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On August 04 2021 12:59 KwarK wrote:Show nested quote +On August 04 2021 12:49 JimmiC wrote:On August 04 2021 11:11 KwarK wrote: The decision regarding whether to leverage your investment is completely independent of the decision of whether or not to raise rent. Your point? I'm independently picking to not raise rent and fuck over my renter because I got extremely fortunate. I'm also fine because my expenses didn't change and I have not increased my risk of losing my income stream and not replaced it. Then I'm independently choosing to leverage. But likely not only in real-estate. You keep saying that leveraging the equity from the first house to get three and then renting all three out below market rate is better than raising rent while ignoring that the alternative isn't raising rent, it's raising rent and also leveraging the equity to get three houses. Your entire argument that low rent is better than high rent is built on the leverage which is a completely unrelated factor that could equally be applied to both. If I were to argue that Thai food is better than Chinese food because after I get Thai food I can go get ice cream you would rightly point out that 1) That has absolutely nothing to do with the Thai food and 2) That's equally applicable to Chinese food So when you're here arguing that charging below market rent is better than charging market rent because what if you leverage the equity I really have to wonder what the fuck you're talking about. If you raise the rent and leverage you will go above your made up roi need on the income side. As once the equity is back to what it was your ROI % on income is back to what it was. Which is another reason no one chooses rental rate like that. They base it on what the market will bear and then back calculate to see if they can profit or at least breakeven, as some are happy with just the mortgage getting paid and will take the house value gains over the long term.
In the real world if the market could handle 50% more people would have charged it and housing jumping like that didn't give renters more disposable income nor did it lower the supply of rentals. Maybe in a monopoly situation could you pull the bullshit you are suggesting with the awful logic, but this is why monopolies are bad for society.
My argument is that basing rent on a predetermined roi based income requirement tied to value of the house is stupid. If maximizing ROI is your goal it is awful, if it's minimizing liquidity risk it's awful, if it's minimizing concentration risk it's awful, if it's minimizing income stream risk it's about the worst, and so on. It is a horrible strategy. What it is, is a lame question on a test meant to see if someone knows how to calculate ROI, that's it.
The people are not "generous" for not jacking the rent that much. They just understand the housing market way better and understand there are many ways that are safer with substantially more upside then jacking the rent. (Feel free to math out the 3 houses at 4% on the equity and 2% on the income compared to 1 house with the substantially less leveraged equity and 3% income roi. Hell do 1%.)
I've brought up the leveraging because you were saying they "had too" jack the rent to maintain their roi (as if there was some rule where people reset it back annually). I was pointing out just another false thing you were stating as fact while with what people actually commonly do.
Edit: also, you really need to stop posting about how much money you make and other blantant brags, not only does it age poorly, but it's cringy as fuck and screams of insecurity. It's the accountant equivalent of "do you even lift". It is having the opposite effect of what's intended.
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United States40765 Posts
It's very simple. Let's say you own a house valued at $200k, your expected equity growth is 3% and your expected rental income is $6k (3% of asset value) for an asset ROI of 6%. Let's also say you can invest in a stock that yields 5.5%/year on average (and before you bring up leverage, let's say you can leverage the stock investment (that's called margin)).
Logically you would keep the house and rent it out because 6% ROI is higher than the next best alternative, 5.5%, and so renting it out is the rational choice. You could make $12k/year from the rental vs $11k/year from the stock.
Now let's say that the house goes up to $300k. Your expected long term equity growth is still 3% because that's based on a long term average trend. Before you try to average the two years please remember that that's not how it works. Remember the scratch off lottery ticket example. You cannot use already realized gains in your prospective ROI calculation, just as you cannot include the money you won on the last lottery ticket in the calculation for whether you should buy another. This may seem obvious but I really do have to spell it out because you really did previously try to argue that the money that you already made was relevant. So the expected equity growth in Y2 is $9k (and not $109k/2 years = $54.5k/year as you previously attempted to argue). If your rental income remains $6k then your Y2 expected return on the house is $15k ($9k + $6k). The ROI has dropped from 6% to $15k/$300k = 5%.
