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The Folk Economics of Housing

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Re: The Folk Economics of Housing

#141

Post by stego-tech »

kube-system wrote: post #127
stego-tech wrote: post #82

Earlier quoted context omitted.

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%.

** right off. If I’m in a downtown metro near any newer development at night - rentals or owners - they’re largely dark and empty with little to no signs of life.

Your statistics are damned lies to those of us observing lived life in our cities. Nobody is hand-checking every single unit out there for accurate statistics on housing utilization, it’s all self-reporting.

Re: The Folk Economics of Housing

#142

Post by lcnPylGDnU4H9OF »

greenie_beans wrote: post #132
lcnPylGDnU4H9OF wrote: post #74

Earlier quoted context omitted.

> so you are suggesting that one house is better than two to alleviate supply? No, they are saying that building one high-end house still has the slightly unintuitive effect of increasing the supply of low-end homes. They also give their reasons for believing this.

i'm very aware of how filtering works in the housing market. but if your goal is to increase supply, then 2 > 1. therefore, in my opinion, filtering due to market mechanics and developer incentives is not the most optimal or efficient solution.

I'm just saying that OP didn't say that it was the most optimal or efficient solution. They were really only saying that it had the filtering effect. If your point is that we should offer incentives to build two homes and disincentives to build one home then I'm with you; I was just pointing out that you were putting words in their mouth.

Re: The Folk Economics of Housing

#143

Post by mediaman »

seanmcdirmid wrote: post #131
mediaman wrote: post #108

Earlier quoted context omitted.

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…

> 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. Are you denying that induced demand is a thing for housing? That everyone who wants to…

Yes, people are going to get squeezed out of the housing market by new arrivals if new housing stock isn't built.

"Squeezing out" is done by a price mechanism: a family that would prefer to stay in Seattle decides to sell, because that new buyer (unable to buy the condo, because it hasn't been built) decides to offer a high enough price to induce the existing family to leave.

That's only done by reducing housing affordability (increasing prices) which is the public policy outcome we're trying to avoid.

It sounds like you agree that new supply is good, I think, because you believe new entrants would otherwise "squeeze out" existing residents and I assume you would agree that this is done by price, and so therefore you would also agree that new housing stock (which decreases the "squeezing") also suppresses price level relative to the alternative fixed stock scenario.

Re: The Folk Economics of Housing

#144

Post by SilverElfin »

keeganjw wrote: post #8
SilverElfin wrote: post #2

Is it that they truly don’t believe it or they don’t want more supply (since that changes their quality of life, neighborhoods, traffic, etc) but still do want lower prices in other ways (like by price caps or other things). One legitimate reason to not think supply reduces prices is because of big financial companies buying up lots of houses and having effectively free rein to price how they want. It removes the com…

This is another huge myth in the US housing market, that big companies own lots of the housing and are jacking the prices up. It's simply not true. Large corporations own a tiny fraction of the market while the vast majority is owned by individuals and small landlords.

Is it different in different places though? Like some places have more of this ownership problem and so it looks worse locally?

Re: The Folk Economics of Housing

#145

Post by WarOnPrivacy »

bryanlarsen wrote: post #62
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…

how does renting out old stock not increase supply? Renting and buying are relatively fungible. People buy fewer houses when renting is cheaper.

> how does renting out old stock not increase supply?

Raw and overall housing numbers can be misleading by their nature. That is, they can be technically true while being false for many/most people.

    Declaration: Housing supply is increased!
    Actuality: Increase is only in homes for >$100k income earners.
    The declaration is true for >$100k.
    It is not true for most
Past that, there is a challenge in tossing around $250k and $500k houses as examples of anything. Those numbers are 4x & 8x over what typical-wage households can afford.

Generally, there is no affordable, reasonable housing for typical income earners.

Re: The Folk Economics of Housing

#146

Post by bluGill »

whall6 wrote: post #37
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…

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?

Adam smith observed in his book that as people get more money they typically spend is on nicer housing.

Re: The Folk Economics of Housing

#147

Post by LargeWu »

dazc wrote: post #109
LargeWu wrote: post #81

Earlier quoted context omitted.

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..

It was a surge of demand, driven by the availability of cheap money.

Re: The Folk Economics of Housing

#148

Post by kube-system »

stego-tech wrote: post #141
kube-system wrote: post #127

Earlier quoted context omitted.

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%.

** right off. If I’m in a downtown metro near any newer development at night - rentals or owners - they’re largely dark and empty with little to no signs of life. Your statistics are damned lies to those of us observing lived life in our cities. Nobody is hand-checking every single unit out there for accurate statistics on housing utilization, it’s all self-reporting.

1. your anecdote isn't data

2. usually things are quiet at night because people go home and/or bed

3. the only places i've been to where the nightlife is in a neighborhood called "downtown" are small towns

4. my anecdotal data contradicts yours

Re: The Folk Economics of Housing

#149

Post by amanaplanacanal »

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…

Even if 25% are sucked up by speculators and not rented out, just left empty (which I don't believe), that still gets you 75% as increase to the housing supply.

Re: The Folk Economics of Housing

#150

Post by majormajor »

taeric wrote: post #99
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…

This seems to be claiming something different, though? You are pointing at that development slows as prices go down. Which seems somewhat expected? That is, adding supply lowers prices. And lowering price reduces potential profit such that fewer people will build. With fewer people building, prices should go up again. Stated differently, thin margins reduce the number of people offering products in a market. Ironical…

Well I'm saying that in practice adding supply hasn't lowered practice it has merely slowed the increase in prices. And that's mathematically essentially the same thing, but it's importantly different in two big ways:

1) If people see their costs going up while they also see new construction, the correlation machine's gonna jump to the wrong conclusions

2) If costs are still going up people are still going to be unhappy and worse off

Supply can increase AND price can still go up, and so for people to be won over and convinced you need to crack the second part, not just the first part. In a libertarian "just reduce regulation" approach that's often pitched, the natural equilibrium will be closer to "supply increase and price go up slowly", and people skeptical of "just reduce regulation" as a solution are more accurate than they're given credit for. Gotta actively intervene to make supply increase enough for any sustained period of time - we only see it in cases of macro shocks. Like the 2008 recession, or the post-Covid-bullwhip.

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