AEIOUM

[Sybilla]

There are a few wonderful things in the world that increase in beauty and quality with age. An exquisite vintage for instance can almost be described as priceless by connoisseurs. A fine pearl can take many years to form, and a natural diamond can take billions of years - both of which are highly sought after by those with appreciative tastes in jewelry. Other things however do not age so well but can still rise in value simply by the basic arithmetic of supply and demand. Automobiles for instance degrade in quality but their market value can be high if the model is a rarity and in superb condition. Any collector item of limited quantity can potentially be valuable in a similar way. Real estate however is not one of those things, unless one is talking about a truly unique and magnificent gem capable of bestowing tremendous prestige to their owners. But a regular house? There is no logical reason why the price of a used residence should go up with age. That is, unless it is driven up in value by high demand and restrictions in supply. i.e. "the market" forces that drive the price.

But the real estate market is a mixed bag consisting of many different players, each with varied motivations and goals, which tends to make the game unfair if the rules do not provide the necessary boundaries. For instance, using an analogy of a famous board game focusing on asset accruement, not everyone starts the game with $1500 in their pocket, and receive $200 when they pass "Go". Nor can everyone have that "special relationship" with the banker, or have that magic "flick of the wrist" when casting the die. And if you're entering a late game swimming with established players, then you can be sure the sharks will come circling swiftly. Affordable residence for new players is therefore not achievable under such a framework, as a mature game is naturally rigged to favor the apex predators. Not only that, but those with financial leverage will always use all available means at their disposal to shape the environment in their favor. They may even attempt to peg the supply demand curve such that is is disallowed to go below a certain value, because a market correction would destroy the old guard and threaten the established system. And if the argument is to be believed, then the destruction of the "Lords of the Land incorporated" would ripple and destroy more than just their interests, but it would affect the IOUs of the casinos and the "big deals" made by the suits behind gilded doors and shook upon the country club greens. Too much leverage, too much greed, too big to fail.

If such an environment did not exist and a new game were to be set up, one can make a few basic assumptions about how the asset prices would behave. One would expect that like with any tangible asset such as an old automobile for instance, the value of the property would diminish over time due to natural degradation. But unlike an automobile, a real estate property is statically restrained to a geographical area, and hence its price would rather be disproportionately affected by the virtue of its surroundings and of its perceived attractiveness. Therefore, even though the house itself may be a condemned hovel, the desire for the location would be the determining factor that drives the price. But what if that geographical demand did not exist or became a minuscule factor in determining that price? What if the price of the house and the price of the plot of land were to be disassociated? What if it would be just as easy for someone to move her house from one location to another without being heavily burdened by colossal financial commitments? Can that lead to something that may be a fairer housing market?

[Candideto]

Here's a little story to paint a picture of the housing situation observed today.

As the snow flied on a cold and gray Chicago mornin', a poor little baby child was born in the ghetto (in the ghetto). And he grew up to be a hopeful young man, despite the hardship and the troubles of his youth. One day it was his time to say his goodbye to his dear old mama. He picked up his old "silver tramp's boot" piece from his antique wardrobe, gave her a warm hug and a peck on the cheek, and set about to make his mark in the world - in the game of Monopoly. This is his story.

The boy's name was Johnny, and he didn't have much of anything to start with. For one, he started the modified "Landlord's game" at his mother's residence at Mediterranean Avenue, so there wasn't much cash to help him find his footing or to get him set up with initial investments. There weren't any good paying jobs in the ghetto either, so the only way to get capital was to get out and look elsewhere for a decent pay. And you can be sure, it was going to be a long time before he could pass "Go" and collect that $200, which he figured, some of it would likely be needed to pay for the repairs on his mother's ghetto house. So Johnny rolled the dice and set forth on the board.