But the value of the next best alternative, the 5.5% stock, is now $300k * 5.5% = $16.5k. Factoring in opportunity cost the decision to keep the rental is now costing you $1.5k/year compared to the return from the next best alternative. If property prices go up and rents do not then the real ROI for the landlord goes down and renting becomes less appealing. For that reason rents go up with property prices.
If you're about to say "but what if I take out a loan against house 1 and buy a 2nd house", yeah, you can do that with stocks too so assume that the stock was also leveraged. Also, as I keep fucking explaining, doubling the numerator and denominator of a fraction doesn't change the fraction. $5k/$100k = $10k/$200k.
I know you can't follow this maths so I'm mainly posting it for everyone else reading this topic.
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On August 04 2021 14:13 KwarK wrote: It's very simple. Let's say you own a house valued at $200k, your expected equity growth is 3% and your expected rental income is $6k (3% of asset value) for an asset ROI of 6%. Let's also say you can invest in a stock that yields 5.5%/year on average (and before you bring up leverage, let's say you can leverage the stock investment (that's called margin)).
Logically you would keep the house and rent it out because 6% ROI is higher than the next best alternative, 5.5%, and so renting it out is the rational choice. You could make $12k/year from the rental vs $11k/year from the stock.
Now let's say that the house goes up to $300k. Your expected long term equity growth is still 3% because that's based on a long term average trend. Before you try to average the two years please remember that that's not how it works. Remember the scratch off lottery ticket example. You cannot use already realized gains in your prospective ROI calculation, just as you cannot include the money you won on the last lottery ticket in the calculation for whether you should buy another. This may seem obvious but I really do have to spell it out because you really did previously try to argue that the money that you already made was relevant. So the expected equity growth in Y2 is $9k (and not $109k/2 years = $54.5k/year as you previously attempted to argue). If your rental income remains $6k then your Y2 expected return on the house is $15k ($9k + $6k). The ROI has dropped from 6% to $15k/$300k = 5%.
But the value of the next best alternative, the 5.5% stock, is now $300k * 5.5% = $16.5k. Factoring in opportunity cost the decision to keep the rental is now costing you $1.5k/year compared to the return from the next best alternative. If property prices go up and rents do not then the real ROI for the landlord goes down and renting becomes less appealing. For that reason rents go up with property prices.
If you're about to say "but what if I take out a loan against house 1 and buy a 2nd house", yeah, you can do that with stocks too so assume that the stock was also leveraged. Also, as I keep fucking explaining, doubling the numerator and denominator of a fraction doesn't change the fraction. $5k/$100k = $10k/$200k.
I know you can't follow this maths so I'm mainly posting it for everyone else reading this topic. You really need to stop embarrassing yourself by posting the same basic math over and over. Life is not an accounting 101 class. I've gotten no math wrong you just have to strawman my point and not answer my actual posts to try to save face. I agree that if someone was dumb enough to raise and drop their rent based solely on home value increase that they would have to raise the rent by the same %. That you think I'm arguing that is unbelievable, stop strawmaning so blatantly. Or if you actually believe that go back and reread.
Find a real world example where rent went up in lock step with housing prices during a boom. Sig bet on who can find more examples? I can find hundreds can you find any?
Even this example above is so simplistic it becomes stupid. If person sells his house because he can only get 5% roi instead of 5.5% in the market he loses a shit ton because he has to first find a buyer (renters will start looking for a new place as they don't know if the new owner will keep them increasing your risk that your smaller income stream flips negative), then he has to pay the legal and realtor fees, probably a cost to leave your mortgage early, then he has to pay the fees to purchase the stock. On top of that when he sells he will have realized those capital gains and have to deal with them.
