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There is more to high house prices than constrained supply

economist.com

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Re: There is more to high house prices than constrained supply

#201

Post by CalRobert »

titanomachy wrote: post #182
djrobstep wrote: post #167

Earlier quoted context omitted.

> Why can't I just gather materials and build my own house? Indeed. This is why discussion of "supply" misses the point. - Many people would quite happily build their own house in the middle of Central Park. But they cannot, because government intervention prevents them. - Many homeless people would happily sleep in unused climate-controlled office buildings at night, but cannot, because government intervention preve…

Are you suggesting that anyone who wants to should be permitted to build a house in Central Park? And that the "government" is unreasonable for preventing them from doing so?

No, but I do think it's worth exploring the idea of a commons once more. I suspect a not tiny percentage of the population might be better off with a low-overhead lifestyle that we've made extremely difficult with our model of land ownership.

I respect property rights, which is why the more I learn the more our current system of selling the right to occupy land that was arbitrarily taken (from Irish and English farmers, from native Americans, or hell, even from Mexico) to be scaffolding designed to hide the fact the land was basically just stolen. Nevermind more recent outrages, like redlining.

Re: There is more to high house prices than constrained supply

#202

Post by CalRobert »

djrobstep wrote: post #189
titanomachy wrote: post #182

Earlier quoted context omitted.

Are you suggesting that anyone who wants to should be permitted to build a house in Central Park? And that the "government" is unreasonable for preventing them from doing so?

No, I'm saying that the problem isn't "supply", but that access to existing supply is violently (and unevenly) restricted. I'm interested in why you put government in quote marks. Do the cops who prevent people engaging in construction in Central Park not work for the government?

Indeed. The descendants of people who occupied central park ca. 1600 might have thoughts on that.

Re: There is more to high house prices than constrained supply

#203

Post by masonic »

CalRobert wrote: post #202
djrobstep wrote: post #189

Earlier quoted context omitted.

No, I'm saying that the problem isn't "supply", but that access to existing supply is violently (and unevenly) restricted. I'm interested in why you put government in quote marks. Do the cops who prevent people engaging in construction in Central Park not work for the government?

Indeed. The descendants of people who occupied central park ca. 1600 might have thoughts on that.

Central Park didn't exist until 1857.

Re: There is more to high house prices than constrained supply

#204

Post by masonic »

true_tuna wrote: post #195

But there’s also extremely constrained supply. Look at Mountain View CA from 2000 to 2010. The city blocked new housing religiously for a decade while welcoming tens of thousands of new jobs. Now traffic is insane, housing prices are insane. Tell me simple supply and demand is not at play here. If we add jobs we gotta add housing. It’s baffling that we’d try to do anything different. And yet every city in the Bay Are…

  The city blocked new housing religiously for a decade
Specific examples? (I'm a MV resident for 26 years and have seen no such examples.) There have been significant blocks against new retail (e.g. the "gorilla" campaign that killed the Home Depot at El Camino and the Americana), but not housing. There's little bare land except on the Bay side of 101.

Re: There is more to high house prices than constrained supply

#205

Post by Retric »

closeparen wrote: post #131
paulddraper wrote: post #98

Earlier quoted context omitted.

It's insane what schools can get away with for price discrimination. Remember the uproar over Orbitz (and others) price discrimination based on Mac/iOS usage? [1] Schools have been doing the same thing in broad daylight for years and years with far greater consequence, basing their price on your parent's income levels.* And near zero public blowback. It's confusing. * This is all done through school scholarships, but…

It’s an informal social program. The rich subsidize everyone else.

Not so much the rich as like social security the cost caps out fairly low. Save on the low end ~100$ to high end ~500$ a month from birth and collage is mostly paid for via compound interest. That’s expensive, but students with 100+k in debt mostly don’t go to affordable schools.

Re: There is more to high house prices than constrained supply

#206

Post by [deleted] »

malvosenior wrote: post #63
nly wrote: post #23

Earlier quoted context omitted.

