back
Lack of construction workers is also holding things back, this could be a lit of a licensing issue, but there aren't enough workers to do all the projects that are funded now.
It's not like the European model even works. Public transport is only as good as it is convenient, and it's virtually impossible to make it convenient for most people outside of extra-super-ultra urban areas (think New York City and London).
If you can hop on a bus within a 5 minute walk of where you live, and then hop off withing a 5 minute walk of where you work, life is beautiful and you can probably ditch your car (at least for daily commute). For most, this is not the case.
And I don't want to live in a ultra-urban area.
If you can hop on a bus within a 5 minute walk of where you live, and then hop off withing a 5 minute walk of where you work, life is beautiful and you can probably ditch your car (at least for daily commute). For most, this is not the case.
And I don't want to live in a ultra-urban area.
Pure nonsense - you don't have to live in Megacity One to have that level of functioning public transport. Most people in Europe live in cities with populations under a million and guess what - even the smaller regional cities in Germany, France, the Netherlands etc have fully functional public transport systems.
The only thing really holding back public transport is lack of imagination and ambition. Just because things don't work now doesn't mean they can't if you actually try.
The only thing really holding back public transport is lack of imagination and ambition. Just because things don't work now doesn't mean they can't if you actually try.
You don’t have to live in an ultra-urban area, but 80% of Americans live in an urban area already. [0]
When we have discussions like this, the “normal case” is actually that people live in cities, so that’s obviously what the conversations gravitate around.
I grew up in a small town (4k pop), and there’s no reason bikes shouldn’t be extremely effective in town. It’s tiny! There’s no true need to drive a large, inefficient vehicle .5mi to the rite aid or McDonald’s. Nearly everyone in this tiny town is within quick walking distance of what used to be a passenger train station. It could become a passenger train station again with the right investment.
People living in truly rural areas is an edge case where cars obviously make sense. Even then, the majority of car trips are local. 60% of trips are fewer than 6mi.
0: https://www.census.gov/programs-surveys/geography/guidance/g... 1: https://www.energy.gov/eere/vehicles/articles/fotw-1042-augu...
When we have discussions like this, the “normal case” is actually that people live in cities, so that’s obviously what the conversations gravitate around.
I grew up in a small town (4k pop), and there’s no reason bikes shouldn’t be extremely effective in town. It’s tiny! There’s no true need to drive a large, inefficient vehicle .5mi to the rite aid or McDonald’s. Nearly everyone in this tiny town is within quick walking distance of what used to be a passenger train station. It could become a passenger train station again with the right investment.
People living in truly rural areas is an edge case where cars obviously make sense. Even then, the majority of car trips are local. 60% of trips are fewer than 6mi.
0: https://www.census.gov/programs-surveys/geography/guidance/g... 1: https://www.energy.gov/eere/vehicles/articles/fotw-1042-augu...
The average trip distance is likely higher than 6 miles. Even assuming 0 mile trips for all of the 60% under 6 miles and the low end of each range puts the average over 5 miles. That also pretends that you don't take kids, or pets, or other people. Not everyone is traveling only by themselves to very local places.
Edit: meant average, originally put median
Edit: meant average, originally put median
Come visit Edinburgh! People love to complain about the buses here too, but they're genuinely pretty good -- and there's absolutely no way I'm commuting into the city centre by car.
The fact that it will take time is not a counter-argument.
The US is suffering from a lack of cheap EVs. The cheapest EV, Nissan Leaf, has a 5-month waiting list and is still $20,000 - and only after $7.5k in tax subsidies which expire this year.
Meanwhile, China has a lot of options starting at $5000.
We're currently seeing a Western industrial failure generally, to encourage cheap mass-market EVs. Some of our safety regulations (especially those which force automakers to add heavy or draggy components) should also be overhauled.
Meanwhile, China has a lot of options starting at $5000.
We're currently seeing a Western industrial failure generally, to encourage cheap mass-market EVs. Some of our safety regulations (especially those which force automakers to add heavy or draggy components) should also be overhauled.
Good points, but you still have the fundamental physics problem of hauling too much mass for too much distance for too little gain (1s kgs of groceries, etc).
The US needs to get as many people off the road as possible. Get them on to bicycles (e-bikes), walking, riding buses and trains.
I am looking at America's balance sheet and the only thing cars do is blow a whole in it. Cars cost too much relative to cash flow generated for families. Cars take up too much space in cities, killing cash flow generated from sales taxes and property taxes. The Return on Assets from a car is just too low, I believe the rate falls below the US gov/state govs cost of capital (hand wavy-speaking).
The US needs to get as many people off the road as possible. Get them on to bicycles (e-bikes), walking, riding buses and trains.
I am looking at America's balance sheet and the only thing cars do is blow a whole in it. Cars cost too much relative to cash flow generated for families. Cars take up too much space in cities, killing cash flow generated from sales taxes and property taxes. The Return on Assets from a car is just too low, I believe the rate falls below the US gov/state govs cost of capital (hand wavy-speaking).
The Dark Side of Electric Cars: https://www.youtube.com/watch?v=2_T5DgsO0jc
And half the middle classes' nest eggs go poof, while the politicians who voted for it (many of whom don't hold down their own jobs) need to explain that it's actually for everyone's good.
It wouldn't be a short cut. The long cut would be to change American culture to be able to make big changes like that for the good of the country.
If something like this was proposed, the House that flips the fastest would be the House of Representatives, followed by the White House.
It wouldn't be a short cut. The long cut would be to change American culture to be able to make big changes like that for the good of the country.
If something like this was proposed, the House that flips the fastest would be the House of Representatives, followed by the White House.
I used to drive past a Dunkin Donut every day on my way to work and back. Every single time there was a police vehicle idling in their parking lot.
> Let go of pride and commute by bicycle.
Could you please elaborate on how pride gets in the way of commuting by bicycle? This is alien to me.
Could you please elaborate on how pride gets in the way of commuting by bicycle? This is alien to me.
Can someone explain this a bit more clearly ?
> Consider what that means for the home buying market. Those of us fortunate enough to have 30 year fixed rate mortgages at about 3% are about to see our mortgage “debt” give us better returns than our stock holdings.
Does this mean we should have borrowed as much as possible to buy a house when rates were low ?
> Consider what that means for the home buying market. Those of us fortunate enough to have 30 year fixed rate mortgages at about 3% are about to see our mortgage “debt” give us better returns than our stock holdings.
Does this mean we should have borrowed as much as possible to buy a house when rates were low ?
The comment is implying that fixed rate debt below inflation is "free" money. Rate at 2% and inflation at 3% means an effective gain of 1% a year on the spread.
It's wrong though. Home prices are likely to fall quite substantially if you actually look at all the fundamental data and cast it in the light of significantly higher mortgage rates.
Higher inflation also raises the risk free rate which devalues assets. The stronger effect of the two will win out, and with valuations multiple standard deviations above the mean, the end result is pretty clear
It's wrong though. Home prices are likely to fall quite substantially if you actually look at all the fundamental data and cast it in the light of significantly higher mortgage rates.
Higher inflation also raises the risk free rate which devalues assets. The stronger effect of the two will win out, and with valuations multiple standard deviations above the mean, the end result is pretty clear
From what I've heard there is a massive supply issue. Rates will only fall if supply increases or if demand drops. From what I've heard, the demand isn't expected to fall and there are limits in the supply side of things due to all sorts of issues many stemming from covid and the long recession we had on the housing market post crash of 2008.
Ideally demand will go down because things as it stands are just not affordable to most. The rent also is going way up, so that drives housing prices too.
Ideally demand will go down because things as it stands are just not affordable to most. The rent also is going way up, so that drives housing prices too.
We had an 'undersupply' problem in NZ until very recently. It seemed like it was all the media ever talked about. Then inflation hit, rates went up, and property prices started declining rapidly (current rate of decline looks like NZD5000/w on a median priced home over the past few months). Suddenly, the number of properties on the market is up 2-3x in the major cities and available rentals have doubled in places. Rents are falling even as commentators claim landlords will try to pass on their increased holding costs to their tenants.
Where have those properties all come from?
Consider that all properties are either investments or owner-occupied. By definition owner-occupiers don't keep empty (or underutilised properties - assuming second homes and holiday homes can be categorised as investments). Therefore, if there are more investors active (or more correctly, investment properties) in the market, the proportion of empty or underutilised homes is going to be higher. Investment activity in the market has undoubtedly been increasing for some time.
What appears to be happening is that our underutilised housing stock is now being revealed as investors panic. The same thing happened in Ireland during the GFC.
There are many reasons investors will leave properties empty or underutilised during a speculative boom (renovating to flip, on the market, good old fashioned landbanking, a convenient city pad or holiday home, etc). There is much more of this about than people realise.
I am very confident that rising interest rates are going to turn out to be a good thing for renters and first time buyers. It'll just take a bit of time and some economic upheaval.
Where have those properties all come from?
Consider that all properties are either investments or owner-occupied. By definition owner-occupiers don't keep empty (or underutilised properties - assuming second homes and holiday homes can be categorised as investments). Therefore, if there are more investors active (or more correctly, investment properties) in the market, the proportion of empty or underutilised homes is going to be higher. Investment activity in the market has undoubtedly been increasing for some time.
What appears to be happening is that our underutilised housing stock is now being revealed as investors panic. The same thing happened in Ireland during the GFC.
There are many reasons investors will leave properties empty or underutilised during a speculative boom (renovating to flip, on the market, good old fashioned landbanking, a convenient city pad or holiday home, etc). There is much more of this about than people realise.
I am very confident that rising interest rates are going to turn out to be a good thing for renters and first time buyers. It'll just take a bit of time and some economic upheaval.
There's a lot of flexibility in how much living space a person is using also, it's an order of magnitude difference depending on how much money they have.
People used to live a whole family in a one room apartment, and now we have single divorced boomers living in whole houses alone. I think people adjust a lot here depending on the economy
People used to live a whole family in a one room apartment, and now we have single divorced boomers living in whole houses alone. I think people adjust a lot here depending on the economy
That's a good point.
It's interesting that for the past 15 years or so the average household size in NZ has remained at about 2.7 despite a housing crisis with more people living in cars, converted garages, etc. I always assumed that the more crowded households were 'balanced out' by an increase in the number of smaller dwellings with fewer people (specifically apartments) but it could also be an increase in the number of people living just 1-2 in larger dwellings.
It's interesting that for the past 15 years or so the average household size in NZ has remained at about 2.7 despite a housing crisis with more people living in cars, converted garages, etc. I always assumed that the more crowded households were 'balanced out' by an increase in the number of smaller dwellings with fewer people (specifically apartments) but it could also be an increase in the number of people living just 1-2 in larger dwellings.
Very true. California is an interesting one though with their occupancy rules. Very low density could reduce in a crunch but people who would go to the highest density are prevented from doing so by the landlord owned legal system.
My boss (not divorced or a boomer, but definitely single) lives alone in a 5,000 foot gorgeous home up in the hills. It’s crazy.
An alternative explanation would be reduced demand. If interest rates have been around 3% for a while and you’re now looking at 8–10% (and there’s some expectation that house prices will fall) then maybe getting a mortgage to buy a house isn’t such an attractive proposition. Lower demand over a reasonable amount of time should lead to more properties being on the market.
Demand is going to crash with many not being able to afford mortgage payments or rents this will result in prices tanking and people having to top up as property values will be lower than mortgages. I have a feeling commercial property values are being artificially kept inflated by banks, realtors as well as the city governments as lower prices are going to be very painful for everyone. But as defaults start snowballing we will see the dominos fall similar to 2007-8.
