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Should the government intervene in the real estate market if housing costs are too high

Government is the problem. Not the solution.

The problem is simple supply and demand economics of available land, demanded by an increasing population. Either more land needs to be opened up for expansion, or the population needs controlled. Would you support a one child law like China?

But the costs for localities take a big financial hit providing services for new residential housing and therefrom, try to minimize their exposure
and approve more commercial dev. which is a positive financially for the locality.

There have been communities cited by federal courts for having no federal housing projects or requiring an extraordinary steps be taken,
putting the dev. at greater risk. Orders were to approve the housing within the same community as all housing.
 
So what do you think is driving up prices in cities like Vancouver?

Income. The more buyers earn, the more the houses cost.
 
You only have to look at the failure of rent control / rent stabilization in NYC to know that.

You'll have to point that out. I have a friend in Manhattan who loves rent control and he has neighbors in the same building that don't care
but are paying over 10 times his rent. Yes, 10 times actually more. He pays $550 a month, across the hall, it's $6,500 a month.
 
Nonsense. All the difficulties you find in London (and any other city) are the result of government interference and regulation, from the tiny cobblestone streets lined with ancient buildings, to the antiquated sewer system, electricity grid, communications, plumbing and lighting. Governments have five trillion rules restricting private business, so the crowded, old, outdated mess is entirely – 100% - the result of nosey, interfering, bureaucratic, small minded government Vogons.



Give the running of London to private enterprise and it will be a hundred times bigger, with plenty of opportunities for all price brackets, amazing roads, bullet trains, underground tunnels, fantastic skyscrapers and the most efficient way to move, travel, shop, be entertained, eat, holiday and enjoy in the world. Just keep it away from government Vogons.

Little could be further from the truth. London is going the same way all major cities go through...no more room, no more houses.
Hell in little ole nothing Fairfax Co., Va. for 40 years the 3rd richest county in the US and the middle class and below have already left.

They left because it has remained among the 'richest' counties and only because of its high real estate prices. It happened to Fall Church, once the 'richest'
city in the US, only because of the housing. ($400-$500,000 townhouses) Finally it came Loudoun Co., Va. that once a huge project by Toll Brothers of 6,000 homes, singles priced $600,000 and up was sold out.

Now if you can afford to live in either of those places you are living in the richest areas of the country and why, because high homes prices
require and draw the income. Everybody else...get the hell out.

Blogroids, the above is all speculation in land and housing where every area that qualifies for high cost area and they do, at FHA and [it] will guarantee mortgages up to a loan of $675,000. Isn't that just precious ? How much would your homes cost if the govt. will buy up a $675,000 mortgage ?

Want to see deregulation at work ? Calif. deregulated elec. power. Nothing changed except that they now
pay 3 times that of other states for elec. power.

We have in Nev. a vote coming up to deregulate our power. Nevada currently pays 1/2 that of Calif. Let's see what happens
when and if dereg. is voted in. Like for example, what 'competing' power we can get when we pull the plug on NV Energy.

There will be none. Utilities dereg. is in fact, selling a monopoly and what will remain one...pure and simple
 
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You'll have to point that out. I have a friend in Manhattan who loves rent control and he has neighbors in the same building that don't care
but are paying over 10 times his rent. Yes, 10 times actually more. He pays $550 a month, across the hall, it's $6,500 a month.

It's really pretty straightforward. Many rent controlled apartments are rented well below market value. $550 a month for an apartment in the middle of the biggest city in the country is ridiculously cheap. For reference a 1 BR in Queens county runs about 3x times that.
Landlords have to make up the difference somewhere.
 
Excellent - give you mother my best regards. It looks like I had you all wrong - sorry about that. ;D

Its OK Rob, and thank you for the kindness.

Aaahhhhh, so the truth emerges.

You aren't so much pissed that you are priced out of the housing market you live in, you are pissed that others can afford what you can't. :lol:

If you want the nicer places, get a better job. Or move to a town where the cost of living is lower.

