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What happens when housing prices go down?

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Re: What happens when housing prices go down?

#101

Post by ragebol »

andrewstuart wrote: post #44
ragebol wrote: post #24

Earlier quoted context omitted.

Demand can be affected by people living together, or encouraging that in some way. Be it having roommates, elderly parents living in, staying with ones parents longer, communes. None of them popular long term I think. Hence: supply

But not the rich, right? The rich don’t need to cram more people in, everyone else does. True?

The rich sharing their homes with many other people would reduce demand as well I guess. But they don't because they can afford not to.

Some may argue that the rich help in the supply by building new houses, but that makes them even richer. If it doesn't, they don't bother (a point from this article).

Re: What happens when housing prices go down?

#102

Post by ta1243 »

9rx wrote: post #43
andrewstuart wrote: post #9

There’s no such thing as “demand” in housing. Only supply. Housing has its own economics in which supply is the only solution ever put forward. Not a single politician or economist ever says that most dreaded and awful word “demand”. Property developers, politicians, economists, demographers, real estate agents, landlords all agree that supply supply supply will …….. errrr it will…… ummmmmm more supply will definitel…

Demand isn't talked about because demand is solved by high prices. But, politically, we want to increase demand (by offering lower prices).

The demand is still there, it's just restricted. Someone living in the back of a van in a gym carpark on an industrial estate is typically doing that because the cost of a 1 bed flat is too high. Lowering prices allows that demand to be seen.

In the UK 8.5 million people in England are facing some form of unmet housing need. That's more than 10% of the population.

https://www.housing.org.uk/globalassets/files/people-in-hous...

> More than 1.9 million households are hosting a ‘concealed’ household – for example, adult children still living with their parents.

Even when it costs nothing, there's always a limit to demand. Just look at say a hotel breakfast. I could have 50 sausages, 20 cups of coffee, etc. I don't, despite it being costless.

Re: What happens when housing prices go down?

#103

Post by 9rx »

bryanlarsen wrote: post #50
billy99k wrote: post #2

"If “build more” was going to bring prices down and stabilize the system, we wouldn’t be seeing these mixed signals." Where have we seen anything close to 'build more'? Regulations in many major cities have prevented building more for decades and I haven't seen any loosening of these regulations (they were only increased during the Biden administration). "Prices are softening. Delinquencies are rising. Builders are w…

> Where have we seen anything close to 'build more'? It's considerably easier to build in Canadian cities than most American cities. Not easy, but easier. Over the past ten years Canadian cities have seen incredible growth, due to high immigration levels. Toronto is the fastest growing city in North America. Vancouver isn't far behind. Yet Vancouver has seen flat housing prices over the last 10 years. [1] (Though fla…

> Toronto is the fastest growing city in North America.

Wouldn't that be more apt to be Langford? https://www12.statcan.gc.ca/census-recensement/2021/as-sa/98...

East Gwillimbury, the fastest growing municipality in Canada, is within Toronto CMA. Perhaps that is what you were thinking of? But Toronto CMA is not a city, neither legally nor colloquially. Its mostly rural area. Growth in the City of Toronto is relatively slow.

Re: What happens when housing prices go down?

#104

Post by rossdavidh »

yoden wrote: post #76

> Price Drops Don’t Lead to Supply. They Kill It. It really depends on how much you reduce costs. If you reduce costs enough, you can have increasing supply even in the face of falling prices. This argument sounds like one made by a hedge fund protecting its real estate investments. The reality is that the housing market in the US (and most countries) is heavily distorted by government NIMBY regulations. Because of t…

Different states are very different in this regard; Austin Texas is considered the NIMBY-est city in Texas, and it's still building lots of houses even as prices drop, and have been for a couple years now. Other states do (mal)function as you describe, but not all of them.

Re: What happens when housing prices go down?

#105

Post by AnimalMuppet »

zesterer wrote: post #64
roenxi wrote: post #32

> The theory says we should be celebrating and accelerating home production even more to get prices to levels that would actually be affordable. The reality demonstrates otherwise. Reality demonstrates the well known - the people who celebrate house prices going down don't have a loud voice in political circles and are ignored. Almost by definition they're going to be representatives of the world which doesn't have v…

Right, and if the original statement is true - that price drops are killing supply (without providing houses at a sufficient level) - then that implies that housing does not work like a traditional commodity. Which it doesn't.

Could you expand a bit on "which it doesn't"? How does it not, and why does it not?

I strongly suspect that 1) higher housing prices make builders more likely to build (or at least to max out their ability to build), and low prices (at least below some threshold) cause them to be more hesitant to do so, 2) high prices make people less willing to buy, and low prices make them more willing (or at least able).

