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30 years later...


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13 hours ago, jaclaz said:

Technically, the "fools" used to build cities/villages either on top of hills (easier to defend from enemies/invaders) or along rivers (ready availability of water and often possibility of using the river for transportation via boat), the choice to evaluate was between risks of floods and risks of landslides.

The fact that you (and me, and everyone else) exist and are alive after a couple thousand years should mean that all in all the plan of the "fools" worked.

You brought up "a couple thousand years" in your post before I did when you seem to have been offended by the word "fools" (which I also did not bring up).

At any rate, "things change".

I don't really see the point in debating history.

But let's at least agree to learn from history instead of repeating it.

 

And history tells me that relocating a "poverty population" from New Orleans due to Katrina to the Midwest only added to the Midwest's poverty issues.

So REPEATING that and relocating "poverty population" from Chicago due to covid does not do anything POSITIVE to the poverty issues HERE that hasn't even fully recovered since the last time we tried this "experiment".

"Distributing" poverty across the map is no better a "solution" than "distributing" wealth across the map, shuffling the cards in the deck doesn't change the faces on those cards.

Edited by ArcticFoxie
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12 hours ago, ArcticFoxie said:

But let's at least agree to learn from history instead of repeating it.

Sure :), that is the whole point.

I had the impression that our friend Gansangriff was going to enter into a typical Chesterton's Fence fallacy:

https://wiki.lesswrong.com/wiki/Chesterton's_Fence

jaclaz

 

Edited by jaclaz
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Give me a chance to reply! In the honour of the city planners.

Jaclaz, your feeling about city planning architects is very understandable! Cities are burning a lot of money on "city development concepts". And some of them are downright terrible. About 10 years ago, Hildesheim (German city) complained about not having a shopping mall in the center (every city has to have one nowadays to attract loads of visitors). Now where to place it? 15 minutes away from the train station in a second parallel street next to the main pedestrian zone, not even visible from the main street. Hannover (a city that makes Hildesheim jealous) has their mall at the opposite side of the train station, sucking the customers in like a vacuum-cleaner. Dammit, says Hildesheim. Their shopping mall isn't running too well. Half of the stores in the mall are empty.

Another example for city planning is the concept of the "city of short distances". Super tight planning, so that people don't have to drive that much around and get to their destinations quickly. They have used this in Darmstadt (German city), and I saw a terrible result: People are stacking on top of each other at the sidewalk! It's a very compact city with much less room than other cities.

If I recall correctly, Darmstadt was one exception of a city where the planners decided to scrap the old routes of their medieval inner-city after it got destroyed in the war years. Most German cities have rebuild their inner-city in a historical way like it was before. But why was did the planners "modernise" it? Because streets don't have to be made for horses anymore and the old guard wall doesn't protect from enemies anymore. The needs for people have changed, and everyone who has to fight with a car through terrible tight alleys here would have loved to see this properly planned for his current vehicle.

And of course I'd like to apologise for using the word "fools" in a little bit inapropriate way there when referring to the people of the past building their cities next to rivers (which they had to do of course). That was meant as an exaggeration from today's viewpoint about the location of some cities, resulting them to drown regularly. Of course people got on with the disadvantages of it. Nearly every German city burned down completly in the medieval times once or twice. Speaking of complete destruction in the war. Most people usually stay where they are, even if there is a war or a natural hazard going on. And if things break, they build it up again, because it's their home. Is that about right?

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I myself wasn't too concerned with the word-choice of "fools".

We have multi-million dollar homes build in Los Angeles or Malibu that are often built on "stilts" and collapse decades later.

We have poverty-homes in New Orleans that flood over and over and over again, but "the rent is cheap" so the renters just "deal with it".

"Fools" to me has no socio-economic undertone.  There are rich "fools" and there are poor "fools".

New Orleans homeownership rate is 48% when parent-state to New Orleans (Louisiana) has a homeownership rate of 69%.

There is a reason for the large percentage difference.

The "smarter" people relocate to safer districts and rent to the "fools".

MOST sea port cities have a lower homeownerhip rate then their parent-state - but New Orleans tends to be among the largest percent-difference (69-48=21).

