jetpack domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /mnt/stor08-wc1-ord1/694335/916773/www.tvhe.co.nz/web/content/wp-includes/functions.php on line 6131updraftplus domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /mnt/stor08-wc1-ord1/694335/916773/www.tvhe.co.nz/web/content/wp-includes/functions.php on line 6131avia_framework domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /mnt/stor08-wc1-ord1/694335/916773/www.tvhe.co.nz/web/content/wp-includes/functions.php on line 6131I completely buy your point.
But, if we believe somewhere to live is a NEED – something that we could not live without – I think it can be appropriate (or at least enlightening) to treat it this way.
If we believe we REQUIRE a future position X then not buying an asset that provides X in the future is like a short position – as the change in the value of X (which we have committed to buying) can change.
As a result, no you do not have a short position on cars.
]]>I suppose what I wonder is whether you can apply a method that was formulated for analysing securities to an analysis of consumables?
]]>The key point to remember is that you are COMMITTED to consuming one rental unit per period in the future – committed. So if you own NONE you win from a fall in price, if you own one you are neutral, if you own two you lose.
As Moz says, its not super simple as you can choose the size etc of your property and this is a consumption decision you can decide on.
But when we look at it as a commitment it does become obvious why people choose housing as a low risk asset class – where the “asset” is infact the value of future rental equivalents. If we have a bubble this is a bit messier – but again that is just a transfer between agents in the economy.
]]>I think the logic is that a house is only worth its rental equivalent over time – so the position is in rental services.
If you decide not to buy a house you have to purchase rental services, and the value of rental services varies – so if real rents fall you make some money. If you buy one house you neither have to buy or sell rental services so the rental value has not impact on you. If you buy two houses you are now selling a rental service – so if real rents fall you lose some money.
A short position merely means that if the value falls you win. If you own zero houses (which many people do at birth) then lower rents also implies lower house prices which is a win for you – as it is now cheaper to get the rental service you REQUIRE in the future.
If you have one house lower rents and lower house prices should not matter as you both own a rental service and want to consume one rental service.
If you own two houses you are “long housing” as you own two rental services but only consume one – as you need to sell one a fall in prices hurts you.
]]>If we didn’t need somewhere to live we wouldn’t have an initial negative position in housing.
Interesting that this agrument implies that when you buy a house you aren’t neccesarily net long in housing, as you are offseting the negative postion you already have.
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