The Folk Economics of Housing • Hacker News Board

Re: The Folk Economics of Housing

#21

Post by entropicdrifter » Fri, Aug 15, 2025, 4:27 PM UTC

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…

This makes sense in a world where the market adjusts rationally and there's an unbroken chain of people from different levels of wealth who can afford to buy houses. Unfortunately in the US right now, that is not reflective of the present scenario due to the immense generational wealth gap and housing bubble.

Re: The Folk Economics of Housing

#22

Post by segphault » Fri, Aug 15, 2025, 4:27 PM UTC

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

This just isn't true and isn't supported by the data. https://www.noahpinion.blog/p/corporations-arent-the-reason-...

Re: The Folk Economics of Housing

#23

Post by TulliusCicero » Fri, Aug 15, 2025, 4:28 PM UTC

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…

Also, they can only address the luxury market so much.

If you're only legally or practically able to build and sell so many cars, then you're gonna focus on Lexuses more than Toyotas. But if you can build and sell as much as you want, that's when you start seriously addressing the mainstream market.

Re: The Folk Economics of Housing

#24

Post by loeg » Fri, Aug 15, 2025, 4:28 PM UTC

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…

> 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.

This effect, in this context, is called "filtering."

Re: The Folk Economics of Housing

#25

Post by legitster » Fri, Aug 15, 2025, 4:28 PM UTC

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 single-family homes.

So even areas where population is stable, and housing supply increases, it can result in very few tangible gains at the margin.

Re: The Folk Economics of Housing

#26

Post by stego-tech » Fri, Aug 15, 2025, 4:28 PM UTC

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 speculative in the form of PE-owned inventory and rentals. It’s not used as shelter, it’s used as a vehicle of growing capital. When that’s pointed out, suddenly economists blame the very same people who can’t get onto the “property ladder” for failing to “compete in the free market”.

In a vacuum, their original idea makes sense. In reality, it’s heavily exploited for the gains of those already on the ladder at the ongoing expense of those they actively prohibit from joining them. It’s societal exploitation leveraging the singular most basic human need after food and clean water: shelter.

Re: The Folk Economics of Housing

#27

Post by jimbob45 » Fri, Aug 15, 2025, 4:29 PM UTC

TulliusCicero wrote: post #15

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. Big corporations don't have unlimited money to do this kind of thing. And in practice, the expensive areas they do it in, are usually very limited in how much new housing goes up, they're still very much supply constrained markets. If what y…

This is the propaganda they were pushing about RealPage too until it turned out that it was happening and the market was being distorted.

At any rate, if a buyer notices it happening in their area, then "it's not happening that much" is not only not going to make them feel better, it's going to also make them feel like you don't want to fix it.

Re: The Folk Economics of Housing

#28

Post by pwarner » Fri, Aug 15, 2025, 4:29 PM UTC

entropicdrifter wrote: post #21

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…

This makes sense in a world where the market adjusts rationally and there's an unbroken chain of people from different levels of wealth who can afford to buy houses. Unfortunately in the US right now, that is not reflective of the present scenario due to the immense generational wealth gap and housing bubble.

But that's a supply problem. Create the supply, prices will drop and that bubble and generational wealth challenge begins to heal.

Re: The Folk Economics of Housing

#29

Post by TulliusCicero » Fri, Aug 15, 2025, 4:29 PM UTC

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…

Presumably it's cheaper to build a home when a developer is building a whole bunch at once in a neighborhood, as opposed to a single person or family ordering something custom built.

Re: The Folk Economics of Housing

#30

Post by pphysch » Fri, Aug 15, 2025, 4:29 PM UTC

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.

There's a lot of synergy and overlap between small landlords, property management companies, rent-fixing companies, and Wall St. It doesn't matter to the renter that their slum is owned by a tiny LLC that is nevertheless part of the broader constellation of anti-social rent-seeking behavior that is bringing down this republic.