Mobile, Alabama has a homeownership rate of 54% to Alabama's 72% (72-54=18).

Miama, Florida is #1 for worst cities based on hurricane hotspots - homeownership rate of 51% to Florida's 69% (69-51=18).

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Just my thoughts and experiences. Long term average real estate prices basically rise not much more than the rate of inflation plus population growth (demand). Here real estate prices on average over many decades have doubled every 10 or maybe 10-15 years, although it's not linear. Young families basically buy houses when they need them, so purchase price will not necessarily be at the bottom of a cycle.

So i think @ArcticFoxie maybe your father did okay in personal real estate but with such a long mortgage and additional lines of credit certainly not much to brag about. Also here, additions like swimming pools add little value to the property when selling, as many buyers may not desire such upgrades resulting in a smaller pool of potential buyers. You also did not equate property tax and house insurance, going up every year now. Don't be hard on your father or tear him down, he probably did the best he could, paying off a house and raising a family. I wish my father was still around to enjoy a barbecue or do some fishing :(

Presumably adding features, like a swimming pool, provided you with a 'happier childhood'. The cost of some items, like eventual siding replacement, is unfortunately sometimes necessary, it won't make money but it protects the home. At least his mortgage was a forced savings program and he now owns a property outright. Doing the long term math on 30 years of renting, not to mention no control/ownership of your personal space, would not be pretty. Plus he would now still be renting vs a paid off house.

Here personal real estate capital gain is not taxable, so to me the best is to purchase a reasonable detached (think COVID) family dwelling, pay off the mortgage early (<10-15 years) and invest additional funds into dividend paying stocks. If your investments are spread across 10-15 different stocks, you've created your own mutual fund without management fees. Many dividend paying publicly traded companies have essentially figured out a way to legally print money. Many of them are real estate companies and landlords in disguise. Think about how much land is owned by large corporations like McDonald's and Walmart, for example, which equates to land appreciation, rent from tenants (franchisee) and profit margins on products and services. McDonald's was once described by one of it's administrators as a real-estate company that makes burgers on the side.

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I'll provide a single point anecdata.

I bought a flat at a very young age, in 1984, nothing fancy, a small, average looking flat,in an average area in the city, in an average building, suitable to live in one or two people (single or young couple).

At the time I was a sort of apprentice, at the lowest possible (legal) pay (for full-time work), my wage (net, i.e. real money that went in my pockets) was around 700,000-800,000 Lire/month and the cost of the flat was around 70,000,000 Lire + (if I recall correctly) some 3,500,000 Lire taxes, and notary and other fees..

Thus the flat equated roughly to 100 x basic monthly/wage.

At the time a more than average pay was 1,100,000-1,200,000 and a very good one in the 1,500,000-1,600,000 range (or double the minimum one).

Nowadays a comparable apartment would probably sell for something in the 180,000-220,000 Euro range.

The lowest possible (legal) pay is now around 900-1000 Euro range (again, net, in the pocket).

An average wage now is  1,300-1,500 Euro and a very good one in the 1,800-2,000 range.

Do the math on the value as ratio on the wages, no matter the increase in value of the property, the point is that a young man starting his career (if any) today cannot simply afford what I could afford 35 years ago, the ratio is doubled, 200 instead of 100.

jaclaz

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Dad has actually come around to my way of thinking (not because he gave up his argument, but because we do have a way of convincing each other and turning each other around over the years, but it's always a head-butt at first).

What really started this whole debate (between dad and I) was dad's use of the word "investment".

As someone else pointed out, real estate basically keeps up with INFLATION - that does NOT define it as an "investment".

True, "not all investments make money" - but to "define" an asset class as an "investment" means that you "expect it" to make money - any my point is that real estate RARELY DOES.

It may keep up with inflation, but a "savings account" 'safe haven' and an "investment" are two entirely different asset classes.

 

To @jaclaz's point of 1984 and a young man today, I offer the comparison for a young man in the US. (I used Google and this web site - https://dqydj.com/historical-home-prices/ )

1984 annual average wage was $16,135 and the median house cost $68,198 (for reference, inflation-adjusted this is $168,696 in June 2020).

So that ratio is 4.23 (house cost divided by wage).

