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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: GraceZ who wrote (3711)7/30/2002 8:58:12 PM
From: Elroy JetsonRead Replies (2) of 306849
 
Imagine that, a house in the poor part of Bakersfield (a town noted for nothing more than oil wells, sheep, and excessive heat and cold) doesn't appreciate like a home in Beverly Hills. Same thing happened in the Japan housing bubble. Prices of homes bubbled up in Tokyo but didn't really do much of anything in rural Japan.

Real estate is a primary factor of production. As a consequence its aggregate rise in value will exactly match GDP. Of course more desirable real estate will garner more of the increased wealth than an undesirable area.

The exception to this match with GDP is a demand preference shift from other wealth holding instruments driven by tax policy, or other change in preference. Make homes more desirable from a tax stand-point and you gain a one-time increase spread out over a period of time. All tax policy intended to make homes more affordable accomplish nothing in the end - as the rise in home price is equal to the subsidy. Home prices in Los Angeles County exactly matched GDP growth from 1890 until 1945. There were three distinct tax driven price adjustments above GDP after 1945. The most recent was the silly non-taxation of home appreciation.

Imagine, an investment whose cost, like mortgage interest and property taxes, are subsidized by the public purse, yet the gain is entirely untaxed.
A Public Welfare system for those who buy a building.
I think its high time homeowners get off the dole and become self-supporting.
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