Why Shouldn't Home Prices Go Down Over Time?

[phattonez]

OK, and I agree that the source of one's income should not determine its taxation rate. What this has to do with property or housing costs is unclear. I suppose that you will soon return to your usual (typical?) landlords are evil rant but was actually enjoying your questions and observations concerning building and land costs and the associated area of property taxation.

I was responding to the point that all income should be taxed the same. I fundamentally disagree with that because not all income is earned through wealth creation. We all agree that we ought to be maximizing wealth creation, and so our tax policy ought to be optimized to create that outcome. Taking income that is uninvolved with wealth creation lower than wealth creating income is foolish.

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[phattonez]

Such as . . .?

Machinery, factories, etc. Invest in the means of production, things that increase wealth creation. A home is not a means of production.

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[phattonez]

Liberals have no concept of supply and demand.

This isn't a supply and demand issue. No one is arguing that housing should be free or something foolish like that. Are you unable to debate anything but a straw man?

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[phattonez]

Why do you think the only source of wealth is labor?

Can you have a nation of laborers? Of course. Can you have a nation of landlords? No, everyone would starve.

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[phattonez]

No need to eliminate property taxes. The other measures sound good.

Property is not that expensive outside of big cities. Why not focus on transportation solutions that allow the suburbs to extend farther out?

I agree that our cities need new infrastructure.

I don't think eliminating investment properties would do much good. Most of the high prices are just due to individuals who desperately want to live in a certain area. Look at the inflated prices in districts with good schools.

If I could live in Vermont and commute to NYC in 30 minutes I wouldn't need to get into bidding wars for a small house in NYC.

It would divert investment away from land speculation, which doesn't generate wealth, and into actual wealth production. Do you realize how much of our economy is finance, insurance, and real estate? It's the biggest sector of our economy now, and it used to be manufacturing. What have we gotten for it? Wages have been stagnant since the mid 1970s while the real cost of living has soared. It's more evidence for my point that money is not a factor of production.

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[phattonez]

It is obvious you have never owned a home.

Hint: they aren't making more land.

:roll: Respond to the OP. That post was making a rhetorical argument.

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[phattonez]

Other than keep the business running. Minor point.

His ownership of shares of a company does nothing to keep the business running. He could die and nothing would change with the company.

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[Stealers Wheel]

You just explain to me why someone, say, buys parking lots and then when skyscrapers are built next to them he should become a millionaire.

Do parking lots provide a service which is in demand next to skyscrapers? If the service is of any value, should the person who invested in parking lots be compensated for providing that service? Should they be prevented from becoming wealthy for providing that service? Can we simply build more and more parking lots to minimize the value of parking lots? And if someone sees a greater potential and offers the parking lot owner much more money than he paid for the land and improvements, should the owner not sell at a substantial profit? And, if the new owner doesn't stop there, and builds a multi-story parking garage which generates far more income at a lower rate than the original, does he not deserve to be compensated?

Back in the 1950's my grandfather purchased a parcel at a county land auction, sight unseen. It was just dirt. He paid $2500 for ten acres. Since it was fairly close to the railroad tracks, he figured it might someday become industrial property and he could turn a profit when he sold. One day, he decided to take a ride and see his property. When he got there, he was really, really disappointed, to say the least. He had bought a flood channel. Every time it would rain, massive flooding would go right through his property. He figured he had lost his investment.

About five years later, my grandfather got a call from a man interested in that property. The man's opening offer was $20,000! Obviously my grandfather sold that property to the fool and took his $20k.

Today, there is a parking garage on that property for the Excalibur Hotel on the Las Vegas Strip. Property on the Las Vegas Strip today sells for upwards of $1000 per square foot.

 

[Mason66]

Yes, I made that point in the OP. I also stated that this makes people wealthy despite not doing anything. Do you think this isn't a problem?

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How could this be a problem?

 

[Mason66]

My point is that it isn't the labor of the property owner that makes it increase in value in the example.

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Are you of the opinion that a person should never make money unless they are doing manual labor to earn it?

 

[Mason66]

What about the labor the owner did to be able to purchase it in the first place? The work to pay the mortgage? You start punishing owning income property you reduce the supply - then what happens to those that either can't afford to purchase a home, or just don't want to?

He forgets about upkeep and everything else that goes into owning property.

 

[phattonez]

Do parking lots provide a service which is in demand next to skyscrapers? If the service is of any value, should the person who invested in parking lots be compensated for providing that service? Should they be prevented from becoming wealthy for providing that service? Can we simply build more and more parking lots to minimize the value of parking lots? And if someone sees a greater potential and offers the parking lot owner much more money than he paid for the land and improvements, should the owner not sell at a substantial profit? And, if the new owner doesn't stop there, and builds a multi-story parking garage which generates far more income at a lower rate than the original, does he not deserve to be compensated?

Of course parking lots provide a service. When did I ever argue that parking should be free? The point I'm making is that the increase in property value that occurs when something is built nearby your property isn't achieved by the property owner. You did nothing to bring about more wealth to the economy. As such, why should you profit from that?

Back in the 1950's my grandfather purchased a parcel at a county land auction, sight unseen. It was just dirt. He paid $2500 for ten acres. Since it was fairly close to the railroad tracks, he figured it might someday become industrial property and he could turn a profit when he sold. One day, he decided to take a ride and see his property. When he got there, he was really, really disappointed, to say the least. He had bought a flood channel. Every time it would rain, massive flooding would go right through his property. He figured he had lost his investment.

About five years later, my grandfather got a call from a man interested in that property. The man's opening offer was $20,000! Obviously my grandfather sold that property to the fool and took his $20k.