2020 annual average wage was $87,864 and the median house cost $300,987.

So the ratio is 3.43.

 

So I guess things are better here in the US compared to Euro as far as 1984 versus 2020.

But I also did not verify your Euro numbers, I'll take them at your word.

 

Edited by ArcticFoxie
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On 6/15/2021 at 8:01 PM, ArcticFoxie said:

So I guess things are better here in the US compared to Euro as far as 1984 versus 2020.

No. :no:

Maybe they are :) but you completely failed to demonstrate it :dubbio:.

You are mixing numbers liberally, median house means nothing and of course average wage is very different from "net amount in pocket" of a yute.

You need a very specific kind of house in a very specific kind of city and a specific (initial, first full time job, unqualified) net wage to be able to make a meaningful comparison.

Go compare the  price of a 600 sq ft flat in (say) New York, San Francisco, Seattle against a same size flat in (still say)  Akron or Detroit.

Median and average mean nothing, as an old Italian poet said, if I eat a chicken and you eat nothing, on average we had half a chicken each, and of course, from the Simpsons:

Quote

Oh, people can come up with statistics to prove anything, Kent. 14% of people know that.

jaclaz

 

 

 

 

 

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Then I shall leave it up to YOU to demonstrate if true or if NOT true.

I'll sit back and see how YOU attempt to demonstrate WITHOUT the use of "statistics".

Because from "this side", YOUR demonstration of YOUR "flat" CAN NOT BE PROVEN - if you don't have some sort of "statistic" that is VERIFYIABLE, then you might as well MAKE UP NUMBERS or PULL THEM OUT OF YOUR BUTT  :o

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6 hours ago, ArcticFoxie said:

Then I shall leave it up to YOU to demonstrate if true or if NOT true.

I'll sit back and see how YOU attempt to demonstrate WITHOUT the use of "statistics".

Because from "this side", YOUR demonstration of YOUR "flat" CAN NOT BE PROVEN - if you don't have some sort of "statistic" that is VERIFYIABLE, then you might as well MAKE UP NUMBERS or PULL THEM OUT OF YOUR BUTT  :o

So after all, you do doubt my word for it :w00t:, of course you are perfectly free to go along this line of behaviour, which - JFYI - I find both offending and uncalled for/confrontational, besides the unneeded use of capital letters to shout at me.

And of course I don't have to demonstrate anything.

You might want to refresh the reading of board Rules/Guidelines, with particular attention to #7.b and 11

https://msfn.org/board/guidelines/

jaclaz

 

Edited by jaclaz
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I shall publicly apologize if I offended.

Was certainly not my intent.

 

But I will add this, I *love* statistics so from "my side", you struck first  :yes:

 

So taking a few steps back then, how would you propose a demonstration on whether home-ownership has "improved" MORE or LESS in the US versus Italy for 1984 versus 2021 ???

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11 hours ago, ArcticFoxie said:

I shall publicly apologize if I offended.

Was certainly not my intent.

 

But I will add this, I *love* statistics so from "my side", you struck first  :yes:

 

So taking a few steps back then, how would you propose a demonstration on whether home-ownership has "improved" MORE or LESS in the US versus Italy for 1984 versus 2021 ???

No problem, the fact that your post was hostile and offensive doesn't mean that I was actually offended. :)

Statistics is fine, if compared with statistics, the moment you use averages and medians of (extremely large and "miscellaneous") datasets against specific datapoints what you obtain is at the most a median or average of a mishmash.

You compared an average wage (which is usually, but has to be checked, NOT net) against a (surely) net data for a very specific kind of income: first job, minimal legal pay for full time that I provided. 

Surely there is similar data for the US, but you have some 50+ states, and each one is different, minimum wage is between 7.25 US$/hour and 15 US$/hour:

https://www.monster.com/career-advice/article/state-minimum-wage

https://www.epi.org/minimum-wage-tracker/

For around 2,000 hours/year, that means a fork between 15,000 and 30,000 US$/year which is between 1,250 and 2,500 US $/month.

And  that is - I believe - gross  or "before income and other taxes", anyway both extremes are very different from the $87,864 you used in the comparison.

