> And also, there's a problem with revolving credit (i.e. a 2-year mortgage), such as Australia or Britain, or anything that is floating along with some interest rate. But these are a) intentional problems that the people making the loans hope will make them rich, and
The 30 year fixed US mortgage is responsible for a lot of the higher prices in US. Future taxpayers or users of the USD pick up a lot of the interest rate risk on behalf of present day borrowers. Evidently, given the continued resilience of the USD, market participants are very okay with this.
> b) problems with pricing, because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
This is a highly dubious claim for which I would need to see proof. The actual building of a house in the US is down to 100 days by a well operated tract builder. The outsize portion of the cost is in the land.
> The actual building of a house in the US is down to 100 days by a well operated tract builder.
So I think one person should be able to manage it in less than 30 years, periodically calling in skilled help. If you're a Walter Segal fan, you can probably do it a lot faster.
> The outsize portion of the cost is in the land.
It is. I think that's a problem because land value is always speculative, so everything can be written off as land value. Why is that land worth that much? Because that's what was paid for it.
If you think the average person is capable of doing the things needed to build a modern house, or learning to do them at a level of expertise compared to any professional, we are living in different worlds.
90% of people will not get past laying a concrete foundation.
I think of all the reddit DIY posts where there are immediately a hundred comments about how those notched beams will inevitably collapse and destroy the second story, or about how those pipes are laid out wrong and are guaranteed to clog, and then there's the nightmare that is bad wiring...
Not to mention code compliance. It requires high skill just to understand what requirements you must meet, when they must be inspected, etc. The idea that most people can build a modern house is hilariously out of touch.
> 90% of people will not get past laying a concrete foundation.
Mainly because it's a good idea to leave certain parts to the pros. Anyone can do framing or hang drywall. Roofs are as simple as you design them to be. It's the areas where your house 'interfaces' with the rest of the world where you'll need the most help, but a lot of those situations can be set up so you can do the majority of the labor (and the tools available now make it easier than ever).
The USA has enough cheap and cheerful (aka "shit") housing already. The last thing we need are people with no building skills building crappy stud framed square boxes. If they have to build, let it be more quirky and individual, and if they don't, lets try to keep pushing building standards forwards, not backwards towards the level that Jill & Joe Everyman will likely (not necessarily, just likely) operate at.
People could also learn to do a lot of stuff they choose to buy instead, like sew their own clothes or build their own furniture. What makes housing so special here?
I could take a random sample of 10 HN users, ask them to frame and drywall a house, and the result would have to be condemned. Please don't kid yourself.
I’m fairly handy and have hung drywall before. It’s not the hardest thing in the world, but you quickly realize a mediocre hanging job results in far more work by the mudding/taping crew. And the end result still probably would be OK at best.
Agreed, and I was exaggerating of course. There are definitely some handy people around here, but a lot of folks tend to underestimate what is involved. I've worked with a lot of beginners, and they can have a rough time just getting drywall screws to sink properly.
Like you said, it's not the hardest thing in the world, but it's not something that just anybody can do.
they can assemble houses on sight that fast too. however it is a lot of management and you often have people standing around waiting until someone else finishes their part so they can start. . it is done as a stunt once in a while, but for price reasons it takes a few months.
The US federal government explicitly and implicitly guarantees a huge portion of the mortgage market, keeping an interest rates lower than they would be. Explicitly via things like FHA/VA/Ginnie Mae loans since investors know the government will pay even if borrowers default, and implicitly by bailing out Fannie Mae/Freddie Mac in 2008, as well as the COVID bailouts (unemployment/PPP).
All of these actions either accrue more debt for the federal government, which usually means higher taxes in the future, or increase money supply, which means reduced purchasing power for users of the currency, which also includes taxpayers.
I write usually in the paragraph above because if the debt or issuance of new money results in commensurate economic growth, then it would not reduce purchasing power, but I am of the opinion that a large part of the economic growth equation is birthrates and proportion of working age population, which has been in decline for a long time. The effects were tempered due to automation/immigration and productivity enhancements in general, but I do not think that has been able to keep up with declines in birth rate for a while now.
Ok so many things are like 90% correct here but missing the crucial 10%.
Fannie and Freddie are not end holders of your mortgage. They sell it ahead and because they’re govt entities, they actually pay less for offloading that risk off their balance sheet than a typical bank would. As you say, they are guarantors. This means you as a taxpayer are on the hook only during events of default which happen once a decade if that. 2008 was a massive one off.
Gnma loans are sub prime as you’d know but they’re also just guarantors. They’re not literally lending money.
The cost of these guarantees is typically very very low compared to the size of the US govt. FNMA is like a $47 billion company. And that is with full conservatorship. It’ll likely expand in size as the public takes on more risk. But it’ll still be very small.
Your second paragraph is also like 95% correct. I’m not sure what you mean by increased money supply in the future. Increasing debt is increased money supply in the present, not in the future. Econ 101 would tell you it means reduced purchasing power but that doesn’t account for how much the US dominates the world. There are several untapped sources of low labor and costs around the planet. This is currently a non issue unless we suffer a double whammy of continuous high rates and the discarding of the $$$ as the worlds leading exchange currency.
The last paragraph I understand but disagree with. Economic growth imo is driven by loose monetary policy and almost nothing else. Human ingenuity or labor capital continues to be as high as it ever was in the highest echelons of research, finance, industry etc (compared to the revenue being produced). But that’s just my opinion. It is likely someone has studied this but I’m too lazy to search and then find a study where I find immediate issues with the way it is structured right in the abstract.
>Increasing debt is increased money supply in the present, not in the future.
I phrased that poorly. I should have written now and in the future (the future because I am assuming bailouts will happen regularly until a total collapse). When the government enables socialization of losses and privatization of profits, that lets people today realize a lot of the potential gains from the future. For example, land that costs x years of work can now cost 2x or 3x years of work.
>Econ 101 would tell you it means reduced purchasing power but that doesn’t account for how much the US dominates the world. There are several untapped sources of low labor and costs around the planet.
I think there is a lessening of the domination, specifically with competition from China.
>This is currently a non issue unless we suffer a double whammy of continuous high rates and the discarding of the $$$ as the worlds leading exchange currency.
Yes, the US is still in a relatively good position, but what has occurred is a fracturing in the trajectories of the US population itself. If you are top 10%, life is awesome and looks okay going forward. Next 10%, you have a chance of moving into the top. Next 10%, you are treading water and with some luck might move up. Bottom 70% has stagnant futures or looking at declines (relative to their recent past).
>Human ingenuity or labor capital continues to be as high as it ever was in the highest echelons of research, finance, industry etc (compared to the revenue being produced).
Yes, but the distribution of gains from the ingenuity will be less equal.
The 30 year fixed US mortgage is responsible for a lot of the higher prices in US. Future taxpayers or users of the USD pick up a lot of the interest rate risk on behalf of present day borrowers. Evidently, given the continued resilience of the USD, market participants are very okay with this.
> b) problems with pricing, because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
This is a highly dubious claim for which I would need to see proof. The actual building of a house in the US is down to 100 days by a well operated tract builder. The outsize portion of the cost is in the land.