Stop blaming others for your inability to live where you want. That's on you.

I actually have housing. I made the original post because of what I see as a problem in my city. But anyway, I don't have the numbers with me, but I remember reading this article a while ago that calculated what percentage a person earning a certain income would have to spend on housing, and it was found that this number was getting bigger and bigger. The trend was that a person would need higher, higher, and ever higher average income in order to secure the same level of housing. I will admit that you have a point, in that maybe some people don't make enough money. But how high do housing prices have to be before you will admit that they are too high? Do they have to be so high that even doctors can't afford it? I don't understand how you don't see the plight of the average working people making modest income. I believe that people should have the right to affordable housing. Housing shouldn't be something that only rich people can afford.

Do you think that people should leave where they were born and grew up in just because they do not make a lot of money?

Who decides what's too high? And what do you do about people who lose money because the government's decided that the property they're trying to sell needs to be sold for less money?

I am not saying the government should artificially determine the prices of houses. I am saying that they should perhaps put a restriction on home-ownership by investors (especially foreign buyers). I don't believe that real estate should be for investment. It should be reserved mainly to satisfy the housing demands of local people.
 
Its OK Rob, and thank you for the kindness.



I actually have housing. I made the original post because of what I see as a problem in my city. But anyway, I don't have the numbers with me, but I remember reading this article a while ago that calculated what percentage a person earning a certain income would have to spend on housing, and it was found that this number was getting bigger and bigger. The trend was that a person would need higher, higher, and ever higher average income in order to secure the same level of housing. I will admit that you have a point, in that maybe some people don't make enough money. But how high do housing prices have to be before you will admit that they are too high? Do they have to be so high that even doctors can't afford it? I don't understand how you don't see the plight of the average working people making modest income. I believe that people should have the right to affordable housing. Housing shouldn't be something that only rich people can afford.

Do you think that people should leave where they were born and grew up in just because they do not make a lot of money?



I am not saying the government should artificially determine the prices of houses. I am saying that they should perhaps put a restriction on home-ownership by investors (especially foreign buyers). I don't believe that real estate should be for investment. It should be reserved mainly to satisfy the housing demands of local people.

Putting aside the question of foreign investors, real estate investment and speculation has been a thing since the dawn of private property. You're talking about trying to undo something that's been around for thousands of years. And honestly it serves a useful purpose by insuring a pool of rental property. Not everyone wants to own a home and even those that do often start out renting - I rented for 5 years while I worked to be able to afford the kind of home I wanted. If you did away with investments in single family homes what happens to people who want to rent single family homes?

Property rights and such aside there are always consequences to actions. It isn't enough to just say "we should do away with investment in single family homes" without thinking through what that actually means in the real world and what the possible ramifications of that action are.
 
Justin Trudeau is hated in our household. My mother absolutely detests him. He takes his nanny on tours, all on the taxpayers' dime. He dumps refugees on our country, and he emerges as the humanitarian, whilst the rest of the us foot the bill--having to feed, clothe and shelter these people.

You think that sniveling piece of **** is bad now, wait till Trump beats him up on trade.. LOL

I was born and raised in southern Ontario, but now this country looks nothing like the one I grew up in. Shame!

Tim-
 
Read your links and having spent 10 years in real estate, I am not impressed.
I posted those reference links to provide empirical and meta-analytical information about the behavior of housing prices. That is the same reason the authors of those documents presented their analysis. So be impressed or don't, but whether you are or not is of no matter.

First the fed describes housing as a productivity issue as if houses were being made in factory to then be put on the retail shelf to be sold. Not in any way true. Almost all housing isn't built, until it is sold.

  • I don't know what gave you that idea. If I had to guess, I'd say that you read the very last paragraph in the paper's conclusion and arrived at the interpretation you've above stated because you didn't understand what you read. The conclusion states, "Considering the general lack of success that DSGE models have had in capturing asset price behavior, and considering that the model has only one driving force, exogenous productivity growth, it is reasonable to call it a success."

