Skip to navigationSkip to content

Housing can’t both be a good investment and be affordable

By City Observatory

The City Observatory is a study of modern-day cities and urban development practicesRead full story

Comments

  • Also share to
  • That depends on where you live. In Tokyo city centre, housing still be a good investment, especially if you can borrow from a domestic bank with very low interest rate (e.g., 1%) that is fixed for 35 years (which is common in Japan.

  • Well, there is the counter example of Singapore: high home ownership and seemingly perpetually rising prices. Although that model is now being tested as public housing leases get closer to expiry for the first time.

  • This is an interesting analysis of a problem that has been growing for decades now. The trouble is that there is no easy solution. 100% social housing? Rent control? New economic centers?

  • Flawed analysis at its finest.

    He kinda missed that when you purchase a home to live in you no longer pay rent. Putting rent into the equation a typical homeowner will be at least a half million better off across a typical 30 year mortgage. Conservatively.

    You will have lower returns in crappy neighborhoods. Don’t think you need a whole article to explain that. Buy in the best neighborhood you can.

    Buy the house you can afford. Save as much as you can. Forgot you read this article as fast as

    Flawed analysis at its finest.

    He kinda missed that when you purchase a home to live in you no longer pay rent. Putting rent into the equation a typical homeowner will be at least a half million better off across a typical 30 year mortgage. Conservatively.

    You will have lower returns in crappy neighborhoods. Don’t think you need a whole article to explain that. Buy in the best neighborhood you can.

    Buy the house you can afford. Save as much as you can. Forgot you read this article as fast as you can.

    But don’t buy if you’re going to live somewhere for a couple years. That’s too risky. A home is an equity asset, its value will fluctuate across short time periods. In the US, real estate is only second to stocks as an asset across longer time periods. But there’s still volatility.

    Those who purchase and hold for a long period of time are far better off than those who rent. Renters get no tax break, pay increasing rents, and are left with nothing in the end. Not a good long-term deal.

  • What I see in pretty much every major city in the world with bloated home price is that investor owners hoarding their unit empty, while buyers lost interest. Transaction volume has fallen a lot. Something has to give to clear the market, and that something should be investor owners' capitulation and acceptance of lower prices. Tighter central banks will only facilitate such a process of price discovery. That way, we'll see healthier and more balanced housing market.

  • George Carlin famously remarked that there’s no money to make off of homelessness or we’d have taken care of it a long time ago.

  • I actually agree with the hypothesis here, even if the data on San Francisco isn’t the best supporting data. For average, middle class (and below) people, treating your home like an asset is a foolish. The bad lending practices of the 2000s only caused a financial crash because so many people believed “home prices always go up, which builds wealth” and then took those bad loans. So in the world of home ownership, I think the solution is to break this myth about your personal home being a financial

    I actually agree with the hypothesis here, even if the data on San Francisco isn’t the best supporting data. For average, middle class (and below) people, treating your home like an asset is a foolish. The bad lending practices of the 2000s only caused a financial crash because so many people believed “home prices always go up, which builds wealth” and then took those bad loans. So in the world of home ownership, I think the solution is to break this myth about your personal home being a financial asset. It may be the most expensive thing you own but for average people, it’s too important an asset to play market games with.

    The issue of rental property is messier and fits better into the conundrum posed by this article. In recent years, it seems that the correcting factor of renters simply avoiding rentals that are overpriced is not working. Property valuations are continuing on the same upward trends they did before 2008, but household savings and wage growth are low. This leaves people paying more than they know they should for rent, but feeling without other options to choose. Meanwhile rental property owners likely have no idea what the experience of their tenants are because it hasn’t quite hit a tipping point yet.

  • True true, and existing property owners are the fiercest opponents of new construction. Hurts their investment after all.

  • Very good points indeed. I would argue though that SF is an anomaly, one that's about to end. Also, one point I keep missing in most analysis is the massive exodus of countryside people moving into the city and turning certain cities into mega cities. Under such scenario, house prices skyrocket because there is just not enough houses available either to rent or buy. This is a problem we need to solve because the sharing economy is accelerating the trend too.

  • Agreed

    “We say we want housing to be cheap and we want home ownership to be a great financial investment. Until we realize that these two objectives are mutually exclusive, we’ll continue to be frustrated by failed and oftentimes counterproductive housing policies.”

  • Love this article! Truth! Gotta share this!

  • https://fred.stlouisfed.org/graph/fredgraph.png?dwnld=1&hires=1&type=image/png&bgcolor=%23e1e9f0&chart_type=line&drp=0&fo=open%20sans&graph_bgcolor=%23ffffff&height=450&mode=fred&recession_bars=on&txtcolor=%23444444&ts=12&tts=12&width=748&nt=0&thu=0&trc=0&show_legend=yes&show_axis_titles=yes&show_tooltip=yes&id=USSTHPI&scale=left&cosd=1975-01-01&coed=2018-04-01&line_color=%234572a7&link_values=false&line_style=solid&mark_type=none&mw=3&lw=2&ost=-99999&oet=99999&mma=0&fml=a&fq=Quarterly&fam=avg&fgst=lin&fgsnd=2009-06-01&line_index=1&transformation=lin&vintage_date=2018-11-03&revision_date=2018-11-03&nd=1975-01-01

    https://fred.stlouisfed.org/graph/fredgraph.png?dwnld=1&hires=1&type=image/png&bgcolor=%23e1e9f0&chart_type=line&drp=0&fo=open%20sans&graph_bgcolor=%23ffffff&height=450&mode=fred&recession_bars=on&txtcolor=%23444444&ts=12&tts=12&width=748&nt=0&thu=0&trc=0&show_legend=yes&show_axis_titles=yes&show_tooltip=yes&id=USSTHPI&scale=left&cosd=1975-01-01&coed=2018-04-01&line_color=%234572a7&link_values=false&line_style=solid&mark_type=none&mw=3&lw=2&ost=-99999&oet=99999&mma=0&fml=a&fq=Quarterly&fam=avg&fgst=lin&fgsnd=2009-06-01&line_index=1&transformation=lin&vintage_date=2018-11-03&revision_date=2018-11-03&nd=1975-01-01

    I think the data is flawed. Since 1980, the only dip in home prices was the government inspired real estate crash around 2008. As long as the government keeps borrowing money and monetizing the debt, real estate will increase in value even during recession. The case of San Francisco and other restricted areas is exacerbated by development restrictions otherwise there is always affordable housing where there is development. Real estate isn’t always a good investment, but home ownership is always better than renting.

Want more conversations like this?

Join the Quartz community for all the intelligence, without the noise.

App Store BadgeGoogle Play Badge
Leaderboard Screenshot

A community of leaders, subject matter experts, and curious minds bringing nuance back to how we talk about the news.

Editors' Picks Screenshot

No content overload: our editors will curate the most notable and discussion-worthy pieces for you every day.

Share Screenshot

Don’t just read the story, tell it: contribute your ideas and experience to the dialogue.