As a want to buy a home person... I certainly hope you are correct. As it stands now, it just doesn't make sense to buy a home.
There is no supply issue, only an active listings issue. Which is rapidly clearing up as purchase demand has fallen off a cliff.
People touting supply issues don't understand the difference between number of housing units and inventory.
The number of housing units per person is at an all time high
People touting supply issues don't understand the difference between number of housing units and inventory.
The number of housing units per person is at an all time high
I can confirm this in the context of NZ.
During the past 25 years the number of residences relative to the number of households has increased substantially from roughly 3.5% more residences to something like 6.5% more. All while the number of people per household has declined slightly and prices have increased astronomically.
Very frustrating this past decade to have the entire debate framed around building more houses as the only solution to deal with this 'undersupply'.
In my opinion a speculative boom has created excess demand and increased the number of underutilised properties. Thankfully rising interest rates appear to be dampening that excess demand (to put it mildly).
During the past 25 years the number of residences relative to the number of households has increased substantially from roughly 3.5% more residences to something like 6.5% more. All while the number of people per household has declined slightly and prices have increased astronomically.
Very frustrating this past decade to have the entire debate framed around building more houses as the only solution to deal with this 'undersupply'.
In my opinion a speculative boom has created excess demand and increased the number of underutilised properties. Thankfully rising interest rates appear to be dampening that excess demand (to put it mildly).
What you wrote doesn’t appear to be true.
Divide columns B7 on sheets 2 and 3 in the NZ data (https://www.stats.govt.nz/information-releases/dwelling-and-...). The all-time high of 1.06 happened in 2012 and the ratio has since fallen back down to around 1.043, just a bit above the 1.04 value from the 1990s.
My prior is that there is an undersupply, signalled by prices, and I’m afraid this method tends to underestimate it. First, household formation (as in, moving out and starting a family etc.) depends in part on housing availability. Second, internal migrations due to urbanization cancel out in national level data – for every move to a city, there may now be an empty rural unit, and a crowded urban unit.
PS Remember too, that there’s a natural churn to housing – people sell/renovate/etc. on average once every X months – therefore we need at least 1/X of excess housing to smooth it out. This is an absolute lower bound that assumes people don’t differentiate between any two houses, but are willing to randomly swap e.g. a 120 sqm in the central business district for a 30 sqm in a rural area. This assumption is obviously wrong.
Divide columns B7 on sheets 2 and 3 in the NZ data (https://www.stats.govt.nz/information-releases/dwelling-and-...). The all-time high of 1.06 happened in 2012 and the ratio has since fallen back down to around 1.043, just a bit above the 1.04 value from the 1990s.
My prior is that there is an undersupply, signalled by prices, and I’m afraid this method tends to underestimate it. First, household formation (as in, moving out and starting a family etc.) depends in part on housing availability. Second, internal migrations due to urbanization cancel out in national level data – for every move to a city, there may now be an empty rural unit, and a crowded urban unit.
PS Remember too, that there’s a natural churn to housing – people sell/renovate/etc. on average once every X months – therefore we need at least 1/X of excess housing to smooth it out. This is an absolute lower bound that assumes people don’t differentiate between any two houses, but are willing to randomly swap e.g. a 120 sqm in the central business district for a 30 sqm in a rural area. This assumption is obviously wrong.
You are right. Those figures are off but they are based on the same dataset you are referring to (or at least an earlier version).
I notice that they have revised some of the more recent household estimates. I had 1991 at 1,307,000 private dwellings and 1,252,600 households. A difference of 4.16%. And 2017 (or rather Q4 2016) at 1,855,500 private dwellings and 1,734,800 households. A difference of 6.5%. This - at least a few years ago when I first looked this up - was the most recent period where both figures were available.
They have indicated the revision to the household data and I am almost certain that they have revised the dwelling data as well.
The long and the short of it is, we still have a higher ratio of dwellings to households than we did before this price boom started to take off.
If I am reading you correctly, and you are indeed saying that rising prices are enough to assume an undersupply, I would have to both agree and disagree. I think it is only enough to indicate an undersupply relative to total demand, but that demand is both for homes and investments. As interest rates fall, monthly mortgage payments stay roughly the same while the size of mortgages rises as people are able to bid more for a house. With rising prices comes speculation and extra demand. We are about to find out what happens when that type of demand is removed or at least severely curtailed.
Your point about churn is definitely true. I mentioned in another comment in this thread that 'on the market' is one of many reasons that a house can be empty. I take your point but also believe that turnover is more frequent when speculation is at play.
If you are interested in measuring supply/inventory/utilisation of residential property, I'd recommend that you look up the 'Speculative vacancies report' published by Prosper Australia, a Georgian group based in Melbourne. They have an interesting methodology whereby they gather water usage data and use that to determine if a property is underutilised/vacant.
I notice that they have revised some of the more recent household estimates. I had 1991 at 1,307,000 private dwellings and 1,252,600 households. A difference of 4.16%. And 2017 (or rather Q4 2016) at 1,855,500 private dwellings and 1,734,800 households. A difference of 6.5%. This - at least a few years ago when I first looked this up - was the most recent period where both figures were available.
They have indicated the revision to the household data and I am almost certain that they have revised the dwelling data as well.
The long and the short of it is, we still have a higher ratio of dwellings to households than we did before this price boom started to take off.
If I am reading you correctly, and you are indeed saying that rising prices are enough to assume an undersupply, I would have to both agree and disagree. I think it is only enough to indicate an undersupply relative to total demand, but that demand is both for homes and investments. As interest rates fall, monthly mortgage payments stay roughly the same while the size of mortgages rises as people are able to bid more for a house. With rising prices comes speculation and extra demand. We are about to find out what happens when that type of demand is removed or at least severely curtailed.
Your point about churn is definitely true. I mentioned in another comment in this thread that 'on the market' is one of many reasons that a house can be empty. I take your point but also believe that turnover is more frequent when speculation is at play.
If you are interested in measuring supply/inventory/utilisation of residential property, I'd recommend that you look up the 'Speculative vacancies report' published by Prosper Australia, a Georgian group based in Melbourne. They have an interesting methodology whereby they gather water usage data and use that to determine if a property is underutilised/vacant.
I was just looking into this. Was trying to get a sense of the number of total US housing units compared to the number of households. And the number of extra units seems to have been fairly constant over the last 20 years (about 9% more housing units than number of households).
[1] Total US Households: https://fred.stlouisfed.org/series/TTLHH [2] Total US Housing Units: https://fred.stlouisfed.org/series/ETOTALUSQ176N#0
[1] Total US Households: https://fred.stlouisfed.org/series/TTLHH [2] Total US Housing Units: https://fred.stlouisfed.org/series/ETOTALUSQ176N#0
Yes, today there are roughly 1.1 housing units per household, which is exactly in line and consistent with history. This is also trending up, as population growth slows and rate of building increases
Shortage narrative is propagated by people who don't look at the data
Shortage narrative is propagated by people who don't look at the data
It was reported that, in a major county near me, about 1 in 2 homes sold last year were to businesses. Individuals are being squeezed from participating in traditional supply and demand markets.
It doesn't really matter who buys them.
What matters is the fundamentals relating to number of dwellings vs number of people
What matters is the fundamentals relating to number of dwellings vs number of people
Many people purchase properties through LLCs to protect their personal assets. The Blackrock style companies make up a very small percentage of the market.
It depends on what your time horizon is. If you look short term, then anything can be the case at any point of time. Short term is volatile and you can be up and down at any moment.
However if you look long term then housing inflation out paces interest rates. This is always the case. So taking a 30 year loan with low rates is a pretty safe bet that you will come out on top over this long term time period.
However if you look long term then housing inflation out paces interest rates. This is always the case. So taking a 30 year loan with low rates is a pretty safe bet that you will come out on top over this long term time period.
I thought home prices were high because new home construction fell off a cliff after the 2008 market crash and has never fully recovered - thus leaving a massive shortage of homes and the Millennials (i.e. Baby Boom 2) generation now reaching the age where they want homes for their kids. Low supply + high demand = high prices. Don't see that changing anytime soon. What we should expect from higher mortgage rates (what I as an old-timer would call "normal" mortgage rates) would be a cooling off on prices. We're already seeing that happening. That's an example of how high rates combat inflation. Your food and energy costs may be soaring but housing costs have just been brought in check.
If rents continue to rise home prices won’t fall substantially.
https://fred.stlouisfed.org/series/CUUR0000SEHA
https://fred.stlouisfed.org/series/CUUR0000SEHA
There's no reason for rents to rise and I'd argue that even current rents are overpriced.
Urban offices aren't filling up and essential workers have less money than ever.
Urban offices aren't filling up and essential workers have less money than ever.
Rising interest rates drive up
the mortgage rates. The vast majority of US home buyers have to finance their purchases, so an increase in mortgage rates is effectively an increase in the total cost of buying a house. The total cost of homeownership is correlated to rental markets, as we are talking about different ways of consuming the same good.
Interest rates have gone from 2.75 to 5.4%, meaning monthly payments on purchases have gone up almost 40%. Not all that will transfer to the rental market, but I be surprised if rents don’t continue to go up; barring a general collapse in house prices.
Interest rates have gone from 2.75 to 5.4%, meaning monthly payments on purchases have gone up almost 40%. Not all that will transfer to the rental market, but I be surprised if rents don’t continue to go up; barring a general collapse in house prices.
That is not how rent prices work. It is pretty much supply and demand. No one cares how much your financing costs. If people start losing their jobs because the FED induces a recession, that means less money for rent. Younger folks move back in with their parents. People take on an extra roommate or two. Demand for rental units goes down. Prices go down.
If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it.
If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it.
The supply of housing for purchase directly competes with the supply of housing for rent. If you can get a 2 bed home for $1800/month as a renter or $1700/month to own, most people will choose to purchase, forcing landlords to lower prices. Similarly, if you can get $2500/month in rent for a property that costs $2100 a month to own and operate as an investment people and institutions will purchase or convert units to rental properties.
Yes, they aren't 100% interchangeable (down payment requirements and transaction costs can change the equation renting all things being equal ) and some markets (the bay area in particular) seem to have a bizarre separation in the cost of renting versus buying, but in general this holds true.
Yes, they aren't 100% interchangeable (down payment requirements and transaction costs can change the equation renting all things being equal ) and some markets (the bay area in particular) seem to have a bizarre separation in the cost of renting versus buying, but in general this holds true.
> If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it.
Purely anecdotally, a large proportion of the housing available for sale in Plymouth (UK) seems to be rental property. Tenants are being thrown out while landlords sell up.
I have been wondering if the drive to cash out at a time when holding cash isn't necessarily such a great idea is exactly what you suggest - that those with buy-to-let mortgages are looking at the potential of interest rates rising faster than rents.
Purely anecdotally, a large proportion of the housing available for sale in Plymouth (UK) seems to be rental property. Tenants are being thrown out while landlords sell up.
I have been wondering if the drive to cash out at a time when holding cash isn't necessarily such a great idea is exactly what you suggest - that those with buy-to-let mortgages are looking at the potential of interest rates rising faster than rents.
Yes - but mortgage interest rates are key component of house prices. In home purchases the buyer is typically constrained by the limit of what they can afford to pay monthly. Higher rates make that go higher putting downward pressure on housing.
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I honestly feel like rents are at the breaking point, it's ridiculous in California at least and people I know who rent are leaving the state because of this.
In 2021, Portland, Oregon saw it’s population decline for the first time since 2010.
This has been attributed to the high cost of housing. [1]
The secretary of HUD was here a month ago taking a tour, talking about affordable housing.
