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The Folk Economics of Housing

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Re: The Folk Economics of Housing

#161

Post by amanaplanacanal »

kypro wrote: post #94

Immigration is a similar debate where supply and demand goes out the window for political reasons. Here in the UK it's really hard to convince people that it's really hard to address our housing shortage through building alone when we bring in about a million people every year. Even a lot of economists seem to think supply/demand doesn't apply when it comes to wages and house prices if you introduce immigration as a…

The problem is an aging population. If you don't have immigration who is going to support all the retirees?

Re: The Folk Economics of Housing

#162

Post by dragonwriter »

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…

> 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.

No, its not. If only one big company was allowed to do that in each locality, and they had the ability to buy up all the supply no matter how much new housing was built, that would be a reason; absent monopoly power, they don't have free reign to price how they want, and can price higher the less supply there is, even if you assume all of it is owned by similar big firms and used as rentals.

Re: The Folk Economics of Housing

#163

Post by colonCapitalDee »

stego-tech wrote: post #49
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. 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…

In every single reputable empirical study of housing, adding supply really does bring down prices. Your preferred policy solution would decrease housing affordability, hurting the very cause you profess to champion. If this truly is something you feel strongly about, you have a duty to yourself to investigate the evidence, otherwise you are shooting both yourself and your movement in the foot.

Re: The Folk Economics of Housing

#164

Post by taeric »

majormajor wrote: post #150
taeric wrote: post #99

Earlier quoted context omitted.

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 unh…

Ah, fair. And I see how this goes in with your idea of government spending.

It is frustrating, as that feels like an easy argument to show why a lot of things decreased in price. You had governments spending a ton of money. Or incentivizing the spend. Usually both?

I think my approach there would be to say you can't use profit as incentive to lower housing prices? For the exact cycle we both spoke to.

This is my big "abundance pill" that I've swallowed. It isn't necessarily deregulation you need. But if you want a goal, you have to spend towards it. And "lower prices" is a goal. To get there, governments will have to spend money.

Re: The Folk Economics of Housing

#165

Post by TulliusCicero »

9rx wrote: post #130
TulliusCicero wrote: post #83

Earlier quoted context omitted.

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.

I think they could be, but a place where demand is high for housing but it's easy to build a lot more housing, that doesn't really seem to exist anymore.

Re: The Folk Economics of Housing

#166

Post by bluGill »

stego-tech wrote: post #89
kube-system wrote: post #86

Earlier quoted context omitted.

Those speculative investments only make sense in a world where it is expected that supply will not keep up with demand.

And when your PE firm owns significant share of homebuilders, owns large tracts of land, and owns politicians, lobbying groups, think tanks, and economists, then you can effectively game the market to maximize your personal returns at the expense of everyone else. They wouldn’t be buying 1 out of every 4 homes and bankrolling schemes to “unlock homeowner equity” (HEOCs, reverse mortgages, etc) if they thought this wo…

Fortunately homebuilders include a lot of private companies and so they can't do that.

Re: The Folk Economics of Housing

#167

Post by m463 »

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 you might be right, and I think people who buy new care less about price.

Re: The Folk Economics of Housing

#168

Post by BobaFloutist »

stego-tech wrote: post #49
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. 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…

>Buyers of new luxury stock are increasingly just leveraging prior housing equity to fund the new purchase and renting out old stock at “market rates”, which doesn’t actually increase supply or decrease pricing

Ok, but they have finite leverage and financing. The market can easily overwhelm their access to capital, no investor class has anywhere near enough access to capital to fully corner the behemoth that would be a healthy housing market.

Re: The Folk Economics of Housing

#169

Post by seanmcdirmid »

colonCapitalDee wrote: post #160
seanmcdirmid wrote: post #131

Earlier quoted context omitted.

> 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…

I've never understood the induced demand argument. Yes, when goods get cheaper demand increases. Or, to put it another way, when we make our cities more affordable more people want to live there. What's the problem? Sure, induced demand means that the marginal increase of affordability is less than it may have been if demand remained constant, but a. affordability still increases, and b. the solution is just to keep…

The problem isn't one of "we shouldn't build new housing", but rather the one of "are we going to see prices really fall after 10,000 new units of housing are built?"

It is only controversial if you really expect prices to fall when new housing is built (or to say, if you think the only solution is to build new housing and nothing else). Otherwise, the "building new housing" part isn't controversial at all.

Re: The Folk Economics of Housing

#170

Post by BobaFloutist »

lcnPylGDnU4H9OF wrote: post #104
SoftTalker wrote: post #70

Earlier quoted context omitted.

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…

Investors have finite capital, and it's easier to corner a tight, pinched market than a large market with lots of liquidity.

You don't see PE making huge investments in gas stations, because you can always easily just go to another gas station, and there's way too many of them to easily corner the market. We could pretty easily make housing similarly unattractive.

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