The boy was fortunate to be able find work in various entry level and temporary positions. He paid his rent and his bills like he was supposed to, and he believed that one day if he saved enough, he could purchase a nice property and get his "game on". But trouble always has a way of following those who try to leave the ghetto life. It didn't take long before Johnny was involved in an incident that landed him in the local jail. A criminal record, no matter how minor, is like an ugly scar on a pretty face. It's a hard sell, and Johnny's career prospect was dampened but his resolve remained firm. It took a couple of years, but that damning record was erased from his background history, and he was back on his feet again in no time.

Then one day by chance, he landed himself a visit to the doctor for a strange growth on the side of his throat. Yes, Johnny had cancer and the treatment at the clinic wiped out his savings, despite the health insurance covering most of the expenses. Such is the game of Monopoly - c'est la vie. It looked like disability benefits and personal loans were the only viable options from this point onwards. He also took out a loan to go back to school, thinking that perhaps a degree was going to help ease his climb up the board. Unfortunately that wasn't the case. The supply was far in excess of demand for those positions, and before long, Johnny found himself living out of a tent at Atlantic Avenue; because that's where the "good jobs" were but the rent was astronomically unaffordable. But at least he was half way there (of the Monopoly board); livin' on a prayer; he clasped his hands and swore that he'll make it to "Go"; livin' on a prayer - and packets of instant ramen. Go go! Go Johnny go, go, go!

And back home, his mama cried. 'Cause if there's one thing that she don't need, it's another homeless son coming back into the ghetto (in the ghetto). She thought maybe her house on Mediterranean Avenue might help Johnny a bit, if she could pay off the third mortgage. But everything was getting so expensive - how was she to manage? And she sat by the windowsill, and bemoaned that poverty was the fate of losers in the game of Monopoly. The sun set slowly on that scarlet skyline; the verdure house snugly fit in between the tiles of "treasure chest" and "Go"; either side containing fortunes barely out of reach of her outstretched hands; a mere casualty of a game, of a deliberately unfair system. And Lizzie wept bitterly - joining the tears of billions; and her cries for a game of Anti-Monopoly echoed - amplified - and ascended to a thunderously tempestuous reverberation - a lamentation of the damned - throughout the ghetto (in the ghetto) (in the ghetto).

[G.I. Bergstein]

Real estate monopolies is a reality. The world of mega realty has created a new royalty, and has also created an unrealistic climate that stubbornly claims is "capitalistic" and promotes "free market". Preferential government protection and lucrative deals are most certainly not indicative of a society that values free enterprise and sound economic fundamentals. Corruption would be the correct word to apply in such a circumstance, but then again, when such a practice is applied across the board and prosecutions are silenced, it just means "business as usual". After all, "greed is good" is not a catchphrase meant to shock the average person who has a strong moral compass; it is a mantra for the generation to cast off the compass altogether as a relic of idiocy. Emulate the villain rather than vilify him, because you can always wash your hands and turn back in the future; go pick up the moral compass when you're done with your pillaging; ask for forgiveness when you're on your deathbed, after scorching the earth for a few pieces of silver; It's not your fault of course. None of it was your fault. It was the fault of the big bad wolf... Oh what a long nose you have, Pinocchio. I hear the woodcutter is at the door; he's looking for his little girl. Have you seen her? Have you seen her, Pinocchio?

Since when is any private business "too big to fail", unless it was no longer private? If it was public, then it should be "too publicly important as a key infrastructure to fail". If is still was a private business, then it should actually be, "too big and inefficient to succeed on its own without relying on cronyism". Such a business practice is not business at all. It's called raiding the public coffers for the benefit of the few - grand theft mortgage and government backed securities, if you will - to keep the roulette wheel spinning, and to let the game continue in the hope of winning back the gambling losses. *Dumb da da dumb, dumb dumb dumb, dumb da da dumb, dumb dumb dumb*

"Do you really expect to win at the roulette table, Goldfinger?"
"Of course, Mr. Bond, I expect to cheat! It's worked tremendously well so far, and I don't see any reason why it can't continue. Just keep it rollin', bruh! And don't let the laser beam inching its way to your crotch bother you!"