Today, there is a parking garage on that property for the Excalibur Hotel on the Las Vegas Strip. Property on the Las Vegas Strip today sells for upwards of $1000 per square foot.

See my point? He, and we, all would have been better off had he invested in something that produced real wealth.

Sent from my HTC phone. Instaurare omnia in Christo.

 

[phattonez]

How could this be a problem?

The problem is that it encourages people to get wealthy through land speculation. It diverts production away from actual wealth producing industries and increases the price of land for everyone.

Do you think it's a coincidence that as we've lowered taxes for passive income, capital gains, etc., that homes have become more unaffordable? This is the exact opposite you should expect of society. Progress, you would think, means more and more people can own a home. In fact, we're seeing the opposite trend, and everyone has been propagandized into thinking that's just fine.

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[phattonez]

Are you of the opinion that a person should never make money unless they are doing manual labor to earn it?

Not really. You can't entirely eliminate unearned income, and unearned income can lead to higher productivity. I'm fine with someone who starts a business, invests in machinery, and hires a lot of people making a lot of money. I'm not against wealth. Should you be a billionaire? I don't think anyone needs that kind of money. The kind of unearned income that I'd like to see totally eliminated are things like share buybacks. We've had more money directed to this than to capital investment. Why do corporate boards do this? Because they enrich themselves. The tax code is set up to encourage this type of corruption and lack of care for long term profits.

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[phattonez]

He forgets about upkeep and everything else that goes into owning property.

No, I specifically mentioned maintenance. However, you can do all the maintenance in the world on a car. It's still going to be worth less than a new one.

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[Stealers Wheel]

The point I'm making is that the increase in property value that occurs when something is built nearby your property isn't achieved by the property owner. You did nothing to bring about more wealth to the economy. As such, why should you profit from that?

When the market says your property is worth more than you paid for it, or in the case of my grandfather, can potentially be worth more, you will profit if you sell at that time. It is the simply the law of supply/demand.

As long as you did nothing underhanded to acquire it and you don't misrepresent it at the sale, there is nothing wrong or immoral in selling something you own at a profit. The market will determine the price.

When the lucky bargain hunter happens to purchase an old painting at a garage sale that later turns out to be a million dollar masterpiece, that must just drive you nuts. THEY DID NOTHING!

 

[phattonez]

When the market says your property is worth more than you paid for it, or in the case of my grandfather, can potentially be worth more, you will profit if you sell at that time. It is the simply the law of supply/demand.

I agree that it's worth more. Now why do you deserve any of that profit for doing no work?

As long as you did nothing underhanded to acquire it and you don't misrepresent it at the sale, there is nothing wrong or immoral in selling something you own at a profit. The market will determine the price.

When the lucky bargain hunter happens to purchase an old painting at a garage sale that later turns out to be a million dollar masterpiece, that must just drive you nuts. THEY DID NOTHING!

Let's stick to the land example. When a freeway is built near a property and the value goes up, shouldn't society, who built the freeway, get that increase? Any company would try to internalize the externalities that they create. Why should government be any different?

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[Wayne Jr]

Why Shouldn't Home Prices Go Down Over Time?

They can, and often do. The building only deteriorates with time, but the land can become more valuable. Cars aren't valid comparisons as there is no land permanently associated with a car.

 

[phattonez]

They can, and often do. The building only deteriorates with time, but the land can become more valuable. Cars aren't valid comparisons as there is no land permanently associated with a car.

This is the point I'm making. Why are we allowing people to profit simply from holding land?

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[Wayne Jr]

How does a patch of dirt appreciate? Why does a patch of dirt gain a massive value if a skyscraper is built next to it?.

Because other skyscrapers want to be built on that patch of dirt and many developers are willing to pay you a premium to be close to that other skyscraper.

Let's keep in mind that value is relative, these are not objective intrinsic attributes of land here. To discuss how land is valued is to discuss not the value of land, but human behavior.

 

[Wayne Jr]

This is the point I'm making. Why are we allowing people to profit simply from holding land?

Because that's how our economic system works. Please google the reason why we have the Thanksgiving holiday at all for more details.

 

[phattonez]

Because that's how our economic system works. Please google the reason why we have the Thanksgiving holiday at all for more details.

This isn't an argument. Why is this the way it should be?

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[jimbo]

Can you have a nation of laborers? Of course. Can you have a nation of landlords? No, everyone would starve.

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Doesn't answer the question. But does beg a couple more.

Who in your world hires and pays your nation of all laborers?

Who attends to the distribution of the product of your nation of laborers?

Who develops the new innovations and assumes the risk and reward in your nation of laborers?

That's the beauty of the market system. The questions become self answering. If 1 million laborers need housing, 10,000 landlords will step in and provide it using labor who then get a pay check.

Food gets moved where it's needed. California to NYC, by an entrepreneur in Chicago who makes a buck in the process. Truck drivers get paid.

 

[Wayne Jr]

This isn't an argument. Why is this the way it should be?

You asked "why". A "why" doesn't need an argument for a replay, just the answer. I gave you the answer to "why". Here's the next:

Because it works better than all the other things we've tried.

 

[Stealers Wheel]

I agree that it's worth more. Now why do you deserve any of that profit for doing no work?



Let's stick to the land example. When a freeway is built near a property and the value goes up, shouldn't society, who built the freeway, get that increase? Any company would try to internalize the externalities that they create. Why should government be any different?

And, in the converse, if a smelly pig farm or garbage dump is built adjacent to the property, are you against the owner taking a loss? You're against the owner profiting from the increased value, but you have no problem with them taking a loss. Interesting.

So in your world, there should be no upside to speculative investing in real estate, but there should be a huge downside. Interesting.