    Perhaps you don't understand exogenous productivity growth? Regardless of your conception of what it is, what it isn't, in the context of housing price changes, is merely the building of houses. It is growth driven by the sum of factors that motivate firms to build more (more or fewer, depending on whether the change under consideration is a growth increase or growth decrease (aka "contraction"), but not a cessation of growth) houses.

    Perhaps instead you've conflated "productivity" with "actual production" of houses. The authors are speaking of the productivity (output and returns on it) of all factors -- the raw materials, the intermediate goods and services (transportation being one), the financing/money, the grading of the land, the land itself, etc. -- that contribute to the finished good we think of simply as a house one purchases. The reality is that economically speaking, when one buys a house, one is buying a "boatload" of firms' goods and services that coalesce in the product we call a house. It is that "boatload" of firms' productivity that the paper refers to by the term "productivity." While firms' production of houses is an element in the overall growth model the Fed presents to describe housing price changes, it's hardly the only one, and it's not depicted as a dominant one. In fact, it's but a piece of one of the factors (section 3.7). Indeed, the authors expressly identify the two sectors of productivity in the housing marketplace -- each sector having multiple elements -- their model describes with regard to changes in housing prices (remember, the model describes change, not a specific "direction" of change):
    • "a 'manufacturing' sector that produces non-housing related goods and services, as well as the capital (structures and durable goods) that go into housing services," and
    • "capital, labor, and land [used] to produce a flow of housing services."
  • The Fed paper presents an empirical model of the behavior of housing prices. That model does not assume houses are "put on the retail shelf to be sold."
    • It assumes that "land, capital, and labor are inputs to production, and housing and non-housing consumption provide utility to consumers" and based on that assumption along with the "behavior of housing prices since the 1960s."
    • The model makes no assumption or remarks about the nature of the house-structure manufacturing process and how it's performed.
  • The Fed's shows that its model aptly depicts housing price behavior as function of multiple productivity factors, the two key ones being:
    • Technologically enabled productivity growth, and
    • "The elasticity of substitution between housing and non-housing consumption," which is consumers' predilection to purchase (not rent) other products/services instead of houses, is another key factor in the determination of housing price changes.
      • Aside: The second of those two parameters, while not experientially novel to observers of the housing market in 1980/-90s Tokyo (perhaps all of Japan?), is one that I didn't expect to see as having a demonstrably material impact, particularly with regard to housing prices in the U.S. (That the elasticity of substitution is indeed a key factor highlights just how critical and pervasive "the basics" of economics are, even to the analysis of a highly complex process. What is there to say? The principles of economics are thus named for a very fine reason.)

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(continued from post 59)

The financing link describes many factors in portfolio criteria vis-a-vis budgeting, portfolio risk balance and many other issues from my experience
are irrelevant. Because.....FHA/HUD, Fannie and Freddie held the same lending criteria for the last 60 years or more until Freddie and Fannie then went outside their mortgage buying criteria.

In my experience, the FHA loans were approved under debt/income ratios, credit record and if good, the buyer could put down 5% and either Freddie
or Fannie would buy the ensuing mortgage. It is just that simple and no govt. agency changed policies or how they operated and had nothing to do with the meltdown

Freddie and Fannie went bad only when they went outside their own parameters for buying mortgages, [they] also bought MBS (mortgage backed securities) and then borrowed more to buy even more. That's how those two got in trouble.

Residential (all real estates markets) are highly regulated in just how much can be built and also by limiting it to where you could build.
This in effect reduces supply at the local level.

Builders come in knowing full well the median household income and attempt to build houses that capture a mortgage within the FHA criteria against that income. I.e., the most expensive houses that the next two earner couple can afford.

When FHA raises their loan guarantee, sales prices rise right along with it.

I don't really know why you embarked on a discussion about house financing, particularly after your having presumably read the Fed's paper. The stuff you mention is accounted for in the Fed's model.
 