So far, so much "working like a traditional commodity". Where do you see it working differently?

Re: What happens when housing prices go down?

#106

Post by postflopclarity »

Workaccount2 wrote: post #90

Transpose the problem into a Taylor Swift concert and the problem becomes clearer: Everyone* wants to go see Taylor Swift. She comes to a stadium and the sell out is instant, the aftermarket is bloody and ruthless. The stadium has 90,000 seats, 2,000 floor spots, and they are gone before you can reload the ticket page. Taylor Swift is the embodiment of "good jobs". The stadium is the local housing market. Those VIP b…

> the experience for everyone becomes worse in a multitude of ways.

your analogy requires the assumption that the stadium is already "at capacity" for the maximum comfortable number of seats

99% of American municipalities are nowhere even close to this capacity.

Re: What happens when housing prices go down?

#107

Post by carlosjobim »

partypete wrote: post #84
Apreche wrote: post #13

The problem can not be solved by trying to manage supply or demand. We must ban the concept of the landlord entirely. https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-... A landlord gets a loan from a bank to develop a residential property. That loan is paid by the tenants who live in that property. At the end of the day, the landlord owns the property. This is fundamentally unjust. If the tenant paid off…

The idea that a home loan is risk-free ignores decades of recent history. A quick google search for "2008 GFC" will bring you up to speed. Given that home loans are not, in fact, risk-free, how do you expect anyone to risk the large up front cost of financing a home if they do not have any expectation of profit? The small profit that landlords make off of these investments is mostly that risk premium. As a tenant, I…

> how do you expect anyone to risk the large up front cost of financing a home if they do not have any expectation of profit?

This is done already, and it's not complicated: A property development company will present a project and sell subscriptions to people who want to invest (usually people who want to live in the apartments). These people will start paying a monthly amortization to the property development company, which uses that money to purchase the land and start building. People start paying this amortization a few years before construction commences, and continue to pay it a few years after construction is finished. After that, they own their real estate outright.

Yes, the property developer expects some profit from this. And most people who are subscribing except profit as well. They can sell their investment / subscription at any stage of the development. But the financial risk is spread among all investors.

Re: What happens when housing prices go down?

#108

Post by falcor84 »

rwarfield wrote: post #77

This article is a mess. From the third paragraph: > What happens when prices actually start to fall? Because that’s not just a hypothetical. It’s already happening in places like Phoenix, Atlanta, Miami, Dallas... Then two paragraphs later > In The Atlantic, Rogé Karma recently pointed out that housing prices are rising fastest in the very cities once seen as escapes from high-cost coasts, places like Phoenix and Dal…

> The author is making the classic econ 101 mistake of confusing the supply curve (which is supply as a function of price) and quantity supplied.

This seems to be just another good demonstration of Michał Kalecki's famous aphorism about how "Economics is the science of confusing Stocks with Flows".

Re: What happens when housing prices go down?

#109

Post by electriclove »

newsclues wrote: post #21
Apreche wrote: post #13

The problem can not be solved by trying to manage supply or demand. We must ban the concept of the landlord entirely. https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-... A landlord gets a loan from a bank to develop a residential property. That loan is paid by the tenants who live in that property. At the end of the day, the landlord owns the property. This is fundamentally unjust. If the tenant paid off…

So you want the government to be the only landlord or does everyone get their own home from the government (if they can’t afford one)?

Or limit people to owning 1 or 2 homes. Does it make sense for one person to own 100 homes and rent them out? Think about the distinction that permanently creates for people who live in that community. Something like that only benefits the landlord class.

Re: What happens when housing prices go down?

#110

Post by AnimalMuppet »

avmich wrote: post #69
indymike wrote: post #22

Earlier quoted context omitted.

> "If “build more” was going to bring prices down and stabilize the system, we wouldn’t be seeing these mixed signals." Bringing prices down is usually a losing idea with existing asset holders. Even a financially strapped homeowner does not want the price of her/his home to go down. Politically, this is a complete non-starter. Also, appreciating home values serve as a very strong way to attract talent to a city. > "…

> Builders are walking. Why? Builders are supposed to be doing the paid work, why would they walk out of it?

If you buy a plot of land, go to a builder and ask them to build a house on it, sure, they'll do it. That's not what most builders do most of the time, though.

Most of the time, most builders buy a piece of land, build a house on it, and then find a buyer (or at least while they're in the process of building the house). If they're having trouble selling houses, then they're left with a bunch of houses on their hands, on which they're having to pay the interest. They don't want to be in that position.

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