> Truly, economics is the dismal science, and it's wholesale embrace by govt and society is making our lives dismal too.

Yes, I think of this a lot in the context of healthcare; applying market economics to human morbidity and mortality is just grim and macabre. At points it is unavoidable I'm sure, but in the end you end up with unanswerable questions regarding the value of human life. I sort of get the feeling that in that context, "Logan's Run" was basically the optimal economic solution.

I mean, you're being downvoted, but you're not wrong.

>Housing can’t both be a good investment and be affordable

The problem in the housing market is land taxes are too low to incentivize land owners to do something (more) productive with the land, like building more dense housing.

"Truly, economics is the dismal science, and it's wholesale embrace by govt and society is making our lives dismal too."

Calling economics a "science" is a stretch. If one subscribes to a definition of science that requires a process for falsifying hypotheses,^1 then how are economic theories falsified. (Prediction: No replies will answer this question.)

Originally economics was called "political economy" and that's the era from which the "dismal science" term came from.^2 The original use of the term "dismal science" to refer to economics occured long before the scientific method was widely adopted.

1. This did not appear until the 1930s.

2. The first use of the term "dismal science" was an article in an 1849 issue of Fraser's Magazine about trying to use political economy ("economics") to justify the use of slavery on plantations in the West Indies.

"It may be granted that, even in its purest form, economic theory has implications for policy and in that sense makes political propaganda of one kind or another. This element of propaganda is inherent in the subject and, even when a thinker studiously maintains a sense of Olympian detachment, philosophical and political preferences enter at the very beginning of the analysis in the formation of, as Schumpeter would have it, his vision: the preanalytical act of selecting certain features of reality for examination."

Blaug, Economic Theory in Retropsect

What's your alternative, government allocation? That hasn't historically turned out much better.

As long as you can mostly buy and sell houses freely it's a market, it being supply constrained just means high prices (which is what we see).

Worth noting that this way of thinking is true in the inverse too — when interest rates were super low, house values didn’t really go up, only credit got cheaper. In other words, the appreciation in costs is not about house value, it’s about the cost of a loan.

But underneath, it really is just under-supply of homes. People are competing for limited housing, but instead of hitting a natural ceiling of affordability, they’ve continued to compete on prices by out-borrowing each other to offer ever-higher bids.

We now seem to be hitting the next ceiling — buyers are unable leverage their bids any higher. I can’t wait to see what “innovations” the financial sector comes up with to create a new ceiling. I’m guessing fractional ownership or something like that.

this is why the housing market is frozen up in the US, until job losses or something else force people to sell renters can't afford houses and home owners have no reason to sell because losing their 3% mortgage would force them to downgrade homes.

Check out Canada housing prices where they only have 5 year fixed rates, 1.3M dollar homes 2 years ago are selling for 700-800K. This is what will happen in the US unless interest rates go down again, it's basic math.

Well, kind of both. Houses increased in prices until Q3 2022.

https://fred.stlouisfed.org/series/ASPUS

After that point the 'sale' value dropped, but the interest increase has made houses massively more expensive.

> A $1mm 30 year mortgage at 3% fixed means paying $4200 a month

I feel like I'm teaching someone to suck eggs but but the price of houses has rocketed in both terms of absolute and relative-to-earnings.

Your $1mm house was $300k two decades ago, and $60k two decades before that. 8%/30yr on those sums was affordable. Interest rates of 8-10% were normal in the 90s. Expensive credit isn't the problem.

Use simple interest to pay down mortgage. Amortization is a scam paying all the interest up front.

Only people who can do all cash offers can afford a home

Unless you're working remotely those prices in Dayton are expensive as the local wages are much lower. People at the bottom end of income need places to live/rent too. And these days with collusion in the rental markets renting is a great way to go broke faster than ever.

> The author of this piece is using as a base line the two most expensive housing markets in America. That's not really representatives of 95% of people.

Those two cities are expensive, but I think there are a lot of other expensive cities too (Austin, Los Angeles, etc.)