We started a family last year and despite needing to move out of a duplex, we would not seriously consider a purchase.
Prices and terms of sale have been outrageous.
Deciding our best bet was to rent, we found the rental market for single family homes a disaster.
The only way we found something was because we know a postal worker who saw a for rent sign while walking their route.
The place never hit the internet.
The house needs a ton of work and the only way it can be priced the way it is is because the market is so totally busted.
My wife tracked pricing and made a spreadsheet of comparable rentals when we signed the lease. I’d guess our rent was at least $400 under market.
I grew up in Portland. I went to a portland public school and college in Oregon. I had wanted to live here.
However, we need housing to show clear indications it will turn, an unexpected windfall, or we will move away from family here and toward other family in the mid-west.
Regular people are desperate here, valley folks are coming in doing the same thing we would do to wherever we could land in the Midwest.
Housing is broken.
[1] https://www.wweek.com/news/city/2022/05/27/new-census-number...
This has been attributed to the high cost of housing. [1]
The secretary of HUD was here a month ago taking a tour, talking about affordable housing.
We started a family last year and despite needing to move out of a duplex, we would not seriously consider a purchase.
Prices and terms of sale have been outrageous.
Deciding our best bet was to rent, we found the rental market for single family homes a disaster.
The only way we found something was because we know a postal worker who saw a for rent sign while walking their route.
The place never hit the internet.
The house needs a ton of work and the only way it can be priced the way it is is because the market is so totally busted.
My wife tracked pricing and made a spreadsheet of comparable rentals when we signed the lease. I’d guess our rent was at least $400 under market.
I grew up in Portland. I went to a portland public school and college in Oregon. I had wanted to live here.
However, we need housing to show clear indications it will turn, an unexpected windfall, or we will move away from family here and toward other family in the mid-west.
Regular people are desperate here, valley folks are coming in doing the same thing we would do to wherever we could land in the Midwest.
Housing is broken.
[1] https://www.wweek.com/news/city/2022/05/27/new-census-number...
We need supply side solutions. The market would totally take care of demand if property rights were strong enough to allow folks to build housing.
We need to get a federal level right to build housing on your land. We also need to overturn Euclid v Ambler.
We need to get a federal level right to build housing on your land. We also need to overturn Euclid v Ambler.
This year could possibly the worst time in a lifetime to start bulding a new home.
Until next year! It doesn't get better.
Well, consider that if you start building now, you're likely not done until next year, or maybe the year after....
I'm more than 2 years in and no physical progress has been made. "Local control" is a huge problem and it needs to go away.
The real question is how quickly is someone else renting their place after they leave.
I have also known quite a few people have recently left California. And not a single one of them left a vacant house behind.
I have also known quite a few people have recently left California. And not a single one of them left a vacant house behind.
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Rents expanded quickly due to massive increase in disposable income from government programs leading to expansion of number of households.
Now that real incomes have been falling rapidly for months, we can expect household contraction and rent stagnation or decline.
Now that real incomes have been falling rapidly for months, we can expect household contraction and rent stagnation or decline.
Raising interest rates can increase the costs of housing. (Not the sticker price, the cost.)
Fewer developers will build new apartment buildings because financing is getting much more expensive. Fewer new apartments with a growing population means rents will not be getting cheaper unless we have a deep recession and lots of people lose their jobs entirely.
Same goes for housing -- fewer houses will be built by builders.
Existing housing prices will probably go down, but the people buying them with mortgages will pay just as much, if not more for them each month because debt is getting more expensive. But instead of that money going to the old owner, it'll go to the lender.
Fewer developers will build new apartment buildings because financing is getting much more expensive. Fewer new apartments with a growing population means rents will not be getting cheaper unless we have a deep recession and lots of people lose their jobs entirely.
Same goes for housing -- fewer houses will be built by builders.
Existing housing prices will probably go down, but the people buying them with mortgages will pay just as much, if not more for them each month because debt is getting more expensive. But instead of that money going to the old owner, it'll go to the lender.
Interest rates always go down later. The reason older boomers look so good is they bought a house at 12% then refinanced later.
Yup. The key is to buy a house you want to live in for a decade or more.
Those who bought homes 2-3 years ago when 30 year fixed mortgage rates dipped below 3% have already seen their values go up like 30-40%. There is no reason to expect it to crash by that much in the next few years, if ever.
"Prices have skyrockets in the past two years, but it's impossible for an equal price change in the negative direction though"
Possible does not mean guaranteed. Yes prices could go down. But just because they have gone up x% doesn't mean they have to go down x% as well.
It's happened before and it will likely happen again, barring rapid and unexpected disinflation.
FL fell 60% in the 2000s, and I wouldn't be surprised to see 40% this time around
FL fell 60% in the 2000s, and I wouldn't be surprised to see 40% this time around
The Fed pushed a trillion or so of free money into mortgage markets. That is why house price went up. They have stopped. Prices will likely come down.
While there are likely supply constraints at the margins, the house price gains have been a result of the amount you can borrow at a certain monthly payment being abnormally high.
While there are likely supply constraints at the margins, the house price gains have been a result of the amount you can borrow at a certain monthly payment being abnormally high.
> There is no reason to expect it to crash by that much in the next few years, if ever.
Was there a reason to expect it to happen in the first place? Aside from ex post facto reasoning?
Housing is a tough market to crash because people need to live somewhere, so if prices fall people just avoid moving, and liquidity drops. For prices to fall substantially requires that people express a liquidity preference -- they'd rather have the money, even discounted, then keep the house. And the primary way that happens is that people can no longer afford to service their mortgages.
This doesn't happen easily, but when it happens, things can break very dramatically.
Was there a reason to expect it to happen in the first place? Aside from ex post facto reasoning?
Housing is a tough market to crash because people need to live somewhere, so if prices fall people just avoid moving, and liquidity drops. For prices to fall substantially requires that people express a liquidity preference -- they'd rather have the money, even discounted, then keep the house. And the primary way that happens is that people can no longer afford to service their mortgages.
This doesn't happen easily, but when it happens, things can break very dramatically.
That depends on the fed. If they raise rates enough to kill inflation, we could have 2008 all over again, possibly worse. But if inflation remains high, the nominal price of the house may go up further.
> Does this mean we should have borrowed as much as possible to buy a house when rates were low ?
I refinanced my morgage in spring 2020, up to the maximum allowed at the lowest interest rate bracket. The main reason was to ensure that I had liquidity, in case the economoy would crash much harder than it did in 2020, the secondary motive would be to take advantage of investment opportunities that might show up even if the credit market would crash (potentially making it hard to borrow).
Until now, I've been paying about 1% over the floating interest rate, but made a good profit from the money, most of which was put into index funds, even if half the profit has been lost this year. I've moved half my index fund holdings into index funds focusing on commodities, hoping that these will hold better than generic index funds if inflation stays high.
I don't belive central banks will be able to bring inflation under control on the first attempt. Instead, I predict that interest rates will go up until a moderate/strong recession causes people to enter the streets, and that QE and lower rates will follow for a time period, causing drawn-out stagflation, which is why I dont want to have too much in cash. I do have about 30% in cash, still, in case the market falls much further than it already has.
I refinanced my morgage in spring 2020, up to the maximum allowed at the lowest interest rate bracket. The main reason was to ensure that I had liquidity, in case the economoy would crash much harder than it did in 2020, the secondary motive would be to take advantage of investment opportunities that might show up even if the credit market would crash (potentially making it hard to borrow).
Until now, I've been paying about 1% over the floating interest rate, but made a good profit from the money, most of which was put into index funds, even if half the profit has been lost this year. I've moved half my index fund holdings into index funds focusing on commodities, hoping that these will hold better than generic index funds if inflation stays high.
I don't belive central banks will be able to bring inflation under control on the first attempt. Instead, I predict that interest rates will go up until a moderate/strong recession causes people to enter the streets, and that QE and lower rates will follow for a time period, causing drawn-out stagflation, which is why I dont want to have too much in cash. I do have about 30% in cash, still, in case the market falls much further than it already has.
> Does this mean we should have borrowed as much as possible to buy a house when rates were low ?
Sort of. You should have borrowed as much as possible up to the level that, under nearly any circumstances, you could have still serviced that debt(i.e. made the payments). Historically, those were really cheap rates to borrow money and we might not see them again for a few years(or a few decades).
Sort of. You should have borrowed as much as possible up to the level that, under nearly any circumstances, you could have still serviced that debt(i.e. made the payments). Historically, those were really cheap rates to borrow money and we might not see them again for a few years(or a few decades).
Next time we see them again, we will likely be in a hyperinflationary period, I would think. At some point in the future (not brave enough to say when), the Fed will run out of runway, credibility and backbone, and the easy money will never cease until the currency itself dies.
We will see them again after the recession. They will stay low until at least 2030 then we will print ourselves out of low interest rates. Look at an long term interest rate cycle chart.
Also, folks forget that as nasty as inflation is... it's always good for borrowers of inflation-currency-denominated debt.
Like, say, a USD$25T federal debt?
Deflation (or even undershooting inflation) isn't an option.
Like, say, a USD$25T federal debt?
Deflation (or even undershooting inflation) isn't an option.
Your debt is losing value at the rate of inflation, and you are paying less than the rate of inflation for that debt. If I'm paying 2.9% on -800k and that -800k is inflated away at 8.6% then I'm making 5.7%.
But isn’t this assuming your pay increases at the rate of inflation? If your pay doesn’t increase then you don’t get any benefit of high inflation against your debt.
Or the asset you bought with that debt, as real estate has normally kept pace with inflation. Or stocks. Both might see temporary shocks though.
God no, the real estate prices are about to plummet (higher interest rates kill demand) and being in max debt will crush you in a recession.
Only if you believe rates will go higher and that you can take advantage of those higher rates.
For example, Having assets on a fixed loan of 3% when you can get a CD of similar duration for 3.5% means you are making money by owing those assets and owing that loan.
It is why deflation is such anathema to the financial industry. They don't want anyone but themselves to benefit from financial conditions.
For example, Having assets on a fixed loan of 3% when you can get a CD of similar duration for 3.5% means you are making money by owing those assets and owing that loan.
It is why deflation is such anathema to the financial industry. They don't want anyone but themselves to benefit from financial conditions.
In this example, you are borrowing the CD right?
You buy the CD (and give the issuer your money on deposit against the rate of 3.5%)
Which is the point of the article, you get 3.5% while the value of your money is -8.6% (or whatever the real rate of inflation is) so in the end you pay the bank to borrow your money.
If I follow the analogy right, the value of your debt is -8.6%.
The path to beating inflation is (a) borrowing at fixed low rates before it kicks in & (b) buying some asset that appreciates at greater than inflation rates (or at least paces it).
The path to beating inflation is (a) borrowing at fixed low rates before it kicks in & (b) buying some asset that appreciates at greater than inflation rates (or at least paces it).
I'm not sure about borrowing as much as possible (though publicly traded companies sure did buffer their balance sheets with low cost debt). I am sure though that I won't be pre-paying my mortgage at any point, given that it's more economic to buy savings bonds, use the yield to pay the interest on the mortgage, and pocket the difference. Never mind comparing to the yield on positively performing risk assets once the markets stop seizing up (and if they don't, we all have bigger problems anyway).
Taking on as much debt as possible is rarely the best idea, especially if your income could at all have been at risk at any point. But yes, with interest rates as low as they were for years, more than average was probably a pretty good idea as long as it was within one's means to support. The Fed lowers interest rates as a means of stimulating the economy, and as the old adage goes, "Don't fight the Fed."