Its OK Rob, and thank you for the kindness.



I actually have housing. I made the original post because of what I see as a problem in my city. But anyway, I don't have the numbers with me, but I remember reading this article a while ago that calculated what percentage a person earning a certain income would have to spend on housing, and it was found that this number was getting bigger and bigger. The trend was that a person would need higher, higher, and ever higher average income in order to secure the same level of housing. I will admit that you have a point, in that maybe some people don't make enough money. But how high do housing prices have to be before you will admit that they are too high?

The answer to that question depends entirely on where you live, and what your income level is.

Do they have to be so high that even doctors can't afford it?

The cost of living is commensurate with the pay for the area, for the most part. A general practitioner will charge far, far more for an office visit in San Francisco than a general practitioner will charge in Bum****, Kansas. He makes more, because he charges more, so he can afford more.

I don't understand how you don't see the plight of the average working people making modest income. I believe that people should have the right to affordable housing. Housing shouldn't be something that only rich people can afford.

No one is saying housing is only for the wealthy, but do you believe all people should equally be able to live in Manhattan, or Beverly Hills? :lol: No. You get to live in better places if you make better money. If you can't afford to live in Beverly Hills, you move somewhere else.

Do you think that people should leave where they were born and grew up in just because they do not make a lot of money?

Yes. :lol: If my parents were wealthy enough to live in Manhattan, that doesn't mean that I get to live there, too, unless I work hard and make a lot of money. You don't have the birthright of living in a wealthy community. Living in Nob Hill is a privilege. Not a right.

I am not saying the government should artificially determine the prices of houses. I am saying that they should perhaps put a restriction on home-ownership by investors (especially foreign buyers). I don't believe that real estate should be for investment. It should be reserved mainly to satisfy the housing demands of local people.

So because you can't afford it, nobody should be able to?

****ty way of looking at things, dude. "If I can't have it, nobody can."
 
The way I look at it is this - if you can't afford to live where you want to, live somewhere cheaper until you can do better. I want to live in downtown Savannah with all the houses around the square, but I don't have the budget for a $1 million dollar house. So I live somewhere much cheaper.

Gotta walk before you can run. Get a small place, in a location with lower property values. Work your way up to a nice place.

Your first car isn't usually a Cadillac, is it? Nah, it's usually a beat-up old Chevy that you have to drop a ton of money into.

Just my two cents. :)

Superfly, not sure if anyone answered you on this, but it's a little different up here. You've gotta remember, we're the 2nd largest country in the world, while only having ~36 million people. Most of the work is highly concentrated in a few urban areas throughout the country, so those areas get get extremely expensive, the closer you are to "the job", whatever that is. Moving away could mean a 2 hour commute, in some cases, before you're in an area where housing even begins to get affordable. It's one of the drawbacks of living here...and the issue is entirely the geography.

I was lucky to move to a much more affordable area in the country, and actually find a job in my field...there's a pocket of automotive manufacturing out my way - reasonably close, my commute is 50 minutes each way...albeit through gorgeous countryside...winter's not so fun sometimes...hehe... But, I had to take a ~$22,000 pay cut to do it...hehe... Totally worth it bring my kid up here, but it was pretty scary, and it's pretty fragile. But, for what I would have paid in the city for Greater Toronto Area (basically all the cities surrounding Lake Ontario) for a 750 square foot townhouse condo with a postage stamp lawn, no trees, no driveway, surrounded by thousands of units that are exactly the same, I can buy a nice four bedroom house with a pool, a couple out buildings, and a three or four acres of hardwood forest - and the condo would still have up to $700 a month in condo fees! That's not what we have...lol...we went a little more modest...haha But we paid just over $200k, and got what would have easily cost $650 - $750k in the city. That's ****ed!! lol Something is wrong.

