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Austin’s surge of new housing construction drove down rents

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Re: Austin’s surge of new housing construction drove down rents

#271

Post by estearum »

epistasis wrote: post #263
estearum wrote: post #246

Earlier quoted context omitted.

And... how is this relevant? I'm not sure what you're trying to imply here. You should spell it out explicitly.

The difference is between buying and asset and producing an asset. Even if RAM costs are falling, it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price. It's entirely different if you're buying the housing already built; there's no productive activity, you're just a rentier and do not benefit at all from falling housing prices. The differences in interests…

> it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.

Right... my point is that the costs are not far below the eventual sales price. That's why construction is slowing down.

And as mentioned several other times, it's actually not as simple as cost > sale price. It's margin > margin of alternative investments of similar scale and risk profile.

Re: Austin’s surge of new housing construction drove down rents

#272

Post by jltsiren »

CharlieDigital wrote: post #219
jltsiren wrote: post #206

Earlier quoted context omitted.

The real issue seems to be the top-heavy tax system that forces local governments to rely on property taxes. A local income tax would make them more capable of building and maintaining infrastructure, but that would require lowering taxes at higher levels. (Income taxes are superior to wealth taxes in the sense that income tends to correlate better with the ability to pay tax.) If the demand for housing is high, zoni…

> If the demand for housing is high, zoning fees can also be used to make developers pay for the infrastructure upfront... It's not that simple because these often end up as legal battles and in some cases, there are laws already on the books at the state and municipal level that would have to be changed. The developer for sure does not want to build a school and even if they build the school, they are not going to b…

The underlying assumption is that laws will be changed when necessary. If it's not possible to do that, most issues probably can't be fixed.

More fundamentally, this is related to the principle of subsidiarity that is occasionally popular in the EU. Everything the government does should be done by the lowest level that can reasonably do it. And to enable that, local and state governments should have sufficiently wide tax bases.

Re: Austin’s surge of new housing construction drove down rents

#273

Post by mmooss »

pclowes wrote: post #176

Its wild how the solution to housing costs is really just: Build more housing. Keep law and order. No it doesn’t need to be “affordable”. Yes rent control is a terrible idea. Just build more housing. Note: that the US already has plenty of housing and housing costs basically go up in areas of low crime relative to economic opportunity. If you build housing, but allow crime to rise, you have wasted everybody’s time.

> Its wild how the solution to housing costs is really just:

> Build more housing. Keep law and order.

Safety (law and order) increases housing costs, as you say. It's desireable on its own, but it does not solve housing cost. NYC is very safe and very expensive. Crime is way down in most of the US, and housing costs are much higher.

Re: Austin’s surge of new housing construction drove down rents

#274

Post by KPGv2 »

ms_menardi wrote: post #242
bryanlarsen wrote: post #228

Earlier quoted context omitted.

35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.

This logic assumes that 35% of Americans WANT to rent their home. Which seems odd to me, if only for financial reasons - why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it?

> why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it

Because the down payment you put into your purchased home could've been put into the stock market and grown faster than property values (this is historically true).

Because you don't want the headache of home maintenance.

Because in the 21st century, job stability doesn't exist so it's a big risk to buy a home fifteen minutes from your current job that might be an hour from your new job after you get fired so a CEO can get more golden parachutes.

Because you might have to change cities a year from now.

My wife and I rented for a long time because it was better than owning for us.

Re: Austin’s surge of new housing construction drove down rents

#275

Post by epistasis »

komali2 wrote: post #262
estearum wrote: post #221

Earlier quoted context omitted.

New construction has already decelerated in Austin due to falling prices, which compresses already-near-zero margin on real estate development. So yes, it really is "just build more housing." The problem is: why would you build more housing as prices fall?

Maybe other real estate savvy people can help me understand this plus two other things I'm confused about in the housing crisis: 1. Houses are unaffordable for many Americans. To get houses to prices where they'd be affordable again would require a housing prices drop that would likely be, market-wide, significantly low enough to put a ton of people underwater on their mortgages. What is society/the government meant…

There's a big difference between land prices and the building prices. When costs rise 5% per year for a house that's untouched, that's almost entirely the land price going up.

You can make housing cheaper by putting more houses on the same amount of land. In high cost areas, the price of land dominates the cost of housing.