Oh and money you already made is always relevant, it is not in yearly ROI calculations, but people only do those in textbooks. Even if someone was crazy enough to that in the real world they would still take into account the costs involved in switching assets not to mention would someone actually pay the new price. You don't exactly keep loyal renters by jacking the price 50% after just made a ton. Heck you might even piss them off enough to have them start wrecking shit, good luck getting that back in small claims court. Not to mention the down time while your fixing and finding someone new, you expenses don't go away. And all your lost "roi" well chasing that money.
You do realize that rent price is not inelastic correct?
How do you understand that opportunity cost of rental income is selling it off and investing something else, but not understand that there is a cost in selling off a house and buying something else?
If they could get 50% more now why didn't they last year,? Why stop at 50% if they did 500% think how much more they could make!
What percentage of renters do you think can and will simply just pay a 50% increase?
You sure you owned a house? Have you ever had renters? Have you met people?
Most professional accountants and especially those who are highly compensated (cringe) understand these simple concepts, if you did not my apologies.
Edit: and we should also get back into the "should" and how someone would be "generous" if they didn't ALSO jack the rent to match their massive windfall. That is some next level greed right there. The good part is this case the person following your advice would be far more likely to lose compared to someone who did not. But still that is a cold, greedy, selfish way of looking at how the landlord tenant relationship "should" be.
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This is actually highly entertaining and somewhat useful for me. Thank you guys.
Even this example above is so simplistic it becomes stupid. If person sells his house because he can only get 5% roi instead of 5.5% in the market he loses a shit ton because he has to first find a buyer (renters will start looking for a new place as they don't know if the new owner will keep them increasing your risk that your smaller income stream flips negative), then he has to pay the legal and realtor fees, probably a cost to leave your mortgage early, then he has to pay the fees to purchase the stock. On top of that when he sells he will have realized those capital gains and have to deal with them.
Surely you can factor in these costs into your calculation for expected ROI and that is being done in more complex models. Obviously there is always uncertainty involved.
Even if ROI is all that matters to you, you will not sell your house when the ROI is 5% for one year and the ROI for stocks is 5,5% - that is the just the baseline from where you start your calculations and I am pretty certain Kwark is aware of this. I would then start factoring in the likelihood of another high percentage value increase of the house within the next few years and if the chance is high enough, you might sit out your lower ROI for some years. You are also probably not increasing rent by 50% in one year because the value increased that much and the the next year lower the rent by 25% because the value dropped for some reason - as rightfully pointed out, probably nobody does this, though you could certainly design a rental agreement that way. Last point, the timelines you are talking about are completely arbitrary, could be a quarter, 1 year, 5 year... and this changes the outcome of your decision making process. But that does not change the math that Kwark has layed out.
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On August 04 2021 15:55 Malinor wrote:This is actually highly entertaining and somewhat useful for me. Thank you guys. Show nested quote +Even this example above is so simplistic it becomes stupid. If person sells his house because he can only get 5% roi instead of 5.5% in the market he loses a shit ton because he has to first find a buyer (renters will start looking for a new place as they don't know if the new owner will keep them increasing your risk that your smaller income stream flips negative), then he has to pay the legal and realtor fees, probably a cost to leave your mortgage early, then he has to pay the fees to purchase the stock. On top of that when he sells he will have realized those capital gains and have to deal with them. Surely you can factor in these costs into your calculation for expected ROI and that is being done in more complex models. Obviously there is always uncertainty involved. Even if ROI is all that matters to you, you will not sell your house when the ROI is 5% for one year and the ROI for stocks is 5,5% - that is the just the baseline from where you start your calculations and I am pretty certain Kwark is aware of this. I would then start factoring in the likelihood of another high percentage value increase of the house within the next few years and if the chance is high enough, you might sit out your lower ROI for some years. You are also probably not increasing rent by 50% in one year because the value increased that much and the the next year lower the rent by 25% because the value dropped for some reason - as rightfully pointed out, probably nobody does this, though you could certainly design a rental agreement that way. Last point, the timelines you are talking about are completely arbitrary, could be a quarter, 1 year, 5 year... and this changes the outcome of your decision making process. But that does not change the math that Kwark has layed out. I've never argued with the math, it's super basic, he would get an A on the accounting 101 quiz. Kwark has the ability to calculate roi if given a limited number of variables. It is the critical thinking part he fails on along with understanding what all the variables are and how those impact other variables. Like in a real world example you don't just raise rent 50% and keep renters.