Taking on as much debt as possible is rarely the best idea, especially if your income could at all have been at risk at any point. But yes, with interest rates as low as they were for years, more than average was probably a pretty good idea as long as it was within one's means to support. The Fed lowers interest rates as a means of stimulating the economy, and as the old adage goes, "Don't fight the Fed."
> Does this mean we should have borrowed as much as possible to buy a house when rates were low ?
Prices were also high. Time will tell.
Prices were also high. Time will tell.
I suspect refis massively benefited. I reduced my rate from 3.75% to 2.625% and with a cash out!
> 30 year fixed rate mortgages
Wait, what? Americans can fix for 30 years?!! The longest I've seen in Australia is 7 years fixed, but the usual home loan is 3-5 years fixed and then a renewal at the new market rate.
Wait, what? Americans can fix for 30 years?!! The longest I've seen in Australia is 7 years fixed, but the usual home loan is 3-5 years fixed and then a renewal at the new market rate.
Here in France people only ever do fixed rate, generally for 20 or 25 year mortgages. I have never heard of someone buying a home with a variable rate loan, not sure if it's even legal.
It might have been a pretty good deal for the people who bought homes with 25 year 0.7-0.9% interest rate mortgages these last few years.
It might have been a pretty good deal for the people who bought homes with 25 year 0.7-0.9% interest rate mortgages these last few years.
As an Australian, fascinating! I would guess that Tue majority of home loans here are variable.
Another question - with a normal fixed interest loan for 30 years, does that normally include paying off the principal? I.e after the 30 years, the loan is paid off?
Here, fixed interest usually don't pay down the loan whereas a variable loan pays down 100% of the principal after the 30 years
Another question - with a normal fixed interest loan for 30 years, does that normally include paying off the principal? I.e after the 30 years, the loan is paid off?
Here, fixed interest usually don't pay down the loan whereas a variable loan pays down 100% of the principal after the 30 years
Yes you do pay down the principal. Non-amortized mortgage loans might exist but if they do they're definitely marginal.
Variable rate loans do exist in France and they were relatively popular 15-20 years ago (up to 38% share).
https://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=304.RAI.M....
https://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=304.RAI.M....
In Denmark, 30 years fixed rate is the standard mortgage. I think it was basically the only way to own a home until "liberalizations" in 2002, and some of the more.. creative financial products that showed up are what ended up causing trouble after 2007.
The majority of American homes are fixed for 30 years
Wow. After a 30 year fixed loan, do you then own the home? See my comment above
Yes, the certified accountant's term is fully-amortized. Each fixed payment includes an increasing share of principal and a decreasing share of interest. This applies whether the interest rate is fixed or not.
Also you always own the home as long as you are meeting the terms of the mortgage contract.
Also you always own the home as long as you are meeting the terms of the mortgage contract.
Mind blown. How did Australians get it so wrong then :(
Fixed for 30 years plus paying down the principal is genuinely mindblowing to me, especially at the fixed interest rates of last year.
Fixed for 30 years plus paying down the principal is genuinely mindblowing to me, especially at the fixed interest rates of last year.
There are quite a few mortgages in the states that don't pay the principal until the end, but it creates drama at the end. Some friends of mine went that route and when the principal came due after 5 years, lots of assumptions turned out to be wrong and they had to sell to pay back the principal.
Yikes. Yeah, that sounds like how normal fixed-interest works here :(
Yes, if you are living in the US, and could access fixed rate mortgages. Or indeed anywhere where a fixed rate mortgage for a reasonable 5+ year term is available.
Because the money supply is in some sense linked to house lending by the banks these days (not the entire source, but a lot of it), house prices will increase in tandem with the money supply, that is fairly guaranteed.
For the rest, look to the latter part of the 1970´s, which is what happens in the US, when following a long period of low inflation, inflation and higher interest rates kick in to create this situation. TLDR, it isn't pretty for the lenders (banks, savings and loan, pension funds) who get stuck with the low interest rate long term loans. But that's prequelling the next financial crisis, not the current one.
Because the money supply is in some sense linked to house lending by the banks these days (not the entire source, but a lot of it), house prices will increase in tandem with the money supply, that is fairly guaranteed.
For the rest, look to the latter part of the 1970´s, which is what happens in the US, when following a long period of low inflation, inflation and higher interest rates kick in to create this situation. TLDR, it isn't pretty for the lenders (banks, savings and loan, pension funds) who get stuck with the low interest rate long term loans. But that's prequelling the next financial crisis, not the current one.
Considering the house increases in value faster than the debt increases due to interest borrowing to buy a house has turned out to be profitable.
Of course the reality is that the 30 years aren’t over and it’s all about risks, this is a gamble where the buyer was lucky.
Of course the reality is that the 30 years aren’t over and it’s all about risks, this is a gamble where the buyer was lucky.
I've joked since 2014 that I was born at the perfect time (1993) to never be able to buy a house, and this seems to prove that my patience in waiting out the market was not in fact a wise move. Very cool
Real estate prices will fall in a high interest rate, cash poor environment. More than most people appreciate. Since real estate is at all time highs relative to median incomes, something has to give.
Trying to time a market always fails, and a first house isn't really an investment in the traditional sense. It's always the best time to buy first home, from a market perspective. The big factor is picking somewhere you plan to live for 5+ years.
> Make the police walk and cycle around town, not sit aloof in their metal tanks.
This is such a good idea. Remember the old police shows where there were always 2 partner cops in the car? That doesn't happen anymore. Now every cop gets his own personal car that they drive home at night. If there is a wreck - even a small fender bender - about 4 cop cars show up with sirens blazing, completely disrupting traffic. It's crazy.
This is such a good idea. Remember the old police shows where there were always 2 partner cops in the car? That doesn't happen anymore. Now every cop gets his own personal car that they drive home at night. If there is a wreck - even a small fender bender - about 4 cop cars show up with sirens blazing, completely disrupting traffic. It's crazy.
In London it's common for people to take 25y~30y loans that are fixed for only 2y~5y. 5 years ago interest rates were 2.5%. If rates go above 10% this year, does that mean a sudden influx of houses in the market because people can't pay their houses anymore?
Edit: Wrong fixed interest rate.
Edit: Wrong fixed interest rate.
I am watching the markets in Romania and Germany and they are completely opposites: in Romania, most people I know went for a no fixed rate loan, meaning they change interest every 3 months. The banks are advertising this as the "cheaper" option - you get 4,8% variable interest now instead of 5,5% fixed. And people go into it with a "how bad could it get" attitude. Meanwhile, there are tens of thousands of new units entering the market (Romania tends to expand cities upwards, building 8-10 stories high buildings). I am really curious about how that market is going to develop.
Meanwhile in Germany, I don't see this option at all, and banks have now started pushing* for fixed rates for 30 years at 3% or save/loan accounts where you save for 10 years and they will give you a house loan in 10 years for 1,8% interest.
* we've got letters from all the banks where we have accounts promoting this
Meanwhile in Germany, I don't see this option at all, and banks have now started pushing* for fixed rates for 30 years at 3% or save/loan accounts where you save for 10 years and they will give you a house loan in 10 years for 1,8% interest.
* we've got letters from all the banks where we have accounts promoting this
Does anyone (UK) even offer fixed rate more than 5 years ahead?
Very simplistic analysis. Real yield is a function of inflation over the life of the bond. It might be 8% now, but the market is not pricing that over the next 20 or 30 years.
And people buy MBS because they have a higher yield than treasuries.
And people buy MBS because they have a higher yield than treasuries.
Or perhaps the market knows that the official rate of inflation is nowhere close to the real rate of inflation and are pricing that in?
Also, I saw an article the other day where the Fed is no longer buying MBS as part of QE <mark whatever> as of last month (I believe, could have been march) so a major buyer has left the market. A buyer who bought for no other reason other than to prop up the market I might add.
Also, I saw an article the other day where the Fed is no longer buying MBS as part of QE <mark whatever> as of last month (I believe, could have been march) so a major buyer has left the market. A buyer who bought for no other reason other than to prop up the market I might add.
how does the market know what's the true inflation rate?
if they use a sampling (basket of goods as proxy) method like other statistical agencies then why do we think the stats agencies are worse?
if they use a sampling (basket of goods as proxy) method like other statistical agencies then why do we think the stats agencies are worse?
As someone who doesn't own a home but would like to in the future, reading this kind of stuff is making me sick.
Rates skyrocketing can be great if you are going to be buying - because prices will usually drop to keep total monthly payments about the same.
And even if you have to buy at 18% interest like in the 80s, you can refinance if rates drop.
And even if you have to buy at 18% interest like in the 80s, you can refinance if rates drop.
Hmm. So if a house cost $2m at 3% interest last year, then interest spikes to 18%, the house should drop to $550,000? Yeah I really don't see prices dropping 70%, sorry. As much as I wish they would, as someone who wants to buy their first house.
If interest rates go to 18%, you bet the house would drop to $550,000.
I'm expecting house prices in my country to drop at least 30% in the next couple of years and I'm only expecting interest rates to get to around 10%, 18% would destroy the housing market.
I'm expecting house prices in my country to drop at least 30% in the next couple of years and I'm only expecting interest rates to get to around 10%, 18% would destroy the housing market.
18% implies a very high inflation rate, 15% or more. At that rate employers will be forced to give significant raises or else purchasing power would drop 50%+ in only three years. Employers tend NOT to match inflation, but they will have to give more than the usual 2-3%. Perhaps 10%, perhaps 13%, depends on the employer, but those higher salaries will send real estate to the moon even after the initial 50% dip. Of course these are extreme numbers and reality is not likely to get this extreme since "inflation" at the moment is primarily (lack of) supply side driven.
> Employers tend NOT to match inflation
Eventually they’ll have to or people will be spending 100+% of their income on basic food and shelter with no way to afford getting to work.
Eventually they’ll have to or people will be spending 100+% of their income on basic food and shelter with no way to afford getting to work.
Well I hope I'm wrong and you're right, because I expect interest rates to keep rising and I could really use a 70% drop in house prices.
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If interest rates are 18% the crash will be so hard that some residences can’t be given away (in undesirable locations) because the tax and maintenance will be higher the home value, and the economy will be fucked. You will probably be out of work.
If you can get a job as a liquidator and have lots of cash as it’ll be hard to borrow at all.
The last black swan like that was probably before my time (1980s) but maybe the ERM debacle in the UK was close.
If you can get a job as a liquidator and have lots of cash as it’ll be hard to borrow at all.
The last black swan like that was probably before my time (1980s) but maybe the ERM debacle in the UK was close.
Yes, your opinion seems based on how the numbers sound rather than what they imply/mean. The United States reaching 18% interest rates would have absolutely massive effects, we've been in a low interest rate environment since the GFC and 10% has not been broken for ~40 years. House prices plummeting would be the least of it.
I'd take the bet that it would get close(sub $1 mill) all else equal. In some areas houses dropped over 50% during the financial crises.
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Around here they barely dropped at all and for barely more than a year.
Out of interest, where?
Home prices are set by the market, not just by affordability.
If home prices dropped 50%, very very few homeowners with rates in the ~5% range would be willing to sell even if they could afford to do so without bankruptcy.
If home prices dropped 50%, very very few homeowners with rates in the ~5% range would be willing to sell even if they could afford to do so without bankruptcy.
Like the previous housing busts, when prices drop 50%, there is so much general distress that there will be foreclosures everywhere, distressed sales, bankruptcies, and general economic misery. Sitting on a 5% mortgage on an underwater is ok, if you have a job, if you believe the market is coming back, if your neighborhood isn't descending into chaos.
