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changes in housing prices make a huge difference. (For simplicity, assume home prices and rent rise or fall together, at the same rate.) A few scenarios:

  1. Housing prices rise dramatically. President John Nimbyism wins in a landslide and decrees no new homes can be built, leading housing prices to rise 6% annually. After 18 years, the price of Alice’s house nearly triples. The whole process of buying (and at the end, selling) the house costs Alice ~600K. Thanks to the money saved, Alice can afford to send Alice Jr. to future-Harvard, which has jacked up tuition to $150K a semester by then.
  2. Housing prices rise moderately. Housing prices rise 4%. Alice’s home value doubles, but she’s only barely better off buying. Over 18 years, renting would have cost her a few tens of thousand dollars. She’s grateful she bought, but her life wouldn’t be much different had she rented.
  3. Housing prices only keep pace with inflation. America realizes it totally forgot about a few million homes it built, greatly expanding supply. Housing prices rise only 2%. Alice is much, much worse off for buying. In total, buying costs ~1.3M. Because her finances were tied up in the house while the home value has gone up so little, Alice has minimal savings. Her daughter receives some financial aid, but takes on hundreds of thousands of student loan debt to go to college. (View Highlight)

She wants a place that’s hers. But she hates the idea that to do so, she needs to root for her home price to double. She hates that once she buys a home, she needs homes to become less affordable. (View Highlight)

the idea that home prices should outpace inflation is insane and maybe has broken modern society. When you invest in a company, you expect the stock price to rise because the company becomes more productive. It hires employees and buys resources to develop technology, improve processes, and eventually produce more widgets, services, or addictive digital videos. The company becomes worth more because it has generated, and can generate, more. When you invest in a home, you expect the price to rise because shrugs it just does. (View Highlight)

But it’s a fake version of wealth generation. The majority of the higher value comes from demand outstripping supply. Little actual value is being created, only transferred (View Highlight)