When was housing not an investment? Throughout history, people have always wanted to drive up the value of their land and properties. There are still plenty of places in the US/Canada/UK where housing is cheap. The problem is that nobody wants to live in those areas.
edit: the history of US house prices is that they strictly tracked inflation, then with government subsidy right after WWII, housing prices jumped up, then stayed flat at that new level for the next 50 years, then the turn of the millennium happens and housing becomes an investment (after a stock market crash.)
“In terms of total returns, residential real estate and equities have shown very similar and high real total gains, on average about 7% per year. Housing outperformed equity before WW2. Since WW2, equities have outperformed housing on average, but only at the cost of much higher volatility and higher synchronicity with the business cycle. The observation that housing returns are similar to equity returns, yet considerably less volatile, is puzzling.”
That link doesn't show that housing was not an investment for centuries, does it?
Why wouldn't you consider an investment something that has a relatively stable value in real terms - at least over a long enough period - and also provides a yield?
The link supports the statement "housing tracked inflation for 400 years". I think the confusion here is the word "investment" is overloaded and could refer to a number of different things regarding property:
- you buy the property that you personally will live in
- you buy some other property and let it out to tenants or businesses
- you are a pension fund, mutual fund, hedge fund, day trader, bank, HFT etc which trades in derivatives based on mortgages
The first two have been going on for centuries at some level. The third only really got going at the point house prices completely disconnected from inflation.
I agree. That's why the original statement "Housing was never an investment before recent decades" doesn't make a lot of sense and the justification "Housing tracked inflation for 400 years" doesn't support it even it's correct.
(Btw, not sure if it was implied but the "you" in "you buy some other property and let it out to tenants or businesses" is often a pension fund or mutual fund.)
I genuinely don't understand why you're getting down-voted.
Not only has it been true historically - there's a real reason to allow it: it incentivizes owners to maintain and improve their properties. Further... maintenance of that property requires investment, both in time and labor. If you make it so that owners have no reward or incentive for improving their properties, they WON'T DO IT.
Why invest money into fixing your place if the price of the house is capped anyways? Trying to prevent this style of investment has almost always failed, and generally makes neighborhoods that are nice/attractive places to live much less nice and attractive - because people stop maintaining and improving them.
I think the real question right now that needs to be answered is: Why are we not able to create new urban areas in low cost areas? What has changed so that we no longer create towns?
Because frankly - right now the issue isn't housing, it's housing in areas where economic opportunities exist. Why are economic opportunities so exclusive to high population centers? What can we do to change that?
This positive effect goes far beyond just maintaining the house and land.
Governments love home owners. They are typically stable citizens in the work-force, law-abiding, reliable, etc. They have a high time preference and have every interest in maintaining the status quo, safety, anything that makes society pleasant.
It's true but the reason people are moving to cities are jobs. Rural locations do not have the job market to support the costs to live there. It's a lower cost, but a much, much lower income outlook as well.
If you have the money to outright buy a rural property and build a house there, it's not a bad place to live. But you don't want to have to depend on the limited job market with an expensive mortgage and limited buyer pool.
> If you have the money to outright buy a rural property and build a house there
That's if there are available builders. It took my mother the better part of a year to get her roof replaced, because there was no one available to do the job. I'd also argue that the place she lives in rural VA is pretty awful in most respects other than having space and she's not all that far from a town.
Remote work is commonplace now. Perhaps in the next few years we’ll test the theory that jobs and house prices are linked. It’s now possible (for tech workers at least) to work from almost anywhere for decent wages.
My hunch is that the housing crisis is simple supply and demand. People want to live in cities because of the better access to entertainment, amenities, and services. There aren’t enough houses to fill that demand. There’s no great city on earth that has a glut of housing. If there were, people would flock to that city to fill the housing. I think that’s the very nature of a city. In some sense, the more people that want to live in a city, the higher the quality of the city. That’s also directly correlated with housing cost, sadly.
It's always been an investment, but the difference is the shift from being a stable asset that appreciated at or above inflation, to the sort of incredible hyper inflation that we now see.
Sooo... the last thousand some years, given that feudalism was widespread by the 11th century (and housing was absolutely an investment before that). Basically - half of recorded history (~400bc for Europe), and longer than the United States has existed.
I don't understand what you think this comment means...
> and housing was absolutely an investment before that
..and don't make absurd generalizations. Humanity is way older that the middle ages, and hundreds of different cultures existed around the world even during the middle ages.
Very few had the concept of investment and the idea a house has a monetary value that grows significantly over time was simply unheard.
> longer than the United States has existed.
Imperial units are bad but measuring history in united-states is even worse. The US is not even 250 years old.
> I don't understand what you think this comment means...
> An exclusively European phenomenon, the bulk of which came and went while it was a backwater region with limited effect on the rest of the world.
Weird that it had limited effect on the rest of the world, since basically history from now back to about the 15th century represents a European hegemony, now a US hegemony that extends European Western philosophy to the world.
Seems that "limited effect" is pretty big. So much so that we're /literally discussing it now in 2022/.
Yes. Its post 1492* relevance through its legacy now established, we revolve back to the point:
- The last thousand some years (in Europe)
- Widespread (in Europe)
- Half of recorded (European) history
You may have misread my original comment, the “limited effect” was to describe Europe’s influence at that particular point in time, not feudalism/Europe’s influence since then.