The problem here is that foreign investors are buying homes and leaving them empty, just letting them increase in value, only to sell them later for a profit. This pushes markets into crazy land, and foreign investors stand to profit while Canadian citizens wanting to make that crucial step into financial independence are the ones who are getting hurt. I think it's good that something like this be managed by the government. It's a risky proposition, when so many empty houses exchange hands for higher and higher prices. Too many big problems get started this way. :)
 
We remember when bush tried that and he collapsed the housing market.
 
The answer to that question depends entirely on where you live, and what your income level is.



The cost of living is commensurate with the pay for the area, for the most part. A general practitioner will charge far, far more for an office visit in San Francisco than a general practitioner will charge in Bum****, Kansas. He makes more, because he charges more, so he can afford more.



No one is saying housing is only for the wealthy, but do you believe all people should equally be able to live in Manhattan, or Beverly Hills? :lol: No. You get to live in better places if you make better money. If you can't afford to live in Beverly Hills, you move somewhere else.



Yes. :lol: If my parents were wealthy enough to live in Manhattan, that doesn't mean that I get to live there, too, unless I work hard and make a lot of money. You don't have the birthright of living in a wealthy community. Living in Nob Hill is a privilege. Not a right.



So because you can't afford it, nobody should be able to?

****ty way of looking at things, dude. "If I can't have it, nobody can."

The main issue I have with your line of reasoning is that, if we take it to its logical conclusion, we will get this: beautiful cities like Vancouver or New York would be off-limits to people who don't have a lot of money. Only the wealthy would be able to partake in the fantastic things these world-class cities have to offer. This just doesn't sit right with me. Note: I am not saying that we should go full-communist and erase all income inequality. There will always be people who are richer and people who are poorer. I just feel that our role as a society should be focused on ensuring accessibility for everyone. Richer people will always exist and they will always be able to buy up more real estate but we should try to make sure they don't do this to such a degree so as to exclude everybody else who is not as wealthy as they are.

Also, when you say things like, "so because you can't afford it, nobody should be able to?", it really sounds like you are making this to be personal. Besides, I already told you that I have housing. I am not "whining" because I "don't have it". I say what I say because I am trying to make things better for other people, people who are not wealthy.

Lastly, just in the spirit of discussion, what criteria would you use to determine whether it's housing prices that are too high, or that it's people not making enough money to afford it?
 
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Superfly, not sure if anyone answered you on this, but it's a little different up here. You've gotta remember, we're the 2nd largest country in the world, while only having ~36 million people. Most of the work is highly concentrated in a few urban areas throughout the country, so those areas get get extremely expensive, the closer you are to "the job", whatever that is. Moving away could mean a 2 hour commute, in some cases, before you're in an area where housing even begins to get affordable. It's one of the drawbacks of living here...and the issue is entirely the geography.

True, but look at the commuters outside of DC, or NYC. They have the same issue. The major cities are not affordable anywhere, because everybody wants to be there. It's easy to get to work, to school, to restaurants, to entertainment, etc. There's a reason major cities are more expensive - because the demand to live there is higher. It's not unusual to commute 2 hours one way to NYC or DC on the train. Even 2 hours away, housing is expensive.

I was lucky to move to a much more affordable area in the country, and actually find a job in my field...there's a pocket of automotive manufacturing out my way - reasonably close, my commute is 50 minutes each way...albeit through gorgeous countryside...winter's not so fun sometimes...hehe... But, I had to take a ~$22,000 pay cut to do it...hehe... Totally worth it bring my kid up here, but it was pretty scary, and it's pretty fragile. But, for what I would have paid in the city for Greater Toronto Area (basically all the cities surrounding Lake Ontario) for a 750 square foot townhouse condo with a postage stamp lawn, no trees, no driveway, surrounded by thousands of units that are exactly the same, I can buy a nice four bedroom house with a pool, a couple out buildings, and a three or four acres of hardwood forest - and the condo would still have up to $700 a month in condo fees! That's not what we have...lol...we went a little more modest...haha But we paid just over $200k, and got what would have easily cost $650 - $750k in the city. That's ****ed!! lol Something is wrong.