At first I would have agreed with you that he must understand this, but from his continued replies it appears he does not. The reason this was started was he said it was generous for the person to raise it 6% and not 50% like he should given the house value. I asked why it should raise as quickly as house prices and so it began.
I agree with everything else you said. The likelihood of another increase is another reason why people looking to maximize roi (along with the others previously discussed) do opt to leverage that equity into other homes vs just leaving it and upping rent.
Edit: also if someone was to calculate profit in absolute numbers instead of percentages the guy who upped his lease was making more that year then the year before. I have a real hard time calling someone generous for making more money but a smaller percentage because he made so much equity the year before.
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United States40765 Posts
Someone renting out a $300k house for 6% more rent than a $200k house is absolutely being generous.
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Can't wait for JimmiC to somehow transfer this argument into the landlord being scum for previously overcharging the renter. After all, the landlord only charged 5,7% less rent for a house that was worth $100k less!
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On August 04 2021 16:42 KwarK wrote: Someone renting out a $300k house for 6% more rent than a $200k house is absolutely being generous. Glad to hear you believe all the landlords of every major city are generous! Lol
Imagine if for once you tried to actually answer a post instead of strawmaning.
Maybe this will help, in the same market a 200k and 300k house will rent for the same amount. But a 300k flat in London will not likely rent for the same price as a 300k house in Lubbock, and especially not after Lubbock just had a 50% increase the past year. If housing went up at a similar place in both locations it might be close, but still unlikely given different costs, rules, taxes, supply/demand and so on.
Edit: before you strawman again. House value does play a role, because it helps to determine the expenses as both interest expense and property tax are functions of the overall value. The relationship is just not immediate so the relationship is not and since it is just one of the factors and not the only factor that is why the relationship is not 1 to 1.
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On August 04 2021 20:41 Fildun wrote: Can't wait for JimmiC to somehow transfer this argument into the landlord being scum for previously overcharging the renter. After all, the landlord only charged 5,7% less rent for a house that was worth $100k less! You've got our arguments backwards. Since I wouldn't think that rent would instantly drop because I don't think that rent is tied directly to house value but rather a combination of expenses and supply and demand. You wrote my name but you're mocking kwark. No landlord would drop their rent by 50% if housing fell 50% they would all go broke since their expenses didn't fall. I'm not sure what mental gymnastics a far right person like kwark would come up with to justify it not dropping the same. Likely all the factors I've brought up like expenses, supply and demand, so on would all the sudden matter.
Roi on equity is a stupid way to determine rent price, so on one actually does it.
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United States40765 Posts
Lol far right Somewhere xDaunt just burst out laughing without knowing why
I think basically all housing should be owned by locally elected and managed soviets with a guarantee of housing to all people. You’re confusing my basic understanding of maths with my political beliefs.
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On August 05 2021 00:47 KwarK wrote: Lol far right Somewhere xDaunt just burst out laughing without knowing why
I think basically all housing should be owned by locally elected and managed soviets with a guarantee of housing to all people. You’re confusing my basic understanding of maths with my political beliefs. Nope I'm taking your opinion that if housing prices go up 50% in one year that a landlord who raises it by only 6% is generous and it should also go up 50%. Since you know, that is what the whole multiple page argument has been about.
I get your confusion though, with all your strawmaning and moving the goalposts you might actually believe this has anything to do with how ROI is calculated lol.
On August 02 2021 03:33 KwarK wrote: With property valuations going up 50% rent should too. I paid $165k for a 4b2b house in 2019, it’s valued over $250k today. It’s nuts. 6% is generous.