Crime certainly pays, it seems - when one runs the casinos. The five families were taken out in a brilliant stroke of ruthless wipeout, and the business had finally become legitimate. The associates and heads of reputable interests paid their respects to the family bearing gifts - of loose credit, cheap labor, and exclusive markets.

Who is greater than the big Kahuna?
Who is better than "(s)he/it"?
Who wants to buy a bridge from the one who keeps the cuff key?
Let the swine eat cheap capital, proclaimed the plastic queen.
Bring forth the refreshments, for the view is supreme.

Let us look at the little engine work its way up the hill - "I think I can, I think I can, I think I can." Watch it reach the top by drawing on skulduggery. Now let us watch it go on down the grade, doubting itself by saying, "I thought I could, I thought I could." *Choo choo* Look out below! Make way for the engine that could, but unfortunately didn't question hard enough whether it should.

[Candideto]

There's every reason to point the finger at the "top hats" and the like as the problematic manipulators driving the property prices beyond the reach of the salaried population. But there are many other players far smaller than those titans who contribute to the effect. People who repair old houses and sell them, a practice referred to as "flipping" (like the bird?), turn a profit usually by making cosmetic changes to old properties in disrepair. The walls, plumbing, wiring, roof, insulation, and siding may all need to be torn down and replaced to justify marketing the property as "renovated". In terms of quality, there's no sensible reason to place the house on the market that is priced at the same value as a new construction. No other sector can justify such pricing. For instance, why would anyone buy a regular "refurbished" automobile or electronics when they can get a new one with better specs at the same price? An inferior product is supposed to cheaper - unless the buyer is desperate - which is another major problem in and of itself.

When one does not own a residence, then the only alternative left is to rent one or to adopt a "nomadic lifestyle". If the rental market is steady and affordable, then the inclination to purchase a property is low. If however the rental market is "hot", then the rising rental price drives the renter to seek a safer and more stable accommodation. Hence the renter enters the property market in search for a cap to the monthly housing expense. This drives the housing market to be "hot" if the inventory of available housing is low. The knock-on effects are linear and the dynamic is simple to understand. In such a situation, the sensible thing to correct the runaway unaffordable housing price hike would be to increase the supply of affordable houses and drive down the price of old houses and rental properties.

But if this is so easy to fix, then why doesn't it work? Well, one likely reason is that it doesn't matter because there are many non-local buyers with interest in owning property - not as a primary residence - but as an investment - whether that means using it for rental purposes or to use it as a bank to accrue value by riding the market. When it's lucrative to shift capital into such investments, you can be sure that people with any bit of wealth will take the opportunity. There can be disincentives to curb such behavior of course, but whether those measures would be effective or not will depend on the availability of better alternative investments for those who engage in such practices. Otherwise it would likely just have the effect of sapping wealth overall and creating a ripe situation for an economic downturn.

[Sybilla]

For a regular person with no investment of any kind, the equity on the house is one of a few number of ways in getting a retirement income. The hope is that by selling the property and then downsizing to a smaller residence will give enough profit to support their elder years. It's a fair assumption and a solid plan, given no alternatives. But from a buyer's perspective, does this make sense? And since a retiree planning on downsizing is also a buyer of a smaller residence, does it make sense for them to buy somebody else's secondhand home? From a quality perspective, let us examine what the expectation would be required of such a house.

Wouldn't a house with a thirty year mortgage require extensive repairs; especially for cheap construction or methods that are designed to have a limited lifetime of say, around fifty years? In such a circumstance, wouldn't the entire house need to be replaced in a couple of decades by the next prospective owner? Even if it did not need to be demolished, the structure is inferior compared to new building methods. They're fitted with outdated materials and appliances, and always needs additional repairs on top of what was done by the previous owner. So why would anyone accept such a deal since one is always buying a lemon? It does not make sense to have a secondhand house market that is priced at the same value as a new construction; no matter the excuse of prime location, high ranking school, convenient amenities et cetera.

