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The value of land changes over time.
The cost to replace the home increases, over time.
Let's break this down, some truth, some not, we have land, housing production, and shelter:
The cost to replace the house should DECREASE over time. As production efficiency and technology improves, the cost of production is decreased. This is evidenced in all areas of manufacturing and you again prove the point about the massive delusion people have regarding housing. Computers for example are better and better every year and cost less per unit of performance every year. Luddites in the 1960's were noted for thinking that eventually computers would become so expensive that few would be able to afford them, using precisely the logic you use as to why the production of a home should cost more in the future than today.
Improvements in material design, construction methods, manufacturing, parts, etc, in an efficient market decrease as a function of technological improvement.
As far as land, I will agree that improvements around the land could theoretically increase its value, but the land is gaining value, not the house. Another reason that the house price should be decoupled in the purchase process.
As far as shelter goes, you can create an infinite amount of vertical land for shelter as evidenced in cities, which is why buildings get higher and higher over time. Should they be more expensive, depends on amenities and such, but no, over the long run the price per unit of utility should drop.
They push an agenda that bcs they sell an overpriced Mcmansion to a retired dr. that the economys booming again.
Myopia.
Look at some of the state forums, you will see this over and over.
Its like reading Wikipedia to learn about microeconomics. Most realtors are clueless.
That's why, like any investor, you have to be smart about it and know what you're doing vs. taking the advice of someone whose only goal is to sell you something. There are good and bad realtors, just like any other profession. If you can find a good realtor who will work with you over time, their advice and help in finding properties as an investment can be invaluable.
We live in an area with a fairly stable economy. We've always bought homes in desirable areas that were in great structural shape, but really needed work (mainly cosmetic) that we could primarily do ourselves. We paid attention to resale value and marketability when we did the upgrades and remodeling, and we've always made a significant profit with our sweat equity. Those profits, over time, allowed us to purchase the large family home we're in now (it was also a fixer upper) nearly outright, plus have a pot of money set aside for most of the renovations (which are now completed). This will be our last home unless we eventually downsize. We're our 50s with zero debt.
That strategy won't work for everyone, but it's a great route to go when you can do the work. A house absolutely is an investment, or it should be. It's the largest single purchase that most people ever make. I wouldn't throw that kind of money into risky market investments, so why wouldn't I take the same care in buying a home? People get into trouble when they DON'T treat a home purchase as an investment.
Yes, housing relies on what is known as the greater fool theory, and your explanation fully supports that.
Greater fool theory:
The greater fool theory (also called survivor investing) is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to "a greater fool"; in other words, buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to someone else at an even higher price.[1]
It is similar in concept to the Keynesian beauty contest principle of stock investing.
The greater fool theory relies on market optimism and market momentum concerning a particular stock, an industry, sector, or the market as a whole.
We're business owners in our 50's, we have zero personal debt, and a sizable investment portfolio on top of the businesses. Who's the "greater fool" in this scenario? It's not me.
Let's break this down, some truth, some not, we have land, housing production, and shelter:
The cost to replace the house should DECREASE over time. As production efficiency and technology improves, the cost of production is decreased. This is evidenced in all areas of manufacturing and you again prove the point about the massive delusion people have regarding housing. Computers for example are better and better every year and cost less per unit of performance every year. Luddites in the 1960's were noted for thinking that eventually computers would become so expensive that few would be able to afford them, using precisely the logic you use as to why the production of a home should cost more in the future than today.
Improvements in material design, construction methods, manufacturing, parts, etc, in an efficient market decrease as a function of technological improvement.
As far as land, I will agree that improvements around the land could theoretically increase its value, but the land is gaining value, not the house. Another reason that the house price should be decoupled in the purchase process.
As far as shelter goes, you can create an infinite amount of vertical land for shelter as evidenced in cities, which is why buildings get higher and higher over time. Should they be more expensive, depends on amenities and such, but no, over the long run the price per unit of utility should drop.
You are not taking into account the rising costs in material and labor to actually built the house. Advancements in tech and outsourcing might be enough to overcome the rising costs in computers, but you cannot outsource building of the house (though people are trying) or find ways to put nails in faster.
A large percent of employment is involved n house construction and low home prices suppress employment. Moreover, it restricts home sales because if a seller can't payoff the mortgage they can't move.
Low home prices do not by themselves suppress employment. Low home prices are an indicator that demand is low and/or supply is plentiful. Low demand means buyers are few - because they either don't have the money to buy, don't have the credit, or don't feel confident enough in their job to tie themselves to a mortgage.
A given house, whether it is $200K or $250K doesn't change anything with employment.
The media celebrates rising home prices. They don't say it very clearly but it shows that foreclosures are fewer, people feel more confident, and it is an indicator of buyer confidence.
Let's break this down, some truth, some not, we have land, housing production, and shelter:
The cost to replace the house should DECREASE over time. As production efficiency and technology improves, the cost of production is decreased. This is evidenced in all areas of manufacturing and you again prove the point about the massive delusion people have regarding housing. Computers for example are better and better every year and cost less per unit of performance every year. Luddites in the 1960's were noted for thinking that eventually computers would become so expensive that few would be able to afford them, using precisely the logic you use as to why the production of a home should cost more in the future than today.
Improvements in material design, construction methods, manufacturing, parts, etc, in an efficient market decrease as a function of technological improvement.
As far as land, I will agree that improvements around the land could theoretically increase its value, but the land is gaining value, not the house. Another reason that the house price should be decoupled in the purchase process.
As far as shelter goes, you can create an infinite amount of vertical land for shelter as evidenced in cities, which is why buildings get higher and higher over time. Should they be more expensive, depends on amenities and such, but no, over the long run the price per unit of utility should drop.
Not many consumer goods today follow the price/performance curve of technology and electronics. Some products that are part of a house, such as timber, have natural constraints on their supply. I'm not aware of any notable improvements that cause lumber to be cheaper today than they were 20 years ago. Asphalt shingles are a bit better than they were many years ago, but they aren't much cheaper. Houses don't use much copper pipe any more - which was costly and labor intensive.
Some say today's houses are "cheap" and poorly built. Some of that is true - but by other measures today's home is vastly more efficient with energy than homes built 50 years ago.
Not many consumer goods today follow the price/performance curve of technology and electronics. Some products that are part of a house, such as timber, have natural constraints on their supply. I'm not aware of any notable improvements that cause lumber to be cheaper today than they were 20 years ago. Asphalt shingles are a bit better than they were many years ago, but they aren't much cheaper. Houses don't use much copper pipe any more - which was costly and labor intensive.
Some say today's houses are "cheap" and poorly built. Some of that is true - but by other measures today's home is vastly more efficient with energy than homes built 50 years ago.
Actually most homes today are substantially better build quality than those of 20-30 years ago. The other reason homes are more expensive is that they are typically larger and have far more amenities. So on marginal basis, homes are built for less than in the past. It could be more, but there are substantial inefficiencies that still hold back advancement in building technology.
Where we have seen a quantum leap in technological advancement is in large building construction.
However, back to the original topic, rising home prices benefit a small group at the expense of the broader economy. Taking on ever increasing debt loads only makes people mules to service payments at the expense of spending money on other sectors of the economy. Financialization, a great way for 1% to continue to skim wealth from productive enterprise.
Real Estate is also business and investment. It is good for owners but often bad for buyers. However, if the owner is looking for to sell and buy another home in same area, it could be bad because if the owner sells the house more expensive then the new house will be expensive as well.
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It's not me.