That you are inconsistent on the left right thing just like you are with so many other opinions and it is not shocking. It is because you need to be right every time and being correct or consistent are simply not that important to you.
Edit: also given xDaunts consistency and leanings he would likely agree with the quoted post I made the same way Gotunk! is. It is not a insult, it just a fact of what type of politics would agree with your opinion on rent.
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United States40765 Posts
I didn’t offer a political judgement on optimization of returns for the rent seeking investor within a capitalist system, I only pointed out the obvious financial implications. A more expensive asset commands higher rent. If you require use of an asset within a capitalist system you must pay for it from the current owner. It doesn’t make a difference whether you buy the use of the asset for perpetuity (purchase it outright) or simply for a period (rent it), both are dictated by the value of the asset because in both cases you are paying the current owner for the rights to use the asset. Explaining the maths that govern how the system works is not an endorsement of the system.
If you would like my political opinion, individual home ownership is a failed Thatcherite project to create a nation of small investors that has succeeded only in creating a system of private landlords. Individual home ownership is extremely wasteful, people buy homes that don’t fit their needs and are then chained down by them. They buy homes today big enough for children that may never be born and keep them long after the children leave. They stay in homes that don’t fit their changing circumstances due to contractual obligations and cannot properly adapt. There are more empty houses than homeless people and homelessness is an expensive ongoing crisis. People in economically depressed areas cannot leave and people in booming areas can’t afford houses. New housing meets the needs of the group with the most disposable income, not society, and houses are hoarded as investments against future demand rather than used as the resource they are. The utility of a house, somewhere for a member of society to reside, is somehow not the source of its value.
I would like to see a system of renting from an elected local authority that is responsible for providing adequate housing to locals and empowered to do so. If you’re in university and want to rent with some other students, great, you can get a house that meets your need. If you’re young and married with student loans you can get an apartment that meets those needs. If you’re offered a great job across the country then your old home no longer meets your needs so you give it up and switch. Get pregnant, apply for a family apartment. Brother dies and you adopt his two kids, bigger house. Dead brother’s home, reassigned to someone who needs it.
Housing is ultimately a period expense that is dictated by highly changeable circumstances. Buying the use of a fixed amount of housing in perpetuity is a very bad way of managing it. The lower the friction in the market the better it works. Private home ownership has created a system in which friction appears to be the point.
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On August 05 2021 03:13 KwarK wrote:I didn’t offer a political judgement on optimization of returns for the rent seeking investor within a capitalist system, I only pointed out the obvious financial implications. A more expensive asset commands higher rent. If you require use of an asset within a capitalist system you must pay for it from the current owner. It doesn’t make a difference whether you buy the use of the asset for perpetuity (purchase it outright) or simply for a period (rent it), both are dictated by the value of the asset because in both cases you are paying the current owner for the rights to use the asset. Explaining the maths that govern how the system works is not an endorsement of the system. + Show Spoiler +If you would like my political opinion, individual home ownership is a failed Thatcherite project to create a nation of small investors that has succeeded only in creating a system of private landlords. Individual home ownership is extremely wasteful, people buy homes that don’t fit their needs and are then chained down by them. They buy homes today big enough for children that may never be born and keep them long after the children leave. They stay in homes that don’t fit their changing circumstances due to contractual obligations and cannot properly adapt. There are more empty houses than homeless people and homelessness is an expensive ongoing crisis. People in economically depressed areas cannot leave and people in booming areas can’t afford houses. New housing meets the needs of the group with the most disposable income, not society, and houses are hoarded as investments against future demand rather than used as the resource they are. The utility of a house, somewhere for a member of society to reside, is somehow not the source of its value.
I would like to see a system of renting from an elected local authority that is responsible for providing adequate housing to locals and empowered to do so. If you’re in university and want to rent with some other students, great, you can get a house that meets your need. If you’re young and married with student loans you can get an apartment that meets those needs. If you’re offered a great job across the country then your old home no longer meets your needs so you give it up and switch. Get pregnant, apply for a family apartment. Brother dies and you adopt his two kids, bigger house. Dead brother’s home, reassigned to someone who needs it.
