"Housing prices have appreciated not inflated. Housing cannot "inflate." Inflation only applies to currency."
Semantics only. Prices have risen faster than consumer goods, so one could theoretically exchange their shelter for more consumables. Housing prices relative to income and relative to the value of the dollar have gone up. They have, therefore, inflated.
"Increases in real estate values increase the overall wealth of Americans."
Wrong again. (If I had a nickel for everytime someone spouted this dogma...) If you buy a house for $30K and sell it for $100K, you have a theoretical profit. But if it would still cost you the entire $100K to replace the house you just sold, you haven't generated any wealth. There is no net gain. It's a financial shell-game.
"Everyone who owns real estate benefits."
Depends on whether or not you'd like to exchange your shelter for consumables. If so, then yes. If not, then no (see above paragraph for explanation). I would amend this to say 'ONLY those who own real estate benefit'. And generally ONLY those who own a piece of property other than their primary residence. For a prospective home-buyer, the inflated market is not a benefit.
"If you think housing is expensive now you would not be pleased with the values if we didn't have the cheap labor to build the houses."
This would apply only to new housing as there is no labor cost tied-up in an existing residence. Only a very small portion of new housing cost is determined by wages. The lion's share of the cost of a new house is land, raw materials, cost-of-sales, utilities, and developer profits.
I can only speak from anecdotal experience on this where I live. 15 years ago, about 95% of home construction labor was performed by American citizens. Now 75% is done by illegal aliens. Prices have still gone through the roof. Cheap labor has not offset the inflationary pressure of increased demand due to population gains, and scarcity of resources regarding real-estate (they're just not making much land these days).
"Isloationist economic policies are the recipe for another depression."
Economic policies did not cause the Great Depression. That was caused by the combination of an over-valued stock market and poor agricultural practices. There was NO labor shortage during the depression.
"Semantics only. Prices have risen faster than consumer goods, so one could theoretically exchange their shelter for more consumables. Housing prices relative to income and relative to the value of the dollar have gone up. They have, therefore, inflated."
The argument is not about semantics. You are misusing the word inflation. Inflation pertains to the value of a currency. The only argument you could make about real estate and inflation is that inflation has led to the rising values. Your factual statement that real-estate values have gone up relative to the value of the dollar proves that the increase in real estate values is not the result of inflation.
"Increases in real estate values increase the overall wealth of Americans."
"Wrong again. (If I had a nickel for every time someone spouted this dogma...) If you buy a house for $30K and sell it for $100K, you have a theoretical profit. But if it would still cost you the entire $100K to replace the house you just sold, you haven't generated any wealth. There is no net gain. It's a financial shell-game."
You are quite condescending for someone who doesn’t seem to understand the role real estate plays in the economy or the definition of wealth. Cash is not the only form of wealth. In fact, most of the world’s wealth is not cash. Real estate is a form of wealth. If people’s real estate goes up in value, then their wealth increases in the form of equity in that real estate. They can then refinance or take out a second mortgage in order to transfer that equity into cash. They do not need to sell the real estate in order to benefit from the increased value.
I will use a modified version of your example as an example. A home is purchased for $30K. Thirty years later that $30K mortgage is paid off. I will make a conservative estimate based on the general appreciation of homes in desirable areas on the east and west coasts and estimate the home is now worth $400K. The owner can now borrow $80K from the bank at a relatively low interest rate because of the favorable LTV ratio. The owner can take that $80K and use it as a down payment on another $400K home for their child, or a vacation home, or an investment home, or they can do home improvements; or they could invest in a new business; or they could just buy products they want or need. All of these things benefit the owner because they have more buying power and more options. (If you factor in inflation over the past 30 years in America, the $80K loan would be equivalent to a $20K loan 30 years ago; This means the new loan is more affordable than the first loan, and the owner is 30 years older so he or she probably has more resources to pay the new mortgage)
The economy is thus stimulated and strengthened by the increased supply of cash that is provided by the appreciation of real estate values. If people own property in an exceptionally hot market like south Florida or Vegas, then their buying power also becomes increased in some other regions’ real estate markets where the appreciation has not been as rapid.
"Everyone who owns real estate benefits."
"Depends on whether or not you'd like to exchange your shelter for consumables. If so, then yes. If not, then no (see above paragraph for explanation). I would amend this to say 'ONLY those who own real estate benefit'. And generally ONLY those who own a piece of property other than their primary residence. For a prospective home-buyer, the inflated market is not a benefit."
The paragraphs above address these false assertions.
"If you think housing is expensive now you would not be pleased with the values if we didn't have the cheap labor to build the houses."
"This would apply only to new housing as there is no labor cost tied-up in an existing residence. Only a very small portion of new housing cost is determined by wages. The lion's share of the cost of a new house is land, raw materials, cost-of-sales, utilities, and developer profits."
New homes account for about 20% of the homes bought and sold in the US. The price of new homes has a direct influence on the price of existing homes. If building costs go up, new home production comes down. This decreases the supply and increases the values. I am a real estate investor so I can tell you firsthand that you are greatly mistaken when you broadly state “only a very small portion of new housing cost is determined by (labor) wages.” The fact is that it depends greatly on the particular situation. Large portions of the developer’s costs can be caught up in legal fees in an area with tough zoning and environmental laws. A majority of the costs could be in purchasing the land for new homes built in prime locations. The cost of labor always plays a significant role in the cost of new housing. More expensive laborers build more expensive houses. Usually more expensive laborers build a higher quality houses. If you had your way more expensive laborers would build average quality homes that immigrants are building at a fraction of the price.
"I can only speak from anecdotal experience on this where I live. 15 years ago, about 95% of home construction labor was performed by American citizens. Now 75% is done by illegal aliens. Prices have still gone through the roof. Cheap labor has not offset the inflationary pressure of increased demand due to population gains, and scarcity of resources regarding real-estate (they're just not making much land these days)."
Values would be up even more without the cheap labor because homebuilding would not be nearly as profitable, therefore builders would have fewer profits and less capital to invest in building more homes. This would increase the housing shortage and values. Then we really would have inflation.
"Isloationist economic policies are the recipe for another depression."
"Economic policies did not cause the Great Depression. That was caused by the combination of an over-valued stock market and poor agricultural practices. There was NO labor shortage during the depression."
First of all, I stated they are the recipe for another depression. I never stated that they caused the first depression, although they did play a role. Your oversimplification of the depression sounds like it was yanked out of some old textbook. Many factors lead to the event. You are the first person I’ve ever seen argue that the depression was not caused by economic policies.
You have overlooked what may have been the largest factor of the Great Depression. Stock market panics and agricultural problems had occurred plenty of times before this. What made the Depression different was a collapse in the American banking system that began around 1930. 30% of the American money supply evaporated as small banks failed throughout the country. This was a deflationary event without parallel, and made the American recession far greater than that of the rest of the developed world.