But again - we have the same issue here. Maybe not on the same scale you do, but we do. I live in a modest home about an hour south of Savannah, Georgia. About 2,500 sf. Nothing fancy, just a 5b, 2b home. I built it new in 2012, and I paid $158K for it. This same house in LA would have gone for probably close to a million. Same in NYC or DC. Why did I get my house so cheap? Because nobody wants to live here. :lol: There are no jobs, save jobs in the tourist industry, because we are a big beach town, and we have FLETC. Other than that, there's nothing here. My husband is retired, and I am a student, so we don't have to worry about jobs, but if we did, I'd have to commute to Savannah or Jacksonville to work. Everybody here does. Is it fair? Hell no it's not fair. But it's the price you pay to have a nicer, bigger place. You just commute. If jobs were here, housing would be much higher.

The problem here is that foreign investors are buying homes and leaving them empty, just letting them increase in value, only to sell them later for a profit. This pushes markets into crazy land, and foreign investors stand to profit while Canadian citizens wanting to make that crucial step into financial independence are the ones who are getting hurt. I think it's good that something like this be managed by the government. It's a risky proposition, when so many empty houses exchange hands for higher and higher prices. Too many big problems get started this way. :)

I'm not sure how much US real estate is owned by foreign investors. I know that California, Texas and Florida are apparently interesting to foreign investors.
 
The main issue I have with your line of reasoning is that, if we take it to its logical conclusion, we will get this: beautiful cities like Vancouver or New York would be off-limits to people who don't have a lot of money. Only the wealthy would be able to partake in the fantastic things these world-class cities have to offer. This just doesn't sit right with me. Note: I am not saying that we should go full-communist and erase all income inequality. There will always be people who are richer and people who are poorer. I just feel that our role as a society should be focused on ensuring accessibility for everyone. Richer people will always exist and they will always be able to buy up more real estate but we should try to make sure they don't do this to such a degree so as to exclude everybody else who is not as wealthy as they are.

Also, when you say things like, "so because you can't afford it, nobody should be able to?", it really sounds like you are making this to be personal. Besides, I already told you that I have housing. I am not "whining" because I "don't have it". I say what I say because I am trying to make things better for other people, people who are not wealthy.

Lastly, just in the spirit of discussion, what criteria would you use to determine whether it's housing prices that are too high, or that it's people not making enough money to afford it?

Isn't one based off of the other? If housing prices are too high, people cannot afford them.

I am not making this personal, Wan. If I seem to be, please forgive me. I've not spoken to you much here, but you seem pretty cool. I just disagree with things and see them in a different way than you do. It's like I said before - living in a great location is not a right. It's a privilege. I'd love to live in a nice apartment in Manhattan. I'd love to be able to take the elevator down to the bottom floor, drop off my dry cleaning in the lobby and grab a bagel and a coffee before I ever leave the building. But I can't afford it. I mentioned before - I'd love to live in one of the older houses in Savannah along the squares. Nice, big old houses there. I looked into them when I first planned to move to south Georgia. There was a house on Bull Street, right off the square. $207,000 and it was unlivable. There'd been a fire there that had all but wiped out the home. It would take several hundred thousand dollars to get it back to where it was before. So I couldn't even afford an unlivable house on the square. :lol: But that's OK. I realized that I was looking in an area that was priced out of my price range, so I moved on. Now when I want to go to Savannah for a nice lunch, or shopping along River Street, I just drive up there. It's only about an hour.

It's nothing personal to you if you can't live in nicer places, and yes, it would be great if we could all afford it, but we can't. If there was a brownstone in NY that sold for $1.4 million dollars, and then the same brownstone right next door sold for $500,000, it would undercut the property value of the first one significantly, and even at $500,000, it's priced out of the market for most people.

Just life. :shrug:

It's like this commercial:



It sucks, I know, but that's life. The wealthy people have always had it nicer than those of us who are not wealthy.
 
