Just a few days ago, I had a dream where the homeowners in a country overseas would list their properties on public stock exchanges and property would not only be bought/sold with a a click of a mouse button but values would show real time market fluctuations. My response in the dream was "wow, this is a great idea ... we need to bring this idea to the U.S. and I'll write a blog entry about it!"
Obviously, the idea would be hard to implement in the real world. First everybody would have to be renters. They could own the space they rent but they still have to pay rent. All rent would be paid to a central exchange and then rents paid out as dividends to stock owners. With this in place, publicly traded housing would consist of ownership of future rents. Instead of a mortgage to buy a house, you could buy either fractional shares and slowly build your ownership over time ... or buy on margin. Assignment of leases would then be done via some auction exchange (say an ebay for rentals).
How it might work -- let's say I have my eye on a house I want to live in. I see the lease is due to end in 2 months so I put in my bid for the next lease. The current leasee obviously does not want to be bothered with moving out so they'll have an extra incentive to bid more than I do. But if I make a lot more income, it will be hard for them to outbid me. So through millions of rental auctions happening all the time, the realtime rent values are updated. At any time, you can see what you are paying in rents, what others are willing to pay which in turn implies what they are willing to pay to take over your lease. (E.g. you current pay $1000/mo, market prices for the same location/size rise to $1300/mo -- that means you could sell your lease for $300/mo for the remaining months.)
Now if you want to hedge against increases driven by market forces, you could then buy fractional ownership shares of the housing type you want to live in across multiple units. If both lease and purchase were done at the same time, you would be paying $1000/mo in rent and receiving $1000/mo in dividends. If rental rates increased at the time of lease renewal, your +$300/mo rent would be offset by +$300/mo dividends.
This idea might be interesting to implement in a virtual reality game like Second Life. To do in the game of real life, too many existing conventions would have to be changed -- people would have to have much fewer possessions and be far more mobile.
Just realized this is my 100th entry. When starting out, I had an outline of roughly 15 topics I would write about but wasn't sure if I could keep it up beyond that. I've taken a few breaks here and there but I'm happy with how this has turned out.
(Filed in economics)
Dreams of Economics & Blogging
Posted by Mossy
December 3, 2010 9:42 AM
Obviously, the idea would be hard to implement in the real world. First everybody would have to be renters. They could own the space they rent but they still have to pay rent. All rent would be paid to a central exchange and then rents paid out as dividends to stock owners. With this in place, publicly traded housing would consist of ownership of future rents. Instead of a mortgage to buy a house, you could buy either fractional shares and slowly build your ownership over time ... or buy on margin. Assignment of leases would then be done via some auction exchange (say an ebay for rentals).
How it might work -- let's say I have my eye on a house I want to live in. I see the lease is due to end in 2 months so I put in my bid for the next lease. The current leasee obviously does not want to be bothered with moving out so they'll have an extra incentive to bid more than I do. But if I make a lot more income, it will be hard for them to outbid me. So through millions of rental auctions happening all the time, the realtime rent values are updated. At any time, you can see what you are paying in rents, what others are willing to pay which in turn implies what they are willing to pay to take over your lease. (E.g. you current pay $1000/mo, market prices for the same location/size rise to $1300/mo -- that means you could sell your lease for $300/mo for the remaining months.)
Now if you want to hedge against increases driven by market forces, you could then buy fractional ownership shares of the housing type you want to live in across multiple units. If both lease and purchase were done at the same time, you would be paying $1000/mo in rent and receiving $1000/mo in dividends. If rental rates increased at the time of lease renewal, your +$300/mo rent would be offset by +$300/mo dividends.
This idea might be interesting to implement in a virtual reality game like Second Life. To do in the game of real life, too many existing conventions would have to be changed -- people would have to have much fewer possessions and be far more mobile.
Just realized this is my 100th entry. When starting out, I had an outline of roughly 15 topics I would write about but wasn't sure if I could keep it up beyond that. I've taken a few breaks here and there but I'm happy with how this has turned out.
(Filed in economics)
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