What happens when private equity buys homes in your neighborhood

"Housing as investment" is such a terrible idea, embedding it in culture should be avoided at all costs. Not only does it drive up housing costs, but it has people dumping loads of money into a single investment. Of course people don't want home prices to go down when, for many, it's their primary investment vehicle.

I hope we can get to a point where this idea eventually dies. I'm shocked that 2008 didn't wake people up in this regard, but I guess the supply shortage made real estate a pretty rational place to invest for a while.

"Housing is an investment" is just a sales tactic that took over and went insane.

It's only really used to justify the humungous loan payments you're willing to take on.

I'd happily take a $1 house if it was guaranteed to never change in value; but it also served my needs.

It's moderately fun to try to figure out what a "healthy" home market would look like - probably something similar to cars; "used" houses should sell for significantly and noticeably less than "new" ones (all things considered). But location and constraints often invert this - the new houses are so far away that they sell for less than the old ones in more favorable locations.

The scary thing is that ONCE you are metrically fuckton in debt, you become exceptionally concerned with the valuations, because once it trends to level or goes under, you're stuck!

It probably looks somewhat like this: https://psmag.com/economics/inside-japans-disposable-home-ma...

Healthy means the value of a house is the value of the land, plus the value of building a new house exactly like it minus depreciation (meaning if you replace something the value goes up). Builders of course need a reasonable profit so that is factored into the value.

The reason why the bay is unhealthy is they don't allow you to put something on the land that matches the value of that land. People who want to spend millions on a house should be getting a mansion not a small house. People who buy a small house should get it on a lot not worth much money. I'm not sure of a good number, but something like only 1/3rd of the value should be the lot, 2/3rd the structure. This is right for most people, but there is nothing wrong with wanting a mansion in an area of tiny houses, or a tiny house on a massive lot if that is how you want to live (if a farm lets count the house separate from the rest of the farm buildings - not that this is possible but ...)

I live in the Netherlands. In the 80's we use to have giant stores owned by couples living above or behind it. They owned 100% of the building, they owned everything inside it.

One particularly memorable instance to me was an old couple, the store had a ceiling two floors high with an 8 shaped cast iron balustrade wrapped around it. I want to say they sold puzzles, postcards and mostly wooden toys but technically that was what they had in stock, they didn't sell much of anything. If they sold 3 postcards and 2 puzzles per day it was enough to buy food. Food was really cheap.

The store was empty most of the day, if customers arrived they switched some of the lights on from behind the counter. If a wave of tourists arrived the place lit up brightly like a xmas tree. They sold the single key chain and one post card and went back to their living room on the other side of the door behind the counter. It was a magical place with many items aged into antiques on the shelve.

The old couple eventually died and the place was sold for many millions, stripped down and modernized for millions followed by a parade of over priced tourist traps that went bankrupt one by one.

Everyone working there has to pay for housing too! The rare place to live that becomes available would also be far away enough that you need a car, a long drive 2x per day and places to park it. Then you need to work hard, there need to be at least two shifts, you need to sell lots of things with very large margins.

The difference is much larger than people imagine. A bad day use to be one post card for some potatoes. Today's postcard is 1/100 the production cost, sold for 6 times more but the revenue isn't enough for one employee to park their car.

For just 6 employees at 1500 pp plus say 6000 for the store you end up with 15 000 just for housing everyone (not counting the 80 year olds such store has no use for)

The market you're describing is pretty similar to the Japanese one, where the land keeps its value but the home itself depreciates over time, and old-enough houses are assumed to be teardowns unless proven otherwise.