Home prices dropping 50% puts us in 2018. Why do you think we'll all be knee deep in skeletons clubbing each other to death if that happens?
Because the prices have been so high all of people's wealth is tied up in their homes. It won't happen though unless there's already widespread violence.
> Because the prices have been so high all of people's wealth is tied up in their homes.
Housing has been so high for 3 years
All of people’s wealth was tied up in housing before then too - if they sell they’ll just get less for it now
Housing has been so high for 3 years
All of people’s wealth was tied up in housing before then too - if they sell they’ll just get less for it now
When home price drop 50% usually the economy is in the toilet too, which means jobs are lost, which means people can't afford their mortgages.
Hell, if you're far enough underwater, youd be smart to declare bankruptcy rather than pay an $800,000 mortgage on a $500,000 home.
Hell, if you're far enough underwater, youd be smart to declare bankruptcy rather than pay an $800,000 mortgage on a $500,000 home.
This is exactly what happened in 2009-2010. Not everyone lost their job. Not everyone had taken out an adjustable rate loan that reset at payments they couldn't afford.
Some people were perfectly able to continue paying their mortgage, but due to life circumstances and / or some sort of psychological refusal to continue to pay for a house hundreds of thousands of dollars worth less than the loan, they simply defaulted.
It was called jingle mail because they just sent the keys back to the bank and walked away (sometimes taking the appliances and copper on their way out the door).
Some people were perfectly able to continue paying their mortgage, but due to life circumstances and / or some sort of psychological refusal to continue to pay for a house hundreds of thousands of dollars worth less than the loan, they simply defaulted.
It was called jingle mail because they just sent the keys back to the bank and walked away (sometimes taking the appliances and copper on their way out the door).
It should be noted that this "sending keys back to the bank" thing is a rather funny US-specific possibility.
In most of the remaining parts of the world (speaking for Germany myself, for example) you can't just drop a houses' keys into the banks' mailbox and be done with the entire mortgage. Instead, you are bound to a mortgage that's suddenly not backed by sufficient securities anymore and it's up to the bank to decide whether they just ignore this situation, attempt to somehow mitigate the additional risk by raising rates or requesting additional cash from you, or whether they try to liquidate the security in order to limit their losses and then come after you to cover the outstanding balance.
So if you want to do the bankruptcy play in case the bank requests your last shirt, you actually need to go on full personal default, with all the negative side effects that has on your credit rating everywhere else and all the subsequent obligations like the necessity to show good financial behavior for X years to have your debts be deleted eventually.
In most of the remaining parts of the world (speaking for Germany myself, for example) you can't just drop a houses' keys into the banks' mailbox and be done with the entire mortgage. Instead, you are bound to a mortgage that's suddenly not backed by sufficient securities anymore and it's up to the bank to decide whether they just ignore this situation, attempt to somehow mitigate the additional risk by raising rates or requesting additional cash from you, or whether they try to liquidate the security in order to limit their losses and then come after you to cover the outstanding balance.
So if you want to do the bankruptcy play in case the bank requests your last shirt, you actually need to go on full personal default, with all the negative side effects that has on your credit rating everywhere else and all the subsequent obligations like the necessity to show good financial behavior for X years to have your debts be deleted eventually.
It looks like home mortgages are only non-recourse, meaning the lender can't go after your other assets besides the house if you refuse to pay, in 12 US States: Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah and Washington.
https://www.forbes.com/advisor/loans/recourse-loans-vs-non-r...
https://www.forbes.com/advisor/loans/recourse-loans-vs-non-r...
Not sure why this is down-voted, but it's generally true.
For example, only 2 provinces in Canada are "non-recourse". Default on a mortgage, they lender takes the home and absorbs any loss that remains. Most of the US is like this.
"Recourse" provinces mean the lender takes your home, recovers what they can, then comes after your other assets to make up the difference. Not sure the exact laws but usually primary homes and retirement funds are protected, but they can take other property and auction it off.
For example, only 2 provinces in Canada are "non-recourse". Default on a mortgage, they lender takes the home and absorbs any loss that remains. Most of the US is like this.
"Recourse" provinces mean the lender takes your home, recovers what they can, then comes after your other assets to make up the difference. Not sure the exact laws but usually primary homes and retirement funds are protected, but they can take other property and auction it off.
Many would walk away from the house and/or short sale and then renting at 30-50% of what they were paying to keep a house that will take 10 years to break even.
Gotta live somewhere
Seems like that is belated by real estate being purchased in cash by investment firms, driving prices further up.
> Seems like that is belated by real estate being purchased in cash by investment firms, driving prices further up.
I wonder how much that is already contributing to the pullback in listings that is driving price increases; I suspect investment firms turn over property a lot less (at least, as individual sales) than owner-occupied.
I wonder how much that is already contributing to the pullback in listings that is driving price increases; I suspect investment firms turn over property a lot less (at least, as individual sales) than owner-occupied.
You might think so, but historically that doesn't seem to be the case. Prices rise as interest rates drop, but prices are sticky on the way down. This article is old but still relevant: https://www.theatlantic.com/business/archive/2011/07/how-ris...
The opening line from 2011 seems prescient:
> Mortgage interest rates will rise. We can't be sure exactly when rates will begin to climb or by how much, but we know what's coming.
11 years later it finally happened
> Mortgage interest rates will rise. We can't be sure exactly when rates will begin to climb or by how much, but we know what's coming.
11 years later it finally happened
We are locked in to new construction that keeps getting delayed. Every couple weeks our payments go up as interest rates rise and there’s nothing we can do. It’s brutal.
There's got to be some out, although it might not be pleasant. What happens if you don't secure financing? What happens if the developer never finishes?
Usually you have a pretty high rate construction or bridge loan that you plan on refinancing into a normal home loan when there’s a house to backstop it.
But you can’t get that backstopped loan until the house exists.
Likely you could pull out and lose a deposit (and a good lawyer might even get that back because of delay) but you’re still without a house.
But you can’t get that backstopped loan until the house exists.
Likely you could pull out and lose a deposit (and a good lawyer might even get that back because of delay) but you’re still without a house.
The builder we used builds to spec and then you buy the house minus the initial deposit in full. He’s not a fan of doing customer-originated/owned construction loans, which is fair, I believe a good number of builders in our area operate the same way.
Well, a pretty high rate from 6 months ago might be a reasonable rate today?
We are waiting for the contract addendum with final pricing. It may still make financial sense to go through with everything, once we have all that. It’s just annoying that in this situation, our house costs are fixed against a particular point in time, but interest rates continue to rise.
Can you put some money into instruments to hedge against rising interest rates? Something like TBT comes to mind (it's a fund that's short treasuries basically, so increases in value when interest rates rise) or buying puts against long bond funds.
People bitch about crypto all the time but I never hear anything about these contracts with adjustable rate loans. Those should be illegal; they lay people out. With crypto you only lose the money you put in.
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At least here the rates going up now means renting is cheaper than owning and the price have barely moved.
That might be the case if supply was even close to demand, but at least in most parts of the US the demand outweighs the supply by several orders of magnitude. I don't see prices going down. They might go flat, but they'll never be lower than they are right now.
Let me guess, you never lived through 2008?
A friend of a friend just sold his condo in a Bay Area at a loss. Prices have dropped from their highs.
A friend of a friend just sold his condo in a Bay Area at a loss. Prices have dropped from their highs.
Your friend bought and sold a condo in the same year or so? Maybe I'm interpreting this wrong.
Cause the transaction costs alone are about 10% on a home sale, so it's not something you want to treat like switching apartments every year when they jack up the rent 10%, even if the general rental market doesn't call for such an increase (they know most people won't want to deal with moving, deposits, etc).
Cause the transaction costs alone are about 10% on a home sale, so it's not something you want to treat like switching apartments every year when they jack up the rent 10%, even if the general rental market doesn't call for such an increase (they know most people won't want to deal with moving, deposits, etc).
Your friend bought and sold a condo in the same year or so? Maybe I'm interpreting this wrong.
Cause the transaction costs alone are about 10% on a home sale, so it's not something you want to treat like switching apartments every year when they jack up the rent 10%.
Cause the transaction costs alone are about 10% on a home sale, so it's not something you want to treat like switching apartments every year when they jack up the rent 10%.
Depends on the neighborhood. Arguably, bay area prices peaked in October of 2015, and have been flat or down slightly. If you convert housing prices to $/square foot, it hit and has been flirting with the "magic psychological price point" of $1000/sq ft price for a long time. There are many exceptions to the rule (of course) but you can see prices racing up to a city-wide average of $1000/sq ft and then flattening out quickly if you look at a graph.
Bought in 2019, now worth ~5% less, not even counting transactions costs.
Condos took a big hit in SF during Covid. Starting to recover, but now with increasing interest rates, it may be a while.
Condos took a big hit in SF during Covid. Starting to recover, but now with increasing interest rates, it may be a while.
People are cashing out of expensive markets and moving to cheaper markets, paying all cash. There will be no price drop.
What happens when buyers disappear for the homes in the expensive markets? The prices drop, and the cash available to buy in a cheaper market dries up.
You can argue that people just will stay put, but that assumes they have the ability to service the debt on their home in the expensive area. It doesn't take many forced sales in an illiquid market to drive down prices. It can also drive a panic rush for the exit as folks think they're missing the last chance to cash out of their expensive home.
I saw a couple of open houses today in the south SF Bay. Ghost towns. I can't say if that's representative of the overall market, but I think the pipeline is already draining.
You can argue that people just will stay put, but that assumes they have the ability to service the debt on their home in the expensive area. It doesn't take many forced sales in an illiquid market to drive down prices. It can also drive a panic rush for the exit as folks think they're missing the last chance to cash out of their expensive home.
I saw a couple of open houses today in the south SF Bay. Ghost towns. I can't say if that's representative of the overall market, but I think the pipeline is already draining.
> You can argue that people just will stay put, but that assumes they have the ability to service the debt on their home in the expensive area. It doesn't take many forced sales in an illiquid market to drive down prices. It can also drive a panic rush for the exit as folks think they're missing the last chance to cash out of their expensive home.
> I saw a couple of open houses today in the south SF Bay. Ghost towns. I can't say if that's representative of the overall market, but I think the pipeline is already draining.
The houses sit empty because the owner would rather maintain a (fictious at this point) valuation than realise the loss. That panic sell dynamic you mentioned doesn't seem to happen in housing, and foreclosure sales etc. can always be dismissed as unrepresentative.
> I saw a couple of open houses today in the south SF Bay. Ghost towns. I can't say if that's representative of the overall market, but I think the pipeline is already draining.
The houses sit empty because the owner would rather maintain a (fictious at this point) valuation than realise the loss. That panic sell dynamic you mentioned doesn't seem to happen in housing, and foreclosure sales etc. can always be dismissed as unrepresentative.
> The houses sit empty because the owner would rather maintain a (fictious at this point) valuation than realise the loss.
This happens for a while, and volume collapses except distressed sales. Then there’s a gradual recalibration where sellers adjust to a new normal and properties come back on the market.
Take a look at post-2008 crash behavior and you’ll see this dynamic: volume collapses, then a gradual normalization of volume, all while still far below the previous peak.
One example scenario: if you own a home but want to upgrade, the new home you want got a lot cheaper too. So you might take a loss on your current place to get into the new one.
This happens for a while, and volume collapses except distressed sales. Then there’s a gradual recalibration where sellers adjust to a new normal and properties come back on the market.
