Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Folk Economics of Housing

aeaweb.org

Post reply on HN
Print view View original

101–110 of 250 posts

Re: The Folk Economics of Housing

#101

Post by stego-tech »

jeremyjh wrote: post #68
stego-tech wrote: post #49

Earlier quoted context omitted.

> It's not new affordable housing, but the people moving in to the new expensive houses are leaving their old houses, and the people who buy those are leaving their old houses, so eventually the price drops happen on the older, smaller homes at the bottom end of the market. As I commented elsewhere, that’s the paper math version that doesn’t resemble reality for those of us living in it. Buyers of new luxury stock ar…

Building a new house and renting the old one absolutely does increase the supply of housing.

Again, on paper it does.

But paper often neglects reality. A reality where it can be more profitable to simply hold the land rather than lease out the home on it. Where a constructive loss can improve tax savings. Where the intent is to have it vacant for some other perceived use or gain - like a vacation home, AirBnB rental, Pied-a-terre, or just letting the structure languish until it can be condemned and bypass red tape around teardowns/rebuilds.

Current incentives and structures do not mandate that homes are made available when someone buys another domicile. That’s one of the myriad of issues affecting the housing crisis.

Re: The Folk Economics of Housing

#102

Post by uv-depression »

jeremyjh wrote: post #68
stego-tech wrote: post #49

Earlier quoted context omitted.

> It's not new affordable housing, but the people moving in to the new expensive houses are leaving their old houses, and the people who buy those are leaving their old houses, so eventually the price drops happen on the older, smaller homes at the bottom end of the market. As I commented elsewhere, that’s the paper math version that doesn’t resemble reality for those of us living in it. Buyers of new luxury stock ar…

Building a new house and renting the old one absolutely does increase the supply of housing.

GP was incorrect that it doesn't increase supply, but correct on pricing. Besides, if I can't afford $3000/mo rent, it doesn't matter to me how many rental units are available at $4000/mo. With massive pricing collusion having been the standard for the last few years (RealPage) and the demand for housing always being extremely inelastic, the supply/demand curve is extremely complex.

Re: The Folk Economics of Housing

#103

Post by legitster »

lcnPylGDnU4H9OF wrote: post #48
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…

> people who buy those are leaving their old houses I do not believe this is accurate, at least not in the last ~10 years or so. The houses are purchased by hedge funds and other smaller investors.

> The houses are purchased by hedge funds and other smaller investors.

The hedge fund thing is way overblown. Even if they buy up homes in hot markets, their incentive is still going to be to sell them if/when the market cools. Corporations do not enjoy the same tax incentives as homeowners in this country, and the risks/costs to rent out older homes just doesn't pen out for non-local investors. If PE wants to get into housing, it's such a better deal for them to just build apartments.

Currently less than a percent of homes are owned by private equity. And the majority of those are owned for the purpose of turning around and selling them, like Home Partners.

(Zillow also tried buying up homes for the purpose of arbitrage and it ended up blowing up in their face).

Re: The Folk Economics of Housing

#104

Post by lcnPylGDnU4H9OF »

SoftTalker wrote: post #70
lcnPylGDnU4H9OF wrote: post #48

Earlier quoted context omitted.

> people who buy those are leaving their old houses I do not believe this is accurate, at least not in the last ~10 years or so. The houses are purchased by hedge funds and other smaller investors.

Only because they are scarce enough to be worth doing that. With greater supply, there comes a point where you can make better investments than buying up empty houses. And so they will stop buying them.

I don't see how that really matters. If you keep making homes and investment buyers keep buying them then the price will keep going up and regular folk will still be priced out. If you make so many homes via this strategy that institutional buyers are no longer interested, I think it's because the homes have somehow become genuinely worthless, at least to the investors. I don't see how to do that without legislation that makes the investment unattractive (unprofitable) to them. Policies such as rent control, "you can't buy that house because you're not living in it", etc., are the proper solution.

Re: The Folk Economics of Housing

#105

Post by bilsbie »

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…

I think we should start using hermit crab analogies. Everyone understands that you need more of the biggest shells to free up shells for the little guys.

Re: The Folk Economics of Housing

#106

Post by whall6 »

majormajor wrote: post #90

Nowhere in the US does it at the scale to make a serious long-term dent in prices. Nobody with enough money and exposure to large amounts of real-estate wants to kill the golden goose. Look at the post-Covid-migration build stories. Rents start to soften and development dramatically slows. Like Austin - https://austinmonitor.com/stories/2024/08/as-construction-sl... Or Denver - https://www.denverpost.com/2025/07/24/a…

Is it a crazy mental leap to think that maybe housing was historically mispriced and now we have reached equilibrium?

Re: The Folk Economics of Housing

#107

Post by jeremyjh »

lcnPylGDnU4H9OF wrote: post #48
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…

> people who buy those are leaving their old houses I do not believe this is accurate, at least not in the last ~10 years or so. The houses are purchased by hedge funds and other smaller investors.

They purchase them, and rent them out, and that is still a net increase in housing supply.

Re: The Folk Economics of Housing

#108

Post by mediaman »

starkparker wrote: post #32
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…

> It's not new affordable housing, but the people moving in to the new expensive houses are leaving their old houses, and the people who buy those are leaving their old houses, so eventually the price drops happen on the older, smaller homes at the bottom end of the market. I keep seeing this, but if the housing being vacated is in a different, less-desirable market, it's a bit tree-falling-in-the-woods for locals. I…

This analogy seems confused.

If someone in Chicago moves to Seattle, then our policy options are (1) no new condo in Seattle or (2) new condo in Seattle.

Under policy 1, the new buyer from Chicago must outbid locals for the fixed housing supply; they will wind up buying older housing stock, which otherwise would have gone to existing local residents. Prices go up.

With policy 2, the new entrant buys the new condo and does not compete for pre-existing housing stock.

In this scenario, whatever house is freed up in Chicago is irrelevant to the housing stock in Seattle. I'm not sure why you included it.

The entire question can be contained by the assumption that "there is someone new coming to Seattle" and whether it would be better to have a new condo unit to sell to them or have them compete for existing fixed stock. The whole bit about the Chicago housing market is a distractor, because it stays the same under either policy.

Re: The Folk Economics of Housing

#109

Post by dazc »

LargeWu wrote: post #81
dazc wrote: post #55

Earlier quoted context omitted.

I remember when house prices doubled in the space of 3 years and it wasn't a supply shortage that caused this.

Sure, because demand went through the roof. And demand is currently high again. So either we need fewer people, or more dwellings.

It wasn't a surge in demand either..

Re: The Folk Economics of Housing

#110

Post by AnimalMuppet »

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…

If I build 4 houses, and someone speculatively buys 1 house, I've still added 3 to the housing supply.

As a solution to the housing shortage, building new is 25% inefficient? Great, it's 75% efficient. That's not bad for a solution. So let's do it, in volume, and actually make a dent in the problem.

And for the builders, they don't care. A speculator bought that house? It payed me just the same. But even better, the demand is still there, so I should build another one.

Post reply on HN