What happens when housing prices go down? • Hacker News Board

Re: What happens when housing prices go down?

#281

Post by sokoloff » Mon, Jul 21, 2025, 6:01 PM UTC

doctorpangloss wrote: post #241

sokoloff wrote: post #230

Earlier quoted context omitted.

Price controls work to ensure scarcity. Flooding the market with new construction (at any price level, though ideally at all sizes and quality of housing) will do more to sustainably lower prices while leaving a functioning market.

a dreary part of this conversation is, nobody wants to play the game, what does random HN user sokoloff mean by the words "functioning market," "sustainably," "flooding", "ideally", "quality", and even "scarcity"? I don't know what you are saying, because you are leaning so deeply on an internal glossary known only to you, made worse by hijacking real words that everyone can look up in a dictionary.

??

I'm using those six quoted terms to have a meaning the same as what Google returns as the first definition for five and the second for one (which I think is obvious to all readers from context):

"functioning market" - A functioning market, in economic terms, is a system where buyers and sellers can freely interact to exchange goods and services, with prices determined by the forces of supply and demand, and where information is readily available. A well-functioning market is characterized by competition, efficient resource allocation, and the absence of significant barriers to entry and exit.

"sustainably" - 1. in a way that can be maintained at a certain rate or level.

"flooding" - 2. arrive in overwhelming amounts or quantities. I posit that no one was confused and thought I meant "1. the covering or submerging of normally dry land with a large amount of water."

"ideally" - 1. preferably; in an ideal world.

"quality" - 1. the standard of something as measured against other things of a similar kind; the degree of excellence of something.

"scarcity" - 1. the state of being scarce or in short supply; shortage.

Re: What happens when housing prices go down?

#282

Post by tuna74 » Mon, Jul 21, 2025, 6:17 PM UTC

davidw wrote: post #232

alexb_ wrote: post #224

Earlier quoted context omitted.

What? Strong Towns is not just their "content creation", they ARE local organizations. You might have a chapter in your city. This criticism tells me that you don't know what Strong Towns is, what they do, the actual specific policy guidelines they come up with and push that have real influence on local city planning. Strong Towns gives actionable proposals all the time, and their main purpose is local organizations…

On balance, I think Strong Towns has done a lot of good, but in terms of organizing on the ground, I think the two large YIMBY organizations are better at equipping people to make change in their communities: * https://yimbyaction.org/ * https://welcomingneighbors.us/ I happily read and share a lot of Strong Towns content - they do put out a lot of good stuff despite the occasional dud. But in terms of learning how t…

Doing good stuff and improving cities is not a contest. No organisation can do it all, but if we work together we can do a lot!

Re: What happens when housing prices go down?

#283

Post by tuna74 » Mon, Jul 21, 2025, 6:19 PM UTC

msgodel wrote: post #269

hattmall wrote: post #174

Earlier quoted context omitted.

Permits and licensing is a huge factor, most of the southeast didn't even have licensing boards until the late 90s. If you wanted to build a house you could just do it. Now it's functionally impossible unless you are capitalized enough to spend a considerable amount of time and money on the permitting and approvals process. One of the reasons there's so much gentrification is that it's much easier for builders to tak…

I'm just building my house myself and ignoring the permitting process. It's extremely rural and there's no one to really report the violation plus the house is so small if I'm forced to tear it down it's no big deal. The expected value of "breaking the law" this way is pretty deeply positive.

That is great until you want to sell it.

Re: What happens when housing prices go down?

#284

Post by creer » Mon, Jul 21, 2025, 6:27 PM UTC

ch4s3 wrote: post #189

andrewmutz wrote: post #168

Earlier quoted context omitted.

It is indeed a mess. It's full of strawmen, like: > Price Drops Don’t Lead to Supply. They Kill It. No one believes price drops cause an increase in supply. They believe an increase in supply causes price drops. > If “build more” was going to bring prices down and stabilize the system, we wouldn’t be seeing these mixed signals. People believe that increasing supply will lower prices, not "stabilize the system". The c…

Right clearly, as supply meets demand and prices stabilize or start to drop, new supply will slow down. You can easily have scenarios where lots of supply is being built at once and outruns demand by a lot and causes a short term drop in prices, but that still won't cause supply to drop. I think arguments like the one in the article have over-learned the lesson of 2008. Yes the financial crash in 2008 wiped out so ma…

This discussion so far ignores cost. That's a problem.

And cost has to do with intensity of effort. In the case of construction, if there is less construction going on, then there is ("all other things being equal") more personnel available: so less delays and less hourly cost. If there is less construction going on, there is also less pressure on materials suppliers, so less expensive lumber, concrete, etc. So that it's easier to make a profit. So that it might make sense to build lower value housing. While when construction is booming, there is extra less incentive to build lower value housing.

Of course, if land availability is artificially constrained, then there is never much reason to build lower value housing. The profit is elsewhere.

Re: What happens when housing prices go down?

#285

Post by vannevar » Mon, Jul 21, 2025, 6:33 PM UTC

In a sense, housing suffers from the same identity crisis that bitcoin does. Because so many homes are now being bought for investment purposes and not by resident homeowners, housing has become speculative and the historical slow-but-steady growth in prices has been replaced by a boom-and-bust cycle typical of speculative markets. Just as bitcoin can never become a useful currency as long as speculators dominate its trade, neither can the housing market go back to being the stable economic foundation it once was for the same reason.

Re: What happens when housing prices go down?

