Unpopular Opinion

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Homes and real-estate increasing in value should be considered inflation (sopuli.xyz)

submitted 9 months ago* (last edited 9 months ago) by [email protected] to c/[email protected]

11 comments fedilink hide all child comments

Housing is something people need, and is similarly a necessity like food or electricity. It needs a lot of money to keep in a livable shape, plus constant attention, and will lose its value if just left in place. As such it's not an investment, unless the market isn't working like it's supposed to.

When there was the long period of "low inflation" after the 2008 housing crisis, it's because we didn't consider housing prices a part of the inflation – if housing getting more expensive would've been taken into account we should've never had such a long period of low interest rates. If rents going up is inflation, appreciation should be as well.

As such, housing getting more expensive should be considered a bad thing, as it leads people to mistakenly see it as an investment. People will then "protect" their investment by trying to prevent new projects etc. Nobody would get angry if bread was cheaper the next day, just because they already bought it yesterday.

EDIT: apparently I've been a bit misinformed. I'm not from the US, but EU (Finland) and have understood that our indices don't really include owner-occupied housing in the calculation, but only the direct costs like energy and rent with some weight – which was at least partly the case, but there would seem to be some changes coming. Thanks for the enlightening replies, I'll have to read a bit more into it.

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[–] [email protected] 1 points 9 months ago* (last edited 9 months ago) (1 children)

As someone who lives in a mid-sized city, esp. in a non-coastal state, I get a little jealous of those who are building up equity faster in larger metro areas. Higher home prices yes, but also higher salaries. If you are only going to live in that city for the rest of your life then you have to weigh the pros and cons entirely within that bubble of reality (overall quality of life and cost of living). OTOH, if you’re willing to move some day to a cheaper area, you can stretch that equity so much further than people who lived there from the outset. This could mean earlier retirement, “better” retirement, financial security and lower stress, money for travel, less traffic, etc. But also loss of services and entertainment opportunities you may come to expect in your well-established stomping ground of today.

Just some thoughts to add to your deliberations.

[–] [email protected] 1 points 9 months ago

Wages are still depressed here (I'm in Tampa), it's the work-from-home Northerners who are still getting paid higher, and people moving from where prices are even higher than here so they can pay more driving up home prices, there is more money here now but it's not being made here, if that makes sense. The transplants (God I never thought I'd be one of the complaining native born) are causing other problems in Florida, obviously the politics but also are a big factor in the housing inflation. They have done what you are suggesting and it's a mixed bag, some of the money does stay here and helps but it's offset by housing cost (rent and prices both) increasing so much more than wages. My first house was purchased for about one year of my gross pay in 1994 - this one, same size, cost 4.5x my annual gross in 2020.