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The Folk Economics of Housing

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Re: The Folk Economics of Housing

#121

Post by lokar »

stego-tech wrote: post #111
lokar wrote: post #93

Earlier quoted context omitted.

The political system is particularly susceptible to capture and unfair policy when the public is disengaged and poorly informed (as the paper describes). It makes it very easy to business to get their way. The solution is the (hard and slow) work to engage and educate voters.

Yup, but I also take the tact of educating the current winners of the increasing cost of their inevitable loss when the pendulum swings the other way. Pre-pandemic, the “loss” of home valuations might’ve been 10-15% in many areas once supply was increased and made available to homebuyers; post-pandemic, that loss could be as much as 50% depending on where you bought and what the actual local demand is. That results i…

I agree, any change that causes sharp drops in real (inflation adjusted) prices will be a problem. I think the best we could hope for is a long period of gradual decline (when including inflation, so perhaps a slight increase in nominal prices).

This problem took (in some places) 30+ years to create, it won't be fixed quickly.

Re: The Folk Economics of Housing

#122

Post by 9rx »

tempestn wrote: post #75
9rx wrote: post #17

If you could build houses for free then obviously adding supply would eventually reduce the price. But I have been looking at the cost to build a home, it costs even more to build than to buy a used one. Who, exactly, is going to be able to afford to buy the new houses while selling their current home at a lower price than it would currently fetch? Maybe if AI replaces all the software developers they can flood the h…

The cost of building is one reason why supply is constrained. It doesn't follow from there that increased supply wouldn't reduce prices.

> It doesn't follow from there that increased supply wouldn't reduce prices.

Increasing the supply of labor, thus reducing the cost to build the home, was spoken to.

The average construction worker makes $30/hr. Get that down to minimum wage and the cost of a house will come down pretty quickly. You still might not be able to afford one on a minimum wage salary, perhaps, but the goal of reducing housing prices is met.

Re: The Folk Economics of Housing

#123

Post by stego-tech »

whall6 wrote: post #92
stego-tech wrote: post #72

Earlier quoted context omitted.

It was a series of studies earlier this year that made media rounds; searching for “Wall street housing 25%” returns a myriad of results from mainstream sources citing a number of different studies and papers: https://fortune.com/2025/07/08/investors-buying-25-us-homes-... I’m on mobile and can’t dig into total ownership figures at the moment, but I do know that in the sunbelt states property acquisition by investmen…

Is this housing that they are purchasing just being sat on? I would think that these are being purchased to be rented out (thereby still increasing housing supply), not just held. Homes are depreciating assets.

In the sunbelt, they buy it, jack up rents, evict tenants, and basically turbocharge being a slumlord until they find new buyers for more than what they paid. Due to supply constraints, they often succeed in this process (which repeats under new landlords) multiple times before the market becomes too pricey and further increases aren’t tolerated (which is why organization is on the rise - the rent is too damn high for no valid reason). On paper, yes, the homes should devalue, but take a look at places like New England where absolute shitholes can fetch half a million dollars and it becomes clear that property depreciation is happening far slower than pricing inflation.

Re: The Folk Economics of Housing

#124

Post by Lord-Jobo »

9rx wrote: post #17

If you could build houses for free then obviously adding supply would eventually reduce the price. But I have been looking at the cost to build a home, it costs even more to build than to buy a used one. Who, exactly, is going to be able to afford to buy the new houses while selling their current home at a lower price than it would currently fetch? Maybe if AI replaces all the software developers they can flood the h…

I genuinely want to see a breakdown on what is increasing building costs so much. Houses are not more complicated than they were 15 years ago.

Normally if you make essentially the same product for 15 years, production costs fall.

Re: The Folk Economics of Housing

#125

Post by Ekaros »

dkarl wrote: post #54
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.

In such market fixation on inefficient single-family homes is very weird. In desirable and growing markets those might not ever go down. Population in such market should just accept more dense configurations.

Re: The Folk Economics of Housing

#126

Post by Lord-Jobo »

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.

Thinking a system is bad does not require a misunderstanding of the system.

Re: The Folk Economics of Housing

#127

Post by kube-system »

stego-tech wrote: post #82
tempestn wrote: post #63

Earlier quoted context omitted.

Vacancy taxes seem like a reasonable solution to this problem.

They are one of many pragmatic solutions, though I’d strongly argue cities skip right to forced-divestiture schemes of vacant units for owners and landlords alike. We have a homelessness crisis, and if you own a property that’s vacant nine months out of the year in a major metro then that should be forcibly sold off, incur steep tax penalties, or be rented out at fixed rates and long leases if you want to preserve ow…

There is not some epidemic of vacant rentals driving up prices. Vacancies right now are right around the long-term norm, 7%. Home vacancies are actually near all-time lows: 1%.

Re: The Folk Economics of Housing

#128

Post by potato3732842 »

wyre wrote: post #65
whall6 wrote: post #37

Earlier quoted context omitted.

Curious for a source on the sq footage per capita if you wouldn’t mind sharing. That’s very interesting. Could that also be explained perhaps by the fact that people are willing to live farther away from cities (where land / homes are cheaper and larger) because they only have to work 3 days a week from the office? Or because commuting is less painful with newer cars?

I dont have sources, but the trend for larger houses was happening much earlier than the WfH trend. It's a mix of car culture, proprty value being lower farther away from cities so develops can create a high margin on building neighborhoods marketed on big, new houses.

I feel like McMansions peaked in the sub-prime era and that construction since has been smaller and simpler structures.

Re: The Folk Economics of Housing

#129

Post by intalentive »

>Why is housing supply so severely restricted in US cities and suburbs? Urban economists offer two primary hypotheses: homeowner self-interest and political fragmentation. Homeowners, who outnumber and have organizational advantages over renters, are said to lobby against development to protect their property values. The fragmentation hypothesis emphasizes that development's negative externalities are borne locally while most of the benefits accrue regionally or nationally, leading localities to block housing.

These two hypotheses sound like the same thing to me. Homeowners organize to protect themselves from negative externalities that affect their property values (and quality of life).

Re: The Folk Economics of Housing

#130

Post by 9rx »

TulliusCicero wrote: post #83
9rx wrote: post #69

Earlier quoted context omitted.

That is quite true. Early Americans had absolutely no trouble living in their 300 sq. ft. log cabin with eight children under foot. You don't technically need the behemoths we see today (or even what we saw in the 50s, which were still huge by historical standards). But it remains, if it was cheap enough, people would already be doing it. The law sometimes gets in the way, sure, but that's another subject entirely.

The issue is that localities have mostly made adding new homes a big pain in the ass. If the new supply is constrained, obviously you're going to target the higher end of the market with whatever you do end up building.

The pain in the ass has a cost, certainly, but isn't anywhere close to being the large portion of the cost. Even if you eliminated that cost, the houses still wouldn't be affordable to the average Joe.
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