There’s been some research lately about whether Private Equity outperformance is partly driven by the illiquidity making it harder for investors to dump their positions in a moment of panic. Your thoughts about housing illiquidity seem related to this concept. (If you’re interested, Matt Levine has covered it in Money stuff with links to the research papers).
In addition, we have affordable margin loans, mortgage interest tax deduction, property tax deduction to juice the system, not to mention additional legsilation like 1031 exchanges, prop13, etc.
Many of these were put in place as public policy promoting homeownership driven by the idea that homeownership would be less costly / beneficial to society compared to long term tenancy. That thought doesn’t seem to necessarily be wrong per se. but if you help out demand side legislatively while restricting supply legislatively, sometimes you’ll get cases of imbalance like we see in the coastal cities.
Given what we’ve observed in the last couple of decades around the world, a managed system like Singapore where property appreciates at a ~2% rate a year (and if demand suddenly shoots up, they’ll add transfer taxes or stamp duties or inject supply into the market) seems much more stable for society.
> There’s been some research lately about whether Private Equity outperformance is partly driven by the illiquidity making it harder for investors to dump their positions in a moment of panic.
There are apocryphal stories of studies purporting to find that the best performing investment accounts are those that belong to people who are either dead or had forgotten about their account:
Generally, even if one invested lump sums right at market peaks, just before crashes, you'd still get a decent returns as long money was not withdrawn:
2008 really showed that homeownership is no different than tenancy. Look at Detroit. Entire city blocks were owned by the bank simply because people either couldn't afford the mortgage, their loan was called due, or they thought the short term loss in equity wasn't worth staying in a run down place anymore.
I believe that the purpose for homeownership in the US was primarily to foster a competitive housing environment. That way landlords wouldn't control the majority of the housing market and people could help keep housing prices down per month by being able to have the ability to qualify for housing just as easily as tenancy.
It seems like housing demand is almost entirely a function of population growth. Supply is tied to a finite resource, land. We cannot do much to increase supply. The conclusion from this set of facts should be obvious.
In addition, we have affordable margin loans, mortgage interest tax deduction, property tax deduction to juice the system, not to mention additional legsilation like 1031 exchanges, prop13, etc.
Many of these were put in place as public policy promoting homeownership driven by the idea that homeownership would be less costly / beneficial to society compared to long term tenancy. That thought doesn’t seem to necessarily be wrong per se. but if you help out demand side legislatively while restricting supply legislatively, sometimes you’ll get cases of imbalance like we see in the coastal cities.
Given what we’ve observed in the last couple of decades around the world, a managed system like Singapore where property appreciates at a ~2% rate a year (and if demand suddenly shoots up, they’ll add transfer taxes or stamp duties or inject supply into the market) seems much more stable for society.