Take a look at post-2008 crash behavior and you’ll see this dynamic: volume collapses, then a gradual normalization of volume, all while still far below the previous peak.
One example scenario: if you own a home but want to upgrade, the new home you want got a lot cheaper too. So you might take a loss on your current place to get into the new one.
That only works if rates go down. Most people won’t sell a house worth N financed at 2.5% to buy a new house worth N at 6%.
California’s prop 13 was found to have this effect. So too will the prior low mortgage interest rates.
California’s prop 13 was found to have this effect. So too will the prior low mortgage interest rates.
That doesn't seem quite right. If you're moving up, your decision to buy will primarily be based on affordability, even if the old house had a better interest rate. And in a high-interest environment, house prices become lower and partially offset the extra interest expense, so affordability hasn't changed all that much.
Prop 13 has a big effect but more so in downsizing (eg empty nest / retirement) than in upsizing.
Prop 13 has a big effect but more so in downsizing (eg empty nest / retirement) than in upsizing.
> The houses sit empty
Who can afford to let a > $1 million USD asset sit idle? There is an opportunity cost to that. You also have to service any outstanding debt on the property and pay the property taxes. There are also life changes(i.e. retirement, illness, children, etc) which force relocations. The owner could try renting the unit, but that involves risk and still has issues with opportunity cost. What if the home sits idle and the owner relies on the income to afford a rental in another market?
Who can afford to let a > $1 million USD asset sit idle? There is an opportunity cost to that. You also have to service any outstanding debt on the property and pay the property taxes. There are also life changes(i.e. retirement, illness, children, etc) which force relocations. The owner could try renting the unit, but that involves risk and still has issues with opportunity cost. What if the home sits idle and the owner relies on the income to afford a rental in another market?
> Who can afford to let a > $1 million USD asset sit idle?
People that own >$1 million USD assets. Some of these folks have multi-million dollar properties that they only actually use for a week or two per year.
People that own >$1 million USD assets. Some of these folks have multi-million dollar properties that they only actually use for a week or two per year.
I know someone who had a 2m+ home sit empty in SF for years. A 2m+ home in the Peninsula where the tenants stopped paying rent during COVID and still live there today. The tenant not paying rent annoys them but they’re not financially impacted by any of it. They own a business and make enough money that it’s not worth their time or energy to deal it.
They have no connection to tech and work in a niche industry.
They have no connection to tech and work in a niche industry.
Since he's talking about California the answer is boomers. They bought decades ago and locked in miniscule property tax rates which don't go up because of Prop 13.
Right, but those boomers want to sell so they can buy their dream house on a golf course in AZ. Their clock is ticking and their not going to stay in CA wasting their retirements.
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Divorce, death, job transfers force sales and those things happen all of the time. Not everyone can stay in their homes.
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Among other reasons I’ve been thinking the same.
I have two coworkers looking to buy. They both keep “waiting for the crash”. But I’ve tried to explain to them, they’re getting beat out on every place they look at with over-asking cash offers. If there “is a crash” they will be at the same place they are now.
They need new construction to improve availability, or they need a scenario with there is mass unemployment that doesn’t effect their jobs.
IDK anything. But I’m not sure I see how they get into a house.
I have two coworkers looking to buy. They both keep “waiting for the crash”. But I’ve tried to explain to them, they’re getting beat out on every place they look at with over-asking cash offers. If there “is a crash” they will be at the same place they are now.
They need new construction to improve availability, or they need a scenario with there is mass unemployment that doesn’t effect their jobs.
IDK anything. But I’m not sure I see how they get into a house.
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It's great if you're a cash buyer. Of course it will be difficult to raise that cash if the economy dives and/or real wages(after inflation) keep sinking. But, if you have the cash, you may be rewarded with some good deals on housing. You're generally better off paying a higher rate and less for the actual property since you can always refinance down the line but you can't renegotiate what you paid for a property.
If you are buying a home to live in, just make sure you can stick with it for 5 years at least, and you will probably be fine. And the more years the better. As someone else said, you'll be able to refinance if/when rates go down, and the value of the home will go up if the fed and IRS doesn't change things majorly.
Unfortunately when you’ve been priced out of housing (the pandemic and the recent rise in interest rates priced me out of anything within 2 hours from Silicon Valley), there’s not much you can do other than relocate or find a way to increase income/savings. Housing in Bay Area exurbs like Hollister and Tracy has gone up by over 30% since the pandemic started. I’m currently relying on the latter (I don’t want to move for career and personal reasons), trying to save in the face of high inflation while also trying to level up my career and one day get promotions.
> As someone else said, you'll be able to refinance if/when rates go down
Not necessarily, especially if valuations go down, as well, and especially if the economic conditions leading to lower rates/valuation—low rates being, after all, a monetary stimulus policy—also adversely effect your own earning potential.
Not necessarily, especially if valuations go down, as well, and especially if the economic conditions leading to lower rates/valuation—low rates being, after all, a monetary stimulus policy—also adversely effect your own earning potential.
Stockpile cash for your down payment, rising rates drive down asset prices.
(not investing advice)
(not investing advice)
What should really make you sick is not interest-rate information, but housing restrictions that drive up the cost of housing: https://www.worksinprogress.co/issue/the-housing-theory-of-e.... That's the true villain.
Don't worry toooooo much. The total cost of housing moves around less than changes in rates and house prices would suggest. Over time prices, interest rates and supply tend to move such that people spend, give or take, about the same % of their income on housing.
Right now it sucks in the US because not enough houses were built for a number of years after the financial crises - then that got exacerbated during covid. It's never been easy to buy a house - looking at prices from a generation ago makes it seem easy, but they were facing high teen mortgage rates.
Right now it sucks in the US because not enough houses were built for a number of years after the financial crises - then that got exacerbated during covid. It's never been easy to buy a house - looking at prices from a generation ago makes it seem easy, but they were facing high teen mortgage rates.
We're about to face teen mortgage rates with million+ homes, aren't we?
The people sitting around betting on interest rates don't seem to think so.
Absolutely. The reason for that is for every person who needs to take out a mortgage for that $1m home, there are 3 buyers that are willing to pay cash, and like 20% over asking price.
What many in this thread fail to realize is that there's a larger dynamic to housing right now than anything related to prices and rates. It's purely supply and demand. The demand is just too high for the prices to come down. Having 20% interest rates will curb some of that demand no doubt, but it won't clear it out completely. That means a few dips here and there, but generally, I don't see demand for housing decreasing enough for prices to go down.
What many in this thread fail to realize is that there's a larger dynamic to housing right now than anything related to prices and rates. It's purely supply and demand. The demand is just too high for the prices to come down. Having 20% interest rates will curb some of that demand no doubt, but it won't clear it out completely. That means a few dips here and there, but generally, I don't see demand for housing decreasing enough for prices to go down.
20% interest rates for the US is apocalyptic.
https://www.census.gov/construction/nrc/pdf/newresconst.pdf
Housing starts are trending up. It will take a few years, but supply is coming.
Housing starts are trending up. It will take a few years, but supply is coming.
According to the Taylor rule, the fed needs to raise prime rates to inflation plus 2% to avoid spiraling inflation, that is, 11%. Hope you enjoy double digit borrowing rates or spiraling inflation.
We should be solving this by fixing supply chains, allowing domestic energy production to increase until the Russian war is resolved, raising taxes on the very wealthy, and cutting spending (to reduce deficit spending, which creates new money). These would all be supply side fixes and budgetary fixes.
Instead we're going the demand side route: keep making everyone poorer until people stop buying things.
Instead we're going the demand side route: keep making everyone poorer until people stop buying things.
Given the disparity between the current interest rates and the inflation rate, that is more or less what the Fed is doing. They're no where near the point where they're actually trying to stop inflation with interest rates.
What could cause spiraling inflation? Human behavior? Looks like high energy costs are here to stay (due to years of ESG signalling leading to underinvestment in oil/gas) but what about other prices?
Wages aren't that sticky, and in many cases (big unions, big employers) contractually give out inflation-indexed raises.
So if a transient spike lasts long enough to be considered "inflation", then it gets baked into wage increases, which leads to higher prices, which leads to higher inflation, which leads to wage increases...
Unfortunately, the govt thinks of monetary policy as their only tool to fight inflation, when in fact they have a much stronger, better one: public policy.
The govt should be passing emergency legislation to vastly increase supply of the three main contributors to family spending: housing, healthcare, transportation, and education.
Make it MUCH easier to build housing.
Vastly incentivize cheap car replacements (ebikes, etc).
Loosen drug import laws from Europe & CA like, yesterday.
So if a transient spike lasts long enough to be considered "inflation", then it gets baked into wage increases, which leads to higher prices, which leads to higher inflation, which leads to wage increases...
Unfortunately, the govt thinks of monetary policy as their only tool to fight inflation, when in fact they have a much stronger, better one: public policy.
The govt should be passing emergency legislation to vastly increase supply of the three main contributors to family spending: housing, healthcare, transportation, and education.
Make it MUCH easier to build housing.
Vastly incentivize cheap car replacements (ebikes, etc).
Loosen drug import laws from Europe & CA like, yesterday.
Service and shelter inflation tend to be sticky. You don’t renegotiate your lease or your salary every month.
Inflation is now moving increasingly towards these two categories, which indicates that it could be around much longer even if supply chain issues get resolved.
Inflation is now moving increasingly towards these two categories, which indicates that it could be around much longer even if supply chain issues get resolved.
Creating 40% of broad money in 2.5 years.
This on its own should only create a single inflationary shock, not a spiral.
It takes a while for all that new money to move through the economy. Plus the Fed has been paying banks interest on their excess reserves in order to prevent that sort of thing.
Hell, AFAICT I’m still living off the money I got from unemployment insurance two years ago and have just been banking the cash for the job I’ve had for the last year (and a day, yesterday was my anniversary apparently).
Hell, AFAICT I’m still living off the money I got from unemployment insurance two years ago and have just been banking the cash for the job I’ve had for the last year (and a day, yesterday was my anniversary apparently).
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The sticky thing is the wage market with boomers retiring, reduced immigration, COVID and long COVID removing workers from the job market, and the pandemic in general pissing people off so they start to demand more at their work, rising unionization, etc.
High energy costs are also not here to stay. There's very clearly the post-pandemic supply shock which has spilled over into high energy costs due to a bullwhip effect. And there's the war in Ukraine, which will not last forever. There's also a buildup in inventories now (the bullwhip is coming back around) and there's no huge demand for container ships from China right now. High energy costs didn't stick in 2007, they didn't stick in 2014 and they won't stick this time. Commodities/Energy inflation is cyclical.
High energy costs are also not here to stay. There's very clearly the post-pandemic supply shock which has spilled over into high energy costs due to a bullwhip effect. And there's the war in Ukraine, which will not last forever. There's also a buildup in inventories now (the bullwhip is coming back around) and there's no huge demand for container ships from China right now. High energy costs didn't stick in 2007, they didn't stick in 2014 and they won't stick this time. Commodities/Energy inflation is cyclical.
The argument for high oil and gas costs sticking around this time is that the producers have realized they'll be effectively wiped out in 20-30 years, assuming we get anywhere close to meeting climate goals. There will always be a need for oil and gas but if it's not being used for most heating, transportation, or electricity generation that demand will be a pittance of what they get today. This realization has led them to essentially halt new production and lean hard in to scarcity to get all they can out of a dying market, even if doing so makes that market die faster.
That is what some people thought the last two times oil prices spiked.
Negative real interest rates are inflationary.
Sounds pretty awesome to me, I'd be more than happy to loan at a >11% return.
