Should Housing Prices Go Up?

By Richard

The article “Should Housing Prices Increase?” by Richard, argues against the common notion that housing prices should always increase. The author questions why property prices should increase even when there is no demand or when there is still plenty of land. The article also argues that if property prices were to decrease, it could be beneficial for the economy as it would make housing more affordable for first-time buyers. The author also draws a comparison between housing and other commodities like cars and furniture, which generally decrease in value. 

We are aware that housing prices have increased for many decades and several generations. We accept this as the norm. There have been books and mentors instructing you to invest in real estate and make money. People have made millions of dollars through real estate. However, should housing prices rise?

If the value of real estate decreased, probably 99 percent of individuals would be unhappy. There would be those who invest in property would like to see a continued increase. There are those who want their property to be worth significantly more by the time they retire. You may wonder why anyone would desire a decrease in property prices.

Have you ever considered that the economy would benefit from property depreciation? I haven’t heard a single person say that. However, I recently had an epiphany and thought of this. Here is what I believe would occur if the value of real estate decreased. Permit me to rewind a bit before I continue.

Consider automobiles; in general, do their values increase or decrease? Consider any item in your residence, including appliances, furniture, and tools. Do they increase in value? Consider office and manufacturing equipment; do their values increase or decrease?

We are all aware that their value declines. There are, however, exceptions, such as a classic automobile whose value increases over time.

In essence, the value of man-made objects declines. But there is an odd exception, and that is with real estate.

The majority of individuals would respond, “They increase in value due to supply and demand; since there are more people, prices should rise.”

This is a plausible explanation. Ultimately, supply and demand are the driving forces behind a capitalist market.

Now, I will concede that a property in need of repair should increase in value; after all, something that is repaired or replaced is beneficial to the homeowner. If a location is desirable, and more people are prepared to pay a premium for existing buildings, then it is advantageous. For instance, it is acceptable for the population of a sparsely populated area near the shore to increase in tandem with the number of people who wish to reside there. I have no objections to that. What I’m discussing is this.

• Should property, in crease in value, in general, when the residence or commercial property needs repairs?
• Should property values increase when there is still plenty of land?
• Should the number of dwellings increase if the population is stagnant?
• Should real estate prices rise when there is no demand?

I suppose not. Despite this, we observe consistent growth regardless of the economic, social, or geopolitical climate.

The crucial query is, “Is an increase in property value beneficial for the average citizen?” I repeat, an emphatic “no.”

Why?

Because more individuals could afford accommodation. Numerous first-time purchasers can’t afford a residence; this is the world’s most pressing issue today. Those who can must finance the majority of it. Depending on the amount of interest they pay, they could pay twice as much or more over a period of 25 to 30 years.

Let’s discuss automobiles now.

We have all come to assume that the price of an automobile decreases as soon as the buyer drives it off the lot. This applies to both new and used vehicles. And nobody is complaining. People dislike the decline in value, but we all accept it. We tolerate it because the vehicle is now used and will eventually require maintenance. People have endured this reality for generations.

Even a flawlessly functioning used automobile loses value. A residence that is 50 years old and fully functional is still considered used. And with used items, either maintenance or replacement is required. We all tolerate this when it comes to automobiles, but not when it comes to residences.

What would happen if car prices, including those for used vehicles, rose? How many individuals could afford it? Not many. Young adults can now afford to purchase a car to commute to work due to the decline in automobile prices. Even if they reside close to their workplace or took public transportation, this is irrelevant. When people advocate for this position, they are essentially stating that they want us to be like the impoverished in many countries where everyone commutes to work by bicycle.

This is the mentality of communists: “Good, everyone should take public transportation.” Mobility is an essential element of existence. Even if you resided close to your workplace, there are instances when you must drive to another location. Or, you wish to travel to a different location in half the time required by public transportation.

If the price of older residences had decreased over the past century as automobile prices have, no one would complain and everyone would tolerate it. If society were structured in this manner, more individuals would own residences. If some individuals favoured apartment living, that’s fine. The apartment expenses would also be reduced.

Everyone would have more disposable income for vacations, retirement, and inheritance.

If residences were less expensive relative to other man-made items, fewer individuals would require a mortgage. Consider the following if you purchased a home for $250,000 with a mortgage. And, depending on the duration of the mortgage and the interest rate, you were required to pay an additional $250,000 in interest; imagine what that could have done for your family. You could purchase shares of a reputable company. I am sure you can come up with a variety of uses for a quarter-million USD.

At the turn of the 20th century, 95 percent of the population did not have a mortgage. Few individuals borrowed money to purchase a car. Consider how this benefited everyone.

The reason why property prices are not as low as they should be is because financiers make the majority of their money from mortgages. Therefore, rising property prices benefit bankers and speculators.

Since the majority of properties for sale are older, the majority of people would pay significantly less than they do now. Few, the top 3%, benefit from high real estate prices, whereas lower prices would benefit the majority of people.

Which way do you want it? The decision is yours to make.