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Just got back from month long vacation # 3 this year, perspective fully changed: Working for money is fucking stupid. Wow, is it stupid.
I've met dozens of people who travel full time from property and investment income from their grandparents; and I am probably a couple years from fully supporting myself purely from passive income (though I'll probably keep working just to get the number higher; maybe pile up some burnable cash to buy more investment property during the next crash).
The switch was sudden and totally unrelated to anything specific I had done; it is just a result of two generations of skin flint behavior and interest rates. If your family line can get together mid six figures of money in investments and assets and sit on it for 1.5 generations without anyone buying penis compensation trucks or boats or developing a gambling addiction or fentanyl addition; you can just be fucking set. (Said in the tone of a joke, but actually a big ask according to the facts.)
The people talking about class war are 100% right; I can say that for a fact now that I've experienced it from both ends. It's really nice to be on the winning side for once. I just watch the money I float in my checking accounts go up 70k every couple months and most of it goes into investments that will only be dinged if the government of the USA collapses; recission proof and inflation proof and 98% risk free. It is so fucking easy to live solely off the sweat of other peoples brows; no wonder these dudes who were born into it start thinking they can't possibly fail.
All this to say: What the fuck do we do about the fact that owning shit and renting shit is just flat out better in every way than doing shit or making shit?
It's easier, it's safer, it's more sustainable over the course of your life, and you can pass it down to your kids locked away in trust so even the frailest son can't fuck it up.
I know that my solution (radical wealth redistribution, red-black shit at large, etc and so forth) isn't popular here; but even conservatives have got to recognize there is a problem.
How do you solve it without the revolution? Is that question even coherent?
There's a lot of potential risk, and while not all of it's the sort of thing that explodes a large portion of your asset portfolio, there's some of that class along with the "whoops it's all asbestos", "how do you like dem mold spores" and "tenant from hell that you have to take to your state's supreme court to evict", or just the hailstorm- or leaky-shower-scale problem.
And people can definitely fuck it up. People fuck up the value of homes they live in! This guy swears he'll get your basement renovation done at half the cost, no permits required, and he just needs to cut some notches in this one beam. Labor's expensive for roof repairs right now, just throw some more shingles on top and it'll last another ten years no problem. What does it matter how if the washer and dryer^andsomeotherstuff^ are on the same circuit? The housing inspector said no visible knob-and-tube.
I'd also like to argue that housing as an asset has only risen so consistently because of bad broader-scale policy decisions, but a) I've been saying that for a long time and the regulatory environment can stay stupid long enough for you to stay solvent generations, and b) the last time I decided maybe the counterintuitive economic theory had a point after guessing wrong for decades, MMT self-detonated.
There's a steelman that the risks are out-of-whack with the returns, as evidenced the variety of property management businesses and the relatively low rate of FTX-scale detonations there.
But the extent that's a largely floating on the price of housing being high enough that a small cut off is coming off a large pie. There's a sense where this is revolution-complete, since those high housing prices are the result of a combination of increasing population and immense regulatory and economic pressures against building new (or even replacement) housing, especially in high-demand areas but even in stupid ones, and especially at the lower cost end of the market. But there's another sense where if you could get even a portion of the people needed to have a successful blood-in-the-streets revolution (or the Canadian solution) to get off their couch, you could also change the political calculation, or just move a lot of similarly-minded people to take over a state the Libertarian Party way.
But has it? Here is the St. Louis Fed's real residential property index, which was at 60 in 1971 and about 160 today. In contrast, this calculator claims that $60 invested in the SP500 would be worth $1,540 today after
taxesinflation.Which is not to say that owning housing is not a good investment; if you live in it, you save on rent, and if you don’t, you collect rent. But most of your returns are going to be from something other than the appreciation of the property.
My claim is less that housing prices have been the Single Best Return On Investment, and more that they're just very consistently rising.
Separately, I don't think the St Louis Fed's residential property price index is really an apples-to-apples comparison to stock investments or what I'm motioning around, but their documentation on what data means exactly is pretty painful. This measure is probably closer, but because it's an average of sale values rather than of all values some of the drop in 2008 is probably about decreasing velocity at the top of the market, and it does hide some of the inflation-related 'real' value drops.
But that measure does not seem to be adjusted for inflation. Per the BLS inflatiin calculator, the 26,000 average in 1970 = 211,000 today, so today's $505,000 is 2.39x the 1970 price. That is about the same (actually somewhat less) than the 2.59x increase in the real price index I linked to (60.9 to 157.9).
I spelled out that the Fed numbers I was providing did not include inflation at the end of the post above. (I'm also not sure, but I'm 99% confident the SP500 isn't adjusted for inflation either. Yes to be clear, stocks are still going to end up having larger absolute growth.)
The exact look of the chart varies a lot depending on what inflation and housing price index you use, and some of them will show drops around the 2008 and 1979 (sometimes 1989), but even those will be less volatile than the stock market, unsurprisingly, and that's what I'm pointing toward.
Which is simultaneously obvious and kinda weird! Housing prices are not obviously goods like an opera or string quartet that should be this subject to the Baumol effect, and while land values (and regulatory overhead) are part of the difference in value, you can at least imagine some counterfactual world where a flood of cheap housing brought the average house price lower even if some individual local markets still skyrocketed as they have in our world.
Oops, when I said "$60 invested in the SP500 would be worth $1,540 today after taxes," I meant after inflation, not after taxes. And with dividends reinvested. See calculator here: https://ofdollarsanddata.com/sp500-calculator/
Edit:
Real income has increased substantially over the years, and as real income increases, people can afford to pay more for important purchases such as housing, both in absolute terms and as a pct of income. So, it is not surprising that housing prices have risen slightly faster than inflation. And, of course, new houses have grown in size over time
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