Political pressure to change the investment nature of housing can come from various directions, for example establishing a land value tax, which eliminates the financial incentive to speculate on rising land prices by keeping people out of your area, redistributes all those unearned land rents to the population equally, as is only fair, and also results in a lot of people selling land to be redeveloped taht are otherwise hoarding it when the rest of society would be using it a lot better. Of course, in societies with high levels of land ownership, the voting public usually tries to vote away such extremely fair taxes.

Politically, we must stop prioritizing the views of homeowners at the local level. They already got their reward, massive unearned capital gains on their residence, there's no need to give them priority on land use over the general needs of society.

Re: Austin’s surge of new housing construction drove down rents

#276

Post by maest »

ms_menardi wrote: post #242
bryanlarsen wrote: post #228

Earlier quoted context omitted.

35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.

This logic assumes that 35% of Americans WANT to rent their home. Which seems odd to me, if only for financial reasons - why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it?

The numbers you are using are not common at all.

Re: Austin’s surge of new housing construction drove down rents

#277

Post by pocksuppet »

tkel wrote: post #215
kortilla wrote: post #136

Earlier quoted context omitted.

“People like to drink certain kinds of beer” and “some people don’t drink beer often” are not arguments against supply and demand driving beer prices.

Prices in massively inefficient markets do not follow the supply + demand equilibrium. Beer is not an inefficient market. You're doing the absurd comparison.

It's more correct to say supply and demand still drive the overall average, but in a high-friction market of unique items, every single case is still a unique case. It's not like moving wheat bushels or RAM chips. When they sell oil, they mix up all the oil from different producers in the same reservoir, in the same tanks. Electricity travels in the same wires. Housing is nothing like that.

Re: Austin’s surge of new housing construction drove down rents

#278

Post by FireBeyond »

jfoster wrote: post #186
nomilk wrote: post #118

Dumb question, many cities suffer from extremely high property (i.e. land) prices. I understand the NIMBY barrier. But I don't understand why it isn't more common to simply.. start a new city. Especially in countries like Australia where property prices are sky high and alternative places for setting up a new city are abundant. Maybe internet connectivity was previously a barrier, but now.. starlink. I put this quest…

> Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones. You say that as though reduction in cost of housing is a universal desire, but it isn't. Suppose a couple of years ago you took a $500,000 loan to buy a $700,000 house, which you'll be paying off for the next 10 years. Would you like…

> Suppose a couple of years ago you took a $500,000 loan to buy a $700,000 house, which you'll be paying off for the next 10 years. Would you like the market value of your house to decline substantially during that time?

No, but when your city proposes a "missing middle" plan, watch who all comes out of the woodwork to scream murder at their research that shows that the projected effect of doing so will lower property values in my town from an 11.5% YoY average increase to a "mere" 9% YoY increase. You'd have thought the city was suggesting executing grandmothers in the streets.

(I cannot personally complain, I put down 10% on my home purchase here in 2021 and was able to get out of PMI due to having 20% equity against appraised value 366 days later, while only making required payments.)

Re: Austin’s surge of new housing construction drove down rents

#279

Post by bpt3 »

estearum wrote: post #266
cuuupid wrote: post #261

Earlier quoted context omitted.

It's not necessarily prices falling here but the profitability of [demand] at [price]. Like if prices fall 10% but demand rises 20%, you would want to build more housing. This is the beauty of the free market because it guarantees three things: [1] Real estate is generally a good investment and will hold value or appreciate in the long term, because supply will adjust to demand shocks to rescue values [2] If people w…

> Like if prices fall 10% but demand rises 20% Not as a developer you wouldn't... You already have razor thin margins. Prices going down 10% means you cannot get financing for your project. Holding real estate is generally a good investment. Developing real estate actually is not. > Real estate developers and construction are solid, safe businesses with great unit economics No they are not lol

Can you define razor thin? Grocery stores have very small margins, as little as 1%.

Homebuilders make at least an order of magnitude more on a very expensive item.

Re: Austin’s surge of new housing construction drove down rents

#280

Post by mmooss »

triceratops wrote: post #247
ms_menardi wrote: post #239

Earlier quoted context omitted.

And yet, gentrification.

God forbid bad parts of town ever get good.

Good for whom? If it's good for the residents, that's great. If it's bad for the residents, who get driven out, but good for some developers and outside rich people - that's what gentrification is.
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