Housing is ultimately a period expense that is dictated by highly changeable circumstances. Buying the use of a fixed amount of housing in perpetuity is a very bad way of managing it. The lower the friction in the market the better it works. Private home ownership has created a system in which friction appears to be the point . Yes you did, because you used the words should and generous which are opinions not facts. Also, no one asked for what is the pure capitalist theoretical approach where supply and demand do not exist. Perhaps I would understand your point better if you could explain why rent is inelastic and why these capitalists are arbitrarily keeping it low?
As has been repeated over and over, and not just by myself it is not how it actually happens in the real world. As shown by real world examples, and your inability to show counter ones (sig bet offer still open) how you explained it is not how it works, please stop pretending it is.
As to the part I spoilered to save space, that is far more consistent with the opinions you have shared on other issues but in complete contrast to this post.
On August 02 2021 03:33 KwarK wrote: With property valuations going up 50% rent should too. I paid $165k for a 4b2b house in 2019, it’s valued over $250k today. It’s nuts. 6% is generous.
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United Kingdom13774 Posts
So to my surprise, there are quite a few stories of 20-40% rent increases around here. The market rate for new apartments for rent seems to be around 5-10% increase since last year judging by what you can get apartments for, but there are a lot of these massive rent hikes. Maybe just trying to convince tenants to start packing by raising rates that much?
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If they can get people out of the apartment they can avoid the coming mass evictions and flip the property to black rock for an all cash offer tens or hundreds of thousands over what its worth sight unseen.
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United Kingdom13774 Posts
Selling to one of those "must be tenant-free" cash buyers is what I'm thinking, yeah. Might be some legal merit relative to simply refusing to renew the lease. Admittedly the topic of evicting people who paid while they were on a lease but refuse to pay when the lease expires is one that is rare enough that pre-pandemic it just didn't come up much.
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On August 05 2021 03:13 KwarK wrote: I didn’t offer a political judgement on optimization of returns for the rent seeking investor within a capitalist system, I only pointed out the obvious financial implications. A more expensive asset commands higher rent. If you require use of an asset within a capitalist system you must pay for it from the current owner. It doesn’t make a difference whether you buy the use of the asset for perpetuity (purchase it outright) or simply for a period (rent it), both are dictated by the value of the asset because in both cases you are paying the current owner for the rights to use the asset. Explaining the maths that govern how the system works is not an endorsement of the system.
If you would like my political opinion, individual home ownership is a failed Thatcherite project to create a nation of small investors that has succeeded only in creating a system of private landlords. Individual home ownership is extremely wasteful, people buy homes that don’t fit their needs and are then chained down by them. They buy homes today big enough for children that may never be born and keep them long after the children leave. They stay in homes that don’t fit their changing circumstances due to contractual obligations and cannot properly adapt. There are more empty houses than homeless people and homelessness is an expensive ongoing crisis. People in economically depressed areas cannot leave and people in booming areas can’t afford houses. New housing meets the needs of the group with the most disposable income, not society, and houses are hoarded as investments against future demand rather than used as the resource they are. The utility of a house, somewhere for a member of society to reside, is somehow not the source of its value.
I would like to see a system of renting from an elected local authority that is responsible for providing adequate housing to locals and empowered to do so. If you’re in university and want to rent with some other students, great, you can get a house that meets your need. If you’re young and married with student loans you can get an apartment that meets those needs. If you’re offered a great job across the country then your old home no longer meets your needs so you give it up and switch. Get pregnant, apply for a family apartment. Brother dies and you adopt his two kids, bigger house. Dead brother’s home, reassigned to someone who needs it.
Housing is ultimately a period expense that is dictated by highly changeable circumstances. Buying the use of a fixed amount of housing in perpetuity is a very bad way of managing it. The lower the friction in the market the better it works. Private home ownership has created a system in which friction appears to be the point.