#286

Post by eagsalazar2 » Mon, Jul 21, 2025, 6:44 PM UTC

Very good article. However I think a huge factor is being ignored. The most pernicious side effect of falling prices isn't pullback in investment and construction. It's the immense leverage lender and builder lobbies will apply through decades of regulatory capture, and the massive outcry that will come from homeowners who have bought into the idea that real estate is a great way to build wealth. Anything that results in lower prices will result in damaging the wealth of millions, of the group of Americans that probably has 99% of the wealth and political power. Yeah that won't fly. And I agree the "correction" is overdue and those wealthy boomers whose wealth has doubled and tripled since retirement just by riding that wave (and the stock market, another ponzi scheme) should transfer some of that wealth back to the masses in the form of depreciation. But it won't happen. Not in America, not without something horrible happening to make them give up that wealth.

Re: What happens when housing prices go down?

#287

Post by Glyptodon » Mon, Jul 21, 2025, 6:45 PM UTC

doctorpangloss wrote: post #244

Glyptodon wrote: post #235

Home builders being very short term doesn't seem related. If they won't build because they can only make mc mansions on tiny lots while land values inflate wildly, they're part of the issue and blasting land prices along with home prices to reset the cost of building should benefit them in the long run. But it does mean that they're paralyzed until land values stabilize at a lower value.

by all means, go invest in a REIT whose logline is, "We make money when land values go down!" How exactly would they be building housing in such a scenario? And why wouldn't an investor interested in this simply short real estate instead? Does this illuminate for you that you are right, short term isn't related, but you are wrong, and the truth is surely prices dropping is bad for investing in building houses?

You seem to be ignoring that once land values reach some kind of floor it will be entirely sensible to build houses. Land values going up leads to FOMO, and going down leads to the reverse of FOMO, IE fear that the bottom hasn't been reached.

Clearly it is correct to short, but short positions expire - they are definitionally short term.

That said, the behavior is pretty expected: the current operators are operating on in inflated land value cost because the market has become distorted due to lack of supply. Altering the market by injecting supply will drive down land value and cause operators with money stuck at the current equilibrium to lose money or fail. But it poses no issue to operation or new entrants at the new market equilibrium. If it operates like a market should operators should be happy to begin providing houses on land at the new equilibrium as soon as it's reached. However fear of not knowing when it's been reached will mean that it does to take time settle.

Re: What happens when housing prices go down?

#288

Post by scoofy » Mon, Jul 21, 2025, 6:53 PM UTC

tacticalturtle wrote: post #212

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…

As soon as I saw it was the founder of Strong Towns it all made sense. Strong Towns, Not Just Bikes, and all those content creators are fulfilling the “hobby” of city planning (ie, watching hours of city planning YouTube videos, but never actually organizing at a local level) This is a really great video about one man’s experience with trying to improve his community, getting involved in local government, and his cri…

This is all based on a long and relatively technical book they published last year:

Escaping the Housing Trap: The Strong Town Response to the Housing Crisis.

https://www.housingtrap.org/

Re: What happens when housing prices go down?

#289

Post by avmich » Mon, Jul 21, 2025, 6:54 PM UTC

AnimalMuppet wrote: post #278

avmich wrote: post #239

Earlier quoted context omitted.

> They don't want to be in that position. Then where are the builders which do what they're asked to? Is the problem with the banks which don't do this operation? Then it looks like a financial opportunity. You're effectively saying "this business model doesn't work". This doesn't mean there are no other business models which work in this case. Where they are?

> Then where are the builders which do what they're asked to? These are independent companies. Who do you think is supposed to be asking them to do something? When a customer asks, they do it. What more do you want? > This doesn't mean there are no other business models which work in this case. Where they are? They made less money than this model over the last decade or two. So they are nonexistent, not in the sense…

> But probably, first some homebuilders who use the current model have to go bankrupt.

I think it's not necessary. The different model homebuilders should pick up the orders, that's it.

Re: What happens when housing prices go down?

#290

Post by Glyptodon » Mon, Jul 21, 2025, 7:00 PM UTC

mlsu wrote: post #254

Quite simply, housing has to be either affordable, or an investment. Those two things are literally, by definition, mutually exclusive. If something is an investment it means that it must appreciate in excess of inflation over time. That means, by definition, that it will become unaffordable over time. This is why, whenever you hear terms like "affordable housing" you can safely shut your brain off. There will never…

I think it's possible to housing to be affordable and for it to behave more similarly to to something like gold than something like a bond or stock. That said, it's quite tricky because of property taxes - if they applied to gold imagine what it would do to gold bugs. Fortunately, real estate can be rented, which isn't really a thing for gold.

But to complete the analogy, it seems like the goal should be for residential values in terms of build price per some typical target like ~1500sqft/3br (regardless of form) to remain relatively constant adjusted for inflation and relative to % of median wage while allowing land value to adjust density to match. This allows people to gain from selling to convert from low density to high density, but keeps affordability relatively constant. This likely means that some kind of alteration in tax or sale regime to promote transition to higher density and not just transition to higher value should be present in the market. (IE in places where 1acre is going for ~$1million, it should make more sense for someone to buy and convert to multiple units than for someone to just buy.) This would lead to expensive areas starting to convert to higher density leaving lower value areas to the main option for single family inflows. (Of course this will have loopholes - obviously it incentivizes the "rich enclaves using a COOP" type of model if the tax pressure were assessed at sale - so it need to be thought through more clearly.)

Edit: That said, I do think there's something to your organism analogy. For example, all of what I wrote above given, it explains why it'll still be impossible to find a good plumber and that does interact with the price of building.