Individual action doesn't matter. If you're only willing to spend 30% of your take home pay on rent, whereas your sociodemographic twin is willing to pay 50%, they'll outbid you. Incidentally I currently spend 47% of my take-home on rent in London. At 32, buying a property is still out of my reach. There are statistics on this in this related BBC article https://www.bbc.co.uk/news/business-42179119

I don’t think they’ll outbid you, they’ll buy a more expensive house.

[deleted]

Re: There is more to high house prices than constrained supply

#207

Post by commaone »

Spooky23 wrote: post #25
esotericn wrote: post #15

Earlier quoted context omitted.

What influences the willingness of a lender? Availability of money in the general lending environment, sure, but surely there's a risk component there. The low interest rates can only persist as long as a lender has a reasonable expectation that they'll be paid back (e.g. that rents remain high enough to sustain the mortgage over the term). The real world factors like 'how desirable a place is'/'are good jobs there'…

A: Closing the deal. The only exposure your bank has in terms of losing money is losing the costs associated with starting up the loan when you apply — there is a strong incentive to approve. The government owns the risk on performance. This was a policy choice, because banks making subjective decisions usually looked a lot like redlining. Nobody would write a loan on a luxury condo in a rehabbed factory in the inner…

I think it's also worth mentioning that these local banks are still bundling and selling mortgages as securities,therefore removing the risk of long term price and payment instability. I find it odd that no one has even mentioned this, given we have just been through the largest financial crisis in generations because of it.

Re: There is more to high house prices than constrained supply

#208

Post by commaone »

PakG1 wrote: post #10
A2017U1 wrote: post #8

Earlier quoted context omitted.

> All real estate is local. > The flood of expat money (foreign investment) these two statements are contradictory

The supply is local, the demand not necessarily so. Hence Vancouver's recent tax on foreign buyers.

I'd venture to say this should get more attention than it does. Real estate was local. Glass-steagal (sp?) changed who is valuing the property and from where. Putting pressure on home values based on skewed national or international perspectives that are completely non-local.

Re: There is more to high house prices than constrained supply

#209

Post by mabbo »

brailsafe wrote: post #107
mabbo wrote: post #20

Earlier quoted context omitted.

> Ultimately your payment is determined in step 3 and has nothing to do with interest rates. This presumes a single purchase. You've got to go 'macro economic' to see where this breaks down. When prices start rising because of increased max loan amounts, you get things like bidding wars. Toronto has been terrible for those in the last 5 years. Both the bank and the seller win when people start paying (and borrowing)…

I'm guessing you're in Toronto or Downtown Vancouver, mind breaking down approximately where/what your condo is out of curiosity? I'll never hope to own something here, but I'm always curious how far out these insane prices are getting and what you would get for 1m.

Toronto. We're double engineer income with no kids, and spent years saving up. We were also fortunate in finding this place, the unicorn of condos: 1400 sqft, near a subway station, well-built building, responsibly managed condo board.

Is it worth $1m? Oh heck no. I don't think it's worth what we paid even, once the market readjusts to reality.

Re: There is more to high house prices than constrained supply

#210

Post by mabbo »

RhodesianHunter wrote: post #191
mikekchar wrote: post #185

Earlier quoted context omitted.

If interest rates go up causing people not to be able to afford their payments, those condos will sell -- after the mortgages have been foreclosed. Was in London in 1992, just before the pound was removed from the European exchange rate mechanism. Very instructive. Now is a particularly dangerous time to overextend yourself on a mortgage. For any realistic scenario, interest rates will never be lower than they are no…

Does anyone get floating rate mortgages any more? I thought (could be very wrong) that these had mostly gone the way of the dodo due to exactly what you're describing.

In Canada, most mortgages have to have their rate renegotiated every few years. For example, mine was amortized over 30 years, but on a five year rate. When five years are up, I have to renegotiate an interest rate. "Renewing" the mortgage.

This has interesting properties economically. It's a bit like a floating rate in that it will change, but like a fixed rate in that you don't have to worry about next month having an unexpected high bill. The banks give better rates because they only have to estimate the near-future and not the next 30 years.

Big question: what happens when all the people who could barely afford their mortgage five years ago come to renew with rates higher?

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