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The Folk Economics of Housing

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Re: The Folk Economics of Housing

#51

Post by bondarchuk »

DevX101 wrote: post #41
SoftTalker wrote: post #13

I think that what contributes to this view is that new construction always seems to be at the high end of the market. This makes sense, it doesn't cost the builder a lot more to build a $500k house than to build a $250k house, and building two $250k houses will take twice the time and close to twice the costs. So builders/developers are going to build what is most profitable, which is the most expensive houses that t…

Increasing the supply of the high end market often occurs while simultaneously reducing the supply of the low end market. This happens when landlords renovate their buildings. So it's very possible that adding supply can limit price inflation on the high end, while increasing costs on the low end.

I wouldn't count renovation as "adding supply", though.

Re: The Folk Economics of Housing

#52

Post by gorfian_robot »

kube-system wrote: post #3

Colloquially you can see this in sentiments such as: "All these developers are building is just expensive new luxury apartments" And as the study mentions: > To the extent that ordinary people form loose mental associations between “housing development” and “housing affordability,” they may well associate more development with higher prices rather than greater affordability. New housing, being new, tends to be more e…

I see those going up all over the US West. I know people who live in a few. Always feels like they live in a mid-range hotel. IDK why anyone would want that.

Re: The Folk Economics of Housing

#53

Post by greenie_beans »

tempestn wrote: post #45
greenie_beans wrote: post #31

Earlier quoted context omitted.

so you are suggesting that one house is better than two to alleviate supply? this is exactly why market incentives isn't the cure. we would have more housing if we built more housing. if we built double the housing, then we would be in an even better place. this logic makes zero sense to me.

As your sibling comment says, there is only so much market for luxury housing. If the land, permitting, etc. exists to build two houses, then two will get built. And if there's only sufficient demand for one of them to be high-end, then only one will be. (In aggregate on larger scales of course, not literally any given two houses.) It's not necessary to force a given developer to build two houses instead of one; if t…

the market logic just proves my point. logging off now bc i'm about to get flamed by YIMBYs and georgists! you can go read my comment history for my argument: https://news.ycombinator.com/item?id=44555384

Re: The Folk Economics of Housing

#54

Post by dkarl »

SoftTalker wrote: post #13

I think that what contributes to this view is that new construction always seems to be at the high end of the market. This makes sense, it doesn't cost the builder a lot more to build a $500k house than to build a $250k house, and building two $250k houses will take twice the time and close to twice the costs. So builders/developers are going to build what is most profitable, which is the most expensive houses that t…

NIMBYs actively target this misconception. "New housing is luxury housing."

> eventually the price drops happen on the older, smaller homes at the bottom end of the market

I'd be interested in how long "eventually" takes for single-family homes. I think for rental units it happens very quickly.

Re: The Folk Economics of Housing

#56

Post by pantalaimon »

clausecker wrote: post #33
legitster wrote: post #25

One thing few people take into account is that demand housing is much, much more elastic than people realize - per capita people are consuming far more square footage than they used to. Houses that were built to be house multiple generations under one roof now only hold one generation. Usually elderly empty nesters. In our area we also see people buying up lots of older duplexes or triplexes and converting them into…

In the US, isn't this partially the cause of zoning laws banning anything that is not single-family homes from being built?

This is not limited to the US in the slightest

Re: The Folk Economics of Housing

#57

Post by TulliusCicero »

9rx wrote: post #38
TulliusCicero wrote: post #29

Earlier quoted context omitted.

Presumably it's cheaper to build a home when a developer is building a whole bunch at once in a neighborhood, as opposed to a single person or family ordering something custom built.

Cheaper, sure, but not cheap enough to satisfy anyone who already cannot afford a home. Like cars, the used market is always going to be a reflection of the new market. Used houses are expensive because new ones are even more expensive.

I think it probably could be cheap enough. Part of the issue is actually just that new home sizes keep getting bigger. Like yeah, new homes are more expensive now even in relatively cheaper parts of the countries compared to decades ago, but it's also true that the homes are much larger than they used to be.

A lot of the homes from the 50s and 60s that people talk about being very affordable at the time they are made, were very small things by today's standards.

Re: The Folk Economics of Housing

#58

Post by lokar »

stego-tech wrote: post #26
kube-system wrote: post #3

Colloquially you can see this in sentiments such as: "All these developers are building is just expensive new luxury apartments" And as the study mentions: > To the extent that ordinary people form loose mental associations between “housing development” and “housing affordability,” they may well associate more development with higher prices rather than greater affordability. New housing, being new, tends to be more e…

Yup, and the kneejerk response from economists is that the housing cycle suggests that new luxury stock would be inhabited by buyers who own existing stock, and what they sell would be more affordable to those buyers, and what those buyers sell would become more affordable to the next rung down, etc. Except that’s not the reality. The reality is that a large chunk of the market (as much as 25% in some areas) is specu…

But (the sound) financial models that lead PE and others to this investment are built around the assumption that supply will be artificially limited. If you build enough they will see reduced returns and back off.

Re: The Folk Economics of Housing

#59

Post by energy123 »

kube-system wrote: post #3

Colloquially you can see this in sentiments such as: "All these developers are building is just expensive new luxury apartments" And as the study mentions: > To the extent that ordinary people form loose mental associations between “housing development” and “housing affordability,” they may well associate more development with higher prices rather than greater affordability. New housing, being new, tends to be more e…

  > "All these developers are building is just expensive new luxury apartments"
I've recently realized that any argument that contains the word "just" can be discarded.

Re: The Folk Economics of Housing

#60

Post by LargeWu »

loeg wrote: post #18
LargeWu wrote: post #10

Earlier quoted context omitted.

It seems to be driving largely by anti-capitalist sentiment rather than understanding of economic fundamentals.

Anti-capitalist sentiment is a misunderstanding of economic fundamentals.

IDK, I think there's clearly arguments to be made against so-called "late stage capitalism", where capital is directed towards efforts that extract value rather than create it, and shareholder theory that prioritizes short term gains and creates externalities at the expense of other stakeholders.

But at the end of the day, everything is subject to market forces and it's folly to deny that.

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