The 70s were the worst time to be an investor in terms of real returns. Even worse than the 30s, which saw deflation, so the real return was actually not as bad in comparison.
Also, the market would not react well if the Fed signalled they'd go any higher than 5%.
If I knew 11% was happening, I think I'd liquidate to cash now, then go 60/40 when it happens. (Currently I'm 100% equities.)
Also, the market would not react well if the Fed signalled they'd go any higher than 5%.
If I knew 11% was happening, I think I'd liquidate to cash now, then go 60/40 when it happens. (Currently I'm 100% equities.)
But cash has a negative real return of ~11% in that situation, right? You would just eat that?
I’m 90% in equities, with a short position in German Bunds (their treasuries) as a hedge. I’m also borrowing against those equities (at a 2.18% rate), so you could say I’m 137% in equities. This feels risky, but I don’t know what I could do otherwise.
I hate the idea of sitting in cash with a guaranteed negative real rate of return of about -10% per year, even if it’s for a short period of time.
Also, what happens if the Fed doesn’t stamp out inflation in that case? Wouldn’t that force people to buy equities like crazy?
I’m 90% in equities, with a short position in German Bunds (their treasuries) as a hedge. I’m also borrowing against those equities (at a 2.18% rate), so you could say I’m 137% in equities. This feels risky, but I don’t know what I could do otherwise.
I hate the idea of sitting in cash with a guaranteed negative real rate of return of about -10% per year, even if it’s for a short period of time.
Also, what happens if the Fed doesn’t stamp out inflation in that case? Wouldn’t that force people to buy equities like crazy?
I think I'd eat it in this contrived hypothetical scenario in which I had crystal ball. I don't see how equities and bond funds don't fall 40% or more on the way to 11%.
Obviously no one knows the future so I'm heavily tilted to small cap value and equal-weight large cap value funds, which seem to do well in inflationary times.
Are you getting 2% margin loan from something like IB or M1?
With what vehicle are you short those Bunds? I'm curious.
Obviously no one knows the future so I'm heavily tilted to small cap value and equal-weight large cap value funds, which seem to do well in inflationary times.
Are you getting 2% margin loan from something like IB or M1?
With what vehicle are you short those Bunds? I'm curious.
> Are you getting 2% margin loan from something like IB or M1?
I’m in Sweden so I’m getting it from my broker: https://www.avanza.se
> With what vehicle are you short those Bunds? I'm curious.
I bought a bit of this: https://www.avanza.se/borshandlade-produkter/certifikat-torg...
I’m in Sweden so I’m getting it from my broker: https://www.avanza.se
> With what vehicle are you short those Bunds? I'm curious.
I bought a bit of this: https://www.avanza.se/borshandlade-produkter/certifikat-torg...
> I don't see how equities and bond funds don't fall 40% or more on the way to 11%.
Do you think that applies to all equities, and if so why?
I’ve mostly bought equities that I think will do relatively well in an inflation environment, e.g. because they have a lot of fixed assets and pricing power. For example I’ve bought nuclear power in France, uranium mines in Canada and Amazon. But admittedly I haven’t had time to really research their financials.
Why would stocks like that loose 40% though? If the Fed really stamps out inflation by drastically raising rates then shouldn’t the market see the end of it pretty soon and be willing to bet on stuff that will survive (as a store of value in real terms)?
Do you think that applies to all equities, and if so why?
I’ve mostly bought equities that I think will do relatively well in an inflation environment, e.g. because they have a lot of fixed assets and pricing power. For example I’ve bought nuclear power in France, uranium mines in Canada and Amazon. But admittedly I haven’t had time to really research their financials.
Why would stocks like that loose 40% though? If the Fed really stamps out inflation by drastically raising rates then shouldn’t the market see the end of it pretty soon and be willing to bet on stuff that will survive (as a store of value in real terms)?
I guess not all equities. Coke and Exxon will probably be okay, but I don't buy individual stocks.
> Also, what happens if the Fed doesn’t stamp out inflation in that case? Wouldn’t that force people to buy equities like crazy?
At a very rough level, no. Stocks are valued based on discounted cash flow (in general and over the long term. Plenty of short-term exceptions, i.e. Tesla future earnings costing 18x more than Fords future earnings).
A higher interest rate, i.e. inflation, lowers the value of those future earnings.
Stock prices today represent an extreme historical outlier in terms of the price people are paying for future earnings. This might make sense if we assume low inflation for the next 30 years. It does not make sense in a high inflation scenario.
Reasonable scenarios allow the market to fall another 30-50% over the next year or two.
Reasonable scenarios allow the markets in 10 years to be roughly where they are today in absolute terms (i.e. before adjusting for inflation).
At a very rough level, no. Stocks are valued based on discounted cash flow (in general and over the long term. Plenty of short-term exceptions, i.e. Tesla future earnings costing 18x more than Fords future earnings).
A higher interest rate, i.e. inflation, lowers the value of those future earnings.
Stock prices today represent an extreme historical outlier in terms of the price people are paying for future earnings. This might make sense if we assume low inflation for the next 30 years. It does not make sense in a high inflation scenario.
Reasonable scenarios allow the market to fall another 30-50% over the next year or two.
Reasonable scenarios allow the markets in 10 years to be roughly where they are today in absolute terms (i.e. before adjusting for inflation).
> A higher interest rate, i.e. inflation, lowers the value of those future earnings.
Not necessarily. A company with pricing power can raise prices in an inflationary environment.
But if the risk free interest rate goes up then it will be tempting to park money there instead of course. That requires the Fed really stamping out inflation though, which I’m not sure they will do.
Not necessarily. A company with pricing power can raise prices in an inflationary environment.
But if the risk free interest rate goes up then it will be tempting to park money there instead of course. That requires the Fed really stamping out inflation though, which I’m not sure they will do.
> I hate the idea of sitting in cash with a guaranteed negative real rate of return of about -10% per year, even if it’s for a short period of time.
I would not be surprised to see equities doing worse than -10%. Sometimes there are no good investments, only loss mitigation, and cash is not necessarily a bad idea.
I would not be surprised to see equities doing worse than -10%. Sometimes there are no good investments, only loss mitigation, and cash is not necessarily a bad idea.
> I would not be surprised to see equities doing worse than -10%.
I wouldn’t be surprised by that either, but it’s the wrong question. As long as the expected value of the future price (in today’s USDs) is higher than -10% I’m interested in buying (but the actual decision is a bit more complicated).
But I agree cash is not necessarily a bad idea.
I wouldn’t be surprised by that either, but it’s the wrong question. As long as the expected value of the future price (in today’s USDs) is higher than -10% I’m interested in buying (but the actual decision is a bit more complicated).
But I agree cash is not necessarily a bad idea.
Why not diversify? Or utilize options to hedge stock bets? A 0% return is better than losing 10% holding cash or 40% holding all equities. Or Simple move is Just buying CD’s will get you 3% (still negative 5% real rate but better than all cash) and rising daily.
Didn't many of these old people, enjoying multiple millions of dollars of profit on their houses, buy them in the 70s?
If you were lucky enough to be in a hot market…
I’m originally from the Bay Area, as were my parents, and the family who still live there are sitting on valuable houses. My dad’s parents bought a house in San Jose in the ‘50s, my uncle’s wife ultimately ended up with it an sold it for multi-millions. My step father’s mother has a house in San Leandro that was bought in the ‘50s and is worth maybe $700k — maybe, totally guessing here.
Other family left the Bay Area over the years and bought houses which are nowhere near as valuable because the local markets don’t support that kind of price increases.
In ‘90-91 my stepdad’s work closed and some of the people transferred to South Carolina where they bought literal mansions from the difference in housing prices between the Bay Area. A few years later that place closed and they couldn’t sell their houses because nobody could afford them in the local market.
Long story short, it depends.
I’m originally from the Bay Area, as were my parents, and the family who still live there are sitting on valuable houses. My dad’s parents bought a house in San Jose in the ‘50s, my uncle’s wife ultimately ended up with it an sold it for multi-millions. My step father’s mother has a house in San Leandro that was bought in the ‘50s and is worth maybe $700k — maybe, totally guessing here.
Other family left the Bay Area over the years and bought houses which are nowhere near as valuable because the local markets don’t support that kind of price increases.
In ‘90-91 my stepdad’s work closed and some of the people transferred to South Carolina where they bought literal mansions from the difference in housing prices between the Bay Area. A few years later that place closed and they couldn’t sell their houses because nobody could afford them in the local market.
Long story short, it depends.
Are you sure? You might have said you would be happy getting 8% a few months ago, which would have been bad? And you can get ≈50% putting money into Argentina Government Bonds: https://www.investing.com/rates-bonds/argentina-government-b...
> You might have said you would be happy getting 8% a few months ago, which would have been bad?
If I was locked into some 8% loans now there are worse places to be. Yes I'd take a bit of a hit, that's life.
> And you can get ≈50% putting money into Argentina Government Bonds
For a few months until they default, sure. There's a reason they're so cheap.
If I was locked into some 8% loans now there are worse places to be. Yes I'd take a bit of a hit, that's life.
> And you can get ≈50% putting money into Argentina Government Bonds
For a few months until they default, sure. There's a reason they're so cheap.
Why? How would you even buy that?
Even when inflation is 9% so your real return is 2%?
Don’t you care about the real rate?
11% interest on 30+ trillion dollars of national debt.
Doesn't interest rate changes only affect future debt?
Average maturity of US debt is sitting at 65 months right now. The treasury borrows at several maturities for various practical purposes, including that shorter term maturities have lower rates.
Most of the current debt will have to be refinanced.
Most of the current debt will have to be refinanced.
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Wait what? I remember when it crossed $10 trillion. When did we become Japan?
Who do you hope enjoys this? Why are you excited for something bad to happen?
It's a phrase. "hope you enjoy X". It just means "I'm pretty sure X is about to happen". It doesn't mean the person is excited for it.
It also has the implication that they think X is bad and expect you to feel the same way, which, as one of the replies says, isn’t guaranteed, like if you’re more lender than borrower.
If it happens, I will enjoy it.
I would be relatively happy to see inflation drop while interest rates are above 10%. I could secure my financial future at much lower risk in that world.
I'm not ideally positioned for that eventuality, because I didn't (and still don't) predict that outcome, but it would certainly be an opportunity-filled moment were it to occur.
Honestly, "enjoy" is overstating the situation. The macro economy around such a circumstance would probably be miserable, so I would probably be unhappy. But, I would be happy to have the opportunity that such a moment would produce.
I would be relatively happy to see inflation drop while interest rates are above 10%. I could secure my financial future at much lower risk in that world.
I'm not ideally positioned for that eventuality, because I didn't (and still don't) predict that outcome, but it would certainly be an opportunity-filled moment were it to occur.
Honestly, "enjoy" is overstating the situation. The macro economy around such a circumstance would probably be miserable, so I would probably be unhappy. But, I would be happy to have the opportunity that such a moment would produce.
Any market change is good for you if you can predict it with precision and capitalize on it effectively.
including no change, actually, thanks to the availability of all sorts of interesting options contracts
Bad is a matter of perspective isn’t it?
Obvious sarcasm is not obvious?
Not sure why this is getting downvoted, watch a famous hedge fund manager on CNBC say the same thing the other day
HN commentariat loves shooting the messenger.
Did Taylor consider quantitative easing and tightening? The shadow funds rate messes with these numbers quite a bit
How much QE is still going on?
I don't know the exact numbers but it is still fairly large. They just started cutting back June 1, which does have an effect on what it believe is known as the shadow funds rate
The article is full of jargon and unfamiliar abbreviations, it's quite hard to follow. I wonder what the target group is.
