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The Folk Economics of Housing

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Re: The Folk Economics of Housing

#181

Post by appreciatorBus »

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…

There is also the recursive nature of a shortage 1. housing becomes a bit scarce for any reason, even a temporarily transient reason 2. prices go up 3. people point to high prices a reason new housing is bad, enact laws to limit it 4. housing becomes more scarce 5. goto 2

Re: The Folk Economics of Housing

#182

Post by epistasis »

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…

Why would the price keep going up if more and more houses are being added? Prices go up when there is a shortage. Everywhere that has been building adequate housing sees prices falling.

Re: The Folk Economics of Housing

#183

Post by datadrivenangel »

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…

It's push and pull.

If your goal is to decrease costs, the amount of supply needed may be surprising of latent / induced demand is very large. If NYC cost 1/4th the price to live there it would probably triple in population, so you'd need 40 million new units to get the costs down that much, and the price of the penthouse looking at central park would probably increase even if mean and median costs go down a lot. If a city is at the equilibrium point where supply meets demand, more housing may only keep prices flat for a large amount of new housing.

Re: The Folk Economics of Housing

#184

Post by thereisnospork »

9rx wrote: post #178
TulliusCicero wrote: post #165

Earlier quoted context omitted.

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.

I suppose that goes without saying. If it were cheap and easy to build, there wouldn't be high demand. Would it really be that cheap, though? Hell, even a single wide trailer built in a factory, which is about as ideal as it gets from a cost perspective, is still a home largely out of reach of the average Joe. It remains unclear who is going to buy all these new houses unless they are sold at a loss — but who is goin…

I'm seeing new single wides for around 40k new? The trailer not the land. Even rounding to an even 100k for a nice unit, delivered/plumbed/etc'd that's what, 500 hundred dollars a month on a 30 year mortgage? That's pretty darn affordable - less than any rent I've ever paid.

Re: The Folk Economics of Housing

#185

Post by myhf »

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?

Square footage per capita can be misleading because it goes up as an area moves from low density to medium density, but goes down as the same area moves to high density.

Re: The Folk Economics of Housing

#186

Post by epistasis »

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.

People lie about high vacancies in new buildings almost compulsively.

There was a big splash of PR for a report on high vacancies in new LA apartment buildings a few years ago, and it had to be retracted within a week because the methodology was pretty much nonexistent, like counting lights in windows at night and not realizing that people visit friends, go to concerts, go out to eat, stay at their girlfriend's place, or any one of many other things that keeps lights off in occupied apartments.

I see it with every single new multistory building in my small downtown. People complaining about a building being fully empty shortly after it has been built, when in reality it's filling up faster than planned and there are only 20% of the units left.

Yes, there are lies, but in my experience the lies are only for too many vacancies.

Re: The Folk Economics of Housing

#187

Post by epistasis »

stego-tech wrote: post #119
AnimalMuppet wrote: post #110

Earlier quoted context omitted.

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…

Again, ON PAPER your math works because you’ve narrowed down the problem to a conveniently limited set of variables that, in a controlled experiment, would produce ideal outcomes. And just like physicists keep learning time and time again of late, just because the math works on paper doesn’t mean the thing is real . Yours (and every other detractor trying to eSplain Econ101 and market forces to me) ignores the comple…

There's theory and there's data, and both agree that building more housing lowers prices.

Sure, take care of all that other stuff too, but the data does lot match your theory, and it does match what you call "Econ 101." And I would point out that you haven't even attempted to show that these other things come close to cancelling out Econ 101 effects, you merely have hand waving on the theory without any substance.

Re: The Folk Economics of Housing

#188

Post by petsfed »

legitster wrote: post #103
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.

> 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 in…

I suspect that people conflate "buying a house as an investment" with "investors bought a house", which is leading to the incorrect idea that hedge funds or private equity are somehow cornering the market.

I think the reality is that the main component of investor pressure is from people who hold onto an overly large/well placed home far past the point of utility, because they want to sell as late as possible and maximize their return. Follow that with small-time landlords, and then finally actual explicit investors buying homes as some kind of commodity. A lot of the dysfunction of capitalism (so-called "late stage capitalism") is induced by people trying to outsmart the market, time the market, etc. when they really don't have the knowledge or information to play such games.

Re: The Folk Economics of Housing

#189

Post by danaris »

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…

> per capita people are consuming far more square footage than they used to

^ This...

> demand housing is much, much more elastic than people realize

^ ...does not imply this.

If the only housing that is available is 3000sq.ft. for a family of 3, that family doesn't have the option to split it up and only buy 1500sq.ft. of it. They need to be able to afford the whole thing.

(Also, I question the extent to which this premise is true, at least in cities. Everything else I've been seeing is that people are living in much less space than they used to, due to the rising prices. Taking a studio apartment rather than a 1-bedroom, living with roommates, etc. But even if the premise is true, it doesn't imply your conclusion.)

Re: The Folk Economics of Housing

#190

Post by dc1144 »

No matter, it’s still a demand and supply issue. It just depends on where on the equilibrium point we are. This takes time. And yes, based on pure economics, supply will fill in the most profitable sections first.
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