> Real estate is seen as an investment because prices tend to appreciate over time, not because of some conspiracy.
Housing prices increasing over time is the conspiracy. Laws in this country are set up to pump housing value by making it hard to densify and providing tax advantages for owning. People's expectation that their house will increase in value has lead to a wide range of policy failures.
Until the government and therefore its constituents accept that housing can't be an investment it will remain unaffordable.
> Housing prices increasing over time is the conspiracy.
That's a stretch. It would be basically impossible for a house to not increase in price unless it was built to such low quality that it disintegrates when exposed to weather or the whole region goes into economic collapse (e.g. Detroit of some time back). Neither of these are conditions you'd want if you can avoid them, so you don't actually want a depreciating house.
The reasons are simple, no conspiracy. If you build a house on one of two empty lots today and then someone wants to build an exactly identical house in the other lot in 20 years, it's going to cost a lot more to build that second house. Because materials and labor costs have increased quite a bit. But the house is identical, so market price of the older house will necessarily be about the same as the new house.
(Yes this assumes the older house has been maintained so it is identical to the new one.)
> Because materials and labor costs have increased quite a bit.
Obviously housing value increases with inflation. The question is why it increases so much faster than inflation. Yes, there are some natural reasons like land scarcity in the face of demographic shifts toward urban areas, but the biggest reason is laws that have been passed by local legislatures that are captured by homeowners. I think that's a conspiracy.
housing prices tracked inflation very closely until the dot.com era. Then housing prices started to rise faster, until the 2008 crash. Then housing prices pretty much reverted back to the inflation curve.
The last decade has been an unprecedented bull market with low inflation, so yes, over these ten years housing prices have run away from inflation. But now inflation is rising and housing is dropping. It's anyone's guess whether it'll drop back to the inflation curve but it well might.
So it's clear that housing prices have much larger market swings than the steady march of inflation, but it's not clear that in the long run it actually outpaces it much.
Would be most interesting to see this same graph on a per-city basis instead of nationwide average, but I didn't find that info. Certainly housing prices will outrun inflation in a few hotspot markets like SF or NY. But that also means that for most regular cities the housing prices don't increase at the rate shown in the graph.
House prices appreciate over time because people's income increase and historically do so faster than inflation.
For instance in the UK, in the early 1970s, the average house price was less than £5,000.
Is it reasonable to expect houses to still cost about £5,000 when the average income pa. is now £38k. Of course not.
OK, what about adjusting this by inflation since 1970? Well it turns that gives about £63k. Clearly that'd still be a massive bargain compared to people's income, which means prices would not stay that low.
Bottom line is that as long as (a) houses do not depreciate fast because of fear and tear, (b) that population grows, and (c) that people's income grow in real terms then housing prices will grow and thus real estate will be seen as a viable investment at least to offset inflation.
Frankly this "housing can't be an investment" stance is ideological.
> Frankly this "housing can't be an investment" stance is ideological.
All stances are ideological. The fact remains. If housing increases in value faster than wages it is by definition becoming less affordable. If it doesn't than it isn't an investment. The only solution to housing affordability is to stop making laws that ensure housing will increase in value faster than wages.
Not faster than wages, as that's not sustainable over the long term, but faster than inflation as long as the same keeps happening for wages (which it has over the last 100 years though there is no guarantee to continue). The constraint is incomes.
This is not ideological. This is simply a natural consequence of people getting richer (incomes beat inflation). Nothing in my previous comment is ideological, either. It's an observation of the economic forces at play.
Housing is increasing in value far faster than wages. That is what makes it an investment. If it increased in value at the same rate as wages it by definition wouldn't be investment.
Housing prices increasing over time is the conspiracy. Laws in this country are set up to pump housing value by making it hard to densify and providing tax advantages for owning. People's expectation that their house will increase in value has lead to a wide range of policy failures.
Until the government and therefore its constituents accept that housing can't be an investment it will remain unaffordable.