For a typical business reader, these are pretty standard terms. Most people became familiar with MBS (mortgage-backed securities) during the last financial crisis, and CPI (consumer price index) is a way of reporting inflation.
The article is saying that if inflation is at 8.6%, no one would want to lend money for a lower rate. The real return (which takes into account the purchasing power of the dollars lent) would be negative.
The author gives evidence that there was a “no-bid” to buy debt at 5.5%. Buying debt is in effect another way of lending. Therefore, the author shows that no one wanted to lend at 5.5%, but were willing to lend at 6%. He concludes that this shows mortgage interest rates will go even higher.
That’s not to say that anyone is born knowing these terms, just that they are not particularly exotic among all the acronyms floating around.
The article is saying that if inflation is at 8.6%, no one would want to lend money for a lower rate. The real return (which takes into account the purchasing power of the dollars lent) would be negative.
The author gives evidence that there was a “no-bid” to buy debt at 5.5%. Buying debt is in effect another way of lending. Therefore, the author shows that no one wanted to lend at 5.5%, but were willing to lend at 6%. He concludes that this shows mortgage interest rates will go even higher.
That’s not to say that anyone is born knowing these terms, just that they are not particularly exotic among all the acronyms floating around.
Welcome to the financial press. Can't predict the future but will sure try to hide that by explaining things as counterintuitively as possible.
You buy short duration bonds so you have money to buy the crash
Loan only going to make more than the stock market if the real estate market doesn’t drop by 30% :)
Sooner or later the inflation will be over though, and this guy may then have a house with no mortgage.
Not going to happen (unless we enter an extremely disintigrative/politically unstable phase where you don't want to live here because there's too much violence.) We're bringing in/birthing more people than we're building houses for and the cost of labor to build new ones is going up.
> (unless we enter an extremely disintigrative/politically unstable phase where you don't want to live here because there's too much violence.)
This is always thrown out as a rule but it's definitely not the only possible outcome. Housing can still massively drop without civil unrest but with hard times due to unemployment. 100 years ago the US was still desirable.
This is always thrown out as a rule but it's definitely not the only possible outcome. Housing can still massively drop without civil unrest but with hard times due to unemployment. 100 years ago the US was still desirable.
Population is stabilizing and decreasing in US and many other developed countries. Large populations of older people like Boomers in the US are dying. Whose going to buy all these new, smaller, more expensive homes when there are plenty of existing homes at reduced prices in the market? Long term trends are unfavorable for growth in housing.
Maybe long term trends are but short term there's so much inflation the mortgages aren't a big deal. There's no sign of immigration being slowed down either so I'm not even sure the population will stabilize without something serious happening.
I don't know why this "No Bid" claim is getting so much traction. MBB, an ETF containing only MBS, dropped all the way from 98 to 97 on Friday.
If I understand things correctly, it's because the MBS buyers finally said that they believe inflation is going to be persistent and they require much higher returns. This opinion was unanimous. It came as a shock and indicates rates need to go higher, potentially much higher, in order for the market to continue to function. These higher rates, and the rate at which they're rising, could shock the housing market leading to ripples throughout the economy.
Yea, it's NBD, this thing is off around 1% over the weekend. But check the futures now, it's all off 1% (or was last I looked).
Maybe this is one of those little cracks before the dam? This (coming? ) recession might not give us a bang like 01 and 08 kinda did.
Maybe this is one of those little cracks before the dam? This (coming? ) recession might not give us a bang like 01 and 08 kinda did.
You are looking at an ETF holding existing MBS, not the MBS market itself.
Like if the Treasury issued a bunch of new t-bills and nobody showed up to the auction, that doesn't impact the repayment of existing t-bills. But it is still a really bad sign.
Like if the Treasury issued a bunch of new t-bills and nobody showed up to the auction, that doesn't impact the repayment of existing t-bills. But it is still a really bad sign.
ETFs suffer less from bad liquidity in the underlying. There can be arguments that, in illiquid markets an ETF gives a 'more accurate' price than the market price. Where more accurate means 'better matches the opinion of all traders'.
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The price of existing MBS is, of course, affected by the auction of new MBS.
If the Treasury issued a bunch of new T-bills and no one bought them, the price of existing T-bills would crater. And also the financial system would collapse, but that's a different story.
If the Treasury issued a bunch of new T-bills and no one bought them, the price of existing T-bills would crater. And also the financial system would collapse, but that's a different story.
No, this isn’t right either. MBS deals are still pricing.
It’s a sign the credit markets are starting to break. I think that is the only thing that could get the Fed to reverse course on tightening.
What's the significance of 98 to 97 ?
Nothing. They just found a random ETF that owns MBS and quoted the stock price, while the original article is talking about the MBS market (which isn't part of the stock market).
It's like inferring the health of the commercial real estate market in the bay area by quoting Google's share price.
It's like inferring the health of the commercial real estate market in the bay area by quoting Google's share price.
Thanks. Not really familiar with that ETF so I wasn't sure if that was a big change or a small change but really it's an irrelevant change to the conversation.
No, he's super wrong. That ETF is a basket of MBS. It's traded on the stock exchange so people can trade MBS as a general concept, rather than buying and selling individual bonds. If there were truly a "no bid" situation, the price of existing MBS would crater, and the price of the ETF would crater.
Tell me you don't understand finance without telling me you don't understand finance.
$98 per share to $97 per share.
This reader is still hoping for an explanation of the significance.
I assume the point the GP is making is that it's not at all significant.
Well the OP says the retail rate went from 5.5% to 6% as a consequence. Not very significant either, right?
Surprise comes from data that violates your expectations. I guess it’s mostly a matter of expectations here.
Also, ETF buyers are probably less knowledgeable / professional / sophisticated than buyers of the underlying asset.
Surprise comes from data that violates your expectations. I guess it’s mostly a matter of expectations here.
Also, ETF buyers are probably less knowledgeable / professional / sophisticated than buyers of the underlying asset.
The ETF has a redemption mechanism that keeps its trading price aligned with the underlying net asset value. Thus, the sophistication of the ETF buyers is irrelevant.
Good point.
The pingbacks tell an interesting story here.
Here’s a choice line referring to O&G prices from the post this one is discussing:
> In a rational world, if the party in power in DC were not encumbered by climateers, we would turn on the hose, take every step to unimpede production and delivery.
Watch out for FUD. Economic forecasting is extremely political.
Here’s a choice line referring to O&G prices from the post this one is discussing:
> In a rational world, if the party in power in DC were not encumbered by climateers, we would turn on the hose, take every step to unimpede production and delivery.
Watch out for FUD. Economic forecasting is extremely political.
In a rational world, that hose would have had someone trying to strangle it ~two decades ago.
In the irrational world we live in today, because of sentiments like what you've quoted, we're heading straight towards a climate catastrophe. The cheapest time to avoid it was by taking action 20 years ago, the next cheapest time to avoid it is today, but unfortunately irrational people aren't very price-conscious.
In the irrational world we live in today, because of sentiments like what you've quoted, we're heading straight towards a climate catastrophe. The cheapest time to avoid it was by taking action 20 years ago, the next cheapest time to avoid it is today, but unfortunately irrational people aren't very price-conscious.
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Retail mortgages are 6% whilst Blackrock can borrow at 0.75%. Corporations need to banned from owning single-family residential housing.
Fake news. The government can't even get 30 year money below 3.2% right now.
Blackrock doesnt have any 30 year debt (they have a very debt-light business model). Microsoft has 30 year bonds and theyre trading at around 4.5% right now. But of course, the default rate on AAA corporate debt is much lower than on Joe Schmo's mortgage.
Blackrock doesnt have any 30 year debt (they have a very debt-light business model). Microsoft has 30 year bonds and theyre trading at around 4.5% right now. But of course, the default rate on AAA corporate debt is much lower than on Joe Schmo's mortgage.
Just for context, Microsoft is the one corporation in the world still has higher bond rating than the US government itself. S&P still has US's bond at AA+, and Fitch has US's bond at AAA with "negative" outlook. While all 4 credit agencies have Microsoft at AAA.
Retail mortgages are 6% for 30 yr fixed. Blackrock isn't getting 30 year money at 0.75%. The US government is paying 3 something for 30 yr money and it's climbing fast.
Blackrock owns 60 billion dollars of real estate in a 36 trillion dollar market. They don't matter.
No one can borrow at 75bps
I think they are talking about the federal funds rate. https://en.m.wikipedia.org/wiki/Federal_funds_rate
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I agree, I want the likes of the ilk of the Gates family's hands off single-family residential.
Bill Gates isn't buying SFHs. He's buying all the farmland he can. He's the largest owner of American farmland.
> He's the largest owner of American farmland.
There is 900 million farm acres of farmland in the US. Bill gates owns about 270K acres of farmland. So even though he is the largest private owner of farmland, he owns less than 0.1% of all farmland in the US.
Ref: https://apnews.com/article/fact-check-bill-gates-blackrock-7...
There is 900 million farm acres of farmland in the US. Bill gates owns about 270K acres of farmland. So even though he is the largest private owner of farmland, he owns less than 0.1% of all farmland in the US.
Ref: https://apnews.com/article/fact-check-bill-gates-blackrock-7...
If I had to guess, there’s probably a lot of sfh as well.
Good thing you don't have to and could look it up...
I agree with this. Owning apartment buildings are one thing, but buying hundreds of thousands of single family homes and squeezing regular people out is detrimental to the entire country.
Do regular people not live in apartment buildings?
Sure, and they pay a multiple + overhead on top of the underlying mortgage. Some might call this unnecessary /rent seeking/.
Is this actually a thing? I'm a bit of a map nerd and I look at the King County (i.e. Seattle and surrounding area) parcel maps a lot, and I haven't seen more than one or two single family residential properties that weren't owned by individuals. Do you know of a neighborhood where a lot of houses have been bought up?
Can't remember where I saw it, but IIRC about half the homes sold in the last year in various Atlanta and Dallas suburbs were by corps, REITs, etc. Phoenix and parts of Florida are in a similar boat.
That doesn't mean half the homes are now owned by these corps, just half the homes purchased in last year or two were by corps. But in some cases they've bought whole subdivisions in one shot, so it's not too far from reality depending on the area.
That doesn't mean half the homes are now owned by these corps, just half the homes purchased in last year or two were by corps. But in some cases they've bought whole subdivisions in one shot, so it's not too far from reality depending on the area.
One weird trick to own the speculators and make housing affordable for young people: build some more homes in desirable areas. BlackRock is only doing the same thing that the boomer generation has been collectively doing for years; but I guess giving young people a way to access that unearned NIMBY rent defeats the point.
> Those of us fortunate enough to have 30 year fixed rate mortgages at about 3% are about to see our mortgage “debt” give us better returns than our stock holdings.
This is incorrect. That's only if house prices go up along with inflation, which I don't think it will. House valuations have been sky high, like the stock market was 6 months ago. There's a lot of room for valuations to pull in, I would say at least 33%, if not 50%. So we could see deflation in house prices, and a net loss even though "real" rates are very negative.
This is incorrect. That's only if house prices go up along with inflation, which I don't think it will. House valuations have been sky high, like the stock market was 6 months ago. There's a lot of room for valuations to pull in, I would say at least 33%, if not 50%. So we could see deflation in house prices, and a net loss even though "real" rates are very negative.
With 8% inflation if housing took a 50% hit, your stock holdings don't matter because people are fighting over loaves of bread in the street.
Read the quote literally.
The US would get explosive growth by not forcing such enormously inefficient car-centric cities.