Its quite alright SuperFly. You seem a cool gal too and I must say some of the things you said in this thread really made me ask myself some questions. :)

I enjoyed our exchanges.
 
The way I look at it is this - if you can't afford to live where you want to, live somewhere cheaper until you can do better. I want to live in downtown Savannah with all the houses around the square, but I don't have the budget for a $1 million dollar house. So I live somewhere much cheaper.

Gotta walk before you can run. Get a small place, in a location with lower property values. Work your way up to a nice place.

Your first car isn't usually a Cadillac, is it? Nah, it's usually a beat-up old Chevy that you have to drop a ton of money into.

Just my two cents. :)


It is, however, getting so out of hand that the day will come when one has to move to a third world country before one can afford property or rent.

what then?

The auto comparison doesn't wash because auto production can keep up with demand, thus keeping auto prices from getting too far ahead of wages--society cannot produce land, and demand distorts prices thereby.
 
Hello. Brief introduction: I live in Vancouver (well, close enough) and I can tell you that the housing costs are absolutely out of control. For the average working person, there is no way he can afford a decent place in the Lower Mainland. Someone like me would literally die from overworking before he/she could save up for a down payment on a house. Sure people could get a studio apartment or a one-bed room, but only if they are not planning on raising a family. Vancouver is indeed a nice a place to live, however I feel that our government is too lax when it comes to regulating the real estate market here. I really think they should pass a law to restrict foreign buyers from owning too much real estate here.

Anyway, my point is that it seems like, in my city at least, that government intervention is needed in order to make things right (such as ensuring that the average people would be able to afford housing). If we simply let the free market "correct itself", we could wait and wait and wait. In fact, a lot of people here have already been predicting that the bubble would burst, but it has never happened. Meanwhile, regular people with real housing needs (especially younger people who are leaving their parents' house) wait and wait and wait, but the housing costs do not cool down enough for them. This appears to me that the free market system does not work all the time, that it requires government oversight in order for it to benefit everybody (not just the very rich).

Thoughts?


I have a solution, but if you are a conservative, you won't like it.
 
Government involvement is the reason it is inflated to begin with.

Inflation is not the problem. Inflation of land prices way beyond wage inflation is the problem, and that is because of the free market in a situation where that which cannot be produced (land) gets ahead of wage inflation by virtue of growth of free market demand on a limited resource.

The only solution is a social one. But, it can be done wrong, or right, just like anything else in the world.

I have a few ideas, but we would have to vote out conservatives and libertarians to achieve it.
 
Hello. Brief introduction: I live in Vancouver (well, close enough) and I can tell you that the housing costs are absolutely out of control. For the average working person, there is no way he can afford a decent place in the Lower Mainland. Someone like me would literally die from overworking before he/she could save up for a down payment on a house. Sure people could get a studio apartment or a one-bed room, but only if they are not planning on raising a family. Vancouver is indeed a nice a place to live, however I feel that our government is too lax when it comes to regulating the real estate market here. I really think they should pass a law to restrict foreign buyers from owning too much real estate here.

Anyway, my point is that it seems like, in my city at least, that government intervention is needed in order to make things right (such as ensuring that the average people would be able to afford housing). If we simply let the free market "correct itself", we could wait and wait and wait. In fact, a lot of people here have already been predicting that the bubble would burst, but it has never happened. Meanwhile, regular people with real housing needs (especially younger people who are leaving their parents' house) wait and wait and wait, but the housing costs do not cool down enough for them. This appears to me that the free market system does not work all the time, that it requires government oversight in order for it to benefit everybody (not just the very rich).

Thoughts?


The free market should not be allowed on any resource that is limited which cannot be produced to keep up with demand, such as land.

That is the problem.

At some point, conservatives and libertarians will be forced to accept that reality or be voted out by the majority.
 
Every time the government tries to control a market, bad things happen.