Then the house, you provided median data for a single family house, that is at least a couple levels higher than the kind of flat I used in my post, which is a very basic one, near to the minimum size that a single or a young couple, without children, can live in with a minimum of space, i.e. 55 sq m or 600 sq ft (legally, in Italy, no house can be smaller than 28 sqm, and the minimum - again legally - for a couple, is 38 sqm, roughly, respectively, 300 and 400 sq ft) US houses (and again it depends on states and even on cities) tend to be much larger and a "single family house" is usually a 2 or 3 bedroom one some 1500 to 2500 sq ft:

https://www.statista.com/statistics/529371/floor-area-size-new-single-family-homes-usa/

Then the location, even as we have some rather wide differences by region or city, it is rare to find the same wide differences you have among different states and cities in the US, my single datapoint is about a city which is more expensive than many but not among the most expensive ones, to "port" it to the US, that would possibly be (say) Phoenix, Az or Baltimore, Md:

https://www.fool.com/the-ascent/research/average-house-price-state/

and probably the "bottom tier" prices are more comparable. 

In these two states, minimal pay is around US $ 12, which makes 24,000$/year, which I believe :unsure: are gross and that become for a single (very roughly) around 12,000 (exempt)+85%*12,000=22,200 which, divided by 12 mean around 1,850 US $/month net :dubbio:.

So, in my calculation the ratio is 190,000/1,850=÷100, the same as my old italian 1984 one, but very different from your calculated 3.43*12=41,16 one.

If you have the time and will, try finding the corresponding 1984 US data to be able to make a comparison.

jaclaz 

 

 

Edited by jaclaz
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Allow me to recap so I can follow easier  --

 

2021 Italy  --

190,000 Euro for nothing-fancy, small flat in an average city, in an average buiding, suitable for one or two people

1,850 Euro per month for low range of a good wage

The Jaclaz Ratio (home price / monthly net income) => 190,000 / 1,850 = 102.7

 

1984 Italy  --

73,500,000 Lire for nothing-fancy, small flat in an average city, in an average building, suitable for one or two people

1,525,000 Lire per month for low range of a good wage

The Jaclaz Ratio (home price / monthly net income) => 73,500,000 / 1,525,000 = 48.2

 

Am I correct in my recap?

If so, I'll then do 1984 versus 2021 for a nothing-fancy, small flat in an average city, in an average building, suitable for one or two people for a US City.

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No, the overall results are consistent,2021:1984 ratio of 2, 102..7:48.2 or 200:100 are essentially the same numbers, but you used the "wrong" pay levels.

The idea is (and has always been) bare entry level pay. (as some people will have the possibilities, or capabilities, or luck or all of them to soon have a better wage or however a better than minimum income, but many will be deemed for years, often tens of years, to have the minimum or slightly above the minimum income).

1984:

minimum monthly pay (net): 700,000-800,000 Lire
cost of flat: 73,500,000 Lire

You needed around 100  monthly minimum wages to pay for the flat (100/12=8,4 so this was feasible with a 20/25 years mortgage if you could live in the meantime with roughly 2/3 to 3/4 of the minimum wage[1]).

2021

minimum monthly pay (net) : 900-1000 Euro
cost of flat: 200,000 Euro

You need around 200 monthly minimum wages to pay for the flat. (200/12=17 so this, even if interests are at a very low level, is not feasible with a 25/30 yeas mortgage[2][3])

The huge difference is that the 1984 is (was) feasible. the 2021 is not.

jaclaz

[1] at the time interests were high, but so was inflation and minimum pay followed (somewhat) inflation and increased whilst mortgage was fixed rate, so in a few years the re-payments "weighted" less and less
[2] nowadays we have low interest rates but also inflation is (or, better, is calculated as being) very low, so there are not noticeable increases in minimum pay levels and the weight of the re-payments tends to remain unchanged.
[3] and of course exceeding 30 years for a mortgage is very rare, though there are a selected number of banks that market 40 years ones, in these cases new formulas came out (since around 2014 if I recall correctly), essentially "rent to buy" ones, where you pay partly for the use (rent) of the house and part for its property and delay for several years to go "all in" and pay the rest of the property cost. 

 

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