Decent identification of the problem, but poor solution proposal. Home ownership is good on a societal level, renting is not. Owning a home aligns incentives. Home maintenance, upkeep, and improvements are useful when you own a home, but not so much if you're renting. Sure, landlords can do those things, but it's going to be renters who are living in the properties.
Simpler solution is to juice the fuck out of the housing construction and innovative housing technologies. At the very least, remove the regulatory burdens that make it difficult to build new houses. Housing hasn't yet benefitted from the technological innovations which have reduced the cost of most other goods. Sure, there are some legitimate reasons for this, housing construction is inherently unique due to the land on which it is placed. Moreover, houses are currently built on-site and built by hand. Though, technological innovations can solve these problems with the proper funding. As an example, Boxabl is a promising company which constructs homes in a factory, then transports them via truck.
Side benefit to this simpler solution is that delusional property speculators who wrongly believe that housing is an investment will get blasted, as they should. Housing is a non-value generating commodity. The price increase in housing over the past few decades have been politically derived, speculative, and rent-seeking.
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Look, I'm not generally in the business of wading into jimmi's multi-page wars with people, but I do think housing is not the most rational market. I don't think it's a stretch at all to say that property is often held much longer than it "should" be.
There's a lot of people in the market who really aren't thinking about whether their ROI is optimal. Random people invested in property are often tying up the majority of their networth in one asset and have all sorts of emotional baggage attached to the location, their family memories in their old house, their dreams of retirement at the beach etc etc. Plus, there's all the friction you're talking about. Real estate is obviously pretty illiquid with high transaction costs and large overheads if you go to market but don't find a buyer. It's also quite hard to value in a lot of cases.
All these things contribute to people not wanting to sell even when it's strictly better for them to do so. Grandpa doesn't even know his networth to the 100k, he's not thinking about +/- 0.5% yoy. He really is quite happy to just sit there collecting unrealised gains as long as the rent is higher than the repayments.
I'm not trying to argue that you're wrong or that ROI doesn't matter. Some people will be doing their maths, some people will be doing the opposite and trying to charge more for a place because they personally value it, and over time, even grandpa will become aware that his neightbour's is listed for $100/week more and raise the rent. There is absolutely no doubt that rising prises put upward pressure on rents, but there are a lot of other factors. I think they're often only loosely correlated.
Right now really looks like a perfect storm. House prices are exploding, but at the same time a bunch of stock is tied up with tenants who can't pay, so the few leases that do go to market see insanely inflated demand. All the tenants look at this and bend over for giant increases, without realising that if they all bailed at once, those numbers could fall rapidly. It's a total mess.
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On August 05 2021 08:45 Belisarius wrote: Right now really looks like a perfect storm. House prices are exploding, but at the same time a bunch of stock is tied up with tenants who can't pay, so the few leases that do go to market see insanely inflated demand. All the tenants look at this and bend over for giant increases, without realising that if they all bailed at once, those numbers could fall rapidly. It's a total mess.
Only true in areas were demand is lower the potential supply being realized with evictions. In places where its even halfway desirable to live, it won’t change anything, much less prices. Classic real estate truism hasn’t changed: location location location
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United States40765 Posts
On August 05 2021 09:06 hiro protagonist wrote:Show nested quote +On August 05 2021 08:45 Belisarius wrote: Right now really looks like a perfect storm. House prices are exploding, but at the same time a bunch of stock is tied up with tenants who can't pay, so the few leases that do go to market see insanely inflated demand. All the tenants look at this and bend over for giant increases, without realising that if they all bailed at once, those numbers could fall rapidly. It's a total mess. Only true in areas were demand is lower the potential supply being realized with evictions. In places where its even halfway desirable to live, it won’t change anything, much less prices. Classic real estate truism hasn’t changed: location location location The alternative to renting is buying. If the price to buy goes up the demand to rent goes up.
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