Not always true. I remembered when Reagan deregulated the airlines, and then things got worse. Big airlines gobbled up smaller ones, and once upon a time when you could purchase a reasonably priced ticket and leave in a few days, now ou have to purchase it many weeks in advance, so spontaneous air travel is no longer possible with most people. Big companies lowered rates so low to force smaller ones out of biz, so buy outs happened, and now we have fewer, not more choices, and the borderline profitable lines curtailed perks and service quality, in this particular industry.

Some things should rightly be controlled, for the good of society.


In June 2008 former CEO of American Airlines, Robert Crandall stated,

The consequences of deregulation have been very adverse. Our airlines, once world leaders, are now laggards in every category, including fleet age, service quality and international reputation. Fewer and fewer flights are on time. Airport congestion has become a staple of late-night comedy shows. An even higher percentage of bags are lost or misplaced. Last-minute seats are harder and harder to find. Passenger complaints have skyrocketed. Airline service, by any standard, has become unacceptable
 
True, but look at the commuters outside of DC, or NYC. They have the same issue. The major cities are not affordable anywhere, because everybody wants to be there. It's easy to get to work, to school, to restaurants, to entertainment, etc. There's a reason major cities are more expensive - because the demand to live there is higher. It's not unusual to commute 2 hours one way to NYC or DC on the train. Even 2 hours away, housing is expensive.



But again - we have the same issue here. Maybe not on the same scale you do, but we do. I live in a modest home about an hour south of Savannah, Georgia. About 2,500 sf. Nothing fancy, just a 5b, 2b home. I built it new in 2012, and I paid $158K for it. This same house in LA would have gone for probably close to a million. Same in NYC or DC. Why did I get my house so cheap? Because nobody wants to live here. :lol: There are no jobs, save jobs in the tourist industry, because we are a big beach town, and we have FLETC. Other than that, there's nothing here. My husband is retired, and I am a student, so we don't have to worry about jobs, but if we did, I'd have to commute to Savannah or Jacksonville to work. Everybody here does. Is it fair? Hell no it's not fair. But it's the price you pay to have a nicer, bigger place. You just commute. If jobs were here, housing would be much higher.



I'm not sure how much US real estate is owned by foreign investors. I know that California, Texas and Florida are apparently interesting to foreign investors.

I get what you're saying. I would expect cities to be *reasonably* more expensive than living in rural areas. But it's not just supply and demand for living accommodations driving this, where there are physically not enough houses. There is a very large segment of speculative investment, which is creating a bubble at the same time as it is driving housing costs far beyond the reach of most people who would live and work in that area.

I'm honestly more concerned about the family that needs to live close to work, invests money given by their family, over extends themselves to get financing, thinking they are making a safe investment, even if they have to kill themselves to pay for it, and watch what happens to them when the bubble bursts. This is becoming an economic risk, and I'm glad the government is mitigating it. We all know, having gone through 2008, what can happen when housing markets collapse under the weight of imaginary numbers. That's what I'm worried about here...
 
According to your "logic", if there is an American unhappy with any aspect of his country, he should not try to change it, but instead he should move to another country.

A relevant answer, for sure.

I'm skeptical of government involvement in the real estate markets, but you raise a good point and there may be some compromises and actions that could solve the problem.
 
Inflation is not the problem. Inflation of land prices way beyond wage inflation is the problem, and that is because of the free market in a situation where that which cannot be produced (land) gets ahead of wage inflation by virtue of growth of free market demand on a limited resource.

The only solution is a social one. But, it can be done wrong, or right, just like anything else in the world.

I have a few ideas, but we would have to vote out conservatives and libertarians to achieve it.

It is rather hard to blame a free market when there isn't one. The worst areas in regards to home prices are almost exclusively run by Democrats so the idea it is caused by conservatives and Libertarians is rather ludicrous. You are correct that it is a supply and demand issue in that the number of housing units created in these areas are fewer than the amount of growth in the area, however it isn't that builders don't want to make money it is the government regulating them to the point they can't build.
 
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