# Do aliens from other planets run their housing market the same way ours is run?

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kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Do aliens from other planets run their housing market the same way ours is run?

If we assume that that there are intelligent aliens on other planets, how likely is that the housing markets on Earth accurately reflect the system that works best?

Here's my bet: The chance that we have the best system is 0%. The chance that there are better systems being practiced out there of which we have no knowledge or understanding of is 100%.

Imagine if an alien had come to us and said this is how his civilization values property:

Decree X: "According to the multitude of years remaining in the first 30 years of the property, the price at the house is greater, and according to the fewness of years remaining, the price of the house is lower, for according to the number of the years remaining of those 30 years, is the amount the house to be sold."

So what does this mean? Let's break this down into parts:

y = current price of a home

m = change in the price of a home per year

x = 30 - number of years remaining of those 30 years

b = market price of a home

-m = b / 30

y = m * x + b

Could it be possible that we have such a system in place? The answer is a decisive no. Here's why.

http://en.wikipedia.org/wiki/Home_equity

"Home equity is the market value of a homeowner's unencumbered interest in their real property—that is, the difference between the home's fair market value and the outstanding balance of all liens on the property."

In this definition from Wikipedia, we have several financial constructs that are not part of the method given above it. Just one example for starters: there is no discussion of a "remaining number of years" in regards to a "market value" of a home.

In contrast, Decree X does not discuss an "outstanding balance". Also, Decree X does not discuss of any kind "home equity". The question then arises, "Is the concept that is regarded as 'home equity' on this planet necessarily practiced by other intelligent life in the universe, or could 'home equity' be defined differently or not at all? Also, could Decree X be a superior means of market valuation?"

In our system, if the value of the property fell according to the number of years remaining in the mortgage, we would reasonably expect that the price of the home fall roughly proportional with its value in terms of rent. However Decree X does not treat rent this way. From the formula above, we could interpret m, the change in the price of a home per year, as -1 times the total amount of rent paid that year. -m is defined as -m = b / 30, so the rent per year is decreed equal to the inital price of a home divided by 30. As a result, Decree X decrees that the price of a home must fall linearly over time, so as long no changes to the property to occur to change the value of m. Also, any changes to |m| require that b is changed proportionally. As a result, Decree X's equivalent of rent and mortgage markets are actually part of the same entity. Unlike housing markets on Earth, Decree X gives no special treatement for either renters vs. homeowners. Under, Decree X, renters and homeowners are indistinguishable.

As with housing markets on Earth, Decree X allows for profit to made by selling a home. The amount of profit for the seller:

y at sale - y at purchase

The profit is obtained by meeting two objectives:

First, b must increase, and therefore |m| must increase.

Second, the increase of b and |m| must enough to compensate for the increase in x, for each unit increase x signifies the equivalent of one year of rent.

In our current system of valuation, it is inconcievable that the price of a home can fall linearly after each sale while still making a profit on it, yet Decree X allows this to happen by allowing increment increases in b and |m|, followed by a linear decrease of y. As a result, Decree X stymies the upward pressure on market prices that would otherwise result from the desire of tenants to make a profit off the home and do so without sacrificing the potential for earnings. Under Decree X, homes that have been on the market longer are competed against the price of newer homes due to the cumulative fall in their y value. The ability to keep house prices low means Decree X can prevent housing bubbles and reduce price volitality of homes independently of monetary policies of a central bank. The result is the reductions in abitrary transfers of wealth that would otherwise result from housing bubbles. What does our society do to itself without Decree X?

V
Status: Platinum Member (Offline)
Joined: Dec 14 2009
Posts: 849
Re: Do aliens from other planets run their housing market ...

Intelligent aliens on other planets hunt large animals in a cooperative way and share not only the food but the skins which they use for dwellings which they help each other construct. They also help each other harvest plant material for the frames for the skins and for heating.  They have long since given up the idea that anything that is perishable can actually be " owned" and that the ground upon which any of them walks can be claimed by an individual.

However they have managed to construct spaceships and have come to earth and laid claim to our Earth (since this is the only concept we understand) in an attempt to straighten out our housing fiasco.

Seems about as reasonable as Fannie Mae and Freddie Mac.

V.

PS there were some aliens on this planet for a long time but we have managed to exterminate them.

Thomas Hedin
Status: Platinum Member (Offline)
Joined: Jan 28 2009
Posts: 815
Re: Do aliens from other planets run their housing market ...

If they had any intelligence at all they would not operate a debt money system and have mortgages placed on their property.

Morpheus
Status: Diamond Member (Offline)
Joined: Dec 27 2008
Posts: 1200
Re: Do aliens from other planets run their housing market ...

Simple equation of a straight line.