I checked with Bard, and it looks like 9.2% of the US population lives in New York or San Francisco: "The New York metropolitan area is home to 22.1 million people, or 6.6% of the US population. The San Francisco Bay Area is home to 8.7 million people, or 2.6% of the US population."

In 1936 interwar Poland tried to address catastrophic situation with housing market by relaxing zoning law: If you could buy plot of land, you could build a housing there.

Result was few richest poles first race”ing to buy all the land around cities and then build on those plots apartment blocks for rich poles and foreigners to rent units at.

It was post-war communist govt that started building cheap living blocks en masse in ruined cities. Today those neighborhoods have reputation for being some best places to live due to quality of urban planning: a lot of space between blocks and walking distance to services, schools and health care.

DC is called the swamp for a reason, spreading those jobs around would make life more difficult for lobbyists and other parasites who extract wealth from tax payers so it will never happen.

DC is run like it's still the 1700s despite all the technology that makes it pointless for everything to run in DC. Logically having all leadership concentrated in a single place is a huge risk, but they won't change it

I don’t think this would help if your goal is not rapidly increase housing costs. If covid proved anything about the housing market, it’s that theres a housing shortage everywhere. Plenty of LCoL areas still have disproportionately high housing costs compared to median income now. When remote work was required, people fled cities and led to housing crises in areas that aren’t just major cities.

Great piece from M. Nolan Grey, who is an excellent twitter follow: https://www.theatlantic.com/ideas/archive/2022/08/housing-cr...

Federal agencies are pretty distributed already. In fact, there are many (MANY!) small towns throughout the country where the US Government or a contractor that's essentially a feeder for the US Government is the biggest employer there.

With more collusion occurring in rental markets, home owners are able to extract more wealth from those that do not own homes. Unless something changes in supply (of which current owners will not want) then 'get used to not buying homes' is really what's being said.

Gonna have to disagree with you.

Here in Houston, a city with a medium cost-of-living, the cheapest house that you can get that's in livable condition and isn't outrageously far from where the jobs are is something like $300k. 20% of that is $60k.

For us techies or others with a Well-Paying Job™, saving $60k is not a big deal.

For pretty much everyone else, saving $60k is a huge feat, even after removing all unnecessary expenses. (Why should "they" have to ride the struggle bus when we techies can blow $18 on lattes and avo toast or whatever's hype these days while still hitting these savings goals?)

And when they finally do that 15 years later or whatever, they're competing against the Well-Paying Job™ folks who are rolling equity from the sale of their starter home and putting down all-cash offers.

By saying "people will need to get used to buying homes much later in life," what you're essentially proposing is class-redlining the poors (many of whom come from families that were historically-discriminated against home ownership, either directly or indirectly) out of home ownership. I'm going to assume that this isn't what you intended by writing that, but that's how it comes off.

>The only sensible financial reaction is to save, save, save for a down payment well in excess of 20%

Perhaps at todays rate, but this is not always the case and depends on the relative rates.

We did the opposite, Maxed out our loan and kept cash on hand.

If that’s true it’s truly unfortunate the because there’s a sense of stability and security that comes with buying, and younger people tend to be among those who need that most.

I bought right before the interest rate shot back up with a ~5% down payment, and the past few years of ownership have improved my mental state substantially. You don’t know how much stress is caused by having that potential rent hike (and associated potential apartment hunt and move required to keep housing costs within reason) that comes with lease renewal looming on the horizon until it’s not there anymore.

The alternative is to pay as little as you can, while diversifying the remaining cash elsewhere. For example, an ETF tracking the S&P500

Depends on how much renting is. Waiting for a higher down payment while paying more to rent doesn't necessarily work out better.

Additionally having an emergency fund afterwards is super important.

Finally since prepayment penalties aren't a thing the difference between paying extra principal early on and a bigger down payment is mostly PMI. (And the interest on the payments until you make them)

We have finite lifetimes. If it takes until I'm 60 to afford a home, the reality is that it may no longer make sense to buy.

At some point, we’re just describing a landed aristocracy alongside a rent to own scheme.

> Truly hate to say it but people will need to get used to buying homes much later in life.

This just makes renting seem like a better option. If I won’t pay off my home until I’m dead what’s the point?