But if the house is expected to be replaceable, then the dynamic changes. For instance, if there was a standardized way of creating foundations and a preset access to cabling, the overall structure of the house itself can be swapped out by anyone. This is the concept of what is known as a modular house. Let us say that a plot of land has one of these standardized foundations capable of stacking a number of rooms supporting a certain weight limit. A young couple purchases this plot and separately obtains modular blocks of rooms that can be placed on this land. The neighborhood for this land may state that there's a minimum requirement expected of any domicile of that plot, and therefore the couple will do what needs to be done to meet that need. Later on when their family grows, the couple may purchase additional rooms to meet their needs without needing to relocate to another house. But if they did want to move, then they would take all their rooms with them and place them on the new plot, maybe rearrange them to get some variety, or perhaps update to some other models. Or if they were downsizing, the rooms can simply be sold off.

In such a world, the only "housing" price that one would need to be concerned with would be the location, the rules of the neighborhood, and the quality of the foundation. These would be the major factors that would be at play in the housing market. No need to repair secondhand houses and no need to compromise on anything to do with the house itself. The secondhand house market would be limited to the buying and selling of secondhand modular rooms. As long as there are enough plots of land, home ownership should be a more realistically achievable goal than in the current climate. The rich will continue to live on the affluent plots. The poor will congregate to the cheaper lands. But both will have decent residence under a common code. Also as long as the foundation is compatible with the modular home standard, you can even continue to have "permanent" structures on top of them, as we have today. It may not be a panacea for the housing problem, but this would at least provide more variety, more choice, and a nudge towards a more free market.

[G.I. Bergstein]

How can any "family house" be affordable in a market where the inventory is always in short supply? How can home ownership ever be achievable when the price of every property always goes up? Is this really simply inflation or is it market manipulation (or both)? When too many people have too much money and they "invest" in other people's life's necessities such as their housing, isn't the end result a saturated and untenable market? Wouldn't a significant house tax on non-primary residence deter such behavior? Wouldn't that actually get people to "invest" in economically useful things such as establishing active businesses and hence leading to job creation?

Housing is not an "investment" - it is a human right. Creating housing bubbles to flood a geographical region with external capital may seem like a quick answer to a public servant's electoral woes or financial difficulties of realties, but it most certainly is not a path towards establishing a strong and functioning economy composed of an empowered population. It creates serfs and destroys homes; lives that would have been better off had they not been priced out of their residence by an estate agent carrying out the will of their "too wealthy to care about the details" clients. Do these earls, dukes, marquis, counts, barons, and your royal pain need other people's "family homes" just so that they can get their 10% return? How about a 10% tax on each property for sending humanity back to the middle ages? How about a penalty tax for every ounce of misery incurred on people desperate to own a home? How about a 10% extra penalty fee for agents and institutions who support such people? Wouldn't that clear up the inventory rather quickly?

Imagine if single family homes and townhouses had a property tax that would double for every house you owned. First house - regular tax. Second house - (let's be nice and let the middle class have a holiday home, or an "income" home) - regular tax. Third house - quadruple tax (we were nice about the holiday home, so you can't really expect this to start from double, can you?). Fourth house - octuple tax, so and so forth. If you live out of state, then double the tax number. And no, you can't create a shell company or some limited liability company to shield you from your tax obligations. All such properties must be personally under a person's name (compliant to the IRS rules for tax purposes) - give it to your cousin if you'd like but pay a penalty if you ever touch any of it. Who'd want to keep such properties when they're such harsh liabilities? Wouldn't any sensible person want to move on to greener pastures?

Instead, such investments can move to apartments and condos, which would work under a different taxation system. Perhaps single apartment/condo ownership can still work under the framework of townhouse taxation, if need be. The rental market will need to be affordable for the renter and yet profitable for the business. And therefore it will need a suitable environment for that to function properly. Construction will continue to be needed in many areas; whether that's reinforced cardboard houses of the suburbs or concrete and brick tombs of the cities. There are plenty of opportunities to be had, but they will require more actual work than passive rent and profit collection. One thing is for sure though. The exercise would certainly be better for one's health.