>Everyone (with shoes) is counting on their shoes increasing in value. So the government becomes focused on raising the prices of everyone's shoes
That is not how reality works. Prices go up because people are paying them - it has nothing to do with government. A seller wants the highest price, no matter what the govt or local markets do, and a buyer wants the lowest price, no matter what govt or local markets do. Each is competing against other sellers and buyers. At no point is the govt telling a seller they're too low or a buyer they're not high enough. If either side dislikes the deal, they walk.
It has nothing to do with being an asset class - the causality is the other way. Houses are valuable, are a significant amount of money for most people, and increase in value because, if nothing else, inflation - thus they're an asset. So is holding cash (which actually deflates in value, yet is an asset), so are bonds, stocks, annuities, pensions, and on and on.
As to the shoe example - here's more what happens:
People would all love it for their cars to increase in value, but in reality they do not. The govt is not making this market out of magic to satisfy people's desires - houses increase in value at slightly above inflation because the market values them so.
By your reasoning, govt is magically making prices go up, but the market would not simply follow along.
And, if the govt were magically making prices go up against market wishes, they're doing a terrible job at it - housing only increases around what other assets do - and that's the market doing it.
People have tried using govt or other forces to misprice markets, but that never lasts very long before wise investors pull the rug out and crash it.
History has a lot of examples of people both trying to fake high prices for force low prices by law and losing out to the market. The market commands vastly more resources than any govt to put things in check.
Are you trying to claim that the government (let's pick the US government) doesn't get involved in regulating the housing market?
Do you think they don't attempt to keep the house prices from crashing ? (also known as getting more affordable).
I think it's obvious that the US government is very interested in maintaining and increasing the monetary value of homes and real estate.
Here are some ways they influence them off the top of my head
1) monetary policy (Changing interest rates to encourage borrowing)
2) Subsidizing mortgages (Fannie mae, Freddie mac) - allows people to borrow more and so spend more
3) Zoning (reduces the amount of available land)
4) Bailing out banks involved in real estate
5) Tax relief for home ownership
6) Mortgage interest relief for home owners
etc etc
>Do you think they don't attempt to keep the house prices from crashing ? (also known as getting more affordable).
Also known as wrecking tax base for police, schools, local and state economies.... This is a terrible idea - deliberately crashing any asset class, especially one underpinning the majority of local services.
Property taxes account for as much as 63% of state revenue (NH) to as little as 17% (DE and AL, both of which offset this loss by other specialized taxes). Over the US around 35% of state revenues are property tax.
For most states your desire would destroy the economy vastly worse than the 2008 recession or COVID, neither of which tanked such a huge amount of revenue used for services. Good idea there.
> 1) monetary policy
Also done because it affects all aspects of the economy, from manufacturing, to employment, to R&D, to medicine. Claiming this is done for housing is shortsighted. Such monetary policy is decorrelated from housing prices (which you can check in Excel if you like). So to change monetary policy simply to drive housing prices down is a blunt hammer that will also lessen employment, lessen investment in productive areas of the economy, lessen trade by making exports more expensive, etc.
>2) Subsidizing mortgages (Fannie mae, Freddie mac) - allows people to borrow more and so spend more
No, it does not make me able to afford more loan - that is determined by my income. It provides more liquidity for the market, lowering prices. If there was less liquidity, then money would be harder to get, making borrowing more expensive, not less expensive. If you look at research on what people borrow, the term is Ability to Pay (ATP) as the driving factor, which is based on income, not on Fannie providing liquidity. And if you read more research, you'll find that the increased liquidity lowers prices significantly. You have this completely backwards.
> 3) Zoning
Done to industrial plants being mixed with housing. Here's a paper [2] showing that the major driving cost of housing is the marginal cost of physical construction costs, not zoning. There are very few places where zoning is much of a restriction (mostly places where land is super scarce, which is not the majority of the US).
>4) Bailing out banks involved in real estate
The "bailouts" were loans to provide liquidity, repaid with interest, profiting the taxpayer [1]. Many banks were forced to take these loans against their will to prevent signaling to the market vulnerable banks, to lessen bank run issues [2]. This was the correct govt action to prevent further harm. I think you seriously misunderstand what the "bailouts" were or what they affected.
So on this point your belief is vastly removed from reality. Spend some time reading on the details of TARP and you'll learn banks paid taxpayers, not the other way around (and note taxpayers did not even fund TARP, the Fed did, who was paid back with interest - not a cent was raised in increased taxes).
> 6) Mortgage interest relief for home owners etc etc
This is done to encourage home ownership, not to make prices high or low (note mortgage interest deduction has existed through many boom and bust cycles of housing prices). A good place to check your claim is looking pre and post the recent big change in mortgage deduction laws, and again, there are decent econ papers studying the question. Such papers are vastly more accurate than your opinion.
They do regulate and influence the real estate market specifically the price of housing. And as in the first point they don’t have any interest in the price dropping. If the only way the price is allowed to change is by increasing then that’s the only way it will change.
That is not how reality works. Prices go up because people are paying them - it has nothing to do with government. A seller wants the highest price, no matter what the govt or local markets do, and a buyer wants the lowest price, no matter what govt or local markets do. Each is competing against other sellers and buyers. At no point is the govt telling a seller they're too low or a buyer they're not high enough. If either side dislikes the deal, they walk.
It has nothing to do with being an asset class - the causality is the other way. Houses are valuable, are a significant amount of money for most people, and increase in value because, if nothing else, inflation - thus they're an asset. So is holding cash (which actually deflates in value, yet is an asset), so are bonds, stocks, annuities, pensions, and on and on.
As to the shoe example - here's more what happens:
People would all love it for their cars to increase in value, but in reality they do not. The govt is not making this market out of magic to satisfy people's desires - houses increase in value at slightly above inflation because the market values them so.
By your reasoning, govt is magically making prices go up, but the market would not simply follow along.
And, if the govt were magically making prices go up against market wishes, they're doing a terrible job at it - housing only increases around what other assets do - and that's the market doing it.
People have tried using govt or other forces to misprice markets, but that never lasts very long before wise investors pull the rug out and crash it.
History has a lot of examples of people both trying to fake high prices for force low prices by law and losing out to the market. The market commands vastly more resources than any govt to put things in check.