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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

#361

Post by 9rx »

triceratops wrote: post #336
tharmas wrote: post #321

Earlier quoted context omitted.

Investors add to demand for housing. This will help drive up prices. And no, builders will not necessarily increase supply if they can realise increased margin of profit due to increased demand. We see that with RAM manufacturers. RAM suppliers constrain supply to boost margins. Same with house builders. The difference is people can go without RAM but everyone needs a place to live.

> Investors add to demand for housing And here I thought people who want to live in houses add to demand for housing. Investors buy houses that people want to live in. If people don't want to live someplace, you won't see any investors there either.

> And here I thought people who want to live in houses add to demand for housing.

Desire is a necessary component in demand, but it also requires willingness at a given price point. If houses are selling for $1,000,000 and you only have $500,000 to spend, then no matter how much you dream every night about having a home, you are not a contributor to demand.

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

#362

Post by komali2 »

austhrow743 wrote: post #349
komali2 wrote: post #291

Earlier quoted context omitted.

It seems to me that the market will select for urban sprawl though which is a negative for society but has the highest margin. E.g. Houston suburbs, miles and miles of cheap to fab single family homes that turn it into a suburban hell scape where you have to drive everywhere. I don't think the free market is giving the promises you say it is - supply isn't elastic for real estate if nobody's building because there's…

Why are you accrediting Houston to the free market rather than Tokyo?

Houston doesn't have zoning laws, Tokyo does.

Generally speaking, freer markets seem to lead to worse outcomes overall.

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

#363

Post by SocialGradients »

estearum wrote: post #221
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.

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?

This is an empirical claim. It looks like new monthly permits are down from ~4k a month in 2021-2022 to ~3k a month. They're still up significantly from before 2020. The building boom has slowed but it's still elevated. Not particularly close to zeroing out.

The data is here: https://fred.stlouisfed.org/series/AUST448BPPRIVSA.

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

#365

Post by triceratops »

9rx wrote: post #361
triceratops wrote: post #336

Earlier quoted context omitted.

> Investors add to demand for housing And here I thought people who want to live in houses add to demand for housing. Investors buy houses that people want to live in. If people don't want to live someplace, you won't see any investors there either.

> And here I thought people who want to live in houses add to demand for housing. Desire is a necessary component in demand, but it also requires willingness at a given price point. If houses are selling for $1,000,000 and you only have $500,000 to spend, then no matter how much you dream every night about having a home, you are not a contributor to demand.

Counterpoint: houses sell for $1,000,000 because there are more people with $500,000 (and every other number less than $1,000,000) who want those houses than there are houses.

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

#366

Post by JuniperMesos »

mmooss wrote: post #285
KPGv2 wrote: post #267

Earlier quoted context omitted.

That's not what gentrification is. Relevant to this article, I lived through the gentrification of large parts of Austin in the early 00s. What happened was that good housing full of artists and musicians and other self-employed creatives began gentrifying, driving up property values, which drove up property taxes, which became unaffordable to the existing residents (who had owned their homes for a long time). Many (…

> good housing full of artists and musicians and other self-employed creatives It looks like - it might not be what you mean, but it looks like - you're saying 'good housing' is housing that has "artists and musicians and other self-employed creatives", as opposed to poor working people.

Many artists and self-employed creatives are themselves poor working people - making art is work (and so is marketing it to potential customers), and most artists are not lucky or successful enough to become wealthy doing it.

But yes, I think there is a sense in which people who are driven to create have some kind of ineffable, cultural capital that people without this drive do not have. So a neighborhood that is full of artists is more interesting, and therefore more valuable to spend time in, than one that isn't.

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

#367

Post by jeffbrines »

Or...maybe...Austin just isn't that great? Maybe (just maybe) a lot of people (myself included) woke up one day and was like "why are we doing this?" and moved somewhere better?

Austin is not what people pretend. Same with Denver or SLC.

There are no tier 2 cities. Its like countries. There are first world, and third world. And thats it.

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

#368

Post by Spivak »

vasco wrote: post #359
nsnzjznzbx wrote: post #338

Earlier quoted context omitted.

But building cost > sale value is possible. Or land ends up better value left as suburban house than developing up. Or they build where sale cost - build cost is maximized. I.e. different city. Governments need to build more housing. Make it bland so snobs can price discrimnate themselves to buy builders' homes. Why thrifts by the government home for value for money (and quality).

You think the government knows better how to identify land that is profitable than private builders? Why? Or is this one of those opinions based on "is OK for the state to pay for it because there's infinite money for my pet project"?

Because government has a unique pricing advantage, they get additional value from the houses they build in the form of all the positive externalities and property tax revenue. So projects that wouldn't be profitable for private builders might still be worth it to the government. So it should be both.

They're just gonna pay builders a sum anyway so it's not like they need to shoulder the full upfront cost anyway.

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

#369

Post by SocialGradients »

SocialGradients wrote: post #363
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?

This is an empirical claim. It looks like new monthly permits are down from ~4k a month in 2021-2022 to ~3k a month. They're still up significantly from before 2020. The building boom has slowed but it's still elevated. Not particularly close to zeroing out. The data is here: https://fred.stlouisfed.org/series/AUST448BPPRIVSA .

Not to mention, Austin could just make it cheaper to build to offset lower sell prices. Gruber et al estimate permits are 50% of an LA home's price. Fix permitting and rent goes down 50% by your assumptions that developers build until margins are 0.

Assume austin is only half as bad as LA, a 25% rent decrease would be incredible

Gruber's paper: https://evansoltas.com/papers/Permitting_SoltasGruber2026.pd...

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

#370

Post by smcin »

estearum wrote: post #307
epistasis wrote: post #286

Earlier quoted context omitted.

It was not clear that it was your point at all! Yes of course, gotta get your return on capital invested or the money goes elsewhere, probably into a REIT that invests in the existing assets and drives up prices even further. Because the demand for housing goes somewhere: either existing owners profit or the people building and alleviating the shortage profit. Every single municipality in the US I'm familiar with has…

How do you interpret "which compresses already-near-zero margin on real estate development" if not "the costs are already near the sale price?"

Not all new houses sell. Some become shadow inventory, some take 5+ years to sell. If you drive around new developments you can measure the fraction.

IIRC, Mountain House (near Tracy, CA) in the 2008-2010 crash was an example of a large new development that did not initially sell and was in serious danger of going zombie, and not having the new schools that had been promised to people moving in.

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