I didn’t say it was an asset. The majority of physical things you purchase are assets.
I said it was an “asset class” in the financial use of the term.
“ An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations.”
It is being treated as an asset class as opposed to say a service or a utility.
We need housing and clothing, but we don’t treat or normal clothing as an asset class. We buy it and use it, we don’t expect it to appreciate in value.
Yes, I got that. Housing has been such for well over 100 years, right?
It is not treated as a service or utility because, well it is neither of those things at all.
Even if you somehow forced it into such a market, the value would still likely be the same cost to a homeowner, since there is not going to be some free lunch here. People willing to pay $X to live at Y will continue to be willing to do that. Services and utilities do not mean free or low cost.
>treat or normal clothing as an asset class
Because it is cheap, it wears out, and goes to zero value. You really don't want the value of your house to be zero, meaning it has no utility to anyone, including you.
It institutes restrictions on the amount of shoes that can be made (so as not to crash the market). Supports the market by subsidizing mortgages so people can purchase shoes at high prices (note that people will always be able to buy shoes, they just might not have the money that the market is asking and so the market would need to adjust their price - hence why mortgages are important. They give everyone tax breaks on the income they make from renting out shoes to people without shoes and places restrictions on everyone so that everyone must have a complete set of shoes (no sandals allowed) and forces everyone to always wear shoes.
So now, the people who own shoes are happy. They decide the government is a great government because they are protecting their shoe interest and we have a situation where shoes are very expensive and always must be increasing in value for everyone (with shoes) to be happy.
Lots of people start investing money in shoes (driving up the value of shoes) because everyone knows the government are actively protecting the price of shoes. Which in turn drives up the "value" of shoes and the cost of shoes for people without shoes.
So, are shoes and houses that much different. Houses also require upkeep. You can resole your shoe, you can reroof your house. Some would say houses require much more upkeep. Sure, houses are a little more permanent and hard to steal. But a shoe very rarely burns down.
That is not how reality works. Prices go up because people are paying them - it has nothing to do with government. A seller wants the highest price, no matter what the govt or local markets do, and a buyer wants the lowest price, no matter what govt or local markets do. Each is competing against other sellers and buyers. At no point is the govt telling a seller they're too low or a buyer they're not high enough. If either side dislikes the deal, they walk.
It has nothing to do with being an asset class - the causality is the other way. Houses are valuable, are a significant amount of money for most people, and increase in value because, if nothing else, inflation - thus they're an asset. So is holding cash (which actually deflates in value, yet is an asset), so are bonds, stocks, annuities, pensions, and on and on.
As to the shoe example - here's more what happens:
People would all love it for their cars to increase in value, but in reality they do not. The govt is not making this market out of magic to satisfy people's desires - houses increase in value at slightly above inflation because the market values them so.
By your reasoning, govt is magically making prices go up, but the market would not simply follow along.
And, if the govt were magically making prices go up against market wishes, they're doing a terrible job at it - housing only increases around what other assets do - and that's the market doing it.
People have tried using govt or other forces to misprice markets, but that never lasts very long before wise investors pull the rug out and crash it.
History has a lot of examples of people both trying to fake high prices for force low prices by law and losing out to the market. The market commands vastly more resources than any govt to put things in check.
