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Notes -
It seems to me a lot of the issues the US is going through stem from the fact the US hasn't had a proper crisis since the Great Depression. A good crisis that wipes the slate clean by destroying existing debts and wealth would fix a lot of things:
property prices and the appreciation assumption
student loans
intergenerational wealth gaps
social security spending
All of these things can be fixed if the stock market takes a nosedive and the dollar loses 90% of its value. In addition, it will make American exports extremely competitive, so the recovery should be relatively quick; also, this will hurt the PRC more than it hurts the US.
The source you link to starts in the 1910s, not 1890s. It also indicates that prices rose substantially during "the grime and squalor of the 1970s and 1980s" -- much faster than inflation -- and that prices have been negative since the 2000s. And, prices rose 140 pct from the 30s to the 50s, so the only period in which prices did not move in absolute dollar terms was the 1910s to 1940s.
Of course, the source has limited value because it gives data only for entire decades. We have no idea whether the prices cited are those from the beginning of the decade, the end, some cherry picked point, or even if the answer is different for different decades.
Finally, Manhattan prices are irrelevant. Real estate prices in the US barely exceeded inflation from 1970 to 2012] and most of the increase since then has been driven by low interest rates; monthly mortgage payments did not rise after 2012.
OK, but why are you suddenly referring to rent, when your initial comment was about asset prices? Your source mentions both rent and purchase price per square foot, but you cited it only for the latter.
Yes, but only because it was the result of the biggest real estate bubble in decades. I chose 2012 because my point is that current high prices are a function of the last ten years, and that that has been driven in part by low interest rates. We can choose another date if you'd like. The source I linked to says that the real estate price index was 60.8 in 1970 and peaked at 162.6 in 2022. This calculator indicates that that is an increase of just under 2 percent per year.
I wish people would specify land when talking about real estate and not housing. Interest rate changes do not effect construction costs - that’s labor and materials etc. But areas with scarce land rates do effect peoples ability to pay or more specifically you could run a land rent dcf to find the npv of land.
Low rates do not flow into npv in places like Houston. They just build a bigger city. It’s basically just construction costs in Houston, so if it costs 500k to build a house in Houston then housing gets cheaper. You now pay 500k but your mortgage is cheaper.
In Cali since they essentially banned construction. Peoples ability to pay is driven by rates. So if people could pay 5k then then the price of the home is the npv of 5k a month.
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